Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:
Opinion Marilyn Kelly Michael F. Cavanagh
Elizabeth A. Weaver
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
Diane M. Hathaway
JULY 21, 2009
UNITED STATES FIDELITY INSURANCE &
GUARANTY COMPANY,
Plaintiff-Appellee,
v No. 133466
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant,
and
MICHAEL MIGDAL, Individually and as
Conservator for the Estate of DANIEL MIGDAL,
a Protected Person,
Defendant.
HARTFORD INSURANCE COMPANY OF THE
MIDWEST,
Plaintiff-Appellee,
v No. 133468
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant.
BEFORE THE ENTIRE BENCH
1
WEAVER, J.
This Court originally granted leave to appeal to consider whether MCL
500.3104(2) obligates the Michigan Catastrophic Claims Association (MCCA) to
reimburse a member insurer for personal protection insurance (PIP) benefits paid
to a claimant without regard to the reasonableness of the member insurer’s
payments of PIP benefits. This Court issued an opinion reversing the Court of
Appeals and remanding for further proceedings, while holding that “when a
member insurer’s policy only provides coverage for ‘reasonable charges,’ the
MCCA has authority to refuse to indemnify unreasonable charges.”1
Subsequently, plaintiffs United States Fidelity Insurance & Guaranty Company
and Hartford Insurance Company of the Midwest filed motions for rehearing. We
granted the plaintiffs’ motions for rehearing, and these cases were resubmitted for
decision without further briefing or oral argument.2
We now hold that the indemnification obligation set forth in MCL
500.3104(2) does not incorporate the reasonableness standard that MCL 500.3107
requires between claimants and member insurers. Furthermore, the powers
granted to the MCCA in § 3104(7) are limited to adjusting the “practices and
procedures” of the member insurers and do not encompass adjustment to the
1
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 482 Mich 414, 417; 759 NW2d 154 (2008).
2
United States Fidelity Ins & Guaranty Co v Mich Catastrophic Claims
Ass’n, 483 Mich 918 (2009).
2
payment amount agreed to between claimants and member insurers. Moreover,
we hold that the power granted to the MCCA under MCL 500.3104(8)(g) is
limited to furthering the purposes of the MCCA and that determining
reasonableness is not one of its purposes. Finally, although the MCCA has no
right to directly challenge the reasonableness of a claim, the no-fault statute does
provide the MCCA with safeguards against negligent actions of member insurers.
Accordingly, we affirm the judgment of the Court of Appeals.
I. Facts and Procedural History
United States Fidelity Insurance & Guaranty Co v MCCA
In the first case in these consolidated appeals, Daniel Migdal was injured in
a 1981 car accident in which he sustained catastrophic injuries. His injuries
included a traumatic brain injury with cerebral spastic quadriplegia, severe oral
motor apraxia, and dysphasia. Because of the extent of the injuries, Daniel was
prescribed, and received, 24-hour-a-day nursing care. In 1988, Michael Migdal
(Mr. Migdal), Daniel’s father and the conservator of Daniel’s estate, sued the no-
fault insurance provider, United States Fidelity Insurance & Guaranty Company
(USF&G), to recover expenses paid for Daniel’s care. In 1990, the parties entered
into a consent judgment. Pursuant to the judgment, USF&G paid Mr. Migdal
$35,000 in exchange for a release from all contractual liability for nursing care
provided before May 10, 1989. Additionally, USF&G agreed to pay $17.50 an
3
hour for Daniel’s home nursing care for the following year.3 The payments would
be made regardless of whether Daniel’s parents provided the nursing care or a
third party was brought in to provide the care. The hourly rate, fixed for the first
year after the judgment, was subject to an annual increase of 8.5 percent. The
increased rate would be compounded based on the previous year’s rate.
Pursuant to the consent judgment, USF&G paid Mr. Migdal the consented-
to hourly wage.4 Once the amount paid to Mr. Migdal had reached the statutory
threshold amount of $250,000,5 the MCCA began to reimburse USF&G for
payments made to Mr. Migdal that exceeded the threshold. However, after the
hourly rate had increased significantly with the passage of time, the MCCA
eventually refused to reimburse USF&G for amounts that USF&G paid Mr.
Migdal under the consent judgment, on the ground that the amounts were
3
Mr. Migdal created a company to manage Daniel’s care. This company
acted as an intermediary that used the benefit payments from USF&G to pay the
hired nurses that cared for Daniel and to pay Mr. Migdal for his efforts in Daniel’s
care. The judgment contained a provision stating that if Daniel’s condition
substantially changed, the court retained jurisdiction and could determine whether
a reduction or increase in the payments was “warranted.”
4
Mr. Migdal testified that his duties included reading papers concerning
business management and medical advances, checking and providing maintenance
of Daniel’s equipment, keeping the books, paying the nurses, and shopping for
necessary items for Daniel’s care.
5
MCL 500.3104(2) reads, in pertinent part:
[T]he association shall provide and each member shall accept
indemnification for 100% of the amount of ultimate loss sustained
under personal protection insurance coverages in excess of the
following amounts in each loss occurrence . . . .
At the time of both accidents involved in these consolidated appeals, the threshold
amount was $250,000.
4
unreasonable. In 2003, USF&G filed a complaint in the Oakland Circuit Court for
a declaratory judgment that the MCCA must reimburse USF&G for the total
amount that USF&G paid to Mr. Migdal under the consent judgment, regardless of
the reasonableness of the amount. At the time, USF&G was paying $54.84 an
hour to Mr. Migdal for Daniel’s nursing care.6 The MCCA sought to only be
required to reimburse USF&G at a rate of $22.05 an hour, arguing that the agreed-
upon rate of $54.84 an hour was unreasonable and, therefore, the MCCA should
not have to reimburse USF&G for the total amount. Meanwhile, USF&G sought
to have the consent judgment with Mr. Migdal revised, arguing that circumstances
had changed when Mr. Migdal hired a third party to care for Daniel instead of
providing the nursing care himself. Mr. Migdal filed a motion for summary
disposition for failure to state a claim. The court granted Mr. Migdal’s motion.7
Likewise, the MCCA moved for summary disposition. It contended that
there was no question of material fact that the payments made by USF&G to Mr.
Migdal were unreasonable. Moreover, the MCCA argued that the no-fault act
only required reimbursement of payments that are reasonable. In a countermotion
for summary disposition, USF&G argued that the no-fault act required the MCCA
to reimburse it for the full amount paid to Mr. Migdal, despite any
6
Mr. Migdal paid $32 an hour of this amount to the nurses (including
benefits) and kept the rest as compensation for his work.
7
USF&G did not appeal that decision. We therefore express no opinion on
whether the consent judgment would have been subject to judicial modification on
the ground that the payment amount it called for had become unreasonable with
the passage of time.
5
unreasonableness regarding the amount paid. Alternatively, USF&G argued that
there was a question of material fact concerning the “unreasonableness” of the
consent judgment.
The trial court granted USF&G’s motion for summary disposition, ruling
that the MCCA must reimburse USF&G for its “ultimate loss,”8 including the
entire amount that USF&G had to pay Mr. Migdal regardless of whether the
amount paid was reasonable. The trial court denied the MCCA’s motion for
summary disposition. The trial court entered a judgment requiring the MCCA to
reimburse USF&G in the amount of $1,725,072 under the no-fault act and holding
the MCCA liable for future payments consistent with the consent judgment. The
parties agreed to stay the enforcement of the order while the MCCA appealed by
right in the Court of Appeals.
Hartford Ins Co v MCCA
In the second case of these consolidated appeals, Robert Allen was injured
in a 2001 car accident in which he sustained catastrophic injuries. His injuries
included right-sided pleuritic effusion, brain injuries, quadriparesis, bilateral
frozen shoulder, and cardiopathy. Because of the extent of the injuries, Allen was
prescribed, and received, 24-hour-a-day care by a licensed nurse. Hartford
Insurance Company of the Midwest (Hartford), Allen’s no-fault insurer, initially
paid $20 an hour for the nurse. In 2003, Hartford agreed to pay an increased rate
8
MCL 500.3104(2).
6
of $30 an hour for Allen’s care. Soon thereafter, Hartford’s payments for Allen’s
care exceeded the $250,000 statutory threshold.
The MCCA refused to reimburse Hartford for any payments above $20 an
hour for the services rendered. Hartford filed a complaint for a declaratory
judgment that would require the MCCA to pay Hartford $571,847.21 as
reimbursement for payments exceeding the no-fault threshold. Additionally,
Hartford sought a declaration that the MCCA must reimburse Hartford for the total
payments above the $250,000 threshold, regardless of the reasonableness of the
payments. After the initial filing, Hartford moved for summary disposition,
arguing that the no-fault act required the MCCA to reimburse Hartford for the
entire amount paid to Allen that exceeded the threshold, regardless of the
reasonableness of that amount. The MCCA argued that it only had to reimburse
Hartford for reasonable payments and that there was insufficient discovery
concerning the reasonableness of the amount of the payments. The circuit court
ruled that reasonableness was an element in determining how much the MCCA
must reimburse Hartford and that there was insufficient discovery to determine if
the payments were reasonable. Hartford immediately appealed the trial court’s
holding requiring the element of reasonableness to be considered.
The Court of Appeals Decision
The Court of Appeals consolidated the USF&G and Hartford cases and
held that “MCL 500.3104 does not incorporate a ‘reasonableness’ requirement and
requires the MCCA to reimburse insurers for the actual amount of PIP benefits
7
paid in excess of the statutory threshold.”9 (Emphasis in the original). The
MCCA sought leave to appeal in this Court, and this Court granted leave.10 This
Court issued an opinion reversing the Court of Appeals and remanding for further
proceedings, while holding that “when a member insurer’s policy only provides
coverage for ‘reasonable charges,’ the MCCA has authority to refuse to indemnify
unreasonable charges.”11 Subsequently, plaintiffs United States Fidelity Insurance
& Guaranty Company and Hartford Insurance Company of the Midwest filed
motions for rehearing. We granted the plaintiffs’ motions for rehearing and this
case was resubmitted for decision without further briefing or oral argument. 483
Mich 913 (2009).12
9
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 274 Mich App 184, 192; 731 NW2d 481 (2007).
10
481 Mich 862 (2008).
11
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 482 Mich 414, 417; 759 NW2d 154 (2008).
12
Justices Corrigan and Young were simply shown as denying the motions
for rehearing. However, Justice Young, in his dissent joined by Justice Corrigan,
now takes the opportunity well after the motions for rehearing have been decided
to attack the remaining justices who did not vote to retain this Court’s earlier
decision.
The dissent erroneously asserts that the justices voting to grant rehearing
erred because Peoples v Evening News Ass’n, 51 Mich 11, 21; 16 NW 185 (1883),
held that this Court is precluded from granting rehearing when the composition of
the Court has changed, absent any new arguments from the parties in the cases.
However, contrary to the dissent’s assertions, this Court merely stated in Peoples
that a change in the composition of this Court cannot be the basis for granting
rehearing.
Accordingly, if the composition of the Court changes, and the composition
becomes such that a majority of the Court sees a reason to grant rehearing, the
majority is not precluded under Peoples from granting rehearing. If, for instance,
four justices on the newly composed court concluded that the challenged opinion
8
II. Standard of Review
Statutory interpretation is a question of law, which this Court reviews de
novo. In re Investigation of March 1999 Riots in East Lansing (People v Pastor),
463 Mich 378, 383; 617 NW2d 310 (2000). This Court reviews de novo a trial
court’s decision regarding a motion for summary disposition. Herald Co v Bay
City, 463 Mich 111, 117; 614 NW2d 873 (2000).
III. Analysis
The issue before this Court involves how much of a member insurer’s
coverages the MCCA must indemnify in the event of a catastrophic injury.
Specifically, is the MCCA liable for reimbursement of PIP payments based on
potentially unreasonable claims?
The outcome of these cases depends on this Court’s interpretation of the
language in MCL 500.3104. An overarching rule of statutory construction is
was erroneous, those justices can vote to grant rehearing. The same holds true
whether the deciding vote is a new justice who joined the court after the
challenged opinion was released or whether the deciding vote comes from a justice
who signed the challenged opinion and changed his or her mind after further
consideration.
This practice is consistent with MCR 2.119(F)(3), which creates a
“palpable error” standard for rehearing cases. It is up to the moving party to show
palpable error that would lead to a different disposition in the case. If a majority
of the Court is convinced by the moving party, the Court has the discretion to
grant rehearing. Furthermore, while MCR 2.119(F)(3) states that a motion for
rehearing will generally not be granted if the motion only presents the same
arguments decided in the original disposition of the case, MCR 2.119(F)(3)
explicitly refrains from “restricting the discretion of the court” to grant rehearing.
Accordingly, we are not persuaded by the dissent’s attempts to discredit
this Court’s order that granted rehearing in this case.
9
“that this Court must enforce clear and unambiguous statutory provisions as
written.” In re Certified Question (Preferred Risk Mut Ins Co v Michigan
Catastrophic Claims Ass’n), 433 Mich 710, 721; 449 NW2d 660 (1989)
(quotation marks omitted). “If the language of [a] statute is unambiguous, the
Legislature must have intended the meaning clearly expressed, and the statute
must be enforced as written.” Sun Valley Foods Co v Ward, 460 Mich 230, 236;
596 NW2d 119 (1999). However, “what is ‘plain and unambiguous’ often
depends on one’s frame of reference.” Shiffer v Gibraltar School Dist Bd of Ed,
393 Mich 190, 194; 224 NW2d 255 (1974). In order to ascertain this frame of
reference, the contested provisions must be read in relation to the statute as a
whole and work in mutual agreement. In re Certified Question, 433 Mich at 722.
See also State Treasurer v Wilson, 423 Mich 138, 144; 377 NW2d 703 (1985).
Additionally, the frame of reference shares a deep nexus with the intent of
the Legislature. “The primary goal of statutory interpretation is to give effect to
the intent of the Legislature.” Title Office, Inc v Van Buren Co Treasurer, 469
Mich 516, 519; 676 NW2d 207 (2004), quoting In re MCI Telecom Complaint‚
460 Mich 396, 411; 596 NW2d 164 (1999). Fundamentally, “[t]his task begins
by examining the language of the statute itself. The words of a statute provide the
most reliable evidence of [the Legislature’s] intent . . . .” Sun Valley, 460 Mich at
236 (citation and quotation marks omitted). This Court must “consider both the
plain meaning of the critical word or phrase as well as ‘its placement and purpose
in the statutory scheme.’” Id. at 237, quoting Bailey v United States, 516 US 137,
10
145; 116 S Ct 501; 133 L Ed 2d 472 (1995). “As far as possible, effect should be
given to every phrase, clause, and word in the statute. The statutory language
must be read and understood in its grammatical context, unless it is clear that
something different was intended.” Sun Valley, 460 Mich at 237.
In interpreting § 3104, this Court first must determine how § 3104(2)
corresponds with § 3107 and how these two provisions correspond within the
entire statutory scheme. Section 3104(2) requires that the MCCA “shall provide
and each member shall accept indemnification for 100% of the amount of
ultimate loss sustained under personal protection insurance coverages in excess of
the following amounts in each loss occurrence . . . . ”13 Section 3107(1)(a)
defines “personal protection insurance benefits” as “[a]llowable expenses
consisting of all reasonable charges incurred for reasonably necessary products,
services and accommodations for an injured person’s care, recovery or
rehabilitation.” This provision requires that all PIP benefits claimed and paid
between the insurer and the insured must be reasonable. The MCCA argues that
this Court should incorporate the § 3107 definition of “benefits” into § 3104(2)
where § 3104(2) refers to “coverages.” However, we decline to do so because the
phrase “personal protection insurance benefits” has a distinct meaning from the
phrase “personal protection insurance coverages” that is found in § 3104(2).
13
The amounts are statutorily set to increase over time. At the time of both
accidents, the threshold amount was $250,000. In 2008, the threshold amount was
$440,000. See MCL 500.3104(2)(a)-(k).
11
When the Legislature uses different words, the words are generally
intended to connote different meanings. Simply put, “the use of different terms
within similar statutes generally implies that different meanings were intended.”
2A Singer & Singer, Sutherland Statutory Construction, (7th ed), § 46:6, p 252.
If the Legislature had intended the same meaning in both statutory provisions, it
would have used the same word. Therefore, we disagree with the MCCA and
hold that the definition of personal protection insurance benefits found in §
3107(1)(a) (including the reasonableness standard) is not equivalent to the
definition of personal protection insurance coverages in § 3104(2).
The distinctive use of the term “coverages” is important. LeBlanc v State
Farm Mut Auto Ins Co, 410 Mich 173, 204; 301 NW2d 775 (1981) (“‘Coverage’,
a word of precise meaning in the insurance industry, refers to protection afforded
by an insurance policy, or the sum of the risks assumed by a policy of
insurance.”). Although the terms “benefits” and “coverages” are related because
of their close proximity in the statute,14 the proximity of these two terms does not
mean that they are synonymous.
14
MCL 500.3107(1) provides, in pertinent part:
Except as provided in subsection (2), personal protection
insurance benefits are payable for the following:
(a) Allowable expenses consisting of all reasonable charges
incurred for reasonably necessary products, services and
accommodations for an injured person’s care, recovery, or
rehabilitation. Allowable expenses within personal protection
insurance coverage shall not include charges for a hospital room in
12
Section 3107 excludes from the definition of “allowable expenses” within
PIP “coverages” hospital charges in excess of reasonable and customary semi-
private room charges and funeral and burial expenses in amounts specified in the
policy (subject to a range specified in that section). This leaves all other charges
open to PIP “coverage.” The fact that the Legislature limited the exceptions to
“coverage” so narrowly indicates that the term “coverage” is a broader term than
“benefits.” Moreover, because “coverages” is never given a more restrictive
definition elsewhere in the statute, the word must be afforded its ordinary,
everyday meaning. Sun Valley, 460 Mich at 237 (“The statutory language must
be read and understood in its grammatical context, unless it is clear that
something different was intended.”). In the grammatical context, the meaning of
“coverages” is its common meaning, limited only by the specific statutory
exceptions.
“Coverage” is defined in dictionaries as the “[e]xtent of protection afforded
by an insurance policy [or the] amount of funds reserved to meet liabilities,”15 as
“protection against a risk or risks specified in an insurance policy,”16 as “the risks
excess of a reasonable and customary charge for semiprivate
accommodations . . . or for funeral and burial expenses in the
amount set forth in the policy which shall not be less than $1,750.00
or more than $5,000.00. [Emphasis added.]
15
Webster’s II New College Dictionary (1995).
16
Random House Webster’s Dictionary (2001).
13
within the scope of an insurance policy,”17 and as the “amount, and extent of risk
covered by insurer.”18 Under the common meaning of “coverage,” the
contractual liability amount that an insurer agrees to pay an insured is considered
a part of the insurer’s coverage. USF&G and Hartford paid funds pursuant to a
consent judgment and a settlement agreement with the respective insureds. This
contractual liability, or coverage, owed by each insurer is the total amount agreed
to between the original contracting parties. The reasonableness of the agreed
payment amount is not a factor.
The meaning of “coverages” in MCL 500.3107 becomes clearer after
considering “‘its placement and purpose in the statutory scheme.’” Sun Valley,
460 Mich at 236, quoting Bailey, 516 US at 145. In the statute, “coverages” is
positioned just after “ultimate loss.” “Ultimate loss” is statutorily defined as the
“actual loss amounts that a member is obligated to pay and that are paid or
payable by the member . . . .” MCL 500.3104(25)(c) (emphasis added). The
obligation of the insurer is to fulfill its duty by honoring its contractual coverages.
The duty to perform the contract relates back to the ultimate loss insofar as the
ultimate loss includes payment of the obligation, i.e., the total contracted amount.
Consequently, the MCCA must reimburse the insurers for 100 percent of the
ultimate loss, which reflects the amount to which the insurer and the insured
agreed, and subject to PIP coverage. The ultimate loss specifically refers to
17
Black’s Law Dictionary (7th ed).
18
Black’s Law Dictionary (5th ed).
14
coverage, which is broader than benefits and is not statutorily limited to
reasonable payments.19
Moreover, the MCCA is not a no-fault insurer of its member companies,
and the member companies are not injured persons entitled to no-fault
indemnification. Thus, the relationship between the MCCA and its members is
not subject to the reasonableness requirements found in MCL 500.3107. Rather,
the Legislature provided in § 3104(2) that the MCCA would “indemnify” the
insuring members for PIP payments. The Legislature did not state that the MCCA
would “insure” or “reinsure” the members for amounts greater than the threshold.
Black’s Law Dictionary (5th ed) defines “indemnify” as “[t]o restore the victim of
a loss, in whole or in part, by payment . . . ; to secure against loss or damage . . . .”
Indemnification is not a contingent plan like an insurance plan. Instead, it is a set
security meant to assist against certain circumstances. Here, those circumstances
arise when the PIP amount contracted by the insurer exceeds the statutory
threshold.
Section 3401(1) states that the MCCA is “not subject to any laws . . . with
respect to insurers.” Thus, the MCCA is not a no-fault insurer, and consequently
19
The MCCA argues that if there is not a reasonableness factor for it to
enforce, the member insurers will have no incentive to make reasonable
settlements that do not exceed the statutory threshold amount because the insurers
will not be liable to pay anything beyond the threshold amount. However, one
incentive comes from higher premiums paid to the MCCA. See MCL
500.3104(7)(d) (requiring that the MCCA assess its member companies an annual
premium on each of their no-fault policies written in Michigan). If all the
individual members act in a manner that does not regard the reasonableness of
their settlements, then insurance premiums will increase greatly.
15
it is also not a reinsurer. Because the MCCA is not a no-fault insurer, but, rather,
an indemnitor of no-fault insurers for benefits in excess of the statutory threshold,
§ 3107 does not directly bind the MCCA; it only binds the insurer members and
the insured. Section 3107 “makes both reasonableness and necessity explicit and
necessary elements of a claimant’s [insured’s] recovery . . . .” Nasser v Auto Club
Ins Ass’n, 435 Mich 33, 49; 457 NW2d 637 (1990) (emphasis added).
Specifically, it is the insurance company that has the right to deny a claim (or part
of a claim) for unreasonableness under § 3107. The insured then has the burden to
prove that the charges are in fact reasonable. See generally Nasser, 435 Mich 33,
Manley v Detroit Automobile Inter-Ins Exch, 425 Mich 140; 388 NW2d
216 (1986), and LaMothe v Auto Club Ins Ass’n, 214 Mich App 577; 543 NW2d
42 (1995). Given that the established burden of proof is on the insured, it is
counterintuitive to conclude that the member insurance company would benefit
from not having the burden of proof in one instance against an insured, but having
the burden in another instance against the MCCA.
The MCCA maintains that the foregoing statutory constructions will lead to
higher costs to insureds and will be a disincentive for member insurers to keep
payments reasonable. These fears are unfounded. The MCCA is an
unincorporated nonprofit association, whose purpose is to provide insurers with
indemnification for PIP policies that exceed a certain threshold. See MCL
500.3104(1). The Legislature created the MCCA “in response to concerns that
Michigan’s no-fault law provision for unlimited [PIP] benefits placed too great a
16
burden on insurers, particularly small insurers, in the event of ‘catastrophic’ injury
claims.” In re Certified Question, 433 Mich at 714. The MCCA maintains that it
should have the ability to unilaterally stop making indemnification payments to a
member when it determines that the claim payments are unreasonable. Yet, the
MCCA acknowledges that a member can take the MCCA to court over a
reasonableness dispute, which would leave a finder of fact as the ultimate
authority over whether the payments are reasonable.
In essence, under the MCCA’s preferred outcome, when a member insurer
makes an agreement with an insured (often in a litigation setting, whether it be an
arbitration hearing, consent judgment, or declaratory judgment), the member must
then sue the MCCA if the MCCA finds that the payment is unreasonable. If this
Court were to accept the MCCA’s argument, the logical consequence would be
that member insurers would be reluctant to settle with the claimant. Member
insurers might then force a jury trial with every catastrophically injured claimant
in order to secure a verdict with a “reasonable” stamp on the result. This outcome
goes against the legislative purpose of assuring efficient and quick recovery for
claimants in the no-fault system. Shavers v Attorney General, 402 Mich 554, 578-
579; 267 NW2d 72 (1978) (“The goal of the no-fault insurance system was to
provide victims of motor vehicle accidents assured, adequate, and prompt
reparation for certain economic losses.”).
In response to the MCCA’s concerns, it should be pointed out that the
MCCA is not without a safeguard to protect against unreasonable payments. The
17
Legislature specifically laid out powers that the MCCA can exercise to guard
against unreasonable settlements of catastrophic claims. MCL 500.3104(7)(b)
states that the MCCA shall
[e]stablish procedures by which members shall promptly report to
the association each claim that, on the basis of the injuries or
damages sustained, may reasonably be anticipated to involve the
association if the member is ultimately held legally liable for the
injuries or damages. Solely for the purpose of reporting claims, the
member shall in all instances consider itself legally liable for the
injuries or damages. The member shall also advise the association
of subsequent developments likely to materially affect the interest of
the association in the claim. [Emphasis added.][20]
This statutory language requires and empowers the MCCA to establish procedures
to protect itself from unreasonable settlements in all cases involving claims that
may exceed the threshold and consequently affect the MCCA. The MCCA’s plan
of operation likewise echoes these statutory requirements.21 This language enables
the MCCA to establish procedures that will enable it to exercise appropriate
control over settlements whenever the member reasonably anticipates that the
claim will involve the MCCA.
20
Section 3104 includes numerous other rules for the MCCA, such as
membership requirements, liability, and creation of a “plan of operation.”
21
Art X, § 10.01 of the plan of operation provides in part:
Members shall report to the Association such information as
the Board may require on forms prescribed by the Board: (a) As
soon as practicable after the loss occurrence, Members shall report
each claim which, on the basis of the injuries or damages sustained,
may reasonably be anticipated to result in a Reimbursable Ultimate
Loss, and for purposes of reporting the Member shall consider itself
legally liable for the injuries and damages.
18
Only then, not after the claimant and member insurer have reached a
settlement, can the MCCA exercise control over the settlement process. Under
MCL 500.3104(7)(g), the MCCA must
[e]stablish procedures for reviewing claims procedures and practices
of members of the association. If the claims procedures or practices
of a member are considered inadequate to properly service the
liabilities of the association, the association may undertake or may
contract with another person, including another member, to adjust or
assist in the adjustment of claims for the member on claims that
create a potential liability to the association and may charge the cost
of the adjustment to the member. [Emphasis added.]
Thus, when § 3104(7)(g) is read in conjunction with § 3104(7)(b), the outcome is
that the MCCA is required to review those reports by members that anticipate
needing indemnification and to assess the adequacy of the procedures or practices
22
of the member. Upon a finding of inadequacy, the MCCA can adjust the
practices or procedures of the member.23 One of the key protections here is that
22
The MCCA argued that because part of § 3104(7)(g) uses the term “may”
instead of “must” in describing some of its potential powers, the MCCA has
greater power than what directly follows in the statute to limit or control the
individual member insurers. The MCCA wishes to conclude that since the section
does not set forth a duty to act in a specific way (e.g., review claims), it allows the
MCCA to act how it wants regarding member claims, including questioning their
reasonableness. This is erroneous. The premise and purpose of the MCCA is to
indemnify insurers for payments beyond the threshold amount, so that insurance
firms of all sizes can compete in Michigan’s no-fault market without fear of
sustaining disproportionate catastrophic loss claims.
23
The plan of operation also echoes the statute in this regard:
If a Member or 3103 Member refuses to timely submit the
reports or information required of it pursuant to Section 10.01 or
otherwise, or if the Board should determine that the reports and
information submitted by a Member or 3103 Member are unreliable
or incomplete, the Board may, at the member’s expense, direct that
an authorized representative of the Association (which may be
19
the MCCA has the power and duty to adjust only “procedures and practices” of the
member that produce an unreasonable payment amount; the power does not
include the power to adjust the amount after a settlement has been reached.24 The
MCCA has the power to step in before a settlement has been reached and adjust
situations that it anticipates might otherwise expose it to unreasonable
indemnification costs. By requiring submission of proposed settlement
agreements for approval, the MCCA can protect itself against later having to pay
unreasonable claims from member insurers. The exercise of these powers is the
MCCA’s protection against a member’s neglect of its duties.
Finally, the MCCA argues that § 3104(8)(g) gives it the power to question
reasonableness regardless of the statute’s other provisions. Specifically, §
3104(8)(g) allows the MCCA to “[p]erform other acts not specifically enumerated
in this section that are necessary or proper to accomplish the purposes of the
association and that are not inconsistent with this section or the plan of operation.”
another member) shall audit and inspect such member’s records and
compile the required information and data. [Art X, § 10.02.]
24
Although § 3104(7)(g) states that the MCCA may “adjust or assist in the
adjustment of claims,” the practical effect of § 3104(7)(g) is that only the MCCA
is able to prescribe procedures and practices by which to ensure the reasonableness
of the amounts that members agree to pay to claimants. When the MCCA asserts
its power to adjust or assist in the adjustment of a claim, the MCCA effectively
steps into the shoes of the member insurer. The claim that the MCCA reviews for
adjustment purposes is the insured’s claim with the member insurer, not the
member insurer’s reimbursement claim with the MCCA. Accordingly, the
MCCA, standing in the shoes of the member insurer, is limited to the member
insurer’s power to review the insured’s claim for reasonableness as spelled out in
the member insurer’s policy, a settlement agreement, or a consent judgment.
Thus, even when the MCCA assists in or assumes control over the claims
adjustment process, the amount payable is still dictated by the amount that the
member insurer is “obligated” to pay to the insured when a settlement already has
been reached.
20
However, this section does not give the MCCA carte blanche to simply avoid a
member insurer’s agreement that it finds unreasonable. The power granted under
§ 3104(8)(g) is limited to accomplishing the “purposes of the association.” More
importantly, the exercise of this power cannot be “inconsistent with this section or
the plan of operation.” Id. The plan of operation created pursuant to § 3104(17)
must be “consistent with the objectives and provisions of this section, which shall
provide for the economical, fair, and nondiscriminatory administration of the
association and for the prompt and efficient provision of indemnity.” MCL
500.3104(17) (emphasis added).
Section 3104(8)(g) allows the MCCA to fulfill the specific requirements of
the statute. Accordingly, we interpret § 3104(8)(g) as granting the MCCA the
limited power to further its purpose of prompt and efficient indemnification of its
members. To interpret that section as granting any further power, such as the
power to decline indemnification on the basis of the reasonableness of the
indemnification amount, would be inconsistent with the Legislature’s intent.
IV. Response to the Dissent
The dissent raises the concern that a decision in favor of plaintiffs in this
case will result in substantially increased insurance costs. Certainly, insurance
costs are a critical concern, but they are a policy concern that belongs to the
Legislature. Nonetheless, we observe that the concern appears highly speculative
and, indeed, unfounded. There is no evidence that insurers have engaged or will
21
engage in slack negotiations. It bears mentioning here that there is no indication
that the settlements in these cases were unreasonable when made.
The dissent bases its concern on an affidavit from defendant’s executive
director in which she refers to an estimate provided by consultants to defendant.
No basis is given in the affidavit for the estimated increase in costs. And there is
reason to wonder about this estimate, at least inasmuch as it might be based on an
anticipated decision from this Court.
First, there is no evidence that defendant has routinely or even occasionally
challenged the reasonableness of insurers’ settlements with their insureds until
very recently. It is difficult to understand how it will cost defendant extravagant
sums to give up a practice it has only recently begun. Second, it is unknown
whether the actuarial assessment factored in the effect of defendant’s potential use
of the cost-containment procedure actually provided by the Legislature in MCL
500.3104(7)(g).
As mentioned, the Legislature has provided that “[i]f the claims procedures
or practices of a member are considered inadequate to properly service the
liabilities of the association, the association may undertake . . . to adjust or assist
in the adjustment of claims for the member on claims that create a potential
liability to the association . . . .” MCL 500.3104(7)(g). There is no evidence that
the actuarial assessment considered the effect of defendant’s implementation of
this legislatively provided cost-savings mechanism.
22
The dissent additionally fails to recognize that there is a compelling policy
reason to reject defendant’s claim that it may review settlements for
reasonableness: namely, to limit litigation and promote settlements. This Court
has long recognized that “[t]he goal of the no-fault insurance system was to
provide victims of motor vehicle accidents assured, adequate, and prompt
reparation for certain economic losses.” Nelson v Transamerica Ins Services, 441
Mich 508, 514; 495 NW2d 370 (1992) (citation and quotation marks omitted).
Additionally, this Court has stated that “[t]he act is designed to minimize
administrative delays and factual disputes that would interfere with achievement
of the goal of expeditious compensation of damages suffered in motor vehicle
accidents.” Miller v State Farm Mut Auto Ins Co, 410 Mich 538, 568; 302 NW2d
537 (1981). The ability of insurers to settle claims is essential to meeting these
goals. Yet, if defendant can reexamine settlements of reasonableness long after
they are made, then insurers will be very reluctant to make settlements. Further, a
new layer of litigation for after-the-fact reasonableness assessments, such as this
one, would be inevitable. There is no evidence that the actuarial assessment on
which the dissent relies has accounted for the substantial increase in litigation
costs that would result if this Court allows defendant the extra-statutory power to
question settlements for reasonableness after they are made.
But, again, these are policy concerns best addressed by the Legislature. It
appears that the Legislature has indeed balanced these concerns in the provisions
of MCL 500.3104, and there is no reason for this Court to apply a strained
23
construction to the statutes to achieve a goal contrary to the purposes of the no-
fault act. In the unlikely event that insurers become milquetoast negotiators,
defendant has the statutorily provided protection to remedy the situation.
V. Conclusion
We hold that the indemnification obligation set forth in § 3104(2) does not
incorporate the reasonableness standard that § 3107 requires between claimants
and member insurers. Furthermore, the powers granted to the MCCA in § 3104(7)
are limited to adjusting the “practices and procedures” of the member insurers and
do not encompass adjustment to the payment amount agreed to between claimants
and member insurers. Finally, we hold that the power granted to the MCCA under
§ 3104(8)(g) is limited to furthering the purposes of the MCCA, and that
determining reasonableness is not one of its purposes.
Accordingly, we affirm the Court of Appeals holding that the MCCA must
reimburse its member insurers 100 percent of the ultimate loss exceeding the
statutory threshold for claims without a reduction based on its unilateral
assessment of the reasonableness of the amount.
Affirmed.
Elizabeth A. Weaver
Marilyn Kelly
Michael F. Cavanagh
Diane M. Hathaway
24
STATE OF MICHIGAN
SUPREME COURT
UNITED STATES FIDELITY INSURANCE &
GUARANTY COMPANY,
Plaintiff-Appellee,
v No. 133466
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant,
and
MICHAEL MIGDAL, Individually and as
Conservator for the Estate of DANIEL MIGDAL,
a Protected Person,
Defendant.
HARTFORD INSURANCE COMPANY OF THE
MIDWEST,
Plaintiff-Appellee,
v No. 133468
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant.
YOUNG, J. (dissenting).
I respectfully dissent.
On December 29, 2008, this Court decided these cases.1 Today, just a few
months later, a new majority2 reverses that decision and it does so without even
affording the parties an opportunity to brief and argue why this reversal is
warranted. Although not relevant to my analysis of the substantive issue in these
cases,3 the costs that the majority’s decision will impose on Michigan drivers is
relevant to assessing the majority’s hurried approach and policy-based reversal of
this Court’s prior decision. As I will discuss later, the majority’s decision will
cause every Michigan resident who owns and insures an automobile to pay a 19
percent higher annual surcharge premium for mandatory catastrophic coverage.
The cost of the majority’s decision to those with insured automobiles will be an
estimated $693.8 million more for the coming year alone.4
I. What Changed?
The facts have not changed. The text of the statute at issue has not
changed. The parties’ arguments have not changed. And the rationale advanced
in the opinions of this Court has not changed. Yet, within a matter of months, a
1
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 482 Mich 414; 759 NW2d 154 (2008) (hereinafter USF&G I).
2
I note that the majority in this case is the new philosophically aligned
majority: Justices Weaver, Cavanagh, Hathaway, and Chief Justice Kelly.
3
See USF&G I, supra at 432 n 32.
4
In response to the motions for rehearing, the Michigan Catastrophic
Claims Association (MCCA) has conducted an actuarial assessment to detail the
expected increase in auto insurance premiums that reversal of our original decision
will produce—19 percent more in catastrophic claims premiums to be precise.
See the affidavit of Gloria Freeland in support of appellant’s supplement to its
answer to appellee’s motion for rehearing, attached hereto as an appendix.
2
decision of this Court, thoughtfully briefed, argued, and considered by seven
justices, is no longer worth the paper it was written on. Even the casual observer,
however, does not really need to ask why. The reason is obvious: On January 1,
2009, the composition of this Court changed.
II. Why is this Case being Reheard?
This case was argued on October 1, 2008. On November 4, 2008, Justice
Hathaway defeated then-Chief Justice Taylor in the election for his seat on this
Court. This case was decided on December 29, 2008, with former Chief Justice
Taylor casting his vote with the majority.
The new majority’s opinion today offers no new rationale or argument. In
fact, it is merely an extended quotation of Justice Weaver’s former dissent.
For over a century this Court has adhered to the principle that a motion for
rehearing should be denied unless a party has raised an issue of fact or law that
was not previously considered but which may affect the outcome.5 Indeed, this
Court codified that principle in our court rules.6
5
See Nichols, Shepard & Co v Marsh, 62 Mich 439, 440; 29 NW 37
(1886); Thompson v Jarvis, 40 Mich 526, 526 (1879).
6
See MCR 2.119(F)(3), which provides:
Generally, and without restricting the discretion of the court,
a motion for rehearing or reconsideration which merely presents the
same issues ruled on by the court, either expressly or by reasonable
implication, will not be granted. The moving party must
demonstrate a palpable error by which the court and the parties have
been misled and show that a different disposition of the motion must
result from correction of the error.
3
As Justice Weaver’s former dissent in these cases and the majority’s new
opinion make obvious, the parties have not raised a new issue of fact or law to
merit rehearing. The only difference is in the membership of this Court. As early
as 1883, this Court had the wisdom to realize that such a change is not a proper
ground for rehearing. In Peoples v Evening News Ass’n,7 this Court’s opinion on
a motion for rehearing stated in its entirety:
This case having been heard and decided when three judges
only were sitting, and a change in the Court having taken place and a
further change being [about] to occur on the first of January, a
motion is now made for a rehearing at the next January term before
the full Court as it will then be constituted.
Held, unanimously, that a rehearing will not be ordered on the
ground merely that a change of members of the bench has either
taken place or is about to occur.[8]
By ordering rehearing simply because a change in the Court has taken place, the
new majority has overruled the longstanding and clear principle of Peoples.9 Will
The new majority states that MCR 2.119(F)(3) “creates a ‘palpable error’
standard for rehearing cases.” Ante at 9 n 12. The actual standard created is: “a
palpable error by which the court and the parties have been misled . . . .” Neither
the parties nor the new majority suggest that this Court was previously misled.
Plaintiffs and the new majority simply disagree with this Court’s prior opinion for
the reasons previously stated in the flawed analysis of Justice Weaver’s dissent.
7
51 Mich 11; 16 NW 185 (1883).
8
Id. at 21.
9
The restraint demonstrated by this Court in Peoples has been duplicated
by other courts denying rehearing when the sole basis is a change in the
composition of the court. See Golden Valley Co v Greengard’s Estate, 69 ND
171, 190; 284 NW 423 (1938); Gas Products Co v Rankin, 63 Mont 372; 207 P
993 (1922); Wolbol v Steinhoff, 25 Wyo 227, 258; 170 P 381 (1918); Woodbury v
Dorman, 15 Minn 341 (1870); Stearns v Hemmens, 3 NYS 16 (NY Comm Pl,
1888).
4
any change in an assigned judge now justify the reopening of a predecessor’s
ruling?
It is apparent that the new majority feels unencumbered by such
principles—even one that has endured for more than 100 years. And, perhaps, its
members no longer feel a need to be cosseted by the concerns and beliefs that they
professed to have for the past decade when they were members of the
philosophical minority of this Court. Indeed, Chief Justice Kelly once exclaimed
that a recent decision of the Court being reconsidered “has hardly had time to
become outmoded.”10 Justice Cavanagh similarly protested that “[i]f a majority of
the Court believes that reconsideration should be granted, then I believe that the
proper course would be to receive briefs and hear arguments on the defendant’s
constitutional argument before remanding the case to the trial court.”11
10
McCready v Hoffius, 459 Mich 1235, 1236 (1999) (Kelly, J., dissenting).
11
Id. at 1236-1237 (Cavanagh, J., dissenting) (emphasis added). Unlike
this case, the defendants in McCready cited new authority for their position.
Nevertheless, Chief Justice Kelly and Justice Cavanagh were adamant that this
Court erred by considering the new authority on rehearing. It is indeed at least
curious that Chief Justice Kelly and Justice Cavanagh opposed the remand order in
McCready, which was premised on new authority, but freely joined this Court’s
order for rehearing “without further briefing or oral argument,” United States
Fidelity Ins & Guaranty Co v Michigan Catastrophic Claims Ass’n, 483 Mich 913
(2009), and the reversal of this Court’s opinion without any new issues being
raised.
Moreover, I find it odd that Justice Hathaway, who, during her Supreme
Court campaign, actively promoted the fabrication that former Chief Justice
Taylor slept through the oral argument of McDowell v Detroit, 477 Mich 1079
(2007), finds it appropriate to cast her vote to overturn this Court’s decision
without so much as attending argument on this case or allowing the party opposing
the motion to have its day in court. See minutes 4:28 to 4:40 at
(accessed June 3, 2009).
5
Because nothing in the facts, arguments, or legal rationale has changed, I
continue to support this Court’s original decision and do not feel the need to
restate it in its entirety here.
III. Facts and Procedural History
The facts and procedural history of these consolidated appeals are simple,
uncontested, and have been set out by this Court in detail three times.
The central question here is whether an insurance company that strikes a
bad bargain with its insured may fob off on the Michigan Catastrophic Claims
Association (MCCA), a nonprofit entity created by the Legislature to spread the
costs associated with catastrophic automobile injuries, these “unreasonable”
expenses. In our earlier decision, we held that the MCCA had explicit statutory
authority to resist assuming responsibility for an insurance company’s
unreasonable payouts.
Plaintiff United States Fidelity Insurance & Guaranty Company (USF&G)
entered into a consent judgment with its insured, Daniel Migdal, which resulted in
USF&G paying $54.84 an hour for attendant care services.12 Plaintiff Hartford
12
The debate here is not whether an insurance company may refuse to fully
compensate a catastrophically injured insured. Indeed, the plaintiff insurance
companies were required to fully compensate their insureds under USF&G I. The
question is whether an insurance company can agree to overcompensate its insured
and escape this burden by having the rest of Michigan policyholders pay for that
bad bargain. This very issue is well illustrated by the facts of USF&G itself.
The rate that USF&G pays its insured, Daniel Migdal, to cover costs
associated with his catastrophic injuries is so inflated that his father (Daniel’s
“caregiver”) started a company, Medical Management, to make a profit from the
arrangement. From the $54.84 hourly payments that USF&G makes, Medical
6
Insurance Company of the Midwest (Hartford) entered into a settlement agreement
with its insured, Robert Allen, which required that Hartford pay $30 an hour for
attendant care services. The MCCA refused to indemnify USF&G and Hartford
beyond a rate of $22.05 and $20 respectively, rejecting the higher amounts as
“unreasonable.”
Plaintiffs brought these actions seeking declaratory judgments that the
MCCA was required to reimburse the full rate of attendant care services that they
paid their insureds. The circuit courts entered conflicting judgments and the
aggrieved parties appealed. The Court of Appeals consolidated the appeals and
held that “the MCCA is statutorily required to reimburse an insurer for 100
percent of the amount that the insurer paid in PIP [personal protection insurance]
benefits to an insured in excess of the statutory threshold listed in MCL
500.3104(2), regardless of the reasonableness of these payments.”13 The MCCA
sought leave to appeal in this Court, which was granted, and this Court held that
“when a member insurer’s policy only provides coverage for ‘reasonable charges,’
the MCCA has authority to refuse to indemnify unreasonable charges.”14
Management pays the nurses (who actually provide Daniel’s care) an average of
$32 an hour (including benefits!) and retains the remainder of the USF&G hourly
payment for itself. So inflated was the USF&G payment that, after paying for all
of Daniel’s care, Medical Management earned from this arrangement
approximately $200,000 in profits for 2003. Under the majority’s new opinion, it
will be Michigan policyholders, not USF&G, who will pay for the profits of
Daniel’s father.
13
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 274 Mich App 184, 192; 731 NW2d 481 (2007).
14
USF&G I, supra at 417.
7
Because the composition of this Court changed on January 1, 2009,
USF&G and Hartford sought rehearing15 and the new majority granted this motion
“without further briefing or oral argument.”16
IV. Discussion
As previously noted, at issue is whether the MCCA has the authority to
refuse to indemnify member insurers for unreasonable payments they make to
their policyholders. I agree with many points of the majority’s new opinion, but
the points of my disagreement are significant and the results of our differences
will be extremely costly to the citizens of Michigan.
I agree that “personal protection insurance benefits” are not the same as
“personal protection insurance coverages.”17 I further agree that “the term
‘coverage’ is a broader term than ‘benefits.’”18 I particularly agree with each of
the definitions for “coverages” cited by the new majority.19 “‘[C]overage’ refers
15
In its reply brief filed February 19, 2009, USF&G argued that “this
Court’s practice of granting rehearing requests based on nothing more than a view
of a majority of the Justices that the Court’s original opinion is incorrect . . . is as
it should be, given this Court’s status as a court of last resort.” This statement
both ignores Peoples and betrays the plaintiffs’ motivation for seeking rehearing.
16
United States Fidelity Ins & Guaranty Co v Michigan Catastrophic
Claims Ass’n, 483 Mich 913 (2009).
17
Ante at 11. Justice Weaver asserts that “the terms ‘benefits’ and
‘coverages’ are related because of their close proximity in the statute.” Ante at 12.
I am unfamiliar with this tenet of statutory construction, and Justice Weaver offers
no authority for it. Indeed, whether separated by two words or two hundred, I
believe that the meaning of benefits and coverages are related, but distinct.
18
Ante at 13.
19
Ante at 12, quoting LeBlanc v State Farm Mut Auto Ins Co, 410 Mich
173, 204; 301 NW2d 775 (1981), for the proposition that “‘[c]overage’, a word of
8
to protection afforded by an insurance policy or the sum of risks assumed by an
insurance policy.”20 I disagree, however, with the new majority’s refusal to
interpret “coverages” consistent with the definitions that it cites—a reference to
the underlying insurance policy.
The majority states its holding: “the indemnification obligation set forth in
MCL 500.3104(2) does not incorporate the reasonableness standard that MCL
500.3107 requires between claimants and member insurers.”21 That is true but
unresponsive to this Court’s holding in USF&G I. This Court did not previously
incorporate the § 3107 standard for personal protection insurance (PIP) benefits
into § 3104(2). Rather, this Court, consistent with the definitions advanced by the
majority, interpreted “coverages” as the “protection afforded by an insurance
policy” and explained that “the member insurer’s policy will ultimately control the
precise meaning in the insurance industry, refers to protection afforded by an
insurance policy, or the sum of the risks assumed by a policy of insurance.” The
new majority also cites the following consistent definitions: (1) the “[e]xtent of
protection afforded by an insurance policy [or the] amount of funds reserved to
meet liabilities”; (2) “protection against a risk or risks specified in an insurance
policy”; (3) “the risks within the scope of an insurance policy”; and (4) the
“amount, and extent of risk covered by insurer.” Ante at 13-14, quoting Webster’s
II New College Dictionary (1995); Random House Webster’s Dictionary (2001);
Black’s Law Dictionary (7th ed); and Black’s Law Dictionary (5th ed). See
USF&G I, supra at 431 n 31.
20
USF&G I, supra at 431 n 31 (emphasis added), quoting Jarrad v Integon
Nat’l Ins Co, 472 Mich 207, 217; 696 NW2d 621 (2005).
21
Ante at 2, 24.
9
standard for the MCCA’s review because the policy establishes the ‘personal
protection insurance coverages.’”22
Referring to the consent judgment and settlement agreement at issue, the
new majority contends that “[t]his contractual liability, or coverage, owed by each
insurer is the total amount agreed to between the original contracting parties.”23
The fallacy in this assertion is that the consent judgment or settlement agreement
is “coverage.” As amply demonstrated by the definitions that the majority cites,
“coverage” refers to the underlying policy purchased by the insured. That policy is
the only relevant contract. The consent judgment and settlement agreement are
separate contractual, albeit judicially sanctioned, agreements. They are distinctly
not “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
22
USF&G I, supra at 430-431; id. at 431 n 31 (“Thus, the terms of the
policy control the standard for the MCCA’s review.”). This fundamental
distinction was underscored by Justice Markman in his concurrence:
The dissent is correct that the reasonableness requirement of
MCL 500.3107 is not integrated into the indemnification clause set
forth in § 3104(2). [USF&G I, supra] at 457 [(Weaver, J.,
dissenting)]. However, the majority opinion does not attempt to
incorporate this requirement into the MCCA’s statutory power to
review a member insurer’s claim to ensure it is in compliance with
the policy. Rather, it holds that the MCCA can review a member’s
claim for compliance with the policy, which, as represented by both
parties, generally includes a requirement that member insurers
reimburse only reasonable claims based on § 3107. [USF&G I,
supra at 434 n 1 (Markman, J., concurring).]
23
Ante at 14 (emphasis added).
10
or registrant of a motor vehicle required to be registered in this state’ . . . .”24
Because the majority offers no principled rationale for departing from the
definitions that it cites or this Court’s prior interpretation of “personal protection
insurance coverages,” I must respectfully dissent.
The majority makes additional erroneous assertions. First, the majority
asserts that member insurers will have an incentive to make reasonable settlements
of catastrophic claims because, if they do not, the MCCA premiums will
increase.25 The majority appears unaware of how incentives, or the MCCA, work.
The premium that the MCCA charges to cover the liabilities it must statutorily
assume is evenly distributed among the member insurers26 and then passed on to
24
In re Certified Question (Preferred Risk Mut Ins Co v Michigan
Catastrophic Claims Ass’n), 433 Mich 710, 723; 449 NW2d 660 (1989). See also
USF&G I, supra at 437-439 (Markman, J., concurring) (explaining that the
consent judgment and settlement agreement are not part of the member insurer’s
“coverages” because “[a] member insurer that informs the MCCA that it will only
pay ‘reasonable’ claims, but then subsequently modifies the policy after the
accident occurs to include unreasonable claims, has essentially sought
reimbursement for claims for which it has not paid premiums”).
25
Ante at 15 n 19.
26
See MCL 500.3104(7)(d), which provides in pertinent part:
Each member shall be charged an amount equal to that
member’s total written car years of insurance providing the security
required by [MCL 500.3101(1)] or [MCL 500.3103(1)], or both,
written in this state during the period to which the premium applies,
multiplied by the average premium per car. The average premium
per car shall be the total premium calculated divided by the total
written car years of insurance providing the security required by
section 3101(1) or 3103(1) written in this state of all members
during the period to which the premium applies.
11
those who buy no-fault insurance.27 Indeed, this Court has been informed that in
response to the order granting rehearing in this case, the MCCA raised its rates
by 19 percent per policy (or $693.8 million more per MCCA assessment in the
aggregate for this year) to create the reserves necessary to pay the more expansive
claims for unreasonable charges that the new majority’s opinion permits. Contrary
to the new majority’s belief that an insurer will have an economic incentive to
bargain for “reasonable” payments to its insureds, the majority opinion will have
the perverse effect of eliminating an insurer’s incentive to negotiate reasonable
settlements. Indeed, instead of providing insurers a protective shield against
unreasonable catastrophic claims, the majority opinion provides plaintiffs’ no-fault
attorneys a lethal sword against an insurer that insists on a reasonable settlement.
MCL 500.3148(1) provides that a claimant’s attorney fee is charged to the insurer
“if the court finds that the insurer unreasonably refused to pay the claim or
unreasonably delayed in making proper payment.” Under the majority’s decision,
an insurer has no reason to refuse any claim; thus, a claimant’s attorney can use
the threat of attorney fees to force an insurer into an unreasonable settlement.28
27
See USF&G I, supra at 432 n 32; In re Certified Question, supra at 729
(explaining that the MCCA premiums are “inevitably” “passed on” to Michigan’s
no-fault insurance customers); MCL 500.3104(22), which provides that
“[p]remiums charged members by the association shall be recognized in the rate-
making procedures for insurance rates in the same manner that expenses and
premium taxes are recognized.”
28
The MCCA provided a useful hypothetical conversation between a future
plaintiff’s no-fault attorney and an insurer:
12
Under the majority’s decision, insurers will be encouraged to negotiate
unreasonable settlements and pass these off onto the MCCA. As stated, any
liability that the MCCA must assume is eventually passed on to anyone in
Michigan who must buy auto insurance.
Perhaps the majority can explain why the legislative method for containing
costs for Michigan’s no-fault insurance customers is an inferior purpose to their
preferred policy objective. In particular, why is it an inferior purpose at a time
when the Governor has requested an auto insurance rate freeze29 and
unemployment in Michigan has exceeded 14 percent?30
My point is not that our decision should be premised on keeping no-fault
insurance affordable. Indeed, I maintain that such “‘[p]olicy decisions are
[Attorney]: I know that amount is a bit high for attendant
care, but that is what we want. We’ll sue to get it and we’ll seek
attorney fees and penalties too. [MCL 500.3148(1)] Do you want
that?
Insurer: Of course not, but that amount is unreasonable.
[Attorney]: What does reasonable have to do with it? [The]
MCCA has to pay you regardless. Do you want to incur three times
that amount in attorney fees instead?
Insurer: Of course not.
29
See Executive Directive No. 2009-1.
30
See Louis Aguilar, Michigan’s jobless rate 14.1%, highest since ’83, The
Detroit News, June 18, 2009, available at
<://www.detnews.com/article/20090618/BIZ/906180412/1001/Michigan-jobless-
rate-14.1---highest-since—83> (accessed June 28, 2009); Heather Lockwood,
State jobless rate of 14.1% is highest--since July ‘83, Lansing State Journal, June
18, 2009, available at
<://www.lansingstatejournal.com/article/20090618/NEWS01/906180327>
(accessed June 28, 2009).
13
properly left for the people’s elected representatives in the Legislature’”31 and that
the Legislature has made the policy decision in this case. Rather, I raise this issue
because elections matter. The majority has seen fit to engage in its own policy-
making while relying on erroneous assumptions. This is a lethal combination that
will result in harmful, unintended consequences. While it may be politically
expedient to position oneself as “looking out for the little guy,”32 this case is an
excellent example of how acting on such an altruistic impulse rather than applying
the law results in a negative consequence for the vast majority of our citizens. In
this context, each of us who must purchase this mandatory no-fault coverage is a
“little guy.”33
Second, the majority emphasizes that the MCCA may only adjust a member
insurer’s “practices and procedures.”34 The majority then immediately (and
31
USF&G I, supra at 432 n 32, quoting Devillers v Auto Club Ins Ass’n,
473 Mich 562, 589; 702 NW2d 539 (2005).
32
See, e.g., Todd C. Berg, Hathaway attacks, but sketchy on incumbent’s
record, Michigan Lawyers Weekly, October 7, 2008, p 14 (“The centerpiece of
Hathaway’s campaign against Taylor has been her claim that he rules against
middle-class families and in favor of ‘big insurance companies and corporate
special interests.’”); Todd C. Berg, Hathaway’s campaign pledge may support
MSC office closure, Michigan Lawyers Weekly, December 15, 2008, p 1
(“Justice-elect Diane M. Hathaway ran for the Michigan Supreme Court on the
platform that she would stand up for middle-class families and oppose the lavish
perks and benefits that Supreme Court justices were bestowing on themselves.”).
33
The exception, of course, is the lawyer who makes a living doing no-fault
insurance work. For such practitioners, the majority’s opinion creates a new
submarket of opportunity. See note 28 of this opinion.
34
Ante at 20. See MCL 500.3104(7)(g), which provides that the MCCA
shall
14
inconsistently but accurately) concedes that MCL 500.3104(7)(g) permits the
MCCA to “adjust or assist in the adjustment of claims” and “[w]hen the MCCA
asserts its power to adjust or assist in the adjustment of a claim, the MCCA
effectively steps into the shoes of the member insurer.”35 I previously agreed with
these propositions.36 Thus, I struggle to comprehend for what purpose the
majority resists the simple proposition that the MCCA is statutorily authorized to
adjust claims.
Third, “[p]laintiffs argue[d] that if the MCCA may reject member insurer
claims on the basis of the reasonableness of the charges, member insurers will
need to seek assurances that the MCCA will reimburse certain payments before
making them, thus delaying payment.”37 The prospect of delayed payment seems
to be a primary concern that drives the new majority’s analysis. In support of its
construction, it contends:
If this Court were to accept the MCCA’s argument, the
logical consequence would be that member insurers would be
reluctant to settle with the claimant. Member insurers might then
[e]stablish procedures for reviewing claims procedures and practices
of members of the association. If the claims procedures or practices
of a member are considered inadequate to properly service the
liabilities of the association, the association may undertake or may
contract with another person, including another member, to adjust or
assist in the adjustment of claims for the member on claims that
create a potential liability to the association and may charge the cost
of the adjustment to the member.
35
Ante at 20 n 24.
36
USF&G I, supra at 430 n 30.
37
Id. at 432 n 32.
15
force a jury trial with every catastrophically injured claimant in
order to secure a verdict with a “reasonable” stamp on the result.[38]
The majority employs this policy-based rationale to depart from its own
definitions of “coverages” because otherwise “[t]his outcome goes against the
legislative purpose of assuring efficient and quick recovery for claimants in the
no-fault system.”39 The majority fails to explain, however, how its alternative
construction actually resolves the issue. In fact, it does not.
The majority concedes that the MCCA has authority to “requir[e]
submission of proposed settlement agreements for approval.”40 This is the very
outcome that the plaintiff insurance companies here sought to avoid. Indeed, I
believe that “requiring submission of proposed settlement agreements” or “seeking
assurances that the MCCA will reimburse certain payments” would have been a
natural consequence of USF&G I, because it actually gave meaning to the plain
language of this statute. The MCCA is likely to act on the majority’s advice
38
Ante at 17.
39
Ante at 17.
40
Ante at 20. The majority acknowledges this authority within the context
of reading MCL 500.3104(7)(g) in conjunction with § 3104(7)(b), which provides
that the MCCA shall
[e]stablish procedures by which members shall promptly report to
the association each claim that, on the basis of the injuries or
damages sustained, may reasonably be anticipated to involve the
association if the member is ultimately held legally liable for the
injuries or damages. Solely for the purpose of reporting claims, the
member shall in all instances consider itself legally liable for the
injuries or damages. The member shall also advise the association
of subsequent developments likely to materially affect the interest of
the association in the claim. [Emphasis added.]
16
(indeed, it should) and mandate that member insurers afford it the opportunity to
object to proposed settlements or other agreements before they become binding.
Ironically, it appears that even the majority does not deny that the MCCA has this
statutory power.
Thus, the issue of delay is not resolved by the majority’s opinion.
Moreover, the majority’s opinion does not address circumstances, like the present
cases, where the MCCA was not afforded an opportunity to reject the agreements,
which likely explains the $693.8 million bill that will be passed onto and shared
by every Michigan automobile owner because of the increased and uncontrolled
liability that the new majority’s opinion will create for the MCCA.
We, as jurists, are ill-prepared to make complicated policy-based judgments
unrelated to the policy choices that the Legislature has enacted. We do the least
damage when we merely follow the Legislature’s lead by giving words of a statute
a plain reading and enforcing the statute as written. “The Legislature, unlike the
judiciary, is institutionally equipped to assess the numerous trade-offs associated
with a particular policy choice.”41 The Legislature has made difficult choices, and
it used particular words with particular meanings to convey those choices. Our
prior opinion respected our role as jurists, and the Legislature’s role as policy-
41
Devillers, supra at 589. Indeed, the new majority’s response to my
dissent underscores this point. The new majority asserts that “there is no evidence
that defendant has routinely or even occasionally challenged the reasonableness of
insurers’ settlements” and “it is unknown whether the actuarial assessment
factored in the effect of defendant’s potential use of [MCL 500.3104(7)(g)].” Ante
at 22. The Legislature, unlike this Court, has the means to obtain the answers to
those questions.
17
maker, by interpreting the relevant statutory language in a manner consistent with
the plain meaning of the words chosen by the Legislature. In an effort to avoid the
meaning of the words chosen by the Legislature, the new majority has engaged in
a wandering, policy-based analysis that is as flawed as it is misguided. It is an
expensive mistake for which every policyholder in Michigan will pay.
Undeterred and aiming to quell the likely negative response to its policy-
based decision, the new majority asserts that my concerns “appear[] highly
speculative and, indeed, unfounded.”42 My concerns will cease to be “highly
speculative” and “unfounded” when they are reflected in the MCCA’s annual
assessments. Michigan drivers will soon receive their no-fault insurance bills (I
have received mine) with the updated higher MCCA assessment for the fiscal year
beginning July 1, 2009. At that point, Michigan drivers will be free to determine
for themselves whether my concerns are sound and based in reality.
Accordingly, I respectfully dissent.
Robert P. Young, Jr.
Maura D. Corrigan
42
Ante at 21.
18
STATE OF MICHIGAN
SUPREME COURT
UNITED STATES FIDELITY INSURANCE &
GUARANTY COMPANY,
Plaintiff-Appellee,
v No. 133466
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant,
and
MICHAEL MIGDAL, Individually and as
Conservator for the Estate of DANIEL MIGDAL,
a Protected Person,
Defendant.
HARTFORD INSURANCE COMPANY OF THE
MIDWEST,
Plaintiff-Appellee,
v No. 133468
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellant.
MARKMAN, J. (dissenting).
I concur fully with the discussion in part IV of Justice Young’s dissenting
opinion and therefore also dissent.
Stephen J. Markman