Michigan Court of Appeals; Docket No. 25429; Published
Judges Burns, Brennan, and Bashara; 2-1 (with Bashara Dissenting)
Official Michigan Reporter Citation: 70 Mich App 487; Link to Opinion 
STATUTORY INDEXING:
Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]
Social Security Disability Benefits [§3109(1)]
General / Miscellaneous [§3109]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In a 2-1 decision written by Judge Burns with Judge Brennan concurring, the Michigan Court of Appeals held that §3109(1) of the No-Fault Law, which provides for a reduction of personal protection insurance benefits by any compensation paid under any state or federal law, is violative of the equal protection clause. The case specifically dealt with the deduction of social security benefits from monthly no-fault survivor’s benefits. The Court held that the effect of §3109(1) is to unreasonably discriminate against the poor. The Court stated, "those who can afford private insurance to supplement no-fault benefits are permitted duplicative recovery while those who cannot afford such are denied duplicative recovery." Some highlights of the decision are:
1. Even though only the validity of §3109(1) was at issue, the Court, in declaring
this section unconstitutional, stated; "as such, the act is void and of no effect as of the date of enactment."
2. Like the recent Shavers decision, this decision recognized that the reduction of the cost of insurance is a proper basis for legislative classifications. However, reduction of insurance costs alone do not justify arbitrary legislative classifications. The Court indicated that setoffs for collateral, governmental source benefits are not always invalid. Mentioning the Florida and Illinois No-Fault Statutes, the Court stated that; "it might be argued” that set-off provisions which apply only to workers’ compensation benefits are reasonable as such benefits are provided without cost to the beneficiary. Such is not the case with §3109(1) as this “very broad" section, as written, is not limited to governmental benefits provided without cost to the beneficiary. Social Security benefits are "paid for” by the recipient as are other employee benefits currently payable to governmental employees and veterans. It must be noted, however, that the force of the Court's intimations that set-offs for workers' compensation benefits might be valid is substantially blunted by the fact that the Court also quotes extensively, and with approval, from Bowser v Jacobs, 36 Mich App 320 (1971). The Bowser decision declared unconstitutional a section of the Motor Vehicle Accident Claims Act which prevented those covered by workers' compensation from recovery under the accident claims act
4. The Court summarily rejected the insurance company's argument that the governmental benefits set-off was valid as it was part of an insurance policy contract entered into between private parties and thus not affected by the invalidity of §3109(1). The Court reasoned that because the terms of the statute are mandatory, the contract would not have existed without the "sanction" of the statute. This being the case, the Court found the contractual provision "patently offensive to public policy" and, therefore, invalid.
5. In the dissenting opinion, Judge Bashara agreed with the majority that the trial judge erred in ruling there was no state action, and, therefore, should have considered the constitutional questions raised in the initial action for declaratory judgment Nevertheless, the dissent considered the classifications created by §3109(1) and found that they had a "reasonable basis" and were, therefore, not in violation of equal protection. The dissent found that it was rational for the legislature to conclude that such a governmental benefit setoff provision would eliminate duplicate recovery and would reduce costs. It is not for a court to say mat the legislature should have gone further and provided an offset for private insurance benefits. In addition, the dissent found that under the existing statutory scheme, everyone has an opportunity to enjoy a minimum statutory benefit and no one suffers an absolute deprivate of benefits. "The fact that some individuals are unable to purchase private insurance is of no moment" stated the dissenting opinion
