Jarrad v. Integon National Insurance

Michigan Supreme Court
Lansing, Michigan
Chief Justice: Justices:

Opinion Clifford W. Taylor Michael F. Cavanagh
Elizabeth A. Weaver
Marilyn Kelly
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman

FILED MAY 3, 2005

ARTHUR T. JARRAD,

Plaintiff-Appellee,

v No. 126176

INTEGON NATIONAL INSURANCE
COMPANY,

Defendant-Appellant.

_______________________________

BEFORE THE ENTIRE BENCH

CORRIGAN, J.

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.1 Plaintiff filed this action to challenge the

coordination of benefits. The parties filed cross-motions

for summary disposition. The trial court granted summary

disposition for plaintiff.

The Court of Appeals affirmed in a two-to-one

decision.2 The majority noted that MCL 500.3109a permits

coordination of no-fault benefits with “other health and

1
Under MCL 500.3107(1)(b), no-fault wage loss benefits
are payable for up to three years after the accident.
2
Unpublished opinion per curiam, issued January 27,
2004 (Docket No. 245068).
2
accident coverage . . . .” The majority explained that in

LeBlanc v State Farm Mut Automobile Ins Co, 410 Mich 173,

204; 301 NW2d 775 (1981), this Court had construed the word

“coverage” as “a word of precise meaning in the insurance

industry, [that] refers to protection afforded by an

insurance policy, or the sum of the risks assumed by a

policy of insurance.” While this definition has expanded

under Court of Appeals case law to include medical benefits

received from health plans typically provided by insurers,

the majority opined that no such expansion of the term

“coverage” has occurred regarding work-loss benefit plans.

Moreover, the majority construed Spencer v Hartford

Accident & Indemnity Co, 179 Mich App 389; 445 NW2d 520

(1989), to preclude coordination where an employee receives

“wage loss benefits from his employer through a formal wage

continuation plan pursuant to a collective bargaining

agreement.” The majority distinguished Rettig v Hastings

Mut Ins Co, 196 Mich App 329; 492 NW2d 526 (1992), because

in that case LTD benefits were provided under an insurance

policy, rather than directly by the employer under a

collective bargaining agreement.

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

3

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 (emphasis

added).

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, 431 Mich 663; 431 NW2d 391

(1988); Medicare benefits, LeBlanc, supra; medical benefits

provided under a union plan, Lewis v Transamerica Ins Corp

of America, 160 Mich App 413; 408 NW2d 458 (1987); services

offered by health maintenance organizations, United States

4

Fidelity & Guaranty Co v Group Health Plan of Southeast

Michigan, 131 Mich App 268; 345 NW2d 683 (1983); and

medical and disability benefits provided by the Army and

Veterans Administration, Bagley v State Farm Mut Automobile

Ins Co, 101 Mich App 733; 300 NW2d 322 (1980).

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).3

II. STANDARD OF REVIEW

We review de novo the decision whether to grant

summary disposition. Maiden v Rozwood, 461 Mich 109, 120;

597 NW2d 817 (1999). Moreover, the meaning of the phrase

“other health and accident coverage” in MCL 500.3109a is a

question of law that is also reviewed de novo. Jenkins v

Patel, 471 Mich 158, 162; 684 NW2d 346 (2004).

III. DISCUSSION

A. Legal Background

MCL 500.3109a states:

An insurer providing personal protection
insurance benefits shall offer, at appropriately
reduced premium rates, deductibles and exclusions
reasonably related to other health and accident
coverage on the insured. The deductibles and
exclusions required to be offered by this section
shall be subject to prior approval by the
commissioner and shall apply only to benefits
payable to the person named in the policy, the

3
471 Mich 914 (2004).
5
 spouse of the insured and any relative of either
domiciled in the same household.

In Nyquist v Aetna Ins Co, 84 Mich App 589; 269 NW2d

687 (1978), the plaintiffs argued that Blue Cross-Blue

Shield benefits were not insurance4 and therefore could not

be coordinated with no-fault benefits. The Court of

Appeals concluded that coordination was permitted, noting

“that § 3109a uses the word ‘coverage’ rather than

‘insurance’; the use of the broader term militates against

plaintiffs’ restrictive reading of the section at issue.”

Nyquist, supra at 592. Moreover, the plaintiffs’

restrictive reading would subvert the statutory purpose of

eliminating duplicative coverage.

An employee’s use of accumulated sick leave, however,

is not subject to coordination. In Orr v DAIIE, 90 Mich

App 687; 282 NW2d 177 (1979), the Court of Appeals noted

that the word “coverage” means protection by an insurance

policy, and that the Legislature thus intended to limit

coordination to health and accident insurance coverage.

Sick leave does not fall within this definition. The

plaintiff’s sick bank could fluctuate depending on usage.

Thus, “[a]ny rate reduction granted based upon this

fluctuating benefit could not be actuarially sound.

However, a rate based upon another policy of insurance with

4
See Michigan Hosp Service v Sharpe, 339 Mich 357; 63
NW2d 638 (1954).
6
fixed limits of liability would enable the insurance

company to offer appropriately reduced premium rates.” Id.

at 690-691.

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 (emphasis added). “Thus,

both private and non-private plans were within the scope of

the bill.” Id. at 203.

The LeBlanc Court also stated: “‘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.” Id. at 204.

This Court concluded that Medicare constituted “other

health and accident coverage” because the Court perceived

“no just reason to differentiate Medicare from other, more

traditional, forms of health and accident coverage which

irrefutably are within the scope of § 3109a. Just like any

so-called private insurer, Medicare compensates providers

of medical and hospital services on behalf of participants

who require health care.” Id. at 205. This Court found it

7

“inconsequential” that, in other contexts, “Medicare has

been deemed not to be insurance in the usual sense of the

term: the same has been said of Blue Cross and Blue Shield

plans which, according to Nyquist, fall within § 3109a.”5

Id.

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 (emphasis added).

5
Although the LeBlanc Court concluded that Medicare
was “other health and accident coverage,” no coordination
was allowed in that case because the insured did not elect
a coordinated policy. This Court’s holding avoided the
mandatory coordination provision in MCL 500.3109(1)
(“Benefits provided or required to be provided under the
laws of any state or the federal government shall be
subtracted from the personal protection insurance benefits
otherwise payable for the injury.”) by ruling that the
permissive coordination provision in MCL 500.3109a
controlled instead. This aspect of the analysis in LeBlanc
is not implicated here because it is undisputed that
plaintiff chose a coordinated policy. We also note that
Congress has subsequently amended federal law to make
Medicare benefits secondary to no-fault insurance. See 42
USC 1395y(b).
8
 But MCL 500.3109a; MSA 24.13109(1) does not
refer to “insurance” but to “health and accident
coverage". Not only have medical and disability
benefits from the Army and the Veterans
Administration been included within this statute,
Bagley v State Farm Mut Automobile Ins Co, 101
Mich App 733; 300 NW2d 322 (1980), but Medicare
payments have also been included. [LeBlanc,
supra.] The term used, “coverage", is a broad
term. [Nyquist, supra.] Accordingly, we hold
that the services offered by defendant are
“health and accident coverage” as defined by MCL
500.3109a; MSA 24.13109(1). [Id. at 272-273.]

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. “To accomplish

this end, the Legislature purposely used the broad term

‘coverage’ rather than ‘insurance’ in describing health and

accident benefits available to the insured independent of

the no-fault contract.” Id.

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. Reviewing the holdings

in LeBlanc and Nyquist, the Tatum Court reasoned:

Military medical coverage is similar to both
Blue Cross-Blue Shield and Medicare in the sense
that, in various forms, each is comprehensive
coverage of eligible individuals for their
medical and hospitalization costs. Further, Blue
Cross-Blue Shield coverage, when provided through
9
 one’s employer, can parallel that which is
provided to active military personnel by the
federal government under [the federal statute].
We can perceive no rational basis for concluding
that military medical benefits, which essentially
serve the same purpose as Blue Cross-Blue Shield
and Medicare benefits, are not “health and
accident coverage” within the meaning of § 3109a.
[Tatum, supra at 670.]

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. The LTD benefits at issue

constituted such “coverage” “because they constitute

protection typically provided by health insurance plans,

10

which include payments for medical expenses resulting from

an accident as well as wage-loss replacement benefits.

LeBlanc, supra, p 204.” Rettig, supra at 333. The panel

distinguished Spencer on the ground that the LTD benefits

in Rettig were paid by an insurance company under an

insurance policy, rather than a collective bargaining

agreement.

B. Analysis

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.

11

 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 application to commercial

insurance policies.

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, 174 Mich App 196; 435 NW2d 423 (1988); Auto-Owners

Ins Co v Lacks Industries, 156 Mich App 837; 402 NW2d 102

(1987). We discern no principled reason why self-funded

12

long-term disability plans should be treated differently

from self-funded medical plans, in light of the holding in

Rettig that LTD plans are “other health and accident

coverage.”

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, 466 Mich 142, 151; 644 NW2d 715 (2002); Cruz v

State Farm Mut Automobile Ins Co, 466 Mich 588, 597 n 13;

648 NW2d 591 (2002); O’Donnell v State Farm Mut Automobile

Ins Co, 404 Mich 524; 273 NW2d 829 (1979).

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, 203 Mich App 548; 512 NW2d 856

(1994), the Court of Appeals recognized that self-

insurance, as certified by the Secretary of State, is the

functional equivalent of a commercial no-fault insurance

policy. While the Court relied in part on provisions of

13

the no-fault act, MCL 500.3101 et seq., and the financial

responsibility act, MCL 257.501 et seq., it also discussed

the “common understanding of insurance”:

The term insurance can be defined . . . as a
contract between two parties for indemnification.
Black’s Law Dictionary (4th ed), p 943. However,
definitions of insurance also include: “coverage
by contract whereby one party undertakes to
indemnify or guarantee another against loss by a
specified contingency or peril,” Webster’s
Seventh New Collegiate Dictionary (1970), p 439
(definition 2b), see also Random House Webster’s
College Dictionary (1991), p 699 (definition 2);
“the sum for which something is insured,”
Webster’s Seventh New Collegiate Dictionary,
supra, p 439 (definition 2c); and “any means of
guaranteeing against loss or harm,” Random House
Webster’s, supra, p 699 (definition 6). In this
case, Enterprise was certified as self-insured,
meaning, for purposes of the no-fault and
financial responsibility acts, that it had
indemnified itself to satisfy judgments against
it. [Elassal, supra at 555.]

We do not suggest that the holding in Elassal is

directly relevant, because we are concerned here not with a

self-insured no-fault plan, but rather with a self-funded

LTD plan that a no-fault insurer seeks to coordinate with

its no-fault policy. We simply observe that the reasoning

in Elassal suggests that even if § 3109a referred to

“insurance” and not (as it does) to “coverage,” a strong

argument would still exist that a self-funded LTD plan

constitutes “insurance” under the common understanding of

that term.

Further, we reject the Court of Appeals majority’s

view—derived from the holding in Spencer—that the existence
14
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:

"(b) [B]asic reparation insurers may offer
the following additional exclusions . . .

* * *

"(2) [Exclusions], in calculation of net
loss, of any of those amounts and kinds of loss
otherwise compensated by benefits or advantages a
person receives or is unconditionally entitled to
receive from any other specified source, if the
other source has been approved specifically or as
to type of source by the [commissioner] of
insurance by rule or order adopted upon a
determination by the [commissioner] (i) that the
other source or type of source is reliable and
that approval of it is consonant with the
purposes of this Act, and (ii) if the other
source is a contract of insurance, that it
provides benefits for accidental injuries
generally and in amounts as [sic] least as great
for other injuries as for injuries resulting from
motor vehicle accidents.” [Spencer, supra at
399, quoting 14 ULA Civil Procedural and Remedial
Laws, UMVARA, § 14(b)(2), pp 82-83.]

The Spencer Court also extracted an official comment

to the model provision: “'The cost reductions may be
15
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, quoting official comments to § 14(b)(2), supra, p 85.

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. The Court then asserted that

because the Legislature did not adopt “the broader language

of the uniform act,” it “did not intend for no-fault

benefits to be coordinated with a broad array of other

benefits which may perhaps be equally duplicative.” Id.

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, 466 Mich 304,

312; 645 NW2d 34 (2002). Where the Legislature has

unambiguously conveyed its intent in a statute, judicial

construction is not permitted. Because the proper role of

the judiciary is to interpret, not write, the law, courts

lack authority to venture beyond the unambiguous statutory

text. Id.

16

 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, citing Michigan Mut Ins Co v Carson City Texaco,

Inc, 421 Mich 144; 365 NW2d 89 (1984). The Spencer Court

failed, however, to adequately explain why this principle

supported its holding.

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

17

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

18

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 than the model

provision. As discussed, we agree with the Court of

Appeals dissent that the statutory phrase, “other health

and accident coverage,” plainly includes defendant’s self-

funded long-term disability plan. We discern no textual

basis to limit the phrase “other health and accident

coverage” to commercial insurance policies. Section 3109a

contains no such limitation, and we believe the phrase

“other health and accident coverage” includes self-funded

plans.

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-

19

term disability plan.6 We overrule Spencer to the extent

that it is inconsistent with this opinion.

IV. CONCLUSION

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.

Maura D. Corrigan
Clifford W. Taylor
Elizabeth A. Weaver
Robert P. Young, Jr.
Stephen J. Markman

6
Our dissenting colleague analyzes the model provision
that the Legislature did not adopt. We again 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,
supra, p 312. Where the Legislature has unambiguously
conveyed its intent in the statutory text, judicial
construction is not permitted. Id. We have examined the
statutory text and concluded that the phrase used by our
Legislature, “other health and accident coverage,” is
sufficiently broad to include a self-funded LTD plan.
Because we are satisfied that the words adopted by our
Legislature are sufficiently clear to resolve this
question, we simply have no occasion to resort to the
method of judicial construction utilized by the Spencer
Court and advocated by the dissent in this case.
20
 S T A T E O F M I C H I G A N

SUPREME COURT

ARTHUR T. JARRAD,

Plaintiff-Appellee,

v No. 126176

INTEGON NATIONAL INSURANCE COMPANY,

Defendant-Appellant.
_______________________________

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, 179 Mich App 389; 445 NW2d 520 (1989), and

Rettig v Hastings Mut Ins Co, 196 Mich App 329; 492 NW2d

526 (1992), is inconsistent with the Legislature’s intent.

Moreover, I would not decide this jurisprudentially

significant issue without the benefit of full briefing and

oral argument. Accordingly, I must respectfully dissent.

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 action to challenge the setoff, and

the parties filed cross-motions for summary disposition.

The trial court granted summary disposition in favor of

plaintiff, and the Court of Appeals affirmed.

II. LEGAL BACKGROUND

A. MCL 500.3109a

MCL 500.3109a provides:

An insurer providing personal protection
insurance benefits shall offer, at appropriately
reduced premium rates, deductibles and exclusions
reasonably related to other health and accident
coverage on the insured. The deductibles and
exclusions required to be offered by this section
shall be subject to prior approval by the
commissioner and shall apply only to benefits
payable to the person named in the policy, the
spouse of the insured and any relative of either
domiciled in the same household.

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

2

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. The Court of Appeals reasoned that § 3109a expressly

limits setoff to health and accident coverage on the

insured and, therefore, the issue was whether the

additional wages the plaintiff received pursuant to a

collective bargaining agreement constituted “other health

and accident coverage” under § 3109a. The Court of Appeals

held that the Legislature did not intend for § 3109a to

apply to the type of benefits the plaintiff received.

After detailing this Court’s decision in LeBlanc v

State Farm Mut Automobile Ins Co, 410 Mich 173; 301 NW2d

775 (1981), as well as its own decision in Orr v DAIIE, 90

Mich App 687; 282 NW2d 177 (1979), the Court of Appeals

3

noted that the scope of coverages within the meaning of

“other health and accident coverage” had been subsequently

expanded. However, “the cases so doing have generally been

limited to benefits corresponding to typical health

insurance plans.” Spencer, supra at 398. In light of

these decisions, and the absence of a clear construction of

the phrase “other health and accident coverage,” the Court

of Appeals observed:

It is also helpful when construing
provisions of the Michigan no-fault insurance act
to look to the Uniform Motor Vehicle Accident
Reparations Act (UMVARA). The UMVARA is one of
the model acts which was utilized as source
material in the drafting of the no-fault act.
Citizens Ins Co of America v Tuttle, 411 Mich
536; 309 NW2d 174 (1981). Thus, where a
provision of the no-fault act is virtually
identical to a provision of the UMVARA, the
UMVARA will be looked to for guidance in
construing a provision of the no-fault act. See
MacDonald v State Farm Mutual Ins Co, 419 Mich
146; 350 NW2d 233 (1984). However, where there
is an absence of a comparable provision in the
Michigan act, it is presumed the Legislature
considered but rejected the proposed language in
the uniform act. See Michigan Mutual Ins Co v
Carson City Texaco, Inc, 421 Mich 144; 365 NW2d
89 (1984). [Id. at 398-399.]

The Spencer Court then examined the language and

official comments of the counterpart of § 3109a in the

model act, 14 ULA Civil Procedural and Remedial Laws,

UMVARA, § 14(b)(2). Notably, the Court of Appeals quoted

the official comments to § 14(b)(2):

“The cost reductions may be significant,
however, in the case of an insurer offering to
sell basic reparation policies to the employees
4
 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.]

In light of the differences between Michigan’s no-

fault act and the model act, the Court of Appeals reasoned:

Thus, 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. Instead of adopting the broader
language of the uniform act, however, the
Michigan act was drafted much more narrowly, and
limited coordination to “other health and
accident coverage.” It appears, therefore, that
in enacting the Michigan act the Legislature did
not intend for no-fault benefits to be
coordinated with a broad array of other benefits
which may perhaps be equally duplicative. [Id.
at 400.]

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

5

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. Accordingly, the

Court of Appeals concluded that the LTD benefits received

by the plaintiff fell within the purview of § 3109a

“because they 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.

Importantly, the Court of Appeals reasoned that its

holding did not conflict with Spencer. The panel in Rettig

observed that the plaintiff in Spencer received wages

directly from his employer pursuant to a collective

bargaining agreement. The Court of Appeals further noted:

6

 There, this Court observed that under the
Uniform Motor Vehicle Accident Reparations Act,
wage continuation benefits pursuant to a union
agreement were intended to be coordinated with
no-fault benefits, but that the Michigan version
of the uniform act contained more restrictive
language and limited coordination of benefits to
insurance coverage. In contrast to Spencer, the
long-term disability benefits in this case were
provided to plaintiff by Reliance Standard Life
Insurance Company pursuant to an insurance
policy, not a collective bargaining agreement.”
[Id.]

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 (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

7

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.

IV. DISCUSSION

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

8

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. As noted by the trial court, this

dichotomy is not as arbitrary as it appears.1 Thus, because

I am not convinced that Spencer was wrongly decided, and

because plaintiff falls within the Spencer box, I would

affirm the Court of Appeals decision.

The majority concludes that Spencer was erroneously

decided because “[i]t is simply not relevant under the

1
In granting plaintiff’s motion for summary
disposition, the trial court stated:

I am persuaded that at this time case law
does clearly hold that the legislature intended
section 3109a only to apply to wage continuation
benefits which are funded by insurance as opposed
to wage continuation benefits which are self-
funded. That is not as arbitrary as it at first
may sound, because I agree with the Defendant
that there’s a clear legislative policy behind
the statute, and that to trade—or mandate, I
should say, the trading of a class of lower
premium insurance policies in return for the
acceptance by the consumer of coordination of
benefits, not in this fact situation we’re not
talking about a consumer buying an insurance
policy. We’re talking about a consumer being
part of a bargaining unit which collectively
bargained a self-funded, non-insurance funded
wage continuation benefit.

9
statutory text whether the coverage arose from a collective

bargaining agreement.” Ante at p 15. 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, 460 Mich 243, 256 n

14; 596 NW2d 574 (1999) (“The fact that our Legislature did

not include this restriction in adopting its version of the

model contribution act is significant to any good-faith

effort to give meaning to the Legislature’s intent.”).

Here, the UMVARA “clearly was ‘one of the model acts

10

utilized as source material in the drafting of the no-fault

act . . . .’” Marquis v Hartford Accident & Indemnity

(After Remand), 444 Mich 638, 652 n 17; 513 NW2d 799

(1994), quoting Tuttle, supra at 546. And § 3109a was

plainly based on § 14(b)(2) of the UMVARA. See Spencer,

supra. Moreover, 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. Thus, in my

view, the Spencer panel properly consulted the model act’s

language and official comments when making its decision.

See, e.g., Ouellette v Kenealy, 424 Mich 83, 86-87; 378

NW2d 470 (1985).

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 from § 14(b)(2) of the model act because “our

Legislature might simply have found a better way than the

drafters of the model provision to express the same

protection.” Ante at 17. The majority further surmises,

“[p]erhaps our Legislature used a synonym or more succinct

11

language to state whatever the drafters of the model

provision had attempted to say.” Id. Without citing any

particular provision, the majority also hypothesizes that

“the Legislature might have concluded that another

statutory provision in Michigan rendered the model

provision unnecessary.” Id. The majority poses these

questions in an effort to discount the Spencer Court’s

conclusion that § 3109a is more narrow than the model act.

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. Accordingly, Spencer’s

position that the Legislature rejected the applicable

portion of the UMVARA in favor of a more narrow provision

is more defensible than the majority’s translucent attempts

to explain away the deviation and further muddy the waters.

I believe that the Spencer Court adequately explained that

because the Legislature rejected one portion of § 14 of the

UMVARA, the Michigan statute is “narrower” (i.e., it does

not contain the rejected portion of § 14). Moreover, I

believe that under these circumstances—where § 14 of the

UMVARA differs from § 3109a, and a self-funded noninsurance

LTD plan under a collective bargaining agreement is

12

implicated—the Michigan statute produces a different

result.

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

18 (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

13

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 have the benefit

of full briefing and oral argument on this particular

issue. As shown by the majority and dissenting opinions,

the ongoing validity of Spencer is a jurisprudentially

significant issue that could have wide implications. Thus,

even though I believe at this point that Spencer was

properly decided, I would prefer to grant leave and

actually hear what the parties have to say on this

particular issue.

V. CONCLUSION

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.

14

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.

Michael F. Cavanagh
Marilyn Kelly

15