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Auto Club Insurance Association v Omega Communications and State Farm Insurance Companies and Morris Associates; (COA-PUB, 1/21/1997; RB #1913)


Michigan Court of Appeals; Docket No. 173738; Published   
Judges Doctoroff, M. J. Kelly, and Markey; Unanimous; Opinion by Judge Markey  
Official Michigan Reporter Citation:  221 Mich App 154; Link to Opinion alt  

Coordination with Other Health and Accident Medical Insurance [§3109a]  
Coordination with ERISA Plans [§3109a]

Employee Retirement Income Security Act (ERISA – 29 USC Section 1001, et seq.) 
Civil Judgments and Interest (MCL 600.6013)   

In this published Opinion authored by Judge Markey, the Court of Appeals resolved a priority dispute between two no-fault carriers and a health insurance carrier and found that the language of the health policy required the health carrier to provide coverage for a non-resident dependent of the covered employee. The court also held that one of the no-fault carriers was not entitled to reimbursement from the health carrier for amounts paid under a settlement agreement providing reimbursement to the other no-fault insurer.

The case arose from an automobile accident injury sustained by Jennifer Schneider on July 21, 1991. At the time of the accident, she was living with her mother, who did not have no-fault insurance. Jennifer was given no-fault first party coverage by Auto Club Insurance Association (ACIA), who provided coverage on the vehicle in which she was a passenger. ACIA subsequently sought reimbursement from defendant Omega who provided health coverage to Ross Schneider, Jennifer's father, under an ERISA employee welfare benefit plan, and State Farm, who provided no-fault insurance coverage to Ross Schneider. The case mediated at the trial court level in ACIA's favor in the amount of $48,000, and subsequently, State Farm settled with ACIA for $24,000. At that point, the trial court decided the remainder of the case on the parties' cross-motions for summary disposition, and held that Omega was solely responsible for providing health benefits. The court also granted State Farm's motion for summary disposition and ordered Omega to reimburse State Farm the $24,000 paid in the post-mediation settlement. Omega appealed.

Omega argued that the trial court erred in concluding that Jennifer Schneider was a covered dependent within the health plan's eligibility requirements, claiming that its coverage was secondary to applicable no-fault insurance. However, the Court of Appeals noted that the health plan contained a coordination of benefits clause providing that the Omega coverage was secondary to any "plan" available to the claimant that was uncoordinated. With respect to other coverage containing a competing coordination of benefits provision, the health plan stated that a "plan that covers the participant as an employee will pay first." The term "plan" was defined to include any no-fault automobile insurance policy. Here, the ACIA no-fault policy contained a coordination of benefits provision. However, the Court of Appeals held that the Omega plan was primary, since its coverage to Jennifer Schneider was provided through her father, who was a participant in the plan as an employee. Under the terms of the Omega plan coordination clause, its coverage became primary under the circumstances.

Omega also raised the issue of when its coverage first became effective. The Omega plan granted coverage for dependents of the participating employee, provided that the child resided with the participating employee, and here, Jennifer Schneider was not living with her father at the time of the accident. However, the health plan further provided that the residency requirement is waived if the participant is required to provide coverage due to a court order or a divorce decree. Here, the divorce judgment granting custody of Jennifer Schneider to her mother, and requiring Ross Schneider to provide health insurance coverage for his children, did not enter until August 4, 1992, over one year after the accident. Therefore, coverage under the Omega plan was payable only for expenses incurred subsequent to the date of the entry of the divorce judgment. Prior to that date, ACIA was obligated to provide coverage for the accident injuries.

ACIA claimed that Omega was estopped from denying coverage from July 21, 1991, the date of the accident to August 4, 1992, the date the divorce judgment entered, because Ross Schneider had paid premiums for dependent coverage during that time period. However, the court held that ACIA was not the proper party to assert the estoppel, as that claim belonged to Ross Schneider only. The court did find that Omega was obligated to refund Ross Schneider's premium for dependent coverage, since his daughter was not eligible for coverage during that time period.

Omega also claimed on appeal that it had no obligation to reimburse State Farm for the amounts State Farm paid in its settlement with ACIA, because State Farm had no legal obligation to make payment to ACIA. The court found that since Jennifer Schneider, at the time of the accident, was living with her mother, and not with State Farm's insured, Ross Schneider, State Farm had no legal responsibility to provide coverage. The court noted a conflict in the case law between the decision in Citizens Mutual Insurance Company v Community Services Insurance (Item No. 80) and Bierbusse v Farmers Insurance Group (Item No. 90) and Smith v Auto-Owners (Item No. 618). This panel of the Court of Appeals elected to follow the reasoning of Citizens Mutual v Community Services, and in so holding, stated:

"According to Citizens Mutual Insurance Company v Community Services Insurance..., while MCL 500.3114(1).. .does not require that an insured's spouse be domiciled with the insured, any relative or child of the insured or the insured's spouse must be domiciled in the named insured's household to trigger no-fault coverage. We believe that this court's construction of MCL 500.3114(1). . .set forth in Citizens, supra, is the more accurate interpretation, despite the decisions in Bierbusse v Farmers Insurance Group.. .and Smith v Auto-Owners..., which found that 'when a couple is separated pending divorce, and one spouse is the named insured on a no-fault policy, the other spouse and the children of the named insured are covered by the no-fault policy, even though they are domiciled in separate households, until the divorce is finalized.' We therefore hold that State Farm was not liable for first-party no-fault benefits for Jennifer Schneider, because on July 20, 1991, she was not a resident relative of its named insured, Ross Schneider."

Next, Omega appealed the trial court's award of attorney fees entered against it in favor of ACIA for prevailing in the suit. The Court of Appeals reversed the trial court and found that there was no statutory authority for the award of attorney fees.

Finally, the Court of Appeals disagreed with Omega's argument that the trial court erred in awarding ACIA 12% pre-judgment interest under §6013 of the Revised Judicature Act (MCLA 600.6013). This statute provides for pre-judgment interest where the award is based upon a written instrument. Here, the Court of Appeals found that Omega's written health coverage plan constituted a "written instrument," thereby triggering the interest provisions of §6013.

Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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