Wood v. Auto-Owners Insurance

Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C h i e f J u s ti c e J u s t ic e s
Maura D. Corrigan Michael F. Cavanagh

Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman
____________________________________________________________________________________________________________________________

FILED SEPTEMBER 9, 2003

WENDY WOOD, Personal Representative of the

ESTATE OF MARVIN JAMES WOOD, JR.,

Deceased,

Plaintiff-Appellee,

v No. 121970

AUTO-OWNERS INSURANCE COMPANY,

Defendant-Appellant.

________________________________

PER CURIAM

Defendant seeks leave to appeal the judgment of the Court

of Appeals reversing the trial court’s grant of summary

disposition for defendant. We reverse the Court of Appeals

decision concerning replacement services benefits under MCL

500.3108 and remand the case to the Washtenaw Circuit Court

for further proceedings consistent with this opinion. In all

other respects, we affirm.1

1
In particular, we affirm the judgment of the Court of

Appeals concerning funeral benefits under MCL 500.3107.

I. INTRODUCTION

Plaintiff’s decedent, Marvin James Wood, Jr., was killed

in an automobile accident during the course of his employment.

Defendant Auto-Owners Insurance Company is first in the order

of priority for payment of no-fault benefits. The issue

presented is how to properly calculate Auto-Owners’ liability

for payment of replacement services benefits under MCL

500.3108, in light of the statutory maximum benefit contained

in MCL 500.3108 and the setoff provision in MCL 500.3109.

II. STANDARD OF REVIEW

The issue presented concerns the interpretation of, and

the relationship between, two statutes. Accordingly, the

issue is one of statutory interpretation, which we review de

novo as a question of law. Lesner v Liquid Disposal, Inc, 466

Mich 95, 99; 643 NW2d 553 (2002).

III. DISCUSSION

A. CALCULATION

MCL 500.3108 provides:

(1) Except as provided in subsection (2),

personal protection insurance benefits are payable

for a survivor’s loss which consists of a loss,

after the date on which the deceased died, of

contributions of tangible things of economic value,

not including services, that dependents of the

deceased at the time of the deceased’s death would

have received for support during their dependency

from the deceased if the deceased had not suffered

the accidental bodily injury causing death and

expenses, not exceeding $20.00 per day, reasonably

incurred by these dependents during their

dependency and after the date on which the deceased

died in obtaining ordinary and necessary services

in lieu of those that the deceased would have

performed for their benefit if the deceased had not

suffered the injury causing death. Except as

provided in section (2) the benefits payable for a

survivor’s loss in connection with the death of a

person in a single 30-day period shall not exceed

$1,000.00 for accidents occurring before October 1,

1978, and shall not exceed $ 1,475.00 for accidents

occurring on or after October 1, 1978, and is not

payable beyond the first three years after the date

of the accident.

(2) The maximum payable shall be adjusted

annually to reflect changes in the cost of living

under rules prescribed by the commissioner. A

change in the maximum shall apply only to benefits

arising out of accidents occurring subsequent to

the date of change in the maximum. The maximum

shall apply to the aggregate benefits for all

survivors payable under this section on account of

the death of any one person.

From the plain, unambiguous language of subsection

3108(1), a survivor’s loss benefit (SLB) is comprised of two

elements: (1) economic loss (EL), which is the loss of

contributions of tangible things of economic value, not

including services, and (2) replacement services costs (RS),

which are the expenses, not exceeding $20 a day, reasonably

incurred in replacing ordinary and necessary services. Miller

v State Farm Mut Automobile Ins Co, 410 Mich 538, 554; 302

NW2d 537 (1981). Under subsection 3108(1), the survivor’s

loss benefit (SLB) cannot exceed the statutory maximum (SM).

Schaible v Michigan Mut Ins Co, 116 Mich App 116, 120-121; 321

NW2d 860 (1982). In equational presentation,

SLB = EL + RS

SLB # SM

MCL 500.3109(1) provides:

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. [Emphasis added.]

Because neither worker’s compensation survivor’s benefits

nor Social Security survivor’s benefits include, or are

required to include, replacement services costs (RS),

subsection 3109(1) setoff benefits (SO) pertain only to

economic-loss benefits (EL). Cole v Detroit Auto Inter-Ins

Exch, 137 Mich App 603, 613; 357 NW2d 898 (1984).

The particular question presented by this case pertains

to the interrelation of the survivor’s loss benefit, the

statutory maximum amount, and the setoff benefit amount. The

Court of Appeals held that the setoff benefit amount is to be

subtracted before the calculation of the survivor’s loss

benefit and before the comparison to the statutory maximum

ceiling. In contrast, defendant argues that the first step is

to determine the survivor’s loss benefit and then compare it

to the statutory maximum ceiling. Only then, according to the

defendant, is the MCL 500.3109 setoff provision applied. We

agree with defendant.

MCL 500.3109 provides that setoff benefits “shall be

subtracted from the personal protection insurance benefits

otherwise payable for the injury.” By this language, it is

clear that one first determines what personal protection

insurance benefits are payable. MCL 500.3108 governs that

determination and specifically provides what benefit amount is

“payable” (AP). Once that amount, i.e., the level of benefits

otherwise payable, is calculated under MCL 500.3108, the

setoff provision of MCL 500.3109 is applied and “[b]enefits

provided . . . under the laws,” i.e., the setoff benefit

amount (SO), is subtracted from the “benefits otherwise

payable.”

Under the statutory scheme, to the extent that a setoff

occurs, the setoff benefit amount (SO) substitutes for and

becomes all or part of the economic loss benefit (EL) payment.

Great American Ins Co v Queen, 410 Mich 73, 85, 87, 96, 97;

300 NW2d 895 (1980). In the present case, this means that the

benefits provided by Social Security and worker’s compensation

governmental programs are deducted from the amount payable by

the no-fault insurer as calculated under MCL 500.3108. This

conclusion is consistent with the statutory language of MCL

500.3109, which provides that setoff benefits are to be

“subtracted from the personal protection insurance benefits

otherwise payable.”

The Court of Appeals erred in applying the setoff

provision before completing the MCL 500.3108 analysis. The

full economic loss benefit should have been credited and

included in the survivor’s loss benefit calculation before the

comparison to the statutory maximum benefit. Great American,

supra at 96; O’Donnell v State Farm Mut Automobile Ins Co, 404

Mich 524, 538, 539; 273 NW2d 829 (1979). According to the

plain language of MCL 500.3109, both these steps are to occur

before consideration of the setoff benefit.

To restate, the proper steps in the process are as

follows: (1) calculate SLB (EL + RS = SLB); (2) compare SLB to

SM (SLB # SM) to determine the amount payable under MCL

500.3108 (AP); and (3) determine the no-fault insurer’s

payment liability (NFIL) in light of the setoff benefit amount

(SO). Because the setoff benefit (SO) serves to reimburse

economic loss (EL), the total setoff cannot exceed economic

loss. Thus: If EL $ SO, then NFIL = AP - SO; if EL < SO, then

NFIL = AP - EL.

B. APPLICATION

In the present case, economic loss benefits (EL) based on

Wood’s salary and taxes were calculated to be $3,643.10.2

Replacement service benefits (RS), at a rate of $20 a day,

amount to $600. The applicable statutory maximum benefit

under the annual adjustment permitted by subsection 3108(2)

(SM) is $3,688.

Concerning the setoff benefit amount, plaintiff receives

$2,513.14 in worker’s compensation benefits and $2,199 in

Social Security benefits. These benefits represent

compensation for economic loss only, not for replacement

services. In sum, the total benefit amount that can be

2
All calculations are for a thirty-day period.

applied as setoff under § 3109 (SO) is $4,712.14.

Accordingly, we first calculate the survivor’s loss

benefit (SLB) by adding the economic loss benefit (EL) and the

replacement services costs (RS):

SLB = EL + RS

SLB = $3,643.10 + $600

SLB = $4,243.10

Second, we compare the survivor’s loss benefit (SLB) to

the statutory maximum benefit (SM) in order to determine the

amount payable (AP):

(The lesser of SLB and SM) = AP

(The lesser of $4,243.10 and $3,688) = AP

$3,688 = AP

Third, we determine the no-fault insurer’s payment

liability (NFIL), considering the setoff benefit amount (SO):

If EL $ SO, then NFIL = AP - SO

If EL < SO, then NFIL = AP - EL

Here, SO = $4712.14 and EL = $3,643.10

Therefore, EL < SO, and

NFIL = AP - EL

NFIL = $3,688 - $3,643.10

NFIL = $44.90

Inasmuch as the Court of Appeals did not follow these

steps, the panel erred.

CONCLUSION

For these reasons, we reverse the judgment of the Court

of Appeals concerning replacement services benefits. In all

other respects we affirm. The case is remanded to the

Washtenaw Circuit Court for further proceedings consistent

with this opinion.

Maura D. Corrigan

Elizabeth A. Weaver

Clifford W. Taylor

Robert P. Young, Jr.

Stephen J. Markman

CAVANAGH and KELLY, JJ.

We would grant leave to appeal.

Michael F. Cavanagh

Marilyn Kelly