Volume XXII, No. 35
December 30, 2010
LAW FAX

MICHIGAN LAW – BLUE | INDIANA LAW – RED www.garanlucow.com

Garan Lucow Miller, P.C. 1111 West Long Lake Road, Suite 300 Troy, Michigan 48098 248.641.7600 From the Co-Editors James L. Borin & Simeon R. Orlowski

DARMER v CITIZENS INSURANCE COMPANY To Set Off or Not To Set Off, What Is The Question

CONTRIBUTOR – PAUL E. TOWER1

On December 14, 2010, the Court of Appeals issued Darmer v Citizens, (Docket #290805) an unpublished opinion which essentially avoided the issue of whether a plaintiff had a coordinated policy pursuant to MCLA § 500.3109a.

At the time of his automobile accident, plaintiff was insured by Citizens. He had an excess or coordinated policy. Plaintiff initially sought wage loss benefits from Citizens. However, plaintiff received long term disability benefits (LTD) from General Motors through a collective bargaining agreement. Citizens asserted a set-off of those benefits pursuant to the terms of policy and MCLA § 500.3109a.

During the pendency of the litigation, the Supreme Court in Jarrad v Integon National Ins Co, 472 Mich 207 (2005) held that no-fault insurers could offset long term disability benefits under § 3109a. During the first appeal in the Darmer case, plaintiff advanced a new position questioning whether Citizens complied with MCLA § 500.3109a. The Court of Appeals remanded the Darmer case to the trial court with the following instruction:

However, plaintiff maintains that Jarrad, supra does not resolve the issue of whether coordination is required here. Instead, pointing to the language of MCL 500.3109a above, he argues that a question of fact exists as to whether an appropriately reduced premium was provided in light of his employer’s self-funded long term disability plan and whether the reduction was “reasonably related” to his being entitled to such benefits. Plaintiff did not argue this claim below, nor was it cited by the trial court. Therefore, we reverse the trial court’s decision as it pertains to plaintiff’s LTD benefits, and remand for consideration of plaintiff’s claim.

On remand, additional discovery was completed in the form of taking the depositions of Douglas Warner, State Manager for Personal Lines of Insurance for Citizens, and Randy Parlor, a Department Analyst with the Office of Financial and Insurance Services (OFIS). Mr. Warner testified that the premium information is always sent to the insurance commissioner. Mr. Warner explained, “At the time those filings were done, we would send an entire copy of our rate manual with each filing, and include support for our change.” According to Mr. Warner, he was not aware of Citizens’ rate ever being rejected by the insurance commissioner.

Randy Parlor of OFIS testified that the filings are reviewed by an analyst. As to Mr. Darmer’s policy, the excess PIP medical factors and wage loss factors were reviewed. The insurance bureau stamped the filings that they were to be effective March 1, 2001. Mr. Parlor explained that if the filings are stamped effective, it indicates that the commissioner has no objection to the filings. Mr. Parlor explained that even though he did not stamp the filing as “approved,” it was treated as if it was approved. Mr. Parlor’s testimony was consistent with MCLA § 500.2236(1) which provides, “Failure of the insurance commissioner to act within 30 days after submittal constitutes approval.”

When the parties filed cross motions for summary disposition, the trial court began by looking at the language of MCLA § 500.3109a, which provides, An insurer providing personal protection insurance benefits shall offer, at appropriately reduced premium rates, deductibles and exclusions reasonably related to other health and accident coverage on the insured. The deductibles and exclusions required to be offered by this section shall be subject to prior approval by the commissioner and shall apply only to benefits payable to the person named in the policy, the spouse of the insured, and any relative of either domiciled in the same household.

The court then granted summary disposition in favor of plaintiff, holding that “because the provisions of MCL 500.3109a have not been complied with, the plaintiff’s insurance policy with his insurance company is not a coordinated policy[.]” In so ruling, the court stated that the language of Section 3109a is mandatory:

It shall be subject to prior approval by the commissioner. And I realize defendant and the carrier submitted all of the documents that appear to be necessary for requesting coordinated — it looks like everything was submitted perfectly in order for my review of that submission. However, I question — I don’t think that constitutes prior approval of the commission. Simply by no action on behalf on the part of the commissioner equals approval by the insurance.

In the second appeal, the Court of Appeals reversed the trial court’s ruling, finding that she failed to adhere to the instructions on remand. The Court of Appeals stated, “We did not instruct the trial courts to determine general compliance with MCL 500.3109a; to the contrary, our remand instructions specifically limited the trial court’s determination on remand to a determination regarding the first sentence of MCL 500.3109a. More importantly, the Court of Appeals found, Finally, even if we had not concluded that the trial court’s ruling in this case exceeded the scope of our remand instructions, we would question the trial court’s remedy in this case. The trial court’s ruling effectively reformed the insurance contract by transforming it from coordinated coverage to a policy that was not coordinated. Courts will reform a contract to reflect the parties’ actual intent where there is mutual mistake, fraud, or the instrument does not express the true intent of the parties. Olsen v Porter, 213 Mich App 25, 29; 539 NW 2d 523 (1995). In this case, however, there was no mutual mistake or fraud, and the policy expressed the parties’ true intent.

Despite the strongly worded opinion, the Court of Appeals remanded the matter to the trial court to resolve the question of whether the employer’s self-funded long term disability plan and the reduction was “reasonably related” to his being entitled to such benefits.

Thus, it appears that the Court of Appeals ducked the issue of whether there had been proper compliance with MCLA § 500.3109a. Based upon the Court of Appeals decision, plaintiffs will not be able to reform their insurance contracts based upon the standard operating procedure of OFIS. Indeed, the Court of Appeals cited approvingly Rory v Continental Ins Co, 473 Mich 457 (2005), which held that a court may not modify an insurance contact based upon a judicial determination of reasonableness. Garan Lucow Miller, P.C. announces an all-day Spring Deposition Boot Camp to take place in March of 2011. The date and venue for this event are still unknown and will depend upon the number of claims personnel who express an interest in attending. There will be no charge for this event.

The seminar will be a workshop designed to provide claims adjusters who are subject to being deposed in PIP cases with the skills necessary to successfully handle the deposition process.

If you would be interested in attending such a workshop, please contact GLM attorney Mr. John Whitman at jwhitman@garanlucow.com

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Wishing you a Healthy and Happy New Year From Your Friends At Garan Lucow Miller, P.C.