Michigan Supreme Court; Docket No. 58833; Published
Justice Coleman; 4-3
Official Michigan Reporter Citation: 404 Mich 524; 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)]
Social Security Survivor’s Benefits [§3109(1)]
Coordination with Other Health and Accident Medical Insurance [§3109a]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In a 4-3 decision written by Justice Coleman and signed by Justices Levin, Cavanagh, and Ryan, the Michigan Supreme Court reversed the Court of Appeals (item number 20) and held that §3109(1) of the no-fault statute, which permits an offset of governmental benefits from no-fault benefits, was constitutional and was not violative of either the due process or equal protection clauses of the Michigan and federal constitutions.
In reaching its conclusion, the majority acknowledged that the effect of §3109(1) was to treat the recipients of private collateral benefits differently from the recipients of governmental collateral benefits. However, the Court implemented the "rational basis" test and held that this statutory schemata was not unconstitutional under a due process or equal protection analysis. The Court reasoned that the statute in question bears a reasonable relation to the legitimate legislative objectives of avoiding duplicative recovery of benefits and reducing the premium costs of insurance. In addition, the statutory distinction between governmental benefit recipients and private benefit recipients "rationally promote the legitimate legislative objectives of enabling persons with economic needs and/or wages exceeding the maximum benefits permitted under the no-fault act to obtain the supplemental coverage they need and of placing the burden of such extra coverage directly on the shoulders of those persons, instead of spreading it throughout the ranks of no-fault insureds."
The Court also examined the interplay between §3109(1) and §3109a, which permits coordinated benefits coverage with appropriately reduced premium rates. The Court noted that even though certain people who did not opt for coordinated benefits protection could still "slip through the colander of §3109(a)" and receive duplicative recovery, the Legislature was not required to avoid all duplicative recovery with mathematical precision. Section 3109a promotes a valid legislative objective of reducing duplicative benefits and is likewise constitutional.
As a part of its analysis, the Supreme Court also addressed the subsidiary questions of whether §3109(1) specifically requires an offset of federal Social Security survivors' benefits against no-fault survivors' benefits (§3108) inasmuch as those were the kinds of benefits that were involved in the case at bar. The Court concluded that §3109(1) did indeed require such a setoff of Social Security benefits. However, this setoff was not arbitrary because the Social Security benefits "are paid as a result of the same accident and duplicate in varying degrees the no-fault benefits otherwise due." The majority's language with regard to the extent of the setoff permitted by §3109(1) apparently allays the minority's concern that §3109(1) would permit a setoff of any government pension or benefit, even those that are unrelated to the auto accident which triggered the receipt of no-fault benefits. In language indicating that the governmental benefit which is sought to be offset against the no-fault benefit must have some relationship to the accident, the Court noted at page 6 and 7 of its slip opinion:
The history of §3109(1) indicates that the Legislature's intent was to require a setoff of those government benefits that duplicated the no-fault benefits payable because of the accident and thereby reduce or contain the cost of basic insurance...
"The survivors' benefits received by the plaintiffs pursuant to §402 of the Federal Social Security Act duplicated the survivors' benefits they received pursuant to the decedent's no-fault insurance policy. The survivors' benefits received pursuant to the no-fault policy were paid as a result of the decedent's death and were based on §3108 of the No-Fault Act…. The survivors' benefits received pursuant to §402 of the Social Security Act were likewise paid as a result of the decedent's fatal accident and serves substantially the same purpose as the no-fault benefits..."
The Court also noted that its opinion was confined to the facts before the Court and accordingly it did not purport to encompass other possible government setoffs such as workers' comp benefits.
Justice Williams, on behalf of Justices Moody and Fitzgerald, wrote a lengthy dissent arguing that §3109(1) was facially unconstitutional as violative of both the equal protection and due process clauses of the Michigan and United States constitutions. Even though the minority acknowledged that avoiding duplicative benefits and reducing insurance premium costs are permissible legislative goals, the classification drawn by §3109(1) was without reason or rational basis.
In holding that the statute, on its face, violates traditional equal protection mandates, the dissenters noted that under §3109(1) both classes of no-fault beneficiaries who received collateral benefits (governmental recipients and private recipients) have the following traits in common: (1) both paid a same premium for the same no-fault insurance coverage, (2) both received common premium reductions, if any, from the 3109(1) scheme, and (3) both monetarily contribute to securing the governmental or private collateral benefits. In spite of those class similarities, the distinction between the two classes of beneficiaries in terms of requiring or not requiring a setoff is based solely on the source from which the collateral benefit is received — a distinction which is irrational and unconstitutionally discriminating.
The dissenters also noted with irony that the passage of the coordinated benefits statute (§3109a) further perpetuated the unconstitutional distinction because it had the effect of insuring that private collateral benefit recipients would now get premium reductions while the governmental benefit recipient receives no premium reductions for the setoff of government benefits.
The dissenters also held that §3109(1) was violative of due process in that, on its fact, it was unconstitutionally over broad and not rationally related to legitimate legislative objectives. In this regard, the Court noted that under the language of §3109(1) a setoff could be claimed for governmental benefits which are not related to the auto accident which triggered the receipt of no-fault benefits, such as governmental pensions, disability plans, and veterans' benefits. In this regard the dissenters noted at page 29 of the slip dissent opinion:
"No doubt, were we to hold this section constitutional, we could envision an insurer setting off an insured's governmental pension benefits awarded because of the insured's employment longevity, against the insurer's no-fault liability for injury occasioned in an automobile accident."
The basic conclusion of the minority opinion was that, for the reason stated above, the scheme mandated by §3109(1) operates arbitrarily and discriminatingly to compel those insured entitled to both governmental and no-fault benefits to subsidize (in the form of lesser no-fault benefits and no premium reductions) the premium savings that are realized by the greater class of all insureds, including recipients of private benefits. In reaching its conclusion however, the dissenting opmion took pains to pomt out that it was not expressing an opinion on the permissibility of offsetting duplicative ex gratia governmental benefits, which are provided without contribution by the insured.
