Michigan Court of Appeals; Docket No. 85172; Published
Judges Beasley, Holbrook, Jr., and Simmons; Unanimous; Per Curiam
Official Michigan Reporter Citation: 152 Mich App 603; Link to Opinion 
STATUTORY INDEXING:
Calculation of Survivor’s Loss Benefits and Maximums [§3108(1)]
Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]
Other Benefits [§3109(1)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous per curiam Opinion, the Court of Appeals reversed a summary judgment in favor of plaintiff who alleged that AAA had wrongfully setoff payments she received from a federal civil service survivor's annuity against her no-fault survivor's loss benefits.
Plaintiff’s husband, a federal postal service worker, was killed in an automobile accident on August I, 1982. Plaintiff’s husband's no-fault personal protection insurer immediately began paying the appropriate survivor's loss benefits. However, plaintiff also began receiving a $303 per month federal civil service survivor's annuity, pursuant to her husband's employment. In October, 1983, AAA began setting off the payments received from the federal civil service survivor's annuity against its no-fault payments to plaintiff. Plaintiff sued, and filed a motion for summary judgment. Defendant argued that the federal civil service survivor's annuity payments received by plaintiff are benefits provided or required to be provided under the laws of the federal government, and thus were subject to the setoff provisions of §3109(1).
The Court of Appeals, in reliance upon the 1984 case of Jarosz v DAIIE (Item No. 702), applied the two-prong test for determining whether the governmental benefits involved in this case duplicate no-fault benefits and therefore are subject to the setoff. The Court of Appeals held that the benefits are clearly required to be provided as a result of the same accident, and therefore, satisfy that prong of the test.. The more difficult question was whether the benefits serve the "same purpose" as the no-fault benefits, i.e., to replace wages that would have actually been earned by the decedent.and provided support to the decedent's family members.
In determining the "same purpose" issue, the Court of Appeals concluded that plaintiff’s federal annuity benefits in this case are more like the Social Security survivors' benefits discussed in O'Donnell v State Farm Mutual Insurance Company (Item No. 142), and therefore were properly setoff against no-fault benefits. In reaching this conclusion, the Court noted that federal civil service employees do not pay Social Security taxes, and are not eligible for Social Security benefits. It appeared to the Court that the purpose of the Federal Civil Service Retirement Act, which includes the provision for survivor annuity benefits to provide a substitute for Social Security to federal civil service employees. Based on the close analogy between plaintiff’s survivor annuity benefits and survivor benefits provided under the general Social Security system, the Court concluded that the purpose of plaintiff s survivor annuity benefits was to replace the actual wages of decedent, and therefore properly the subject of setoff. The recent decision of Perkins v Riverside Insurance Company of America (Item No. 828), was distinguished on the basis that the benefits available to the surviving spouse of the Michigan State Police Trooper in that case served to protect the decedent's vested retirement contributions as distinguished from the purpose of replacing lost wages.
In distinguishing Perkins (supra), the Court noted that the pension benefits in Perkins could not be perceived as a substitute for Social Security benefits as can the federal civil service survivor benefits in this case. In addition, the state trooper pension paid benefits to the spouse in exactly the amount that decedent would have received at retirement, thus indicating a purpose to fully protect the decedent's retirement plan contributions. The federal civil service survivor benefits, on the other hand, provided benefits only in the amount of 55% of what the decedent would receive during retirement, thus indicating a purpose to merely provide a replacement income for lost support to the now single spouse. Finally, the state trooper pension was distinguished on the basis that it did not vest and provide survivor benefits until 10 years of service had occurred, and there was a substantial interest in protecting the decedent's retirement plan contributions through a survivor annuity. In contrast, the federal civil service survivor benefits are provided after only 18 months of service, indicating a purpose to provide support for the surviving spouse, not to protect substantial employee contributions.
The Court of Appeals reversed the judgment as to the workers' compensation setoff, and remanded for a recalculation of benefits in light of its ruling on this issue.
