Michigan Court of Appeals; Docket No. 198307; Published
Judges Markman, McDonald, and Cavanagh; 2-1; Opinion by Judge McDonald
Official Michigan Reporter Citation: 231 Mich App 54; Link to Opinion
This published Opinion written by Judge McDonald deals with the obligation of a coordinated no-fault PIP insurer to reimburse its insured if the insured is required to reimburse an ERISA health plan out of the insured's tort recovery. The court held that the coordinated no-fault insurer was obligated to reimburse its insured in this situation.
Plaintiff was insured with defendant ACIA pursuant to a coordinated no-fault policy, and was also insured under an ERISA health plan established by her employer and administered by defendant Michigan UFCW Health & Welfare Fund. The ERISA health plan contained a coordination of benefits clause which appeared to be ambiguous, and thus, not the kind of clearly written ERISA coordination clause that would have the effect of elevating the no-fault coordinated insurer into the primary pay position under the Supreme Court's opinion in Auto Club Insurance Association v Frederick & Herrud (After Remand), 443 Mich 358 (1993) (Item No. 1628). Therefore, it was presumed that the ERISA fund was the primary insurer to whom plaintiff would turn for payment of medical expenses in the event of an automobile accident injury.
However, as a condition to paying medical expenses, defendant ERISA fund required that plaintiff sign a "subrogation agreement and assignment" which, by its terms, obligated the plaintiff to repay the plan "in full any sums advanced to cover such expenses from any judgment or settlement I or my dependents receive.... All such sums recovered by suit, settlement or otherwise shall be paid over to the fund." Plaintiff signed this subrogation agreement Subsequently, plaintiff settled a personal injury automobile accident claim for $20,000 and reimbursed defendant ERISA fund approximately $6,000 for medical expenses the fund had paid. Plaintiff then contended she was entitled to recover from AAA those medical expenses plaintiff had reimbursed the ERISA fund out of plaintiff’s tort recovery. The trial court agreed with plaintiff, and ordered AAA to reimburse plaintiff. The Court of Appeals affirmed in a 2-1 decision.
In holding that AAA was obligated to reimburse plaintiff, the majority relied upon the Supreme Court's opinion in Sibley v DAIIE (Item No. 1146) which had ordered similar reimbursement by a no-fault PIP insurer to a plaintiff who was obligated to repay federal workers' compensation benefits out of a Michigan automobile tort recovery. The majority concluded that the Sibley rationale should apply to the instant case, as both kinds of benefits (federal workers' compensation benefits and ERISA health benefits) were payable under federal schemes that preempted state no-fault law. Because of the preemptive effect of the federal schemes, automobile accident victims would be in a situation where they were paying their own medical expenses if their no-fault insurers were not obligated to reimburse them when tort recoveries were used to repay these federal benefits. Having injured people pay medical expenses out of their own pockets is a consequence that is specifically intended to be avoided by the operation of the Michigan no-fault system.
The majority also cited with approval its earlier decision in Great Lakes Insurance Company v Citizens Insurance Company (Item No. 1536), which extended the operation of §3116 of the No-Fault Act to preclude a non-ERISA health insurance company from enforcing subrogation rights to seek repayment of medical expenses out of a plaintiff’s non-economic loss tort recovery.
Judge Markman dissented. He felt the plaintiff had received a windfall because she was able to buy a coordinated no-fault policy at a reduced premium, while the no-fault insurer did not get the benefit of the bargain because the no-fault insurer was ultimately required to pay medical expenses in the primary pay position.