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Auto Club Insurance Association v Frederick & Herrud (On Remand); (COA-PUB, 10/8/1991; RB #1509)


Michigan Court of Appeals; Docket No. 135974; Published  
Judges Gribbs, Doctoroff, and Reilly; Unanimous; Per Curiam  
Official Michigan Reporter Citation:  191 Mich App 471; 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.)  

In this per curiam published Opinion, the Court of Appeals issued a significant holding concerning whether ERISA self-funded health and accident benefit plans can be regulated under the coordinated benefits provisions of §3109a, as interpreted by the rule in Federal Kemper (Item No. 897), which would make such plans primary and no-fault insurance coverage secondary in connection with medical expenses arising out of a motor vehicle accident.   

The court held that the provisions of the federal ERISA statute preempted state law where the plan is self-funded, and thus, where the health plan and the no-fault policy had conflicting coordination of benefits clauses, the no-fault policy was primary.  

In its first opinion in this case, Auto Club v Frederick & Herrud, 145 Mich App 722 (1985) (Item No. 866), the Court of Appeals held that the health and accident benefit plan was intended to be primary by the legislature and its enactment of §3109a; and consequently, the no-fault benefit coverage was secondary to the benefits provided under the plan. On remand from this decision, the defendant amended its answer to the complaint and alleged that the provisions of ERISA preempted the state laws concerning such plans. The trial court denied the defendant's motion, and the Court of Appeals thereafter issued a published opinion noting that the issue whether §3109a was preempted by ERISA had been resolved in Northern Group Services. Inc v Auto Owners (Item No. 1090). Following this decision, defendant's application for leave to appeal to the Michigan Supreme Court was denied. However, in November, 1990, the United States Supreme Court released FMC v Holliday, 498 US (1990). That case ruled that ERISA preempted a Pennsylvania law precluding self-funded health and accident plans from exercising subrogation rights on a claimant's tort recovery. In FMC, supra, the United States Supreme Court held that a state could regulate such plans if they are insured, but if the plan is uninsured, the state may not regulate.  

Following the decision in FMC, supra, the United States Supreme Court granted certiorari in the present case, vacated the earlier decision, and remanded the matter for reconsideration in light of FMC. On remand, the Court of Appeals concluded that since the Frederick & Herrud plan was "self-insured" and since it appears that Northern Group Services, supra, was effectively overruled by the United States Supreme Court decision in FMC, the earlier decision was reversed in light of FMC, supra, since the plan is a self-insured plan. Consequently, the effect of this court's ruling is to establish that self-insured ERISA plans may not be regulated by state law provisions such as §3109a, and where conflicting coordination of benefits clauses exist, the no-fault policy is primary.

Finally, in what was probably dicta, the court also held that the purchase of "stop loss" insurance does not transform a benefit plan into an insured plan for purposes of ERISA.

Michigan auto accident attorney 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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