I. Introduction
On June 7, 2022, the Court of Appeals will be holding oral argument in Andary v USAA Casualty Insurance Company, a case involving one of the hottest issues to have arisen in the wake of the Legislature’s recent amendments to the no-fault act. That issue is whether the allowable expense limitations set forth in the amended MCL 500.3157 apply to persons who were injured before the amendment to § 3157 became effective on June 2, 2021.
Several Circuit Courts have addressed this issue – with conflicting results. The Court of Appeals has assigned Judges Jane Markey, Douglas Shapiro, and Sima Patel to resolve that conflict. Insurance companies and auto accident victims alike are anxiously waiting to see what they decide. And, no matter which way they rule, it is almost guaranteed that the Michigan Supreme Court will be asked to review their decision.
This article will summarize the Legislature’s amendment of § 3157 and its interplay with other pertinent statutory provisions, and provide an overview of how I believe the appellate courts should resolve this important issue.
II. Summary of the Amendment
The Legislature did two things when it amended MCL 500.3157.
First, the Legislature limited to 56 the number of hours per week of attendant care that a no-fault insurer is required to pay for if the attendant care is rendered in the injured person’s home by relatives or certain other persons.
III. To Whom Did The Legislature Intend For The Amended § 3157 To Apply?
The Legislature expressly stated in § 3157(14) of the amended statute that the above-referenced limitations “apply to treatment . . . rendered after July 1, 2021.” The issue on which the Circuit Courts have been split, and thus the issue to be decided by the Court of Appeals in Andary, is whether the Legislature meant that these limitations “apply to treatment . . . rendered after July 1, 2021,” with respect to all persons injured in motor vehicle accidents, even if the accident occurred before July 1, 2021, or only with respect to persons injured in motor vehicle accidents on or after July 1, 2021? This writer believes the Legislature intended the former.
First of all, the Legislature stated that the limitations “apply to treatment . . . rendered after July 1, 2021,” and notably did not except from the limitations treatment rendered to persons injured in motor vehicle accidents that occurred before July 2, 2021. If the Legislature had wanted there to be such an exception, the Legislature would have written such an exception into § 3157(14).
Second, the Legislature simultaneously amended the essential insurance act,[2] which is in pari materia with the no-fault act and must be construed therewith, to add MCL 500.2111f(8). The Legislature unequivocally stated therein that the above-referenced limitations set forth in the amended § 3157 “appl[y] . . . to treatment, products, services, accommodations or training rendered to individuals who suffered accidental bodily injury from motor vehicle accidents that occurred before July 2, 2021.”
Third, even if the Legislature’s statements in the amended § 3157(14) and § 2111f(8) were ambiguous – which they are not – the legislative history confirms that the Legislature intended for the limitations contained in the amended § 3157 to “apply to a treatment, training, product, service, or accommodation rendered after the [amendment’s] effective date, regardless of when the accidental bodily injury occurred.”[3]
IV. The Amended § 3157 Is Not “Retroactive”
Many plaintiff attorneys have been incorrectly arguing that the amended § 3157 cannot be applied to persons who were injured in motor vehicle accidents before July 2, 2021, because of the judicial presumption that the Legislature intends for its enactments to only apply prospectively. This assertion is without merit.
First of all, the amended § 3157 is not “retroactive.” A “retroactive” statutory amendment is one that takes away or impairs rights that became “vested” under pre-existing laws. Rights become “vested” when a cause of action “accrues.” And, a cause of action “accrues” when the right has become so fixed that it is not dependent on any future act, contingency, or decision.
With respect to common-law tort claims, a cause of action generally accrues (i.e., becomes vested) when the wrong upon which the claim is based was done. It is on these tort cases that plaintiff attorneys base their “retroactivity” argument. But, a claim for allowable expense no-fault benefits is not a common-law tort action. Rather, claims for no-fault benefits are contract actions.
That is, outside of the assigned claims context (which is statutory, not tort-based), a no-fault insurer’s liability only arises because the no-fault insurer has issued a policy of insurance; i.e., contracted with its named insured. Indeed, it is well-settled that by enacting the no-fault act the Legislature largely abolished common-law tort liability with respect to motor vehicle accidents, and in its place created the contract-based no-fault benefit system of compensation for injuries sustained in motor vehicle accidents.
In addition to mandating that every owner or registrant of a motor vehicle required to be registered in Michigan purchase a no-fault policy (i.e., contract for no-fault insurance), the Legislature mandated that no-fault insurers pay certain no-fault benefits, including “allowable expenses,” as compensation for injuries arising out of motor vehicle accidents. And, the Legislature made clear that sustaining accidental bodily injury in a motor vehicle accident is not alone sufficient for a cause of action for allowable expense no-fault benefits to “accrue” (i.e., become “vested.”). It did this by expressly stating in MCL 500.3110(4) that “[p]ersonal protection insurance benefits payable for accidental bodily injury accrue not when the injury occurs but as the allowable expense . . . is incurred.”
Thus, even though a person has been injured in a motor vehicle accident, a future contingency must occur before a claim for allowable expense no-fault benefits “accrues” (i.e., becomes “vested”). That is, the motor vehicle accident victim must take the subsequent act of incurring reasonable charges for products, services, or accommodations that are reasonably necessary for his or her care, recovery, or rehabilitation before the motor vehicle accident victim becomes vested with an accrued claim.
Here, as discussed above, the Legislature expressly stated when it amended the no-fault act that the limitations set forth in the amended § 3157 “apply to treatment . . . rendered after July 1, 2021.” A person injured in a motor vehicle accident does not “incur” allowable expenses until such treatment is rendered. Accordingly, a claim for allowable expense no-fault benefits does not “accrue” (i.e., become a “vested” right) unless and until such treatment is obtained. Because such treatment is not obtained until on or after July 2, 2021, the amended § 3157 is not “retroactive” simply because the motor vehicle accident occurred before July 2, 2021.
V. Even If Improperly Considered “Retroactive,” The Amended § 3157 Still Applies To Persons Injured Before July 2, 2021
Even if the amendment to § 3157 could be labeled as “retroactive” – which it cannot – that does not mean that its limitations do not apply to persons who were injured in motor vehicle accidents that occurred before July 2, 2021. Rather, the fact that a statutory amendment is “retroactive” merely gives rise to a judicial presumption that the Legislature did not intend for the amendment to apply to persons who were injured before the amendment became effective. But, such a judicial presumption does not always apply.
Of course, one way that the judicial presumption is rendered inapplicable is if the Legislature has expressly indicated that it intends for the amendment to apply with respect to injuries that occurred before the effective date of the amendment. And the Legislature did so with respect to the amended § 3157. Indeed, as mentioned previously, § 2111f(8) unambiguously indicates that the Legislature intended “the application of [§§] 3157(2) to (12) to treatment, products, services, accommodations, or training rendered to individuals who suffered accidental bodily injury from motor vehicle accidents that occurred before July 2, 2021.”
Another way that the judicial presumption can be rendered inapplicable is if the amendment is “remedial” in nature. This means that the amendment was designed to correct a problem with the existing statute, redress an existing grievance, or introduce regulations conducive to the public good. And the amended § 3157 unquestionably qualifies as remedial. Indeed, since the no-fault act’s inception it has been universally acknowledged that two of the Legislature’s primary goals were to contain the costs of both no-fault insurance policies and healthcare rendered to persons injured in motor vehicle accidents. It is similarly universally acknowledged that the Legislature enacted the recent no-fault act amendments to further these goals.
Accordingly, even if the amendment to § 3157 were considered “retroactive” – which again it is not – the inescapable conclusion is that the Legislature intended exactly what it said, which is that the amended § 3157 “appli[es] to treatment, products, services, accommodations, or training rendered to individuals who suffered accidental bodily injury from motor vehicle accidents that occurred before July 2, 2021.”
VI. The Amended § 3157 Is Constitutional
Because it is indisputable that the Legislature intended for the limitations set forth in the amended § 3157 to apply to all persons injured in motor vehicle accidents, regardless of when the accident occurred, plaintiff attorneys have taken the alternative tact of incorrectly asserting that applying the amended § 3157 to persons injured before July 2, 2021, violates the Contract Clause of the Michigan Constitution, which provides that “[n]o . . . law impairing the obligation of contract shall be enacted” by the Legislature.[4] Yet again, their argument is without merit.
First of all, the Legislature’s amendment of § 3157 does not constitute a “law impairing the obligation of contract.” This is because the Contract Clause only prohibits the Legislature from substantially impairing rights that have already become “vested” under an existing contract. As discussed at length above, the right of a person injured in a motor vehicle accident to claim allowable expense no-fault benefits does not “vest” until such time as the person receives and incurs charges for reasonably necessary products, services, and accommodations. Thus, because the amended § 3157 only applies to charges incurred after July 2, 2021, it does not affect any contractual rights that vested before its enactment.
Similarly, the amended § 3157 does not substantially impair the injured person’s right to receive any allowable expense no-fault benefits that were reasonably expected at the time of contracting (i.e., when the policy was purchased). Indeed, before § 3157 was amended, a no-fault insurer’s contractual obligation was to pay “reasonable charges incurred” by the injured person for “products, services and accommodations” so long as those “products, services and accommodations” are “reasonably necessary . . . for [the] injured person’s care, recovery, or rehabilitation.”[5] That contractual obligation of the insurer is unchanged by the recent amendments to the no-fault act, because a no-fault insurer remains contractually obligated to pay “reasonable charges incurred” by the injured person for “products, services and accommodations” so long as those “products, services and accommodations” are “reasonably necessary . . . for [the] injured person’s care, recovery, or rehabilitation.”[6]
That the amended § 3157 limits to 56 the number of hours per week of in-home attendant care provided by relatives and certain other persons on or after July 2, 2021, for which no-fault insurers are liable to pay allowable expense no-fault benefits does not change the fact that the injured person is still entitled to recover no-fault benefits for attendant care provided either outside the home or by persons other than the injured person’s relatives or other specified persons. That is, the amended § 3157 does not alter the injured person’s entitlement to receive allowable expense no-fault benefits for any attendant care that is reasonably necessary for the injured person’s care, recovery, or rehabilitation.
Similarly, that the amended § 3157 places an upper limit on what care providers may charge (i.e., what can be considered a “reasonable charge”) does not affect the injured person’s entitlement to recovery of allowable expense no-fault benefits for charges incurred for reasonably necessary products, services, or accommodations. Instead, the amended § 3157 simply does what § 3157 has always done, which is to preclude a provider from charging the injured person an unreasonable amount for products, services, or accommodations. Indeed, a provider has always been prohibited by § 3157 from charging more than a reasonable fee, and § 3157 has always placed a maximum on what health-care providers may charge in no-fault cases. That is, even before § 3157 was amended, both it and MCL 500.3107 provided that a no-fault insurer need pay no more than a reasonable charge and that a care provider can charge no more than a reasonable charge.
Thus, the limitations set forth by the amended § 3157 are, at most, a “[m]inimal alteration of contractual obligations,” which “ends the [Contract Clause] inquiry at its first stage.”[7]
Moreover, no-fault insurance is statutorily mandated. Thus, persons who purchase no-fault policies do so knowing that the no-fault “act governs the coverages it mandates” and that its provisions are “‘a part of the contract.””[8] Thus, as the Michigan Supreme Court long ago noted:
As early as [1819[9]] Justice Storey pointed out that where the right to alter, amend, or repeal a statute existed, it must [also] be held to be a part of a contract based thereon, and the subsequent exercise of that right would be in accordance with the contract and could not impair its obligation. This principle has been repeatedly recognized.[[10]]
And, finally, even if the amended § 3157 could be viewed as falling within the ambit of the Contract Clause’s protection – which for all of the reasons discussed above it does not – the Contract Clause prohibition on state laws impairing the obligations of contract is not absolute. Rather, even though an act of the Legislature may impair contractual obligations, it is still constitutionally permissible so long as it is necessary to the public good and the means chosen by the Legislature to address the public need are reasonable.
As discussed previously, the Legislature’s goal in amending § 3157 was to contain the cost of no-fault insurance and to simultaneously contain the cost of medical care rendered to persons injured in motor vehicle accidents. Thus, the amendment to § 3157 was indisputably necessary to the public good. It is similarly incontestable that the Legislature’s means of achieving this goal are reasonable, because the amended § 3157 does not affect the injured person’s contractual right to receive allowable expense no-fault benefits for “reasonable charges incurred” for “products, services and accommodations” so long as those “products, services and accommodations” are “reasonably necessary . . . for [the] injured person’s care, recovery, or rehabilitation.”[11]
VI. Conclusion
The plain language of the amended § 3157 and § 2111f(8), as well as both the remedial nature and the legislative history of the amended § 3157, render it indisputable that the Legislature intended for the limitations contained in the amended § 3157 to apply to all persons who were injured in motor vehicle accidents, regardless of whether the motor vehicle accident occurred before July 2, 2021. Moreover, applying the amended § 3157 in the manner intended by the Legislature does not violate the Constitution. Thus, it is beyond question that the Court of Appeals should so hold when it renders its decision in Andary.
And, if called upon to do so (which seems inevitable), the Michigan Supreme Court should affirm that holding.
But, as the myriad of conflicting Circuit Court decisions addressing the amended § 3157 have proven, Judges cannot always be relied upon to do what the Legislature has plainly said. Thus, we shall simply have to wait and see whether the Legislature’s clearly expressed intent will be upheld, or whether the appellate courts will do what many Circuit Courts have done and disregard that clearly expressed legislative intent.
*****
[1] Many people incorrectly refer to this limitation as a “fee schedule”. It is not. A “fee schedule” would simply state specific amounts that no-fault insurers must pay for specific items of treatment. The amended § 3157 does not do so. Rather, MCL 500.3157(1) bars a medical provider from charging more than a “reasonable amount” for the treatment provided. § 3157 thereafter sets forth two alternative upper limits or “caps” on what can be considered a “reasonable amount.” The first potential cap, which existed before the amendment, is set forth by the second sentence of § 3157(1), which provides that “[t]he charge must not exceed the amount that the [care provider] customarily charges for like treatment . . . in cases that do not involve insurance.” Id. The second potential cap, which was added by the amendment, is now set forth by §§ 3157(2) through (14). Those subsections provide that, with respect to treatment rendered on or after July 2, 2021, the care provider “is not eligible for reimbursement . . . for more than” the amounts specified in §§ 3157(2) through (13). Thus, a no-fault insurer is not necessarily liable to pay the amounts specified in §§ 3157(2) through (13). Rather, a no-fault insurer’s potential liability continues to be only what constitutes a “reasonable amount” for the treatment. And, it may be unreasonable in some instances for a care provider to charge the amounts specified in §§ 3157(2) through (13) .
[2] MCL 500.2101 et seq.
[3] Senate Fiscal Analysis, SB 1 (May 7, 2019), pp. 9-10 (emphasis added); House Legislative Analysis, HB 4397 (May 14, 2019), p. 223 (“The above limitations would apply to a treatment rendered after the [amendment’s] effective date, regardless of when the accident happened.”)(emphasis added); House Legislative Analysis, SB 1 (May 15, 2019), p. 4; House Legislative Analysis, SB 1 (May 29, 2019), p. 6 (“In the[ filings required by §2111f(8)], insurers would have to pass on savings realized from the application of the provider reimbursement limits for medical treatment given to individuals who were injured in a car accident occurring before the effective date of the [amendment].” (emphasis added).
[4] Const 1963, art 1, § 10.
[5] MCL 500.3107(1)(a).
[6] MCL 500.3107(1)(a).
[7] Allied Structural Steel Co v Spannaus, 438 US 234, 245; 98 S Ct 2716 (1978).
[8] Meemic Ins Co v Fortson, 506 Mich 287, 297-298; 954 NW2d 115 (2020), quoting Rohlman v Hawkey-Security Ins Co, 442 Mich 520, 525 n 3; 502 NW2d 310 (1993).
[9] Dartmouth College v Woodward, 17 US 518; 4 L Ed 619 (1819).
[10] Harsha v Detroit, 261 Mich 586, 593; 246 NW 849 (1933).
[11] MCL 500.3107(1)(a).
Check out our News & Events page to see what’s happening at GLM and find out about our upcoming seminars.
Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com
