Author(s): James L. Borin, Simeon R. Orlowski


On December 29, 2008, the Michigan Supreme Court issued its long awaited opinion in USF & G v Michigan Catastrophic Claims Association. In a four to three decision, the Michigan Supreme Court held that when a Michigan no-fault insurance policy provides coverage for “reasonable charges” the MCCA has the authority to deny reimbursement for “unreasonable charges”. In coming to their decision, the Court looked to Section 3104(2) of the Michigan No- Fault Act which obligates the MCCA to indemnify member insurers as follows:

The [Michigan Catastrophic Claims Association] shall provide and each member shall accept indemnification for 100% of the amount of ultimate loss sustained under personal protection insurance coverages in excess of $250,000.001 in each loss occurrence. As used in this section, “ultimate loss” means the actual loss amounts which a member is obligated to pay and which are paid or payable by the member, and shall not include claim expenses.Therefore, according to Section 3104(2) each claim submitted by a no-fault carrier must meet three separate requirements. First, the claim must be for the “ultimate loss” i.e., “the actual loss amounts that a member is obligated to pay and that are paid or payable by the member.” Second, the claim must be “sustained under personal protection insurance coverages” and third, the loss must be in excess of the statutory threshold amount. The Court further noted that as only certain, limited claims are subject to reimbursement, it is “necessary or proper to accomplish the

MCCA’s purpose and not inconsistent with Section 3104 for the MCClA to review claims to insure that they meet the requirements of Section 3104(2).2

The Court also found support for the MCCA’s right to review and object to claims that do not meet the requirements of Section 3104(2) in its previous decision in In Re: Certified Question (Preferred Risk Mutual Insurance Company v Michigan Catastrophic Claims Association), 433 Mich 710 (1989).

In addressing the specific issue in this appeal, which was whether the MCCA had the right to review the reasonableness of charges for attendant care services and refuse reimbursement when it deemed those charges unreasonable, the Court acknowledged that Section 3104(2) does notcontaintheword“reasonable”. However,itobservedthatthesecondrequirementofSection 3104(2) provides that the claim must be “sustained under personal protection insurance coverages”. The Court noted that in order to issue no-fault policies in Michigan, an insurer must provide the compulsory security requirements of Section 3101(1) and must comply with the provisions of the No-Fault Act. Section 3107(1)(a) defines PIP benefits, in relevant part, as “allowable expenses consisting of all reasonable charges incurred for reasonable and necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.” Therefore, the Court found that a no-fault policy written in Michigan must, at a minimum, provide PIP benefits to include “reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recovery or rehabilitation.”

The Court further stated that although all Michigan no-fault policies were, at a minimum, required to provide personal protection insurance coverage for “reasonable charges”, insurers are also free to provide broader coverage and greater benefits. Therefore, each insurer’s policy will ultimately control the standard for the MCCA’s review as each policy will establish the “personal protection insurance coverages.” Therefore, when an insurance carrier’s policy provides coverage only for “reasonable charges” the MCCA has authority to deny reimbursement for “unreasonable charges”. If however, the policy provides broader coverage, the MCCA must review claims for compliance with the broader coverage and provide reimbursement for only those claims within that coverage. As such, the Supreme Court remanded these case back to the Trial Court to determine what personal protection insurance coverages were provided by the insurance policies at issue and, if the policies provided coverage only for “reasonable charges” whether the attendant care charges were reasonable.

2Section 3104(8)(g) provides that the MCCA “perform other acts not specifically enumerated in this Section that are necessary or proper to accomplish the purposes of the association and that are not inconsistent with this Section or the plan of operation. The plant of operation provides that “the association shall, upon verification of the propriety and amount of the payments made and the member’s entitlement to reimbursement therefore, reimburse the member the amount due it.

This important decision will be discussed in greater detail at the firm’s next seminar in Lansing on February 19, 2009.