Michigan Supreme Court; Docket No. 74545; Published
Opinion by Justice Riley; Unanimous
Official Michigan Reporter Citation: 422 Mich 594; Link to Opinion 
STATUTORY INDEXING:
Coordination with Other Health and Accident Medical Insurance [§3109a]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In this unanimous Opinion by Justice Riley, the Supreme Court held that where a no-fault policy and a health insurance policy both contain "coordination of benefits" provisions making that particular policy secondary to the other, the health insurer is primarily liable for payment of the insured medical expenses.
The Supreme Court reasoned that by giving effect to the no-fault insurer's coordination of benefits provision, the purposes of the no-fault act to contain auto and health insurance costs while eliminating duplicate recovery are furthered, and the result is consistent with the legislative scheme vesting in insureds rather than insurers the option of coordinating benefits.
The "escape clause" in the health insurance policy stated that "under no-fault legislation, the benefits of this plan shall be determined after the benefits provided by no-fault legislation in those states where such legislation is enforced and allowable by law."
The "coordinated benefits clause" in the no-fault policy stated, "this insurance does not apply to the extent that any amounts are paid or payable for allowable expenses to or on behalf of such named insured or relative under the provisions of any other insurance, service, benefit or reimbursement plan providing similar direct benefits, without regard to fault, for bodily injury sustained as a result of the operation, maintenance or use, including the loading or unloading, of a motor vehicle."
The circuit court held that there was no conflict between these two "escape clauses" because the health insurance clause did not refer to benefits provided by no-fault "policies," but rather to the benefits provided by no-fault "legislation." The circuit court determined that this did not conflict with the no-fault policy clause which refers to other "insurance."
The Court of Appeals reversed the trial court and determined that the two escape clauses were conflicting "other provisions." The Court of Appeals resolved this conflict by disregarding both clauses and prorating liability.
The Supreme Court agreed with the Court of Appeals' conclusion that the two policies did contain conflicting "other provisions." The Supreme Court was not persuaded by the attempt by the health insurer to distinguish its clause from a typical "other insurance" provision. The health insurer claimed that its "escape clause" did not require reference to the other policy, but rather, defined its exclusion in relation to no-fault legislation.
The Supreme Court, in rejecting this argument, noted that PIP benefits are not paid directly by reason of the Michigan no-fault law, but rather, the statutory scheme contemplates that PIP benefits will be paid under insurance required pursuant to that law.
Although in agreement with the Court of Appeals decision that the two clauses did in fact conflict, the Supreme Court did not agree with the method utilized by the Court of Appeals to resolve that conflict through prorating of liability. The Supreme Court held that in the circumstance where the no-fault insured chose coordinated coverage, and the no-fault insurer charged a lower premium rate pursuant to the provisions of MCLA 500.3109a; MSA 24.13109(1), the defendant health insurer is primarily liable.
The Supreme Court held that giving effect to the no-fault insurer's coordinated benefits provision furthers the purposes of §3109a to contain both auto insurance costs and health care costs, while eliminating duplicative recovery. Further, the Supreme Court noted that this result is consistent with the legislative scheme vesting in insureds, rather than insurers, the option of coordinating benefits.
In an important footnote (footnote 10), the Supreme Court noted that its decision was made in the factual context in which the no-fault insured chose coordinated coverage, and the no-fault insurer charged a lower premium rate. The Supreme Court expressed no view as to what the result would be when the insured does not so elect and the no-fault premium is not correspondingly reduced.
Pursuant to the court's holding, the Court of Appeals decision in Federal Kemper (Item No. 737) is affirmed as to its conclusion that the two "escape clauses" conflicted, but was modified as to the resolution of this conflict.
