404 Mich. 524 (1979) 273 N.W.2d 829

O'DONNELL
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

Docket No. 58833, (Calendar No. 13).

Supreme Court of Michigan.

Argued March 3, 1977. Decided January 4, 1979.

Calder & Kirkendall, P.C. (by Robert E. Logeman), for plaintiffs.

Bodman, Longley & Dahling (by Theodore Souris and James R. Buschmann) and DeVine & DeVine (by Allyn D. Kantor) for defendant.

Amici Curiae:

Foster, Swift & Collins, P.C. (by Webb A. Smith *537 and David W. McKeague), for American Mutual Insurance Alliance.

Gerald E. Mugan and Eugene F. Black.

Bush, Luce, Henderson & Bankson for Allstate Insurance Company.

Decided January 4, 1979. Rehearing denied 406 Mich. 1103.

COLEMAN, J. (to reverse).

Section 3109(1)^[1] of the Michigan No-Fault Insurance Act^[2] requires that the amount of benefits payable under any no-fault insurance policy must be reduced by the amount of benefits payable to a beneficiary by the state or Federal government, but it does not also require an analogous set-off of benefits payable to a beneficiary by private health or accident insurance programs, which persons may voluntarily add to the basic no-fault insurance. The principal question presented is whether 3109(1) discriminates against the recipients of government benefits in violation of the Equal Protection Clause of the state or Federal Constitutions.^[3] The Court of Appeals ruled in a 2 to 1 decision that 3109(1) was unconstitutional.^[4] We reverse the decision of the Court of Appeals. The Legislature's judgment that the recipients of private benefits should be treated differently from the recipients of government benefits is supported by a rational basis and should therefore be sustained. This distinction rationally promotes the legitimate legislative objectives of enabling persons with economic needs and/or wages exceeding the maximum benefits permitted under the No-Fault Act to obtain the supplemental coverage they need and of placing the burden of *538 such extra coverage directly on the shoulders of those persons, instead of spreading it throughout the ranks of no-fault insureds.

A subsidiary question is whether 3109(1) requires a set-off of Federal social security survivors' benefits such as those received by the plaintiffs as a result of decedent's death and, if so, whether this is totally arbitrary and thus violative of the Due Process Clause of the state or Federal Constitutions.^[5] We conclude that 3109(1) does require a set-off of these government benefits but is not arbitrary because the benefits are paid as a result of the same accident and duplicate in varying degrees the no-fault benefits otherwise due. All persons who receive redundant government survivors' benefits arising from one accident are treated the same and all are guaranteed a maximum survivor's loss benefit of $1000 per month for three years. It therefore does not violate the Due Process Clause of the state or Federal Constitutions.

This opinion is confined to the facts before the Court and does not purport to encompass other possible government benefits.

Plaintiffs' decedent was killed in an automobile accident in 1974. Plaintiffs qualified for survivors' benefits under certain subdivisions of 202^[6] of the Federal Social Security Act^[7] which provide for the payment of secondary benefits to the dependents of a wage earner who is fully qualified to receive primary social security benefits at the time of *539 death.^[8] Plaintiffs also qualified for survivors' benefits under the no-fault insurance policy issued by the defendant to the decedent.

Section 3109(1) of the No-Fault Act requires the subtraction of government benefits from no-fault benefits otherwise due:

"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."^[9]

The no-fault policy issued by the defendant to the decedent incorporated this legislatively mandated provision:

"Any amount payable by the company under the terms of this insurance shall be reduced by (a) the amount paid, payable or required to be provided under the laws of any state or the federal government * * *."^[10]

Pursuant to this provision, the defendant subtracted the amount of survivors' benefits payable by the Federal government to the plaintiffs from the amount of survivors' benefits payable under the decedent's no-fault policy and sent the plaintiffs a monthly check for the difference. The actual amount received by the plaintiffs from the Federal government and the defendant totaled $1000 per month, the maximum amount authorized by 3108^[11] of the No-Fault Act.

*540 Plaintiffs sued the defendant in circuit court, alleging a breach of the insurance contract and contending that 3109(1) violated the Due Process and Equal Protection Clauses of the Michigan and United States Constitutions. The circuit court granted a defense motion for summary judgment. The plaintiffs appealed to the Court of Appeals and that Court reversed in a 2 to 1 decision, the majority declaring that 3109(1) was unconstitutional.^[12] The defendant appealed and we granted leave to appeal.^[13]

In Shavers v Attorney General, 402 Mich. 554; 267 NW2d 72 (1978), Justice WILLIAMS explained the proper approach this Court must take when confronted with an equal protection or due process challenge to socioeconomic legislation such as the No-Fault Act:

"[I]n the face of a due process or equal protection challenge, `where the legislative judgment is drawn in question', a court's inquiry `must be restricted to the issue whether any state of facts either known or which could reasonably be assumed affords support for it'. United States v Carolene Products Co, 304 U.S. 144, 154; 58 S. Ct. 778; 82 L. Ed. 1234 (1938). * * * [W]here the legislative judgment is supported by `any state of facts either known or which could reasonably be assumed', although such facts may be `debatable', the legislative judgment must be accepted. Carolene Products Co v Thomson, 276 Mich. 172, 178; 267 N.W. 608 (1936)."^[14]

In a footnote at the very end of this passage, *541 further guidance was offered as to the limited nature of the Court's role:

"See Ferguson v Skrupa, 372 U.S. 726, 730-731; 83 S. Ct. 1028; 10 L. Ed. 2d 93 (1963), where the United States Supreme Court stated:

"`[C]ourts do not substitute their social and economic beliefs for the judgment of legislative bodies, who are elected to pass laws. As this Court stated in a unanimous opinion in 1941, "we are not concerned * * * with the wisdom, need, or appropriateness of the legislation." Legislative bodies have broad scope to experiment with economic problems * * *. We refuse to sit as a "super-legislature to weigh the wisdom of legislation."'"^[15]

The proper test for judging socioeconomic legislation such as the No-Fault Act was also stated in Shavers:

"The test to determine whether legislation enacted pursuant to the police power comports with due process is whether the legislation bears a reasonable relation to a permissible legislative objective. See Michigan Canners v Agricultural Board, 397 Mich. 337, 343-344; 245 NW2d 1 (1976).

"The test to determine whether a statute enacted pursuant to the police power comports with equal protection is, essentially, the same. As the United States Supreme Court declared in United States Dep't of Agriculture v Moreno, 413 U.S. 528, 533; 93 S. Ct. 2821; 37 L. Ed. 2d 782 (1973):

"`Under traditional equal protection analysis, a legislative classification must be sustained, if the classification itself is rationally related to a legitimate governmental interest.'"^[16]

This test recognizes and preserves the constitutional principle of separation of powers, which *542 forms the fundamental framework of our system of government. Its purpose is to make certain that the judiciary does not substitute its judgment for that of the Legislature as to what is best or what is wisest. So long as the Legislature's judgment is supported by a rational or reasonable basis, the choices made and the distinctions drawn are constitutional. The United States Supreme Court and our Court have instructed:

"If the classification has some `reasonable basis', it does not offend the Constitution simply because the classification `is not made with mathematical nicety or because in practice it results in some inequality'. * * * `The problems of government are practical ones and may justify, if they do not require, rough accommodations * * * '".^[17]

"If it be said, the law is unnecessarily severe, and may sometimes do injustice, without fault in the sufferer under it, our reply is: these are considerations that may very properly be addressed to the legislature, but not to the judiciary ÔÇö they go to the expediency of the law, and not to its constitutionality."^[18]

The responsibility for drawing lines in a society as complex as ours ÔÇö of identifying priorities, weighing the relevant considerations and choosing between competing alternatives ÔÇö is the Legislature's, not the judiciary's. Perfection is not required:

"[T]he drawing of lines that create distinctions is peculiarly a legislative task and an unavoidable one. Perfection in making the necessary classifications is neither possible nor necessary."^[19]

*543 Nor is it necessary that the Legislature deal with every aspect of a problem at the same time:

"[W]e are guided by the familiar principles that a `statute is not invalid under the Constitution because it might have gone farther than it did,' * * * that a legislature need not `strike at all evils at the same time,' * * * and that `reform may take one step at a time, addressing itself to the phase of the problem which seems most acute to the legislative mind' * * *."^[20]

In short, we do not sit "as a superlegislature to judge the wisdom or desirability of legislative policy determinations".^[21] We sit as a court to determine whether there is a rational basis for the Legislature's judgment. If there is, then that judgment must be sustained:

"It is not this Court's role to decide whether the Legislature acted wisely or unwisely in enacting this statute. We will not substitute our own social and economic beliefs for those of the Legislature, which is elected by the people to pass laws."^[22]

III

In order to facilitate analysis of whether 3109(1) violates the Equal Protection Clause of the state or Federal Constitutions, we will first discuss the question of whether it requires a set-off *544 of the social security survivors' benefits received by the plaintiffs and, if so, whether this violates the Due Process Clause of the state or Federal Constitutions.

Section 3109(1) states:

One of the most important principles of statutory interpretation is that the words of the statute should be construed in light of the Legislature's intent. See, e.g., Moore v Dep't of Military Affairs, 398 Mich. 324; 247 NW2d 801 (1976). The history of 3109(1) indicates that the Legislature's intent was to require a set-off of those government benefits that duplicated the no-fault benefits payable because of the accident and thereby reduce or contain the cost of basic insurance.

In a letter to the Governor from the Commissioner of Insurance analyzing a series of proposed no-fault bills introduced in 1971, none of which contained a set-off provision, the Commissioner criticized the bills because they tended to "increase the duplication and overlap between auto insurance and other insurance programs, sick leave programs and social security".^[24] Subsequent bills did contain set-off provisions.^[25] The final version of 3109(1) was similar to an amendment suggested by the Commissioner.^[26] According to the *545 Commissioner, the purpose of the amendment was "to provide a more complete and effective coordination of benefits between Michigan auto insurance and the benefits provided by the laws of all the states and the federal government".^[27] As noted by Justice WILLIAMS in his opinion in this case, the Commissioner's comments "make clear that the purpose of the 3109(1) statutory scheme was framed in terms of maintaining or reducing premium costs for all insureds through the elimination of duplicative benefits recovery".^[28]

The survivors' benefits received by the plaintiffs pursuant to 402 of the Federal Social Security Act duplicated the survivors' benefits they received pursuant to the decedent's no-fault insurance policy. The survivors' benefits received pursuant to the no-fault policy were paid as a result of the decedent's death and were based on 3108 of the No-Fault Act, which states:

The survivors' benefits received pursuant to 202 of the Social Security Act were likewise paid as a result of the decedent's fatal accident and served substantially the same purpose as the no-fault benefits:

*546 "As originally enacted in 1935, the Social Security Act authorized a monthly benefit for qualified wage earners at least 65 years old and a death benefit payable to the estate of a wage earner who died at an earlier age. 49 Stat 622-624. In 1939 Congress created secondary benefits for wives, children, widows, and parents of wage earners. See 53 Stat 1362, 1364-1366. The benefits were intended to provide persons dependent on the wage earner with protection against the economic hardship occasioned by loss of the wage earner's support. Mathews v De Castro, 429 U.S. 181, 185-186 [97 S. Ct. 431; 50 L. Ed. 2d 389 (1976)]. Generally speaking, therefore, the categories of secondary beneficiaries were defined to include persons who were presumed to be dependent on the wage earner at the time of his death, disability, or retirement." (Emphasis added.)^[30]

Thus, the benefits received by the plaintiffs from the Federal government fell within the scope of 3109(1)'s set-off.

This set-off is not arbitrary and it does have a rational basis. It promotes the valid legislative objectives of insuring payment for economic loss up to $1000 per month for three years and of attempting to reduce or contain the cost of no-fault insurance by eliminating some of the benefit duplication that would otherwise occur. The means chosen, a set-off of duplicative government benefits, is rationally related to that end. It reduces the amount that the insurance companies must pay out, making it possible for them to reduce the amount that they must charge, and it does so only in those situations where the benefits are redundant. Thus, as in the case at bar, all beneficiaries are eligible for up to $1000 per month for three years of survivors' benefits to compensate for their loss. Social security survivors' benefits are never interrupted. Having a rational basis, 3109(1) does *547 not violate the Due Process Clause of the state or Federal Constitutions.

The remaining question is whether 3109(1) discriminates against the recipients of government benefits in violation of the Equal Protection Clause of the state or Federal Constitutions.

It is undisputed that 3109(1) treats the recipients of government benefits differently than it treats the recipients of private health or accident insurance benefits. It does not require that private benefits be set off against no-fault benefits otherwise due. Unlike the government benefit recipient, the recipient of private benefits can receive full no-fault survivors' benefits up to the maximum of $1000 per month, plus full private benefits as well.

The mere fact that the Legislature has chosen to draw a distinction between government benefit recipients and private benefit recipients does not mean that 3109(1) is unconstitutional. If this distinction is supported by a rational basis, then it passes constitutional muster.

The Legislature had to wrestle with several competing considerations when it was deciding whether the act should contain any set-offs and, if so, what kind of set-offs it should encompass.^[31] Because the first-party insurance proposed by the act was to be compulsory, it was important that the premiums to be charged by the insurance companies be maintained as low as possible. Otherwise, the poor and the disadvantaged people of the state might not be able to obtain the necessary insurance. Thus, there was a viable need for cost-cutting *548 measures of some kind. Set-offs were one possibility. Another consideration was that the $1000 per month maximum established by 3108 would leave many persons with economic losses and needs greater than that amount without adequate compensation. Large families would be especially hard hit by this cap on survivors' benefits. Of course, the maximum recovery could be raised to some higher amount, but this would increase the cost of the program and spread higher premiums over all purchasers.

Faced with this dilemma, the Legislature chose to experiment with a compromise solution. First, all persons would be guaranteed up to $1000 per month survivors' loss benefits under 3108. This would provide adequate compensation for most people. Second, by virtue of 3109(1), duplicative government benefits would be set off against no-fault benefits otherwise due. This would make it possible for all persons needing no-fault insurance to obtain it at less cost. Third, no set-off would be required for private health or accident insurance benefits. This would enable the persons with incomes or needs exceeding $1000 per month to purchase the extra coverage their families required by paying extra premiums without the hardship of (1) purchasing no-fault insurance, for the basic $1000 coverage and (2) purchasing another $1000 coverage to be set off against the basic insurance and then finally (3) purchasing whatever amount of private insurance in excess of that setoff $1000 required to cover income loss and family needs ÔÇö all to be purchased with after-tax ÔÇö as opposed to tax ÔÇö dollars. It was finally resolved that these persons with extra needs would directly bear the burden of those needs; none of that burden would be borne by the no-fault system. The payment of extra premiums would pay in full for the *549 extra coverage. Therefore, there would be no discrimination in this totally voluntary option.

This solution promotes several valid legislative objectives. It attempts to reduce the cost of basic no-fault insurance for everyone and make it possible for most persons to obtain most of the coverage they need. (It could, in fact, be discriminatory to prevent it.) Section 3109(1), the means chosen by the Legislature, is, as outlined above, rationally related to these legitimate objectives.

It is not necessary that we agree with the wisdom of the judgments made by the Legislature in order to uphold this section of the act. (We may or we may not agree, but that makes no difference.) Nor is it necessary that the supposed beneficial effects envisioned by the Legislature be verified at this time. As stated just a few months ago in Shavers with respect to other supposed benefits of the act:

"The fact that these effects are not yet evident does not diminish the legitimacy of the goals sought to be achieved or the reasonableness of the means adopted. At this early stage in the functioning of the No-Fault Act these long-term developments cannot yet fully be assessed. Indeed, this litigation itself, with its resulting uncertainty as to the viability of the No-Fault Act, may slow the achievement of the act's goals. Our decision in Manistee Bank [& Trust Co v McGowan, 394 Mich. 655; 232 NW2d 636 (1975)] is particularly relevant to this aspect of the case: it is precisely because regulation in the economic field often deals with long-term developments that the Court treats such legislation with great deference."^[32]

In time the Legislature may decide that the benefits originally associated with 3109(1) have *550 not materialized or that although they have materialized they are not worth the social and economic costs. However, the rational basis for the distinctions drawn by the Legislature between the recipients of government benefits and the recipients of private benefits ÔÇö primarily the desire to make it possible for persons with requirements exceeding the benefits assured by the No-Fault Act to obtain the extra coverage they need without burdening other no-fault insurance purchasers ÔÇö requires us to hold that 3109(1) is constitutional.

Section 3109(1) did not attempt to address the problem of overlapping no-fault and private health or accident insurance benefits. Soon after the No-Fault Act was passed by the Legislature, however, an attempt was made to fine-tune the set-off provisions so that this kind of duplication could be reduced while still permitting persons with needs exceeding the benefits provided by no-fault insurance to obtain the extra coverage they required. The Legislature enacted 3109a^[33] which 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 spouse of the insured and any relative of either domiciled in the same household."

Although the Legislature did not choose to make *551 this set-off mandatory, as it had done with 3109(1)'s government benefit set-off, this distinction is justified by the perceived necessity of making it possible for persons with greater needs to obtain the coverage they require and pay reduced rates on the no-fault insurance through deductibles and exclusions approved by the Commissioner. That some persons can still slip through the colander of 3109a and receive additional benefits does not mean the statute is unconstitutional. Mathematical precision is neither possible nor required.

Section 3109a promotes the valid legislative objective of reducing duplicative benefits; the means chosen is rationally related to that end; and the distinctions drawn are supported by a rational basis. This statute is also constitutional.

Our brethren have raised the specter of Boettner v State Farm Mutual Ins Co, 388 Mich. 482; 201 NW2d 795 (1972), and Blakeslee v Farm Bureau Mutual Ins Co, 388 Mich. 464; 201 NW2d 786 (1972), in a footnote to their opinion.^[34] Neither of these cases was raised in the application for leave to appeal or briefed by any of the numerous parties who have participated in this case ÔÇö and for good reason. Both are inapposite to the case. The question in each was whether certain set-off provisions created by insurance companies violated the Legislature's statutorily declared public policy in favor of full recovery. In the case at bar, the Legislature has statutorily declared that the public policy of this state now favors certain set-offs. We have no authority to invalidate that legislative *552 decision so long as it is supported by some rational basis.

VII

In Richardson v Belcher, 404 U.S. 78; 92 S. Ct. 254; 30 L. Ed. 2d 231 (1971), the United States Supreme Court was faced with a challenge to a statute similar to the challenge that we face today. The Federal Social Security Act required a set-off of workers' compensation benefits from the social security benefits otherwise due, but did not also require an analogous set-off of private benefits. The plaintiff claimed this distinction violated the equal protection guarantee implicit in the Due Process Clause of the Federal Constitution. The Court found that there was a rational basis for the distinction and affirmed the constitutionality of the set-off. The Court's closing words provide an appropriate conclusion for the case at bar:

"We have no occasion, within our limited function under the Constitution, to consider whether the legitimate purposes of Congress might have been better served by applying the same offset to recipients of private insurance, or to judge for ourselves whether the apprehensions of Congress were justified by the facts. If the goals sought are legitimate, and the classification adopted is rationally related to the achievement of those goals, then the action of Congress is not so arbitrary as to violate the Due Process Clause of the Fifth Amendment."^[35]

Reverse. No costs, a public question being involved.

*553 KAVANAGH, C.J., and LEVIN and RYAN, JJ., concurred with COLEMAN, J.

WILLIAMS, J.

This summary judgment case squarely raises both the facial equal protection and due process^[1] viability of 3109(1) of the No-Fault Insurance Act,^[2] MCL 500.3101 et seq.; MSA 24.13101 et seq. Section 3109(1), commonly referred to as the governmental "set-off" provision, reads as follows:

"(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."^[3] MCL 500.3109; MSA 24.13109.

A similar set-off, however, is not likewise mandated with respect to an insured's directly financed *554 private, collateral insurance benefits.^[4] As Federal Social Security survivors' benefits supported by wage deductions are at issue in this case, we are not called upon to determine whether a set-off of free governmental transfer payments is constitutionally permissible.

The present controversy arose when defendant no-fault insurer sought to reduce its liability on the no-fault fund due plaintiffs, the no-fault insured's statutory dependents, by the amount of Federal Social Security survivors' benefits for which contributions had been made through Social Security wage deductions.^[5]

Plaintiffs first contend that the 3109(1) statutory scheme operates to deny equal protection of the laws to the arbitrarily drawn class of governmental benefit no-fault insureds. Distilled to its *555 essence, plaintiffs' argument proceeds as follows. All no-fault insureds pay the same premium dollar for presumably identical no-fault coverage. No-fault insureds entitled to the receipt of certain governmental benefits, particularly Federal Social Security survivors' benefits, monetarily contribute to that governmental insurance system.^[6] No-fault insureds entitled to the receipt of private, collateral insurance benefits likewise monetarily contribute to that private insurance system. Further, the nature of those injuries compensable by the governmental insurance system are frequently also compensable by funds emanating from the private insurance system. Based on these premises shared by both governmental and private, collateral insureds, plaintiffs conclude their syllogism with the contention that 3109(1) affords these two artificially created classes of similarly situated no-fault insureds widely divergent treatment without rational basis, as the disputed statutory scheme mandates the set-off of certain collateral benefits while not requiring the set-off of other similar collateral benefits solely on the basis of the source or fund from which those benefits spring. In short, plaintiffs contend that there exists no significant *556 difference between a contributory governmental benefit program and a contributory private benefit program; both, therefore, should be treated similarly.

Formulating their analysis with reference to the traditional equal protection test, plaintiffs elaborate that there exists no rational relation between these two legislatively created classes of no-fault beneficiaries, on the one hand, and the admittedly permissible legislative purposes of duplicative benefit elimination or premium cost reduction, on the other, sufficient to constitutionally uphold the difference in treatment afforded these two similarly situated classes under this scheme. Plaintiffs allege that this conclusion is inescapable as duplicative benefit elimination is neither realized practically nor legally through the operation of 3109(1) since the private beneficiary is permitted to retain duplicative benefits. Further, since the legislatively desired reduction in premium rates, if any, flows equally to both classes of no-fault insureds, its achievement is discriminately borne exclusively by the governmental benefit class of no-fault beneficiaries.

Plaintiffs additionally contend that 3109(1) denies governmental benefit no-fault beneficiaries due process of law insofar as it mandates the set-off of all governmental benefits paid for by the recipient whether or not that benefit is casualty related as no-fault is. It is plaintiffs' position that this statutory scheme does not bear a reasonable relation to an otherwise admittedly permissible legislative purpose. For example, according to its literal language, 3109(1) would permit the set-off of a contributory governmental longevity pension benefit against a no-fault casualty benefit which is patently not duplicative of the longevity award.

*557 Our opinion, in its simplest form, concludes that it is neither logical nor constitutionally permissible to either eliminate benefit duplication or accomplish premium reduction by subtracting personally paid-for Social Security survivors' benefits from personally paid-for no-fault benefits while not likewise requiring a subtraction of analogous, personally paid-for private insurance benefits. We reach this conclusion on the following specific grounds: (i) 3109(1) requires the reduction of alleged duplication in a patently discriminatory manner as it focuses its burden solely on one class of similarly situated no-fault insureds; (ii) the disputed statutory scheme operates to place the burden of commonly shared premium cost reduction, if any, on the Social Security survivor beneficiary class alone; and (iii) there exists no rational basis for subtracting paid-for longevity benefits from a paid-for casualty benefit since in no sense are such paid-for benefits duplicative. In reaching this conclusion, we are mindful that we are not dealing with the elimination of duplicative ex gratia governmental transfer payments.

We agree that, while a superficial distinction may exist between a contributory governmental insurance system and a contributory private insurance system, there exist no logically distinguishable characteristics relevant to the permissible legislative judgment which constitutionally justify the disparate treatment afforded those persons receiving collateral governmental benefits and those persons receiving collateral private benefits, where both classes have received a common premium reduction, if any, and both, at least in the case of Federal Social Security survivors' benefits, have made payments to secure the coverage authorizing the governmental and private benefits. See 42 USC *558 401. As such, the 3109(1) statutory scheme is facially unconstitutional insofar as it creates two differently treated classes based solely on the source from which the collateral compensation emanates. We, therefore, affirm the Court of Appeals^[7] reversal of the trial court's grant of summary judgment to defendant insurer with respect to the constitutionality of this scheme.

I. FACTS

Gary O'Donnell was fatally injured in an automobile collision on February 19, 1974. Plaintiffs are the wife and children of decedent.

The decedent was insured under a "no-fault" automobile policy issued by defendant State Farm Mutual Automobile Insurance Company, pursuant to the Michigan No-Fault Insurance Act, 1972 PA 294 (hereinafter referred to as the "No-Fault Act" or "the Act").

Plaintiffs are dependents of decedent for purposes of Social Security survivors' benefits under defendant's insurance policy as well as under 3110 of the No-Fault Act.^[8]

Decedent's insurance policy with defendant provided that plaintiffs, as dependents, were entitled *559 to recover survivors' benefits not to exceed $1,000 per 30-day period. Section 3108 of the No-Fault Act^[9] provides that plaintiffs are entitled to a maximum survivors' benefits recovery of $1,000 per 30-day period for three years following decedent's death.

Decedent's insurance policy further provided, in relevant part, that:

"(5) Any amount payable by the company under the terms of this insurance shall be reduced by (a) the amount paid, payable or required to be provided under the laws of any state or federal government * * *."

This reduction in payments mandated by paragraph (5)(a) of defendant's insurance policy is similarly mandated by 3109(1) of the No-Fault Act, which states:

Plaintiffs qualified for Federal Social Security *560 survivors' benefits totaling $556 per month. Pursuant to both paragraph (5)(a) of the insurance policy and 3109(1) of the No-Fault Act, defendant reduced plaintiffs' $1000-maximum recoverable personal protection insurance benefits by $556 (the amount of Federal Social Security survivors' benefits owing plaintiffs) and paid plaintiffs $444 per month. During the pendency of this litigation, plaintiffs' survivors' benefits have increased approximately 35% thereby reducing defendant's no-fault liability to $243.20 per month.

Plaintiffs filed a two-count complaint in circuit court. Count I alleged that defendant had breached the insurance contract by not paying plaintiffs the full $1,000 per month in benefits. Count II requested declaratory judgment with respect to the question of whether the statutory scheme relating to 3109 of the No-Fault Act violated the Due Process and Equal Protection Clauses of the Michigan and United States Constitutions. Plaintiffs' complaint requested declaratory relief as follows:

"a. That MCLA 500.3109 [MSA 24.13109] is a denial of due process of law as provided in the Fifth and Fourteenth Amendments to the United States Constitution and Article I, Section 17 of the Michigan Constitution for the reason that said act bears no reasonable relationship to the purpose of the act and that said act deprives those who are receiving governmental benefits from receiving the no-fault benefits for which premiums were paid.

"b. That MCLA 500.3109 [MSA 24.13109] is a denial of equal protection * * * for the reasons that said act is arbitrary and discriminatory in that it creates two different classes (governmental benefit recipients and non-governmental benefit recipients) solely upon the source from which the extra compensation is paid."

Defendant moved for summary judgment on *561 both counts; defendant did not file supporting affidavits. The trial court properly restricted its inquiry to whether the complaint failed to state a claim upon which relief could be granted. GCR 1963, 117.2(1).

The trial court granted defendant's motion for summary judgment. The court held in its order:

"1. That count I of plaintiffs' complaint fails to state a cause of action for the reason that plaintiffs' complaint fails to state facts which allege that the defendant breached any of the provisions of said contract.

"2. That count II of plaintiffs' complaint fails to state a cause of action in that State Farm Mutual Automobile Insurance Company, in entering a contract of insurance which conforms to the requirements of the Michigan statutes, and in particular MCLA 500.3109 [MSA 24.13109], is not itself engaged in state action; consequently, any claim that the contract is itself unconstitutional is unsupportable as a matter of law."

On August 4, 1976, the Court of Appeals in separate opinions written by Judge T.M. BURNS and Judge V.J. BRENNAN (Presiding Judge BASHARA dissenting) affirmed the trial court's summary judgment as to count I and reversed the trial court's grant of summary judgment as to count II. Although referring to "a fundamental due process issue" inherent in the statutory scheme under 3109(1), the majority opinions essentially concentrated on plaintiffs' equal protection challenge. The thrust of the Court of Appeals holding was that the classification matrix created by the statutory scheme of 3109(1) ÔÇö allowing the full receipt of both no-fault personal injury protection insurance benefits and private insurance benefits to one class of persons while deducting from the no-fault personal injury protection benefits of another class of persons any benefits received under the laws of *562 any state or the Federal government ÔÇö did not bear a rational relationship to a "legitimate purpose" and arbitrarily discriminated "against those who receive certain governmental benefits". 70 Mich. App. 487, 498.

Judge BASHARA, in his dissent, would: (1) uphold the trial court's ruling as to count I of plaintiffs' complaint; (2) overrule the trial court's ruling that there was no "state action" involved in this case; and (3) hold that, with respect to the constitutional questions raised by plaintiffs, "the proper procedure is to remand to the trial judge". 70 Mich. App. 487, 503.

Defendant appealed the Court of Appeals decision. On August 27, 1976, this Court granted defendant leave to appeal and ordered such appeal to be submitted to this Court with Shavers v Attorney General, 402 Mich. 554; 267 NW2d 72 (1978). In light of our detailed consideration of the no-fault insurance scheme undertaken in Shavers, we are now prepared to decide this case on grounds of facial unconstitutionality.

II. GENERAL ISSUES PRESENTED

After a thorough review of the exhaustive pleadings submitted in this case, we perceive the following issues:

(1) whether the trial court erred in granting for defendant a summary judgment with respect to count I of plaintiffs' complaint (alleging that defendant had breached the insurance contract in issue by not paying to plaintiffs $1,000 per month in benefits) on the ground that "plaintiffs' complaint fails to state facts which allege that the *563 defendants breached any of the provisions of said contract";^[10]

(2) whether the trial court erred in granting for defendant a summary judgment with respect to count II of plaintiffs' complaint (requesting declaratory judgment with respect to whether the statutory scheme established by 3109[1] is violative of due process and equal protection) on the ground that defendant "is not itself engaged in state action";^[11] and

(3) whether the trial court erred in its rationale for disposing of issue (2), supra, with respect to whether the statutory scheme established by 3109(1) violates the Due Process and Equal Protection Clauses of the Michigan and United States Constitutions. More specifically, based on the facts of this case we will consider whether the 3109(1) statutory scheme operates to deny that class which has paid for its governmental benefits, including Federal Social Security survivors' benefits, both equal protection and due process of law. We do not express any opinion with respect to the constitutionality of a set-off of non-contributory, ex gratia governmental transfer payments.

We answer the first issue in the negative and the latter two constitutional issues in the affirmative.

III. BREACH OF CONTRACT AND STATE ACTION ISSUES

Issues (1) and (2), supra, need not detain us long. As Judge BASHARA stated with respect to these issues in his dissenting Court of Appeals opinion:

"I am of the opinion the trial judge correctly ruled *564 that count I failed to allege breach of contract. The facts pled do not allege breach of contract because the insurance contract provided for a reduction in no-fault benefits to the extent of government benefits received.

"The heart of this lawsuit is count II. The proscriptions of the Fourteenth Amendment, US Const, Am XIV, apply to actions of the state and not merely private conduct. Shelley v Kraemer, 334 U.S. 1; 68 S. Ct. 836; 92 L. Ed. 1161 (1947). The Fourteenth Amendment applies to all state legislation which impairs all due process or denies equal protection. Civil Rights Cases, 109 U.S. 3, 11; 3 S. Ct. 18; 27 L. Ed. 835 (1883).

"It is undisputed that the basis for paragraph (5)(a) of the insurance policy is the legislative enactment of MCLA 500.3109(1); MSA 24.13109(1). This is a state action. See Peterson v City of Greenville, 272 U.S. 244; 83 S. Ct. 1119; 10 L. Ed. 2d 323 (1963). I believe the trial judge erred in determining there was no state action, and consequently failing to consider the constitutional questions raised." 70 Mich. App. 487, 502-503.

We are persuaded by the majority's conclusion as well as dissenting Judge BASHARA'S reasoning in this regard. We specifically adopt Judge BASHARA'S analysis as to issues (1) and (2) of this opinion. Accordingly, we need only further address issue (3), supra, i.e., the consideration of plaintiffs' request for declaratory relief with respect to the question of whether the statutory scheme under 3109(1) violates the Due Process and Equal Protection Clauses of the Michigan and United States Constitutions.

IV. PLAINTIFFS' CONSTITUTIONAL ATTACK ON THE 3109(1) STATUTORY SCHEME: THE APPLICABLE EQUAL PROTECTION AND DUE PROCESS TESTS

Since this final issue involves both facial due process and equal protection challenges to a statutory *565 scheme of the Michigan No-Fault Insurance Act, our discussion in Shavers concerning the appropriate constitutional standards in this area is apposite. In Shavers, this Court held that the "traditional" substantive due process and equal protection tests espoused by this Court in its consideration of other social welfare and general economic legislation were the applicable standards by which to consider constitutional challenges to the various statutory schemes of the No-Fault Act. 402 Mich. 554, 611-618. Manifestly, these tests must likewise be applied in the case at bar.

We articulated the applicable "traditional" due process test in the following terms:

Further, citing the United States Supreme Court's admonitions in United States Dep't of Agriculture v Moreno, 413 U.S. 528, 533; 93 S. Ct. 2821; 37 L. Ed. 2d 782 (1973), this Court articulated the "traditional" equal protection standard to be applied in this area of concern. We stated:

"`Under traditional equal protection analysis, a legislative classification must be sustained, if the classification itself is rationally related to a legitimate governmental interest.'" 402 Mich. 554, 613.

The details of this test were elaborated upon by Justice RYAN in his separate opinion in Shavers:

"Reduced to its simplest, the equal protection guarantees of both constitutions mean that the Legislature may not take what may be termed a `natural class of persons', split that class in two, and then arbitrarily *566 designate the severed factions of the original unit as two classes and thereupon enact different rules for the treatment of each. However, when there is a natural difference between the situation or circumstances of the two classes of persons, the Legislature may be justified in treating them differently. The state enjoys a wide range of discretion in distinguishing, selecting, and classifying, and it is sufficient if a classification is practical and not palpably arbitrary. Orient Ins Co v Daggs, 172 U.S. 557; 19 S. Ct. 281; 43 L. Ed. 552 (1899)." 402 Mich. 554, 662.

In deference to the legislative wisdom, we made clear that in the application of these tests, "it is axiomatic that the challenged legislative judgment is accorded a presumption of constitutionality". 402 Mich. 554, 613.

Recognizing that the presumption of constitutionality to be accorded judgments of the Legislature is rebuttable in nature, we indicated that:

"a party challenging the legislative judgment may attack its constitutionality in terms of purely legal arguments (if the legislative judgment is so arbitrary and irrational as to render the legislation unconstitutional on its face) * * *." 402 Mich. 554, 614.

Cognizant of the bifurcated analytic approach and general principles established in Shavers, our task in deciding the constitutional questions presented herein must be as follows:

In considering plaintiffs' due process and equal protection challenges to the statutory scheme under 3109(1), this Court must (i) determine whether plaintiffs have overcome the "presumption of constitutionality" by establishing through legal argument or otherwise that the evil identified by the statutory scheme under 3109(1) is entirely without basis; and (ii) determine whether *567 either the statutory scheme or classification matrix drawn under 3109(1) is reasonably related to the legislative purpose of correcting the evil that is rationally identified.

We are of the opinion that while the first prong of this analysis has been satisfied, the statutory scheme is deficient on its face as to the second prong, thereby rendering 3109(1) unconstitutional on its face at least insofar as the subtraction of Federal Social Security survivors' benefits is concerned.

V. DISCUSSION: LEGISLATIVE PURPOSE AND STATUTORY CLASSIFICATION

As indicated, supra, in testing both equal protection and due process attacks to statutory schemes under the No-Fault Act, the Court must first determine whether the challenged scheme has a valid legislative purpose.

In Shavers v Attorney General, supra, we opined 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". 402 Mich. 554, 578-579.^[12] Consistent with this legislative objective was the apparent legislative determination to either reduce or contain presently rising levels of premium costs borne by all insureds.

The Court of Appeals reasoning in this case, handed down prior to our decision in Shavers, *568 implicitly recognized this comprehensive legislative judgment. Judge T.M. BURNS, writing for the majority of that Court, further discerned the purpose of 3109(1) in the following manner:

"Presumably, the purpose of 3109(1) is to reduce the overall cost of the no-fault program by eliminating duplicative recovery. If the insurer has to pay less, he can charge less. As recognized in Shavers [65 Mich. App. 355; 237 NW2d 325 (1975)], the reduction of the cost of insurance is a proper basis for classification, and prohibitive cost was a problem that needed solution." 70 Mich. App. 487, 495.

We are satisfied that the legislative objective sought to be achieved by the promulgation of the disputed statutory scheme encompasses either the objectives of duplicative benefit elimination or premium cost reduction, or both. This characterization of the disputed scheme's purpose finds support in both the legislative history of 3109(1)^[13] and the

*569 *570 majority of those cases considering the constitutionality of this scheme.^[14]

Considering the comprehensive legislative objective sought to be effectuated by the promulgation of this Act, we find the purpose of the statutory scheme under consideration to be both an exercise of permissible legislative judgment and rationally based.^[15] In deference to this legislative judgment, we must conclude that the first requirement of the traditional equal protection test has been fulfilled; plaintiffs have not overcome the presumption that the challenged statutory scheme has a valid legislative purpose.

Having so concluded, as did the Court of Appeals, we must now address ourselves to whether the challenged classifications and means engineered under the 3109(1) statutory scheme are reasonably related to this legitimate governmental purpose. We conclude, as did the jurists in the analogous principal cases of Fox v Employment Security Comm, 379 Mich. 579; 153 NW2d 644 (1967), and Bowser v Jacobs, 36 Mich. App. 320; 194 NW2d 110 (1971), that the classification matrix *571 drawn by the Legislature is without the force of requisite logic and is therefore both unconstitutionally arbitrary and discriminatory where contributions have been made by the insured for those governmental benefits, including Federal Social Security survivors' benefits, sought to be set-off by 3109(1). This conclusion is occasioned whether we perceive the purpose of the statutory scheme to be one of duplicative benefit elimination, or premium cost reduction.^[16]

VI. EQUAL PROTECTION CHALLENGE

The gravamen of plaintiff's equal protection challenge to 3109(1) is that, while the purpose of the statutory scheme may be a permissible one, there exist no naturally distinguishable characteristics relevant to the permissible legislative judgment *572 which rationally justify the disparate treatment afforded these two classes. The only apparent distinction between these classes ÔÇö the source of the collateral benefits ÔÇö does not constitutionally justify the disparate treatment afforded those no-fault insureds receiving collateral governmental benefits and those no-fault insureds receiving collateral private insurance benefits.

On the contrary, the identity of class characteristics is patent. Both classes have received the same premium cost reduction, if any, both classes have paid the same premium dollar for identical no-fault coverage, and both, at least in the case of Social Security survivors' benefits, have made monetary contributions to secure the coverage authorizing both the governmental and private benefits. Further, plaintiffs cite persuasive legal authority in support of their contentions.

Defendants, on the other hand, allege that there exist distinguishing characteristics between governmental fund coverage and private insurance fund coverage which justify the disparate treatment afforded these two classes of no-fault recipients in furtherance of what defendant perceives to be the legislative objective of the No-Fault Act, i.e., the structuring of no-fault insurance as a secondary rather than as a primary source of compensation.^[17] Additionally, defendant attempts to distinguish and rebut plaintiffs' legal authority on the basis of Richardson v Belcher, 404 U.S. 78; 92 S. Ct. 254; 30 L. Ed. 2d 231 (1971), attempts to factually distinguish mandatory governmental and *573 voluntary private insurance benefits,^[18] and alleges that the amendment of the No-Fault Act with the addition of 3109a operates to cure the disputed statutory scheme of any constitutional violations otherwise arguably involved.^[19]

*574

*575 In the instant case, we are not called upon to consider whether the absence of monetary contribution by an insured to a governmental insurance system would have a favorable impact on the legislative justification for separate classification. Rather, we are here confronted with the Legislature's attempt to set off those benefits emanating from a contributory governmental scheme. Especially because of this significant distinction, we are persuaded by plaintiffs' arguments that 3109(1) is arbitrary and discriminatory insofar as it treats similarly situated no-fault insureds differently through its creation of two distinct classes solely upon the source from which the extra compensation is paid.

In view of the facts here that (i) both classes of no-fault insureds pay the same premium dollar for identical maximum personal protection no-fault coverage, (ii) both classes have received a common premium cost reduction, if any, and (iii) both classes have monetarily contributed to secure the coverage authorizing both governmental and private benefits, we must find this statutory scheme facially violative of traditional equal protection mandates. Our conclusions in this regard are supported by analogous Michigan precedent: Fox v Employment Security Comm, 379 Mich. 579; 153 NW2d 644 (1967); Bowser v Jacobs, 36 Mich. App. 320; 194 NW2d 110 (1971).^[20]

*576 A. Duplicative Benefit Elimination

If the legislative purpose of the statutory scheme before us is considered to involve the elimination of duplicative recovery, it is apparent that this permissible purpose is neither practically nor constitutionally realized by the 3109(1) classification matrix as the distinction in classes is based solely on the source from which the collateral compensation is paid.^[21] Section 3109(1) irrationally permits the retention of duplicative no-fault and private insurance benefits by that class which has directly engaged such collateral, private insurance. Yet, it concurrently mandates the reduction of insurer-paid no-fault benefits by the amount of benefits likewise directly paid for by the no-fault insured yet fortuitously received under the auspices of a governmental program. We cannot sanction this irrational class differentiation.

This finding of unconstitutionally disparate classification is further emphasized when one notes that 3109a, MCL 500.3109a; MSA 24.13109(1), provides for an optional set-off of private, collateral insurance benefits at the election of the insured, *577 while 3109(1) mandates such a set-off whether the governmental benefit recipient desires such a subtraction or not. There is no logic to support this difference in an attempt to eliminate duplicative recovery.^[22]

B. Premium Cost Reduction

Similarly, pursuant to the classifications drawn by the Legislature in enacting 3109(1), all Michigan motorists pay the same uniform premium rate for no-fault coverage but all do not receive the same benefits. It is urged by defendant that such classifications are permissible means for achieving the lowering of premium rates. We do not agree as 3109(1) focuses the burden of premium cost reduction on governmental benefit recipients alone. That class is confronted with a set-off while similarly situated private insureds who benefit from this premium reduction are not. This conclusion obtains whether we review 3109(1) alone or in conjunction with 3109a.

Section 3109a, MCL 500.3109a; MSA 24.13109(1), provides in relevant part:

The effect of this section is to permit a no-fault insured who has engaged collateral, private insurance *578 to receive a reduction in premium rates if that insured has elected a set-off of private, collateral benefit amounts. Section 3109(1), on the other hand, compels an insured to pay the full premium rate while concurrently requiring acquiescence to a mandatory set-off of governmental benefits for which the insured has paid.

In a real sense, both classes of insureds have paid for their collateral benefits whatever form those benefits have assumed. Yet, those who have engaged private, collateral benefits are permitted to recoup some of their collateral benefit costs through an appropriate premium reduction pursuant to 3109a while those who receive governmental benefits are denied a similar recoupment of some of their out-of-pocket collateral benefit costs through an equally appropriate premium reduction. In effect, private collateral benefit no-fault insureds are disproportionately permitted larger no-fault benefits for their elected full or reduced premium rate payment than are similarly situated governmental benefit recipient-insureds at the mandatory full premium rate.^[23]

Further, proceeding from an analysis of 3109(1) alone, we are similarly convinced that *579 the burden of effectuating the permissible premium cost reduction objective unconstitutionally rests solely upon the governmental benefit class of no-fault insureds. Unlike the collateral private insured class, the governmental recipient insured class is first compelled to purchase no-fault insurance, denied full no-fault coverage on claims compensable by governmental programs ostensibly for the purpose of reducing premiums, and is then denied the full benefit of the savings in premiums while the similarly situated private benefit class is not. In essence, this scheme operates both arbitrarily and discriminately to compel those insureds entitled to both government and no-fault benefits to subsidize premium savings for the greater class of all insureds including those entitled to receive and hold private insurance benefits.^[24]

*580 C. Equal Protection Case Analysis

We find support for our conclusion of facial unconstitutionality in the case law as developed by the courts of this state. Indeed, both this Court and the Court of Appeals have earlier been faced with equal protection challenges to analogous governmental set-off schemes; these challenges were presented in both Fox v Employment Security Comm, 379 Mich. 579; 153 NW2d 644 (1967), and Bowser v Jacobs, 36 Mich. App. 320; 194 NW2d 110 (1971).

In Fox, weekly unemployment benefits were statutorily denied to those employees receiving total permanent, partial permanent, or temporary disability workers' compensation benefits. Recipients of workers' death benefits, "specific loss" benefits, and those employees who elected to accept a "lump sum" workers' compensation award, however, *581 were statutorily permitted to receive weekly unemployment compensation.

Justice T.M. KAVANAGH, writing for the majority, opined that the object of the disputed statutory scheme was to preclude the possibility of benefit duplication; this object was identified by the Court as a permissible legislative purpose. The distinction drawn by the Legislature between the two classes of potential weekly unemployment compensation recipients on the basis of a worker's eligibility for either permanent or temporary compensation as opposed to death benefits, "specific loss" benefits, and "lump sum" benefits, however, was held to be an impermissible, arbitrary classification scheme. This was so, the Court opined, because under the statutory scheme certain workers were permitted to obtain unemployment benefits while others similarly situated were not. Citing People v Chapman, 301 Mich. 584; 4 NW2d 18 (1942), which quoted from Haynes v Lapeer Circuit Judge, 201 Mich. 138; 166 N.W. 938 (1918), the Court stated:

"`"Legislation which, in carrying out a public purpose for the common good, is limited by reasonable and justifiable differentiation to a distinct type or class of persons is not for that reason unconstitutional because class legislation, if germane to the object of the enactment and made uniform in its operation upon all persons of the class to which it naturally applies; but if it fails to include and affect alike all persons of the same class, and extends immunities or privileges to one portion and denies them to others of like kind, by unreasonable or arbitrary subclassification, it comes within the constitutional prohibition against class legislation."'" 379 Mich. 579, 589.

Under the auspices of the "traditional" equal protection test, the Court held that the disputed *582 statutory classification scheme denied plaintiffs equal protection despite its attempt to effectuate a permissible legislative objective of duplicative benefit elimination.

While we are cognizant that Fox is not a direct analogue of the present action, we believe it persuasively offers support for the proposition that the classifications drawn here are violative of equal protection. In fact, we are of the opinion that the Fox Court went further than we are presently required to proceed in finding a governmental set-off scheme constitutionally infirm in that neither the unemployment nor workers' compensation beneficiaries made any financial contribution for their benefit rights whereas in the instant case the beneficiaries made contributions for all benefit rights.

Further support for our ruling of facial unconstitutionality is found in the closely analogous case of Bowser v Jacobs, 36 Mich. App. 320; 194 NW2d 110 (1971) (now-Justice LEVIN, dissenting and recommending remand for further findings of fact). In Bowser, the Court of Appeals considered the equal protection viability of a statutory scheme under the Motor Vehicle Accident Claims Act. The disputed scheme operated to totally bar those employees entitled to workers' compensation from applying for benefits under that act. Those claimants similarly situated, but who had nonetheless secured voluntary collateral, private insurance, however, were permitted recourse against the fund. The majority agreed with the plaintiffs' concern that the classification was violative of "traditional" equal protection mandates.^[25] Writing for *583 the Court, Chief Judge LESINSKI stated:

"The legislative aim of this social legislation * * * is to compensate those injured by uninsured tortfeasors who would otherwise have had no source of recovery. But, as we have seen, some persons who have available avenues of recovery are permitted to reach the Fund but injured employees are not. We are constrained to agree that the legislature has arbitrarily carved out this class from those who have recourse to the Fund. This classification is one made without the force of compelling logic; we find it unconstitutionally discriminatory." 36 Mich. App. 320, 328.

Defendant characterizes Bowser as inapt on the ground that the statutory scheme presently under consideration merely mandates a set-off in recovery while the Bowser statutory scheme required a total bar to recovery. We do not find this distinction persuasive, especially in view of the fact that in both Bowser and the case at bar the concern is one of statutory classification rather than the aggregate amount of an insured's recovery. We find the basis of the Bowser court's reasoning appropriate for consideration in the matter before us.

Defendant's principal rebuttal to the Court of Appeals ruling of unconstitutionality rests upon the decision of the United States Supreme Court in Richardson v Belcher, 404 U.S. 78; 92 S. Ct. 254; 30 L. Ed. 2d 231 (1971) (Justices Douglas, Marshall *584 and Brennan dissenting). We find this arguable, but distinguishable and not persuasive.

The facts presented in Richardson required the United States Supreme Court to consider a "traditional" equal protection challenge to 224 of the Social Security Act. The disputed statutory scheme required the set-off of state and Federal workers' compensation benefits against Federal Social Security disability benefits. Those similarly situated but entitled to voluntary, private benefits, however, were not required to maintain a similar set-off. The Supreme Court, in a 4 to 3 decision, ruled that the difference in treatment accorded these two classes was not constitutionally infirm considering the peculiar legitimate legislative purpose sought to be furthered by the scheme, i.e., the affirmance and encouragement of state workers' compensation schemes. Justice Stewart writing for the majority in Richardson stated:

"It is self-evident that the offset reflected a judgment by Congress that the workmen's compensation and disability insurance programs in certain instances served a common purpose, and that the workmen's compensation programs should take precedence in the area of overlap.

* * *

"* * * The original purpose of state workmen's compensation laws was to satisfy a need inadequately met by private insurance or tort claim awards. Congress could rationally conclude that this need should continue to be met primarily by the States, and that a federal program that began to duplicate the efforts of the States might lead to the gradual weakening or atrophy of the state programs." 404 U.S. 78, 82-84.

We are convinced that Richardson is manifestly distinguishable from the case at bar.

First, the United States Supreme Court's ruling *585 specifically relied on the Federal-state relationship and the congressional desire not to encroach upon a state program. That policy is obviously not present in the instant case.

Second, factually the two situations under comparison markedly differ. This is so in two pivotal respects.

The first significant factual distinction centers on the fact that Richardson concerned the set-off relationship of two non-beneficiary contributory systems from which the insured would benefit gratuitously, whereas the instant case concerns the set-off relationship of two beneficiary contributory systems. Unlike the situation posed in Richardson, this Court is not required to rule on a legislative classificatory attempt to eliminate redundant, free transfer payments; rather, we are faced with a manifestly distinguishable attempt to set off insured-financed governmental benefits against insured-financed private no-fault coverage.

The second significant factual distinction involves the circumstance that the Richardson scheme sought to set off a disability benefit against a disability benefit, whereas the scheme under review seeks to set off a longevity benefit against a disability benefit. We find this dissimilarity compelling.

Third, we find Richardson distinguishable in terms of the legislative purposes sought to be accomplished by the statutory schemes engineered by the United States Congress and the Michigan Legislature. Reduced to their common denominator, both schemes have as an apparent legitimate purpose the elimination of duplicative recovery. This elimination was sought to be achieved by these two legislative bodies, however, through two entirely different vehicles. Indeed, in Richardson, *586 Congress enacted a set-off provision as a vehicle to reduce the Federal government's risk on its own Federal, governmental fund. Here, unlike Richardson, the Michigan Legislature has enacted a set-off as a vehicle to reduce the private insurance industry's risk on a private insurance fund. In essence, the 3109(1) scheme operates to either partially or completely discharge private contractual, no-fault obligations while the Richardson scheme operated to discharge public obligations created and controlled by Congress pursuant to its general welfare powers.

On the basis of the foregoing analysis of Richardson, we are persuaded that the majority's reasoning and holding therein is not dispositive of the case before us as suggested by defendant.^[26] We are further persuaded that the conceptual analysis offered in both Fox and Bowser is both appropriate for our present consideration and supportive of our finding of facial unconstitutionality.

VII. DUE PROCESS CHALLENGE

Plaintiffs additionally contend that the 3109(1) statutory scheme is facially unconstitutional as it confiscates property in the form of personally financed premium payments without due process of law. In support of this contention, plaintiffs forward essentially the same analysis as provided in their equal protection challenge to 3109(1). *587 Defendant similarly rests upon the same analysis it proffered to rebut plaintiffs' equal protection challenges.

We have consistently opined that the over-all objective of the No-Fault Act is to adequately, assuredly, and promptly compensate victims of automobile accidents for certain economic losses. We have likewise determined that the statutory scheme engineered by 3109(1) has as its permissible purpose either the elimination of duplicative recovery or the reduction of premium costs for all insureds.

It is beyond peradventure that payment of personal protection insurance benefits as well as the payment of governmental benefits under the no-fault scheme are triggered by an injury arising from a compensable automobile accident and resulting in economic loss to the insured. Yet, the broad statutory language of 3109(1) irrationally permits the set-off of non-accident as well as accident related governmental benefits.

Indeed, the unqualified, overbroad language of 3109(1) indicates the absurd result that not only may the insurer subtract insured subsidized accident-related Social Security benefits as here, but the insurer may also set off e.g., Federal, state, municipal and employee pension and disability plans, veterans' benefits, and other non-automobile casualty related benefits paid from a governmental fund and financed by the recipient insured. No doubt, were we to hold this section constitutional, we could envision an insurer setting-off an insured's governmental pension benefits awarded because of the insured's employment longevity, against the insurer's no-fault liability for injury occasioned in an automobile accident.

It is clear from the above example that the *588 language of this scheme is unconstitutionally overbroad and devoid of means rationally related to an otherwise legitimate legislative purpose.

VIII. CONCLUSION

We find that the elimination of duplicative benefits and the maintenance or reduction of premium costs are permissible exercises of the legislative judgment. We are not persuaded, however, that either the classifications drawn or the means selected by the Legislature to effectuate this judgment through the enactment of 3109(1) reasonably relate to these otherwise legitimate governmental purposes.

Accordingly, we find the statutory scheme of 3109(1) to facially deny plaintiffs both due process and equal protection of the laws.

Having found 3109(1) facially unconstitutional, we likewise find the contract provision invalid as offensive to public policy. See, e.g., State Farm Mutual Automobile Ins Co v Shelly, 394 Mich. 448; 231 NW2d 641 (1975).

Although the Court of Appeals found 3109(1) to be of no effect as of the date of its enactment, we hold that in the interests of justice our declaration of unconstitutionality must be given only limited retroactive effect. We, therefore, hold the ruling announced today to be applicable to: (i) the instant case and all lower court cases presently pending which have raised this issue but in which a decision has not been rendered; (ii) all appropriate future cases in which this section is disputed subsequent to the date of this opinion; (iii) those cases in which a retrial is to occur after the date of this opinion because of remand on any other issue where the 3109(1) set-off issue has been *589 raised; and (iv) those cases pending on appeal or eligible for appeal after the date of this opinion in which this issue has been adequately preserved.

We affirm the Court of Appeals finding of unconstitutionality and order entry of judgment consistent with this opinion. No costs, a public question being involved.

FITZGERALD and BLAIR MOODY, JR., JJ., concurred with WILLIAMS, J.

BLAIR MOODY, JR., J. (concurring with WILLIAMS, J.)

I agree with the general analysis employed by Justice WILLIAMS and therefore sign his opinion. However, I reserve judgment concerning the scope of the Legislature's intent to avoid duplicative recovery and any distinction between contributive and non-contributive governmental benefits.

NOTES

[1] MCL 500.3109(1); MSA 24.13109(1).

[2] MCL 500.3101 et seq.; MSA 24.13101 et seq.

[3] Const 1963, art 1, 2; US Const, Am XIV.

[4] 70 Mich. App. 487; 245 NW2d 801 (1976).

[5] Const 1963, art 1, 17; US Const, Am XIV.

[6] 42 USC 402.

[7] 42 USC 401 et seq.

[8] The pleadings do not indicate the specific subdivisions of 402 under which the plaintiffs qualified for secondary benefits. We assume that they qualified under subdivision e, widow's benefits, and/or subdivision g, mother's benefits.

[9] MCL 500.3109(1); MSA 24.13109(1).

[10] Appellant's appendix, p 12a.

[11] MCL 500.3108; MSA 24.13108.

[12] 70 Mich. App. 492-500; 245 NW2d 802-806.

[13] 397 Mich. 848 (1976).

[14] Shavers, supra, 613-614.

[15] Id., fn 38, p 614.

[16] Id., 612-613.

[17] Dandridge v Williams, 397 U.S. 471, 485; 90 S. Ct. 1153; 25 L. Ed. 2d 491 (1970), Weinberger v Salfi, 422 U.S. 749, 769; 95 S. Ct. 2457; 45 L. Ed. 2d 522 (1975).

[18] Sears v Cottrell, 5 Mich. 250, 254 (1858).

[19] Massachusetts Board of Retirement v Murgia, 427 U.S. 307, 314; 96 S. Ct. 2562; 49 L. Ed. 2d 520 (1976), Ohio Bureau of Employment Services v Hodory, 431 U.S. 471, 489; 97 S. Ct. 1898; 52 L. Ed. 2d 513 (1977).

[20] Katzenbach v Morgan, 384 U.S. 641, 657; 86 S. Ct. 1717; 16 L. Ed. 2d 828 (1966), New Orleans v Dukes, 427 U.S. 297, 305; 96 S. Ct. 2513; 49 L. Ed. 2d 511 (1976).

[21] New Orleans v Dukes, supra, 303.

[22] McAvoy v H B Sherman Co, 401 Mich. 419, 439; 258 NW2d 414 (1977).

[23] MCL 500.3109(1); MSA 24.13109(1).

[24] Gretzinger, O'Donnell v State Farm Mutual Insurance Co: A Judicial Attempt to Amend Michigan's No-Fault Act, 1977 DCL Rev 187, 192, fn 36.

[25] Id., 192-193.

[26] Id., 194.

[27] Ibid.

[28] Opinion of WILLIAMS, J., p 568, fn 13.

[29] MCL 500.3108; MSA 24.13108.

[30] Califano v Jobst, 434 U.S. 47, 50; 98 S. Ct. 95; 54 L. Ed. 2d 228 (1977).

[31] See, generally, A Judicial Attempt to Amend Michigan's No-Fault Act, supra, 192-195.

[32] Shavers, supra, 628-629.

[33] MCL 500.3109a; MSA 24.13109(1).

[34] Opinion of WILLIAMS, J., p 575, fn 20.

[35] Richardson, supra, 84.

[1] US Const, Am XIV; Const 1963, art 1, 3 (equal protection); Const 1963, art 1, 17 (due process).

[2] As indicated infra, plaintiffs must bear the burden of rebutting the presumption of a statute's constitutionality. That task may be accomplished by one or both of two methods: plaintiffs may either forward persuasive legal arguments indicating that the legislative judgment culminating in the enactment of the statutory scheme under 3109(1) is unconstitutional on its face, see Borden's Farm Products Co, Inc v Baldwin, 293 U.S. 194; 55 S. Ct. 187; 79 L. Ed. 281 (1934); Pinnick v Cleary, 360 Mass 1; 271 NE2d 592 (1971) (Tauro, C.J., concurring), or plaintiffs may offer facts justifying a judicial declaration that the scheme is equally unconstitutional, see Borden's Farm Products Co, Inc v Baldwin, 293 U.S. 194; 55 S. Ct. 187; 79 L. Ed. 281 (1934); People v Poucher, 398 Mich. 316; 247 NW2d 798 (1976). While we have expressed our preference for the latter offer in our consideration of certain constitutional attacks to other disputed no-fault statutory schemes in Shavers v Attorney General, 402 Mich. 554; 267 NW2d 72 (1978), we have not expressed that preference in absolute terms. Indeed, we are of the opinion that in cases such as the one at bar presenting a facially unconstitutional no-fault statutory scheme, the presentation of compelling legal arguments is alone sufficient to support a judicial declaration of unconstitutionality.

[3] This set-off is made against an insured's 3108 no-fault personal protection benefits.

[4] Compare MCL 500.3109a; MSA 24.13109(1) which provides in pertinent part:

[5] In Shavers, supra, this Court held that plaintiffs therein lacked standing under GCR 1963, 521.1 to seek declaratory relief regarding 3109(1) because "[t]here is no proof in the record that any plaintiff had a claim for an injury which had been denied or reduced [in amount pursuant to 3109(1)]". 402 Mich. 554, 592, fn 12. Justice LEVIN similarly addressed this principle in Advisory Opinion re: Constitutionality of 1972 PA 294, 389 Mich. 441, 484; 208 NW2d 469 (1973):

"It is not properly within our function to hypothesize particularized claims or to set up, speculatively, strawmen classes of persons who might claim to be disadvantaged in various ways by the classifications and provisions of the act."

We clearly have no such problem here. It is undisputed that plaintiffs herein "[have] a claim for an injury which [has] been * * * reduced [in amount pursuant to 3109(1)]". The Social Security Act provides for the payment of Social Security survivors' benefits to four categories of individuals if their decedent was statutorily "insured". 42 USC 402 et seq. While the pleadings presented to this Court for review do not indicate under which section of the Social Security Act plaintiffs have secured their survivors' benefits, we can assume without conclusively finding that plaintiffs have been provided benefits pursuant to 42 USC 402(g) and 42 USC 402(e).

[6] It is undisputed that plaintiffs herein, the statutory dependents of decedent no-fault insured, did not personally contribute to the Social Security fund authorizing the survivors' benefits to which they are entitled. Rather, plaintiffs collected this governmental benefit through their deceased father and husband against whom the wage deduction was levied. Under this set of facts, we are of the opinion that plaintiffs should be considered as having made the Social Security fund contribution in the same manner as we would have considered the no-fault insured decedent's contributions had he survived the automobile accident. Obviously, there is no difference in principle, insofar as contributions are concerned, between the present instance and the instance where the actual payor has not been killed in an automobile accident but personally institutes suit for disability benefits personally financed. Additionally, plaintiffs herein suffer further disparate treatment through the operation of this set-off scheme when compared with survivors of a privately insured whose benefits would not similarly be subject to set-off.

[7] O'Donnell v State Farm Mutual Automobile Ins Co, 70 Mich. App. 487; 245 NW2d 801 (1976) (BASHARA, P.J., dissenting and recommending remand).

[8] Section 3110 of 1972 PA 294 provides:

"(1) The following persons are conclusively presumed to be dependents of a deceased person:

"(a) A wife is dependent on a husband with whom she lives at the time of his death.

"(b) A husband is dependent on a wife with whom he lives at the time of her death.

"(c) A child while under the age of 18 years, or over that age but physically or mentally incapacitated from earning, is dependent on the parent with whom he lives or from whom he receives support regularly at the time of the death of the parent." MCL 500.3110; MSA 24.13110.

[9] Section 3108 of the No-Fault Act provides:

"Personal protection insurance benefits are payable for a survivors' 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 his death would have received for support during their dependency from the deceased if he 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 he had not suffered the injury causing death. The benefits payable for survivors' loss in connection with the death of a person in a single 30-day period shall not exceed $1,000.00 and is not payable beyond the first 3 years after the date of the accident." MCL 500.3108; MSA 24.13108.

[10] Appellant's Appendix, p 14a.

[11] Appellant's Appendix, p 15a.

[12] As to the Act's personal injury protection scheme, we elaborated that its "comprehensive and expeditious benefit system", was reasonably related to curing certain pronounced deficiencies of the tort liability system of recovery, including evidence that: "minor injuries were overcompensated, serious injuries were undercompensated, long payment delays were commonplace, the court system was overburdened, and those with low income and little education suffered discrimination". 402 Mich. 554, 579.

[13] Michigan's No-Fault Insurance Act was signed into law by Governor Milliken on October 31, 1972. 3 Mich Senate J (1972) 2032. After two years of substantial alteration and modification undertaken by both the Michigan House of Representatives and Senate, 3109(1) as it presently appears was adopted in that enactment.

In April of 1971, four House Bills were introduced detailing a proposed no-fault scheme of automobile insurance. 1 Mich House J (1971) 783-784. None of these bills, however, specifically provided for governmental benefit set-off. It was in response to the absence of such a provision that then-acting Commissioner of Insurance Van Hooser voiced his concern to Governor Milliken that these House Bills adversely tended to increase remedial duplication and overlap between automobile insurance benefits and other benefit programs (e.g., Social Security and Medicare) receivable by an insured. In an attempt to remedy this apparently undesirable result, the Commissioner opined that the general language, "shall be payable without regard to entitlement to any other program providing wage continuation benefits", should be deleted from the bill's format. Letter from Russell E. Van Hooser, Michigan Commissioner of Insurance, to Governor Milliken (June 4, 1971) concerning analysis of House Bills 4734, 4735, 4736 and 4737, p 3 reproduced in Defendant's Exhibit No. 212, Joint Appendix submitted to this Court in Shavers v Attorney General. These House Bills subsequently died in committee with no action having been taken on the Commissioner's recommendation.

On April 26, 1971, the Michigan Senate introduced Senate Bill 520. 1 Mich Senate J (1971) 663. Unlike the above House drafts, 3520, subds (A) and (B) of that bill provided for an expansive governmental benefit set-off scheme. Indeed, this bill mandated the subtraction of both public and private benefits ÔÇö with the exception of Social Security benefits ÔÇö from the amount otherwise payable by an insurer. Section 3520 of Senate Bill 520 provided in pertinent part:

"Sec. 3520. In Calculating Net Loss:

"(A) Except as otherwise provided in this chapter, all benefits and advantages a person receives or is entitled to receive because of an injury, from sources other than complete and added protection insurance are subracted from loss." Mich Senate Bill 520 (1971).

Commissioner Van Hooser summarized the arguments for this draft legislation, stating: "It would reduce the cost of automobile insurance. * * * It would eliminate duplication of benefits (and the resulting double premiums) by coordinating benefits from automobile insurance with all other benefits". Letter from Russell E. Van Hooser, Michigan Commissioner of Insurance to Governor Milliken (June 4, 1971), p 2 concerning analysis of Senate Bill 520 reproduced in Defendant's Exhibit No. 212, Joint Appendix submitted to this Court in Shavers v Attorney General.

Approximately two months after the introduction of Senate Bill 520, another bill was introduced in the Senate which directed a contrary set-off result to that expressed in Senate Bill 520. Section 9 of Senate Bill 782, 1 Mich Senate J (1971) 1000-1001, provided in pertinent part:

"Sec. 9(1). The amount of disability and survivor benefits a claimant recovers or is entitled to recover under the social security act, United States Code, title 42, sections 301 et seq., because of accidental bodily injury shall be subtracted from the personal protection insurance benefits otherwise payable for the injury." Mich Senate Bill 782 (1971).

Unlike Senate Bill 520, this set-off provision mandated payment to the insured of both personal protection insurance benefits as well as other private and public benefits with the exception of social security benefits.

Commissioner Van Hooser noted that while Senate Bill 782 "would assure prompt and adequate compensation of persons injured in auto accidents in this state for medical expenses, rehabilitation expenses, wage loss and survivor's loss", it would likewise encourage an increase in the cost of auto insurance as it failed to eliminate duplication of benefits. Letter from Commissioner Van Hooser to Governor Milliken (June 4, 1971), p 2 concerning Senate Bill 782 reproduced in Defendant's Exhibit No. 212 in Shavers v Attorney General. Accordingly, the Commissioner proposed an amendment to Senate Bill 782 which he determined would reduce the cost of auto insurance. Letter, p 4. The Van Hooser amendment substantially mirrored the final version of 3109(1) as adopted.

Admittedly addressed only to Governor Milliken, Commissioner Van Hooser's comments make clear that the purpose of the 3109(1) statutory scheme was framed in terms of maintaining or reducing premium costs for all insureds through the elimination of duplicative benefits recovery. We accept the Commissioner's comments as indicative of, if not substantially mirroring, the legislative judgment in this regard. See, generally, Note, O'Donnell v State Farm Mutual Insurance Co: A Judicial Attempt to Amend Michigan's No-Fault Act, 1977 DCL Rev 187.

[14] Greene v State Farm Mutual Automobile Ins Co, 83 Mich. App. 505; 268 NW2d 703 (1978); Hawkins v Auto-Owners Ins Co, 83 Mich. App. 225; 268 NW2d 534 (1978); Smart v Citizens Mutual Ins Co, 83 Mich. App. 30; 268 NW2d 273 (1978); Mielke v Michigan Millers Mutual Ins Co, 82 Mich. App. 721; 267 NW2d 165 (1978); Pollock v Frankenmuth Mutual Ins Co, 79 Mich. App. 218; 261 NW2d 554 (1977); Wysocki v Detroit Automobile Inter-Ins Exchange, 77 Mich. App. 565; 258 NW2d 561 (1977).

[15] As Justice LEVIN posited for this Court in Manistee Bank & Trust Co v McGowan, 394 Mich. 655, 680; 232 NW2d 636 (1975);

"Courts should proceed cautiously and should defer to legislative judgments which are reasonable. The Legislature must be free to experiment without being required to attain `mathematical nicety' in its formulation of remedies to social and economic problems."

[16] In its brief, defendant asserts yet a third purpose allegedly justifying the classification matrix employed by 3109(1). Proceeding from the premise that the No-Fault Act was enacted to "achieve full compensation for all economic losses so defined and limited by the Legislature", defendant concludes that the evident purpose of 3109(1) was designed (i) to "assure that no more and no less than actual economic loss is recovered from any source * * *" and (ii) as "[a]n ancillary effect * * * to reduce no-fault insurance carriers' exposure and, consequently, to keep the cost of no fault coverage within manageable limits". Appellant's Brief, p 18. The primary thrust of defendant's argument in this regard, therefore, is that the classifications drawn by 3109(1) rationally promote the alleged legitimate purpose of the statutory scheme under consideration: the legislatively mandated provision of secondary rather than primary insurance coverage by economic loss. We are of the opinion that this purpose asserted by defendant was not embraced by the Legislature in view of the fact that the "subtractions" mandated by 3109(1) include benefits enjoyed prior to the automobile casualty. Since these benefits were enjoyed wholly apart from the casualty compensable by no-fault, they could not be considered a component of the compensable economic loss resulting from the automobile casualty.

We have reviewed the legislative development of the statutory scheme under consideration as well as the No-Fault Act as a whole in our Shavers decision and can nowhere find support for defendant's assertion of this legislative purpose. Unpersuaded by defendant's particular characterization of the disputed scheme's purpose, we need not further address defendant's contentions in this regard.

[17] Actually, it is difficult to conceive of no-fault benefits as "secondary". Since all drivers in this state are required to be covered by no-fault insurance, and since a significant fraction of these drivers are either not members of the work force from which most governmental benefits arise, or have not been in the work force long enough to be so entitled, no-fault insurance is most frequently a primary rather than a secondary source of compensation.

[18] Defendant cites two principal characteristics which defendant alleges distinguish governmental benefits from private insurance benefits and thereby justify the "modest difference in treatment between such benefits necessary to accomplish the Legislature's objective [of making no-fault insurance a secondary, rather than a primary, source for compensating auto crash victims for economic loss]". In brief, these two characteristics are: (i) governmental benefit programs are universal and involuntary whereas private insurance programs are not; and, (ii) benefits received from governmental programs are uniform and readily determinable while private insurance benefits are not.

Defendant's alleged distinctions justifying disparate treatment are unpersuasive. Indeed, governmental benefits are not necessarily universal as contended by defendant. For example, all no-fault insureds are not necessarily entitled to the receipt of either military benefits or even Social Security benefits although some no-fault insureds are so entitled. Further, we have found that the legislative purpose to be furthered by the disputed statutory scheme is different from that stated by defendant; defendant's distinctions are thereby rendered inapposite.

[19] Section 3109a, MCL 500.3109a; MSA 24.13109(1) provides in pertinent part:

This section of the No-Fault Act provides for an optional set-off of private, collateral insurance benefits at the election of the insured. In contrast, 3109(1) provides for a mandatory set-off of governmental benefits whether the insured desires such a subtraction or not, and is significantly devoid of any similar provision such as "at appropriately reduced premium rates".

Defendant asserts that the injection of 3109a into the composition of the general set-off scheme alleviates any constitutional infirmity of that scheme. Defendant's principal argument in this regard appears to center on the notion that, read in conjunction, 3109(1) and 3109a operate to treat all no-fault insureds in an identical manner as both governmental and private, collateral benefits are confronted with a set-off. As stated by defendant in its brief at page 27:

"The only difference between government benefits and benefits from other private insurance is that government benefits are required to be subtracted from no-fault benefits while the insured has the option of electing to deduct or exclude his other private health and accident coverages or, if he be willing to bear the added cost, to receive duplicative benefits from private sources."

We cannot agree with defendant that the conjunctive consideration of 3109a cures the equal protection deficiency of the appealed scheme by creating uniformity of treatment between governmental benefit and collateral, private benefit recipients. In fact, we are of the opinion that defendant's above-quoted statement of essential similarity between the disputed classifications bears out this very opposite point.

Indeed, rather than creating similarity between the government and private, collateral benefits classes and furthering their uniform treatment, these sections read in conjunction emphasize the arbitrary and discriminatory treatment afforded the governmental recipient class of insureds. Our conclusion first finds support in the fact that while 3109a permits the insured to elect a set-off, 3109(1) requires a set-off. While in many instances a set-off may be encountered in both the governmental benefit and private, collateral benefit spheres, it is not the case that such a scenario will consistently present itself under the terms of this legislation. Thus, we are still forced to deal with that situation where private insureds, not having elected a set-off, are permitted full recovery from the no-fault insurer's fund in addition to the full receipt of collateral benefits while governmental benefit recipients, not even permitted to consider a set-off, are denied full recovery from the no fault insurer's fund as that fund is merely depleted to the extent of the above-threshold governmental benefit recovery.

Second, uniformity is further dissipated by this scheme's premium reduction proviso. Section 3109a permits a reduction in full premium rates if the no-fault insured elects a set-off of collateral private benefit amounts. Section 3109(1), on the other hand, compels the insured to pay the full premium rate while concurrently acquiescing to a mandatory governmental benefit set-off. In a real sense, both classes of insureds have paid for their collateral benefits whatever form those benefits assume. Yet, those who have fortuitously engaged private, collateral benefits are permitted to recoup some of their collateral benefit costs through an appropriate premium reduction while those who have been deemed eligible for governmental assistance are denied a recoupment of some of their real out-of-pocket collateral benefit costs through an equally appropriate premium reduction. In effect, private collateral benefit insureds are permitted larger no-fault benefits for their elected full or reduced premium rate payment than are governmental benefit insureds at the mandatory full premium rate payment.

Had the Legislature chosen to offer both similarly situated classes of insureds the 3109a set-off election with a concommitant reduction in premium rates, we might not have been compelled to consider plaintiffs' equal protection challenge. That exercise of legislative judgment, however, has not been presented for our consideration. As such, we certainly cannot agree with defendant's argument that the amendment of the No-Fault Act with the addition of 3109a operates to breathe constitutional vitality into this otherwise expiring scheme. Rather, we are of the opinion that the juxtaposition of these provisions renders this statutory scheme facially unconstitutional in equal protection terms.

[20] Our holding in Boettner v State Farm Mutual Ins Co, 388 Mich. 482; 201 NW2d 795 (1972), following Blakeslee v Farm Bureau Mutual Ins Co, 388 Mich. 464; 201 NW2d 786 (1972), while not cited by plaintiffs, provides further support for our concern that plaintiffs have been deprived of a benefit for which they have paid and to which they would otherwise be entitled. Both Blakeslee and Boettner dealt with the stacking of automobile insurance policies prior to the advent of the No-Fault Act. Neither was decided on constitutional grounds. One issue presented in both concerned whether an insured could collect on more than one auto policy for which that insured had paid despite the fact that only one covered auto had been involved in an accident. Citing our statement in Blakeslee, 388 Mich. 464, 474, we expressed the following in Boettner:

"`It would be unconscionable to permit an insurance company offering statutorily required coverage to collect premiums for it with one hand and allow it to take the coverage away with the other by using a self-devised "other insurance" limitation.'" 388 Mich. 482, 487-488.

In a real sense, the 3109(1) statutory scheme permits an insurer to collect premiums for personal protection coverage with one hand while permitting that insurer to either completely or partially take that coverage away with the other through the guise of a governmental benefit set-off. Just as we found that practice objectionable in these stacking cases, we find them equally objectionable here.

[21] Actually, the benefits subject to subtraction under 3109(1) may not even be duplicative. This point is illustrated in those instances, for example, where the governmental benefit sought to be subtracted does not arise from an automobile casualty at all, but rather arises from a longevity payment or a war-related disability.

[22] We note in passing that the Legislature could have constitutionally realized its otherwise permissible judgment by treating these similarly situated classes alike, mandating a set-off for both governmental and private insurance recipients. This the Legislature did not do and we therefore feel constrained to declare this classification scheme violative of equal protection.

[23] In view of the Legislature's apparent reluctance as expressed in 3109a to permit a set-off of private, collateral benefits in the absence of a direct premium reduction, it might be argued that the Legislature solely mandated a set-off of governmental benefits based on the misconceived notion that governmental benefits are uniformly available to all no-fault insureds. If this erroneous conception guided the Legislature in its enactment of 3109(1), an equally erroneous conclusion that all insureds are permissibly treated similarly through the operation of 3109(1) would indeed arise. Our disagreement with this notion is apparent. In fact, all no-fault insureds are not uniformly eligible for governmental assistance. This becomes apparent when one considers that only four narrow classes of individuals are eligible for Federal Social Security survivors' benefits if their decedent was also statutorily "insured". 42 USC 402 et seq. Uniformity in treatment, therefore, is not championed by the 3109(1) statutory scheme; rather, unconstitutionally disparate classification once again clearly emerges from this feigned veil of uniformity.

[24] See Manistee Bank & Trust Co v McGowan, 394 Mich. 655; 232 NW2d 636 (1975), wherein this Court considered the equal protection viability of the Michigan guest passenger act. The disputed act statutorily denied tort recovery to negligently injured, non-paying automobile passengers. As one possible purpose for the guest/non-guest classifications drawn by the Legislature, the Court analyzed the allegation that the disputed act was permissibly enacted to limit liability, reduce litigation, and thereby enable insurers to offer mandatory coverage at reduced premium rates. Applying the traditional "reasonable relation" equal protection test to the challenged classification matrix in this particular respect, Justice LEVIN found the statutory scheme to deny plaintiffs equal protection of the laws and stated for the majority:

"Conceding, arguendo, that insurance rates are lower because there is a guest statute, lower insurance premiums do not, without more, justify an essentially arbitrary classification.

"If persons injured on Thursdays or men between 50 and 60 years of age were denied recovery for ordinary negligence, there would be assurance of less litigation, fewer recoveries, and the possibility of lower insurance rates. Nevertheless, all would agree that such classifications would be struck down as `arbitrary' despite the relief afforded `the purse of the motor owning public'.

"It may be legitimate for the Legislature to intervene in the increasing costs of automobile insurance. But the means selected by the Legislature to do so must be reasonably related to the object sought to be attained. Denying guest passengers recovery for ordinary negligence is no more reasonably related to the objective of lower insurance rates than would be denying recovery to persons injured on Thursdays or men between 50 and 60 years of age.

"Guest passengers as a class are not better able to bear the cost of lower premiums for the motor owning public. As a class, they are not necessarily all wealthy nor do they necessarily all have especial sources of recovery. Those who do not have other sources of recovery are forced to exhaust their own resources and may become public charges." 394 Mich. 655, 677-678.

Justice LEVIN further opined that it was even uncertain whether governmental efforts to reduce costs and thereby protect the public purse were sufficient justification for legislative selection of a similarly situated class for disparate treatment.

Analogous to the scenario confronted by this Court in Manistee Bank, this case before us involves governmental benefit recipients who pay the same premium as private insureds, suffer the same losses as private insureds, and are governed by the identical no-fault benefit scheme as private insureds. Yet, when it comes time for the no-fault insurer to compensate loss, the insurer is permitted to reduce its out-of-pocket liability with respect to governmental recipients while it must fully compensate the private insured out of the same pocket, while in both instances championing the notion that this disparate treatment is undertaken in an attempt to reduce premium costs for all insureds. Much like the constitutional plight confronted by guests in Manistee Bank, we can perceive no rational relationship between this class segregation and premium reduction; in fact, it appears that the governmental recipient has effectively paid a higher premium for reduced recovery.

[25] Other jurisdictions have similarly held such statutory schemes reducing an insured's recovery by claims compensable under disability benefit laws by the amount paid out of workers' compensation funds to be invalid as contrary to public policy. See, e.g., Allied Mutual Ins Co v Larriva, 19 Ariz App 385; 507 P2d 997 (1973); Travelers Ins Co v National Farmers Union Property & Casualty Co, 252 Ark. 624; 480 S.W.2d 585 (1972). The Court of Appeals aptly quoted the following language from the Travelers Insurance Co decision:

"`The right claimed by NFU [the insurer] would simply provide it with a windfall in the case of one covered by the workmen's compensation laws. The purpose of the Uninsured Motorist Act was to protect the insured, not the insurer.'" 70 Mich. App. 487, 497.

[26] Defendant also cites the Florida Supreme Court's decision in Lasky v State Farm Ins Co, 296 So 2d 9 (Fla, 1974), for the proposition that the present scheme is not violative of equal protection. Indeed, this was the result reached by that Court; we are not bound, however, by the holdings of other state supreme courts although such authority is frequently considered in our deliberations if well-reasoned and persuasive. We do not find Lasky to fall into that latter category of persuasiveness as the Florida Supreme Court's constitutional analysis of the set-off scheme presented for its review is devoid of policy discussion and lacks the citation of any legal authority.

O'Donnell v. State Farm Mutual Automobile Insurance

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O'DONNELL
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

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NOTES

O'Donnell v. State Farm Mutual Automobile Insurance

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O'DONNELL v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

* * *

NOTES

O'DONNELL
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY