The United States Court of Appeals for the Sixth Circuit has certified, pursuant to MCR 7.305(B), the following question to this Court:
We have accepted the certification,
The CCA is an organization comprising all insurance companies who write insurance in this state. It was created by the Legislature in 1978 in response to concerns that Michigan's no-fault law provision for unlimited personal injury protection benefits placed too great a burden on insurers, particularly small insurers, in the event of "catastrophic" injury claims.
In practice, the CCA acts as a kind of "reinsurer" for its member insurers. Initially, § 3104(1) requires membership in the CCA as a condition of authority to write insurance in this state for all insurers "engaged in writing insurance coverages which provide the security required by section 3101(1) within this state...."
Like any insurer, the CCA charges each of its members a premium for the coverage it provides, which is based on the number of car years of insurance the member writes in Michigan.
In this case, plaintiff Preferred Risk paid Michigan no-fault benefits in excess of $250,000 to an Illinois resident whom it had insured under a policy written in that state, but who was injured in an automobile accident in Michigan. Plaintiff's insured was a passenger in a car owned and insured by a Michigan resident.
Plaintiff's liability for such benefits is not contested here. The parties agree that § 3163(1) of the no-fault act required plaintiff, as an insurer authorized to write insurance in this state, to provide Michigan no-fault benefits to its insured in the event that he traveled to Michigan and was injured in an automobile accident.
There is also no question that at the time of this claim plaintiff was a member insurer of the CCA. A member need not write all of its automobile liability insurance in this state, although some do, and while it also wrote insurance coverages in other states, plaintiff was clearly "engaged in writing insurance coverages which provide the security required by section 3101(1) within this state."
Plaintiff eventually paid over $340,000 in personal injury protection benefits to the claimant in this case. It applied to the CCA for indemnification for the amount over $250,000, reasoning that while it had provided insurance coverage to an Illinois resident, for an Illinois-registered vehicle, it had paid Michigan no-fault benefits, which should be reimbursable under § 3104(2). The CCA denied plaintiff's application, however, claiming that under its plan of operation
Following the denial of its claim by the CCA, plaintiff instituted the present action in the United States District Court for the Eastern District of Michigan (Southern Division). Both parties moved for summary judgment. Plaintiff claimed that since it was a member insurer who had paid benefits under the Michigan no-fault system in excess of $250,000, the CCA was obligated under § 3104(2) to provide it with "indemnification for 100% of the amount of ultimate loss" it had sustained over that amount, regardless of the non-resident status of its insured, and it was required to accept such indemnification. The "resident only" requirement imposed by the CCA in its plan of operation, plaintiff argued, conflicted with the language and purpose of § 3104, and was beyond the CCA'S authority to impose.
The CCA argued in response that its plan of operation, including its limitation of indemnification to coverages written for residents of this state, was a valid interpretation of § 3104. Specifically, the CCA claimed that the Legislature had left it up to the association to determine, through its plan of operation, which particular policies were subject to indemnification under § 3104, and that its limitation of indemnification to policies written for residents was in any event consistent with § 3104(7)(d), which allows it to charge premiums only on the basis of insurance coverages written in this state.
The district court granted summary judgment in favor of Preferred Risk. The association appealed
We believe that the CCA has properly interpreted the indemnification requirement of § 3104(2). For the reasons set forth below, we conclude that § 3104(2) requires indemnification only when the member insurer has paid benefits in excess of $250,000 under a policy which was written in this state to provide the security required by § 3101(1) of the no-fault act for the "owner or registrant of a motor vehicle required to be registered in this state...." The CCA, whose policy of restricting indemnification to "residents of this state" is the subject of this dispute, has acknowledged that for purposes of indemnification under § 3104(2) it considers all owners or registrants of motor vehicles required to be registered here to be "resident[s] of the State for purposes of the Act," regardless of whether they actually live within this state.
We wish, however, to emphasize that the analysis which follows in support of this conclusion is based solely upon our interpretation of the Catastrophic Claims Act itself. In particular, we emphasize that our analysis does not rest upon any finding by this Court that the association's plan of operation constitutes a "reasonable interpretation" of § 3104 in light of the Legislature's deference to its expertise in this area. In our opinion, the Legislature did not leave it up to the CCA to decide who will receive indemnification. As plaintiff aptly argues, the requirement in § 3104(2) that the CCA "shall provide" indemnification for losses in excess of $250,000 can hardly be called deferential. Thus, while we agree with the CCA'S interpretation of § 3104(2)'s indemnification requirement, we do so on the basis of the language of the statute itself.
The question before the Court essentially asks on which coverages will the CCA be liable for indemnification in the event of a catastrophic loss. The answer to that question lies, of course, within § 3104(2), which again provides in relevant part:
Plaintiff contends that the phrase "personal protection insurance coverages" in § 3104(2) refers generally to any coverages under which it may be required to pay Michigan no-fault benefits, regardless of where or for whom written. According to plaintiff, once it had established that it was a member of the association and that it had sustained a loss under a "personal protection insurance coverage" in excess of $250,000, the language of § 3104(2) "clearly and unambiguously" obligated the CCA to reimburse it for that loss.
It is axiomatic, as plaintiff states, that this Court must enforce "clear and unambiguous" statutory provisions as written. Owendale-Gagetown School Dist v Bd of Ed, 413 Mich. 1, 8; 317 N.W.2d 529 (1982); Dussia v Monroe Co Employees Retirement System, 386 Mich. 244; 191 N.W.2d 307 (1971). This rule of statutory construction must be applied, however, with the understanding that "[w]hat is `plain and unambiguous' often depends on one's frame of reference." Shiffer v Gibraltar School Bd
The fundamental purpose of any rule of statutory construction, of course, is to assist the court in discovering and giving effect to the intent of the Legislature. It is thus equally axiomatic that "`the intention of the Legislature, when discovered, must prevail, any existing rule of construction to the contrary.'" Metropolitan Council No 23 v Oakland Co Prosecutor, 409 Mich. 299, 318-319; 294 N.W.2d 578 (1980), quoting Michigan Central R Co v Michigan, 148 Mich. 151, 156; 111 NW 735 (1907). As Justice WILLIAMS elaborated in Metropolitan Council No 23:
Ultimately, "`[t]he particular inquiry is not what is the abstract force of the words or what they may comprehend, but in what sense were they intended to be understood or what understanding do they convey as used in the particular act.'" People v Lynch, 410 Mich. 343, 354; 301 N.W.2d 796 (1981), quoting 2A Sands, Sutherland Statutory Construction (4th ed), § 46.07, p 110.
In our opinion, when § 3104 is read as a whole, and § 3104(2) is examined in the proper context of the entire section, it becomes clear that the reference to "personal protection insurance coverages" under which the CCA may be liable for indemnification in the event of a catastrophic loss is not simply a general reference to all insurance coverages under which an insurer might be required to pay Michigan no-fault benefits. Rather, it is a shorthand reference to the no-fault personal protection insurance coverages that are generally the subject of the act, i.e., those which were written in this state to provide the compulsory security requirements of § 3101(1) of the no-fault act for the "owner or registrant of a motor vehicle required to be registered in this state" — "residents," in the language of the CCA'S plan of operation.
In reaching this conclusion, we note initially that the only other reference in § 3104 to "insurance coverages" is found in § 3104(1), which makes membership in the association mandatory for each insurer "engaged in writing insurance coverages which provide the security required by section 3101(1)." Section 3101(1), again, requires only the owner or registrant of a motor vehicle "required to be registered in this state" to maintain personal protection, property protection, and residual liability insurance on the vehicle.
It is upon § 3104(7)(d), however, that we squarely rest our finding of a legislative intent to limit indemnification under § 3104(2). Section 3104(7)(d) provides the manner and method in which the CCA is to calculate and assess to member insurers the premiums which fund its operation. Under that section, the CCA first arrives at a figure which represents its expected losses and costs for the assessment period. This "total premium" is divided by the total earned car years of insurance "providing the security required by section 3101(1) ... written in this state" by all insurers to arrive at an average premium per car. The average premium is then multiplied by each member's total earned car years of insurance "providing the security required by section 3101(1) ... written in this
In our view, the fact that the Legislature granted the CCA the authority to charge premiums only with respect to policies written in Michigan providing the security required by § 3101(1) for the owners or registrants of vehicles required to be registered in the state, compels the conclusion that it intended to similarly limit the CCA'S liability for indemnification under § 3104(2). Put simply, we can think of no reason why the Legislature would want to provide such indemnification coverage to insurers, even member insurers who do a significant amount of business within this state, absolutely free of charge or, perhaps more appropriately, at no cost to them.
The language of § 3104(7)(d) confirms initially the clear purpose behind the creation of the CCA to reduce, in this state's insurance market, both the inequity of competition resulting from the unpredictability
We find unpersuasive plaintiff's proffered rationale that since § 3163(1) subjects the insurers of nonresidents (if they write coverages in Michigan) to liability under the Michigan no-fault system, including its open-ended personal protection benefits provisions, they likewise should be entitled to all of its protections. Clearly, as to those out-of-state insureds, such insurers have not paid for this particular protection. This conclusion is perhaps best illustrated by reference to another provision of § 3163.
As a practical matter, however, it would make little sense to provide such an insurer with the protection of § 3104, even though it has paid Michigan no-fault benefits, since the insurer who has paid benefits pursuant to § 3163(2) has not paid any kind of premium to the CCA for such protection. The same reasoning must certainly apply to the plaintiff insurer who is required to provide benefits under § 3163(1) because it is authorized to write policies in Michigan. As to its out-of-state insureds, whatever percentage of its business they make up, the plaintiff simply has not paid for the protection of § 3104.
Plaintiff's general assertion that its liability under § 3163 entitled it to "all of the rights and immunities under the Michigan no-fault law irrespective of" the nonresident status of its insured, including the right of catastrophic loss protection under § 3104, is simply unfounded. As defendant
Moreover, even if we were to conclude that § 3163(3) generally provides insurers who file the proper certification with all the rights of an insurer who has written a policy pursuant to § 3101(1) — a question not before this Court — we would still be unable to find a right to indemnification in this case. It is § 3104 itself which limits the right to indemnification to insurers who have provided coverages pursuant to § 3101(1). As a specific and subsequently enacted provision § 3104 must control as against the more general § 3163(3). Thus, the "system" of which plaintiff contends it is a part as a result of its certification under § 3163(1) does not in fact establish plaintiff's right to indemnification.
We must remember that insurers such as plaintiff ran the risk of exposure to such catastrophic claims as a result of § 3163 long before the CCA was created. Plaintiff in this case did not gain additional exposure as a result of the creation of the CCA. Moreover, to the extent that the liability of the CCA is limited to policies of insurance written in this state for Michigan-registered vehicles, insurers such as plaintiff remain free to seek reinsurance elsewhere or act otherwise to limit that risk. Plaintiff's argument that it thought it was somehow "precluded" from seeking reinsurance elsewhere for its out-of-state insureds by the "shall accept" language of § 3104(2) is without merit. The association's plan of operation quite clearly explained that the indemnification was to be provided only for policies written for Michigan
Finally, our conclusion that the Legislature did not intend to confer such a substantial benefit upon such insurers is confirmed by our view that it did not intend to impose so substantial a burden upon those who would be ultimately liable for the cost of such coverage, that is, this state's no-fault insurance consumers, to whom any and all costs of such indemnification coverage inevitably would be passed. Under plaintiff's reading of the statute, these insureds would be required to cover not only the costs of the claims made by their fellow Michigan insureds, who, it must be remembered, have also actually contributed to the fund through passed-on premiums, but also the costs of the claims of insureds from other states, who have not paid into the fund in the same manner. Plaintiff's reading of the statute would thus undoubtedly have a great effect on the cost to consumers of buying insurance in Michigan. Quite obviously, if the CCA were required to take into account the possible claims of nonresidents in arriving at its total premium, the average premium per car, which, again, is passed on only to resident insureds, would necessarily be higher.
In sum, unlike plaintiff, we see no inequity in
The United States Court of Appeals for the Sixth Circuit has asked this Court to consider whether the Michigan Catastrophic Claims Association's obligation under § 3104(2) of the no-fault act to indemnify member insurers for losses incurred over $250,000 for personal protection benefits applies where such benefits are paid to a nonresident pursuant to § 3163.
We answer that the CCA has correctly interpreted § 3104(2) to apply only to personal protection insurance coverages written for "residents" of this state, who, as that term is intended under the CCA'S plan of operation, include not only those
RILEY, C.J., and BRICKLEY, CAVANAGH, ARCHER, and GRIFFIN, JJ., concurred with BOYLE, J.
LEVIN, J. (separate opinion).
I am in substantial agreement with the conclusion and the views stated in the majority opinion.
I write separately to indicate my continued adherence to the view expressed in In re Certified Question (Bankey v Storer Broadcasting Co), 432 Mich. 438, 458; 443 N.W.2d 112 (1989), that there is a substantial question whether the Court has jurisdiction to respond to a certified question.
It was thought that the creation of such an association of insurers would alleviate the competitive inequity of these catastrophic claims by spreading their cost throughout the industry, and also increase the statistical basis for prediction of the overall cost of such claims, making the management of these liabilities easier. See House Legislative Analysis, SB 306, March 13, 1978.
Section 3104(1) also requires membership in the CCA for those insurers who write coverages providing "the security required by section 3103(1) within this state...." MCL 500.3103(1); MSA 24.13103(1) requires third-party insurance coverage for motorcycles. Under § 3101(2)(c), however, motorcycles are not considered motor vehicles for purposes of the no-fault act, and thus such insurers are deemed members of the association "only for purposes of [premium] assessments under subsection (7)(d)." They are not entitled to indemnification for losses sustained, but must still pay into the association's operating fund. Our discussion of the rights of member insurers to indemnification, therefore, is limited to the rights of those insurers providing security for motor vehicles.
Moreover, we do not express any opinion as to whether the CCA would be obligated to provide indemnification to an insurer who has written a policy in this state for a nonresident pursuant to § 3102(1). MCL 500.3303(b); MSA 24.13303(b) appears to indicate that nonresidents who intend to reside in this state for thirty days or more are entitled to purchase insurance in this state upon making a written statement of such intention.
The Department of Commerce Analysis of SB 306 similarly notes the favorable effect of "equitable distribution of catastrophic claims among all of the state's motorists," and also points out that the cost of providing such coverage would be "predictable," since the "base of cars would be all insured cars in Michigan."
In our opinion, providing coverage for policies written in this state for vehicles registered in this state quite clearly advances the goals of the Legislature with respect to ensuring fair competition within this state's no-fault insurance market. We do not believe that a scheme which limits indemnification coverage to those who have paid for it is irrational or arbitrary. Nor do we believe that the state must offer such coverage to all insurers with respect to their out-of-state insureds.