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Gregory v Transamerica Insurance Company; (MSC-PUB, 8/7/1986; RB #934)


Michigan Supreme Court; Docket No. 75490; Published    
Opinion by Justice William  
Official Michigan Reporter Citation:  425 Mich 625; Link to Opinion alt   

Standards for Deductibility of State and Federal Governmental Benefits [§3109(1)]  
State Workers Compensation Benefits [§3109(1)]

Legislative Purpose and Intent
Workers Disability Compensation Act (MCL 418.1, et seq.)   

In this decision by Justice Williams, regarding the appeal of Item No. 792, the Supreme Court held that a redemption agreement with a workers' compensation carrier precludes a claimant from recovering from the no-fault insurer any amount for which the workers' compensation carrier was primarily liable. In so holding, the Supreme Court reversed the decision in Gregory v Transamerica Insurance Company, 139 Mich App 327; 362 NW2d 268 (1984), and resolved the apparent conflict between Gregory (supra) and Thacker v DAIIE, 114 Mich App 374; 319 NW2d 349 (1982).

The plaintiff in this case was involved in an automobile accident while working for Wayne County he received workers' compensation benefits for approximately six months, after which those benefits were terminated based upon a dispute as to disability. The plaintiff received no-fault insurance benefits less a setoff pursuant to §3109 for the workers' compensation benefits received. Subsequent to the termination of his benefits, the no-fault insurer continued to subtract the setoff and pay only the excess amount of no-fault personal protection insurance benefits. Subsequently, the plaintiff settled his workers' compensation claim and received a redemption of $12,500, which was allocated $12,000 to medical expenses, and $500 to wage loss. Plaintiff commenced action claiming entitlement to the full personal protection benefits for lost wages less the $500 allocated to wage loss in the redemption agreement. The circuit court ruled that plaintiff was entitled to the full personal protection benefits as claimed, and the Court of Appeals affirmed.

Justice Williams, joined by Brickley, Riley and Boyle, held that the Thacker decision (Item No. 511) reaches the correct conclusion that the §3109 offset requires subtraction of the full workers' compensation benefits that would have been paid but for the redemption. Williams notes that this result eliminates any need for judicial review of the allocation of settlement amounts and eliminates the incentive for the disabled worker and the workers' compensation carrier to apportion most of the total amount to medical expenses. The majority noted that the Court of Appeals has misapprehended the Supreme Court holding in Perez v State Farm Mutual Automobile Insurance Company, 418 Mich 634; 344 NW2d 773 (1984), in that the Perez decision created only a very narrow exception to the setoff statute by holding that workers' compensations payments are not deductible when they are "unavailable because the employer failed to obtain workers' compensation coverage." Thus, according to the majority, Perez has no direct bearing on the instant case where benefits are available but disputed. The majority noted that the offset statute reflects a determination that the workers' compensation system should be the primary insurer with respect to disabilities arising from an automobile accident at work.

Justice Cavanagh dissented and was joined by Justice Levin. The dissent would hold that where there is a legitimate dispute regarding an injured employee and a workers' compensation carrier, and the parties in good faith enter into a redemption agreement, only the amount of workers' compensation benefits provided pursuant to the redemption agreement should ordinarily be set off pursuant to §3109 of the No-Fault Act The dissent disputes the majority conclusion that the decisions below resulted in duplicate benefits for the plaintiff.

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