JARRAD v. INTEGON NAT. INS. CO. Docket No. 126176.
696 N.W.2d 621 (2005)
472 Mich. 207
Arthur T. JARRAD, Plaintiff-Appellee, v. INTEGON NATIONAL INSURANCE COMPANY, Defendant-Appellant.
Supreme Court of Michigan.
May 3, 2005.
Garan Lucow Miller, P.C. (by James L. Borin and Daniel S. Saylor), Detroit, MI, for the defendant.
In this no-fault coordination-of-benefits case, the trial court and the Court of Appeals ruled that an employer's self-funded long-term disability plan may not be coordinated with no-fault wage loss benefits. We hold that a self-funded long-term disability plan constitutes "other health and accident coverage" that is subject to coordination under MCL 500.3109a. We therefore reverse the judgment of the Court of Appeals, and remand the matter to the trial court for entry of an order granting summary disposition for defendant.
I. UNDERLYING FACTS AND PROCEDURAL HISTORY
Plaintiff sustained injuries in an automobile accident. At the time of the accident, he was employed by the Michigan Department of Corrections. Under a collective bargaining agreement, the state provided a long-term disability (LTD) plan that covered plaintiff. An insurance company administered the plan and processed benefit payments, but the plan was self-funded by deductions from employees' paychecks and employer contributions.
Following the accident, plaintiff began receiving monthly payments of $2,220.04 under the LTD plan. Under the coordination-of-benefits clause in plaintiff's no-fault policy, defendant, plaintiff's no-fault insurer, deducted the LTD benefits from its no-fault wage loss payments, for a net amount of $1,467.76 a month for three years following the accident.
The Court of Appeals affirmed in a two-to-one decision.
Moreover, the majority construed Spencer v. Hartford Accident & Indemnity Co.,
Judge Zahra, the dissenting Court of Appeals judge in this case, opined that the self-funded LTD plan constituted "other health and accident coverage" that is subject to coordination under MCL 500.3109a. Unlike Spencer, where the employer paid wage continuation benefits directly to the employee, the instant case involves an insurance-type benefit paid by a third party from accumulated payroll contributions. The dissent would have followed Rettig, in which the Court of Appeals held that LTD benefits "constitute protection typically provided by health insurance plans, which include payments for medical expenses resulting from an accident as well as wage-loss replacement benefits." Rettig, supra at 333,
Judge Zahra also opined that the self-funded nature of the plan was not dispositive, because in drafting § 3109a, the Legislature used the broad term "coverage" rather than "insurance." Moreover, case law reflects that the phrase "other health and accident coverage" includes coverage typically provided by an insurance company, regardless of whether it is actually provided by an insurance company in a particular case. For example, Michigan courts have held that "other health and accident coverage" includes: military medical benefits paid by the federal government, Tatum v. Gov't Employees Ins. Co.,
Defendant applied for leave to appeal in this Court. We held oral argument on whether to grant the application or take other peremptory action permitted by MCR 7.302(G)(1).
II. STANDARD OF REVIEW
We review de novo the decision whether to grant summary disposition. Maiden v. Rozwood,
A. Legal Background
MCL 500.3109a states:
In Nyquist v. Aetna Ins. Co.,
An employee's use of accumulated sick leave, however, is not subject to coordination. In Orr v. DAIIE,
In LeBlanc, supra, this Court held that Medicare benefits were "health and accident coverage" subject to coordination. This Court stated that because the Legislature did not modify the statutory phrase "other health and accident coverage" with the word "private," the Legislature "intended to give unrestrained application of § 3109a to health and accident coverage from whatever source." LeBlanc, supra at 202,
The LeBlanc Court also stated: "`Coverage,' a word of precise meaning in the
In United States Fidelity, supra, the Court of Appeals held that services offered by a health maintenance organization (HMO) were health and accident coverage for purposes of § 3109a. The Court of Appeals acknowledged that HMOs "have a unique character. Rather than providing health insurance and paying for the bills after the insured has been treated by a doctor, an HMO is a prepaid plan where the participant pays before hand for the services themselves.... Under traditional definitions, a health maintenance organization does not sell insurance." United States Fidelity, supra at 272,
In Lewis, supra, the Court of Appeals held that a union plan that pays medical expenses constitutes "other health and accident coverage" under § 3109a. The Court of Appeals noted that the intent of this provision "was to reduce insurance costs by obviating the potential for double recovery." Lewis, supra at 418,
In Tatum, supra, the Air Force paid the insured's medical expenses pursuant to a federal statute. This Court held that those benefits constituted "other health and accident coverage" under § 3109a.
In Spencer, supra, the Court of Appeals held that wage continuation benefits paid directly by an employer pursuant to a collective bargaining agreement did not constitute "health and accident coverage" under § 3109a. The Court of Appeals opined that the Uniform Motor Vehicle Accident Reparations Act (UMVARA), a model act on which our no-fault law is based, contained a broader coordination-of-benefits provision, and that the model provision would have included wage continuation benefits pursuant to a union agreement. But because our no-fault law was drafted more narrowly, the Court of Appeals believed that the Legislature did not intend to allow coordination in this situation.
In Rettig, supra, the Court of Appeals held that LTD benefits paid by an insurance company could be coordinated under § 3109a. The panel stated that the phrase "other health and accident coverage" "has generally been limited to benefits typically associated with health insurance plans." Rettig, supra at 333,
While the case law is rather muddled regarding the precise meaning of the phrase "other health and accident coverage," we agree with the Court of Appeals dissent in this case that the term does not require that a risk actually be insured under a commercial insurance policy. As noted in Nyquist, in drafting § 3109a, the Legislature used the broader term "coverage" rather than "insurance." The LeBlanc Court stated that the term "coverage" refers to protection afforded by an insurance policy or the sum of risks assumed by an insurance policy. The Court concluded that Medicare is sufficiently similar to an insurance policy to constitute "health and accident coverage." Similarly, military benefits and HMO benefits have been treated as sufficiently akin to insurance to constitute health and accident coverage. Tatum, supra; United States Fidelity, supra.
Therefore, as the Court of Appeals dissent observed, the central question under our case law is not whether an insurance company actually provided the coverage, but rather whether the coverage is typically provided by an insurance company. That approach is consistent with the statutory text, which refers merely to "coverage" and contains no language limiting its
Here, there is no question that LTD benefits are typically provided by insurance companies. Indeed, the Court of Appeals held in Rettig that LTD benefits fall within the statutory term. The fact that the coverage here was funded by employer and payroll contributions, rather than by a separate insurance company, does not alter the fact that this type of coverage is typically provided by insurance companies. We thus perceive no basis to preclude coordination with a self-funded plan.
Moreover, the view that a self-funded long-term disability plan is not "other health and accident coverage" disregards case law allowing coordination with self-funded medical plans under § 3109a. See, e.g., Lewis, supra; Michigan Millers Mut. Ins. Co. v. West Michigan Health Care Network,
Additionally, the courts in Rettig, Lewis, Michigan Millers Mut., and Lacks Industries manifested an understanding that causing not only third-party funded LTD and medical plans, but also self-funded ones, to qualify as "other health and accident coverage" is consistent with the Legislature's overarching commitment in the no-fault act, and its later amendments, to facilitating reasonable economies in the payments of benefits, thus causing the costs of this mandatory auto insurance to be more affordable. See State Farm Fire & Cas. Co. v. Old Republic Ins. Co.,
Also, the Court of Appeals has treated self-insurance as a form of insurance in other contexts. For example, in Allstate Ins. Co. v. Elassal,
We do not suggest that the holding in Elassal is directly relevant, because we
Further, we reject the Court of Appeals majority's view-derived from the holding in Spencer-that the existence of a collective bargaining agreement somehow negates the existence of "other health and accident coverage." The text of § 3109a refers to health and accident coverage-the central question is whether other coverage exists, not how it came to exist. It is simply not relevant under the statutory text whether the coverage arose from a collective bargaining agreement.
Next, we address the Spencer Court's reliance on language in the UMVARA, the model act on which our no-fault act was based. The Spencer Court observed that the UMVARA contained the following provision:
The Spencer Court also extracted an official comment to the model provision: "`The cost reductions may be significant, however, in the case of an insurer offering to sell basic reparation policies to the employees of a large employer, who have defined, generous wage-continuation and accident and health benefits under a common employer-furnished or trade union plan.'" Spencer, supra at 399-400,
The Spencer Court then reasoned that "it is clear from the comments that, under the UMVARA, wage continuation benefits pursuant to a union agreement were intended to be coordinated with no-fault benefits otherwise payable." Spencer, supra at 400,
We emphasize that a court's fundamental interpretive obligation is to discern the legislative intent that may reasonably be inferred from the words expressed in the statute. Koontz v. Ameritech Services, Inc.,
The Spencer Court relied on the proposition that where the Legislature does not adopt a model provision, it presumably rejected the proposed language. Spencer, supra at 399,
The Legislature's deviation from the language in a model act does not grant a court license to simply assert, without any reasoning, that (1) the statute is narrower than the model provision, and (2) the statute must therefore produce a different outcome than the model provision would generate. Such conclusions do not follow ineluctably from the Legislature's rejection of particular language in a model provision.
It is, of course, possible that the Legislature rejected a model provision because it did not wish to enact the provision into law. Other inferences may arise, however. For example, our Legislature might simply have found a better way than the drafters of the model provision to express the same proposition. Perhaps our Legislature used a synonym or more succinct language to state whatever the drafters of the model provision had attempted to say. Or the Legislature might have concluded that another statutory provision in Michigan rendered the model provision unnecessary. Thus, the mere fact that a statute is written differently from a model act does not always compel the conclusion that our statute is written more narrowly.
But even if a statute is written more narrowly than a model provision, a court's analysis does not end there. Even a statute that is written narrowly could apply to the particular case before the court. A statutory provision that provides for coordination, but in fewer circumstances than a model provision, will still allow coordination in some circumstances. Otherwise, the statutory provision would never allow coordination and would be essentially nugatory. Courts must give effect to every word, phrase, and clause in a statute, and must avoid an interpretation that would render any part of the statute surplusage or nugatory. Koontz, supra at 312,
Thus, even if the Spencer Court had supported its assertion that § 3109a is written more narrowly than the model provision, the question would remain whether the statute allowed coordination in the circumstances at issue in that case. Merely asserting, as the Court did in Spencer, that a statute is narrow does not, by itself, resolve whether the statute applies to a given case.
A court may not simply announce that the text of a statute differs from the language in a model act (or, as in Spencer, a comment to the model act) as an excuse to avoid the court's duty to interpret the statutory text adopted by the Legislature. The Spencer Court did not analyze the language of § 3109a. The Court failed to explain why the benefits at issue did not fall within the plain meaning of the term "other health and accident coverage." The Court also did not explain how the statutory phrase is not only narrower than the model language, but too narrow to allow coordination in that case.
Here, it is simply unnecessary to decide whether the model provision is broader than the statute. We conclude that § 3109a allows coordination in this case, regardless of whether it is broader or narrower
Therefore, regardless of how broadly the model provision might reach, the text of § 3109a plainly allows coordination of no-fault benefits with a self-funded long-term disability plan.
We conclude that the phrase "other health and accident coverage" in § 3109a includes a self-funded long-term disability plan, and that defendant may therefore coordinate its no-fault wage loss payments with plaintiff's LTD benefits. We thus reverse the judgment of the Court of Appeals and remand the matter to the trial court for entry of an order granting summary disposition for defendant.
CLIFFORD W. TAYLOR, ELIZABETH A. WEAVER, ROBERT P. YOUNG, JR., and STEPHEN J. MARKMAN, JJ., concur.
MICHAEL F. CAVANAGH, J. (dissenting).
In this no-fault case, I would conclude that the long-term disability (LTD) plan covering plaintiff does not constitute "other health and accident coverage" subject to coordination under MCL 500.3109a. I am not convinced that the dichotomy set forth by Spencer v. Hartford Accident & Indemnity Co.,
I. FACTUAL BACKGROUND
Plaintiff worked for the Michigan Department of Corrections. Under his collective bargaining agreement, plaintiff was allowed to participate in the LTD plan. The LTD plan was administered by a private insurance company; however, the plan was self-funded through payroll deductions and employer contributions. While still employed by the Department of Corrections, plaintiff was injured in an automobile accident. Plaintiff began receiving benefits under the LTD plan, and defendant, plaintiff's no-fault insurer, coordinated the LTD benefits with the no-fault work-loss benefits. Defendant maintained that the setoff was permissible under MCL 500.3109a. Plaintiff filed this
II. LEGAL BACKGROUND
A. MCL 500.3109a
MCL 500.3109a provides:
B. Spencer v. Hartford Accident & Indemnity Co.
In Spencer, supra, the plaintiff was injured during the course of his employment and was unable to return to work. After the accident, the plaintiff received worker's compensation benefits. Additionally, under the terms of a collective bargaining agreement between the plaintiff's union and his employer, the plaintiff received the difference between his worker's compensation benefits and his base rate of pay. The defendant insurance company denied liability for no-fault work-loss benefits, claiming, among other things, that the wage continuation benefits were subject to setoff pursuant to MCL 500.3109a.
The Spencer panel noted that the "purpose of § 3109a is to reduce the cost of no-fault insurance by allowing insurers to offer policies that coordinate benefits with other similar coverages in return for charging a statutorily mandated reduced premium." Spencer, supra at 396,
After detailing this Court's decision in LeBlanc v. State Farm Mut. Automobile Ins. Co.,
The Spencer Court then examined the language and official comments of the counterpart of § 3109a in the model act, 14 U.L.A. Civil Procedural and Remedial Laws, UMVARA, § 14(b)(2). Notably, the Court of Appeals quoted the official comments to § 14(b)(2):
In light of the differences between Michigan's no-fault act and the model act, the Court of Appeals reasoned:
Thus, the Court of Appeals in Spencer held that the plaintiff's wage continuation benefits pursuant to a collective bargaining agreement did not constitute "other health and accident coverage" within the meaning of § 3109a.
C. Rettig v. Hastings Mut. Ins. Co.
In Rettig, supra, the Court of Appeals was again called upon to interpret § 3109a. The plaintiff in Rettig was injured in an automobile accident. At the time of the accident, the plaintiff was insured by the defendant under a no-fault insurance policy that contained a coordinated-benefits provision. The plaintiff also had an LTD plan issued by a different insurance company and made available to the plaintiff by her employer. The LTD plan was paid for by the plaintiff through payroll deductions. Notably, the plaintiff was employed as a supervisor and was not covered under a collective bargaining agreement. The trial court held that the defendant was entitled to a setoff under § 3109a because the plaintiff's LTD plan constituted "other health and accident coverage" under § 3109a, and the Court of Appeals affirmed.
The Rettig Court, similar to the Spencer Court, observed that "[w]hile the scope of coverage included within the meaning of `other health and accident coverage'... has expanded since LeBlanc, it has generally been limited to benefits typically associated with health insurance plans." Rettig, supra at 333,
III. THE COURT OF APPEALS DECISION IN THIS CASE
Here, the Court of Appeals, in an unpublished two-to-one decision, concluded that this case "is more like Spencer than Rettig." Unpublished opinion per curiam, issued January 27, 2004, 2004 WL 144528 (Docket No. 245068). The majority reasoned that, like the plaintiff in Spencer, this "plaintiff received wage loss benefits from his employer through a formal wage continuation plan pursuant to a collective bargaining agreement. Consistent with established precedent, we agree with the trial court and conclude that those wage continuation benefits are not `other health and accident coverage' within the contemplation of MCL 500.3109a."
Judge Zahra dissented, concluding that defendant was entitled to a setoff for the LTD wage-loss benefits because this case was more like Rettig than like Spencer. Unlike the benefits in Spencer, Judge Zahra opined, the LTD benefits in this case were not paid directly by the employer; rather, the plan was self-funded through accumulated payroll deductions. Accordingly, the Court of Appeals dissent found Rettig controlling because the LTD benefits plaintiff received constituted protection typically provided by health insurance plans. Moreover, Judge Zahra reasoned that the notion that plaintiff's LTD benefits were not actually provided by an insurance company was not dispositive.
I agree with the majority that the case law is sufficiently "muddled" regarding the precise meaning of "other health and accident coverage." Moreover, I agree with the majority that the great weight of the case law suggests that the key question for § 3109a purposes is whether the coverage is typically provided by an insurance company. I disagree, however, with the majority's decision to peremptorily overrule Spencer, supra. Moreover, I disagree with the majority's decision to decide this case without the benefit of full oral argument and briefing.
In light of Spencer's thoughtful analysis, I do not believe that the legislative distinction noted by the Court of Appeals is accidental. Even if the term "coverage" is interpreted broadly, there is a difference between a self-funded, noninsurance LTD plan pursuant to a collective bargaining agreement and a so-called typical insurance plan for purposes of the no-fault act. Moreover, I am persuaded by Spencer's rationale that the Legislature intended this difference to be dispositive when it refused to incorporate the broader UMVARA provision into our no-fault act. Accordingly, if a person falls in the Spencer box, such as this plaintiff, then setoff is not permitted under § 3109a. However, if a person falls within the Rettig box, then setoff is permitted.
The majority concludes that Spencer was erroneously decided because "[i]t is simply not relevant under the statutory text whether the coverage arose from a collective bargaining agreement." Ante at p. 628. Rather, "[t]he text of § 3109a refers to health and accident coverage-the central question is whether other coverage exists, not how it came to exist." Id. (emphasis in original). The majority then criticizes the Spencer Court for examining the language of the model act on which our no-fault act was based and for venturing beyond the text of the statute. Stated differently, the majority criticizes the Spencer Court for evaluating the "muddled" case law construing the text of the statute, for examining the model act on which our no-fault act was based, and for not ignoring the elephant standing in the corner once the panel reasonably concluded that there is a glaring difference between the two acts.
This Court, however, has previously acknowledged that it is entirely appropriate, if not prudent, to examine a model act on which a Michigan statutory scheme was based when attempting to discern the Legislature's intent. See, e.g., Donajkowski v. Alpena Power Co.,
Even though the majority claims that the UMVARA should not have been examined, the majority nonetheless travels beyond the text of the statute in an attempt to explain away the Legislature's deviation from the language in the model act and, at the same time, further undermine the Spencer Court's ultimate conclusion. For example, the majority posits that the Legislature may not have included the language
In my view, however, the majority's attempts only solidify the conclusion reached in Spencer. Again, this Court has held that "where the statutory language differs from the UMVARA model, courts can presume that the Legislature considered the model act and rejected it." Marquis, supra at 652 n. 17,
Further, the majority explains that "even if a statute is written more narrowly than a model provision, a court's analysis does not end there" because even the narrow statute could apply to the facts of a given case. Ante at 629 (emphasis in original). Thus, even if Spencer were supportable, the majority claims that a court cannot merely assert that the statute is narrow and conclude that it does not apply. The majority simply dismisses the Spencer Court's analysis as incomplete.
In my view, Spencer's rationale is plainly supportable. The primary goal of statutory interpretation is to discern the Legislature's intent. To this end, the Court of Appeals examined the relevant statutory language and the "muddled" case law that construed this language, consulted the source of the statutory provision, found a difference between the model act and the statutory provision, and reasonably concluded that the Legislature rejected this portion of the model act and intended that wage continuation benefits pursuant to a collective bargaining agreement should not constitute "other health and accident coverage" within the meaning of § 3109a. I do not believe that Spencer's approach was incomplete. Indeed, I believe the approach was prudent and supported by our case law. When compared with the majority's approach, I prefer Spencer's approach under these circumstances because it best effectuates, rather than ignores, the Legislature's apparent intent.
Finally, I would be remiss if I did not point out that neither the parties nor the lower courts in this case questioned the validity of Spencer's rationale. Rather, defendant and the Court of Appeals dissent simply argued that this case was more like Rettig than Spencer. Because the majority has seen fit to take aim at Spencer, the parties never specifically briefed this issue, and, arguably, this result was not clearly foreshadowed, I would have preferred to grant leave to appeal to
I would conclude that Spencer was correctly decided and, therefore, would hold that the LTD plan covering this plaintiff is not subject to setoff under § 3109a. Accordingly, I would affirm the decision of the Court of Appeals. However, because Spencer's viability is jurisprudentially significant and the parties did not specifically brief this issue, I would prefer to grant leave to appeal to have the benefit of full briefing and oral argument on whether Spencer was properly decided. Thus, I must respectfully dissent.
MARILYN J. KELLY, J., agree.
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