Yesterday the Michigan Supreme Court issued its decision in Andary v USAA Casualty Insurance Company, which involved the issue of whether the allowable expense PIP benefit limitations set forth in the amended MCL 500.3157 can be applied by no-fault insurers to persons who were injured before § 3157 was amended on June 11, 2019. Unfortunately for Michigan’s no-fault insurers, the Michigan Supreme Court affirmed the Court of Appeals’ determination that it cannot.
As we have explained in previous Garan Report articles, (The Garan Report – May 10, 2022 and The Garan Report – August 29, 2022) when it amended § 3157 the Legislature did two things that were at issue in Andary:
First, in § 3157(10) the Legislature limited to 56 the number of hours per week of attendant care that a no-fault insurer is required to pay if the attendant care is rendered in the injured person’s home by relatives or certain other persons.
Second, in § 3157 (2) & (7) the Legislature limited the amounts that care providers may charge for treatment, such as attendant care, rendered to motor vehicle accident victims. For treatment for which Medicare provides a payable amount for like treatment, § 3157(2) limits the care provider to charging only a specified percentage above what the provider would be paid by Medicare. For treatment for which Medicare does not provide a payable amount for like treatment, § 3157(7) limits the care provider to charging only a specified percentage of the average amount that the provider charged for such treatment on or before January 1, 2019.
As did the Court of Appeals majority, a five-Justice majority of the Michigan Supreme Court held, in an opinion authored by Justice Welch, that application of these limitations to persons injured in motor vehicle accidents that occurred before § 3157 was amended would constitute “retroactive” application, meaning that it would impair rights of the injured person that had “vested” when the motor vehicle accident and resultant injuries had occurred. In doing so, the Supreme Court majority rejected the insurer’s argument that a motor vehicle accident victim’s right to receive allowable expense PIP benefits is statutorily rendered “prospective” by MCL 500.3110(4). That provision states that “P[IP] benefits payable for accidental bodily injury accrue not when the injury occurs but as the allowable expense . . . is incurred,” (MCL 500.3110(4)), i.e., that the injured person’s right to receive PIP benefits “vests” when the injured person receives treatment for the injury, rather than when the injury occurs. See also Studier v Mich Pub School Employees’ Retirement Bd, 472 Mich 642, 653; 698 NW2d 350 (2005). In so rejecting the insurer’s reliance on § 3110(4), the Supreme Court majority stated:
Pursuant to . . . well-settled law . . . Andary’s and Krueger’s rights to PIP benefits under the applicable no-fault insurance policies vested, at the latest, when their injuries occurred and they first became eligible for PIP benefits. This is also when the insurers’ legal obligation to pay PIP benefits for all reasonable and necessary medical expenses at the statutorily mandated minimum level, as incorporated into the insurance contract, was triggered.
* * *
Defendants are correct that [under MCL 500.3110(4)] a PIP benefits claim for a specific amount of money to pay for medical expenses does not accrue until the expense is actually incurred. . . . But this fact does not change the vesting analysis at issue here; the law is well settled that the law in place at the time the parties’ rights and obligations vested under a contract control absent a clear retrospective modification.[1] While Andary and Krueger cannot seek reimbursement for specific medical expenses until the expenses are actually incurred under MCL 500.3110(4), their rights under the insurance policies for reimbursement of all reasonable and necessary medical expenses at a particular (uncapped) level, if those expenses occur, vested at the time of the automobile accidents causing their injuries – the events that triggered the coverage provided by the insurance policies.
Having agreed with the Court of Appeals majority that applying the amended § 3157 to persons who were injured in motor vehicle accidents before § 3157 was amended constitutes “retroactive” application, the Supreme Court majority proceeded to also agree with the Court of Appeals majority that the Legislature did not intend for the amended § 3157 to be applied retroactively.
The majority first rejected the notion that anything in the language of the amended § 3157 indicates a clear legislative intent that the amendment apply to persons who were injured before § 3157 was amended. Despite acknowledging that the Legislature expressly stated in § 3157(14) that the above-referenced limitations “apply to treatment . . . rendered after July 1, 2021” – and contains no exception for persons injured before § 3157 was amended – the majority simply stated without explanation that “[t]here is nothing in the clear language of MCL 500.3157, as amended by 2019 PA 21, that suggests an intent to modify the contractual rights of an injured individual who has uncapped PIP benefits and family-provided attendant care that vested prior to the enactment of the amendments, i.e., that the amendments apply retroactively.”
The majority also acknowledged that when amending § 3157 the Legislature simultaneously amended the essential insurance act (MCL 500.2101 et seq ) to add MCL 500.2111f(8). Therein, the Legislature mandated that no-fault insurers reduce the rates that they charge for no-fault policies. And, significantly, the Legislature expressly stated therein why no-fault insurers were being mandated to provide such rate reductions. Specifically, the Legislature explained in § 2111f(8) that such rate reductions were being mandated, in part, because of “the application of [the fee and hour limitations] of [§] 3157(2) to (12) to treatment . . . rendered to individuals who suffered accidental bodily injury from motor vehicle accidents that occurred before July 2, 2021.” But, again, the majority simply stated without any cogent explanation that “MCL 500.2111f(8) does not reflect a clear expression of legislative intent that MCL 500.3157(7) and (10) apply retroactively to insureds who were injured while covered by an insurance policy providing them a contractual right to provider reimbursement at pre-amendment levels.”
The majority then reasoned that the Legislature must not have intended for the amended § 3157 to apply to persons who were injured before the amendment due to “th[e Michigan Supreme] Court’s general disdain for retrospective laws because they can impair vested rights acquired under existing laws . . . .” In doing so, the majority again stated its belief that applying the amended § 3157 to persons injured before the amendment would impair vested rights, stating:
In this case, the application of MCL 500.3157(7) and (10) to Andary and Krueger would impair their vested contractual rights to PIP reimbursement for medical care at a particular level. A no-fault insurance policy issued prior to the 2019 no-fault amendments guaranteed uncapped lifetime PIP benefits for those who suffered catastrophic injuries. As previously discussed, Andary’s and Krueger’s rights to receive no-fault PIP benefits vested on the date of the automobile crashes that caused their injuries. It is undisputed that application of the 2019 amendment of MCL 500.3157(7) to Andary and Kreuger would reduce their PIP benefits by nearly half for reasonable and necessary non-Medicare-covered treatment and services they had previously been entitled to receive. For Andary, the terms of MCL 500.3157(10), if applied to her, would mean that her family could no longer be compensated for providing her reasonable and necessary attendant care beyond 56 hours per week. [2]
Joined by Justice Zahra, Justice Viviano issued a dissent that deemed the majority opinion “an erroneous interpretation of the statute, aided by resort to vague and disputed concepts that seem only to serve as cover for fairness concerns, [which] has impeded the Legislature’s effort to . . . . reduce costs and make insurance more affordable for all residents of our state . . . .”
The dissent specifically took issue with the majority’s holding that an injured person’s right to receive allowable expense PIP benefits “vests” when the accident and resultant injury occur, thus rendering application of the amended § 3157 to persons injured before the amendment “retroactive.” Instead, the dissent noted that MCL 500.3110(4) explicitly makes an injured person’s right to receive PIP benefits “prospective” and contingent, since persons injured in motor vehicle accidents “do not have anything more than the expectation of receiving payment in the future if they incur reasonable expenses.” Moreover, the dissent noted that “[t]he statutory text [of the amended § 3157] is very clear about what it regulates: future treatment. . . . The regulated activity is treatment that occurs after the [amendment’s] effective date. . . . The fact that it relates to pre-reform accidents is not enough to make it retroactive.”
The dissent then rejected the majority’s holding that the statutory language does not evince a clear legislative intent for the amended § 3157 to apply to persons injured before the amendment. Specifically, the dissent explained its view that both the language of the amended § 3157 and the language of MCL 500.2111f(8) make clear that the legislature intended for the amended § 3157 to apply to all persons injured in motor vehicle accidents – regardless of when the accident occurred – stating:
The provisions in MCL 500.3157 limiting medical-provider charges are very clear about what they apply to: treatment or training rendered within a specific period in the future. There is no textual indication that the Legislature meant to further limit these sections only to PIP benefits payable for accidents that occurred after enactment [of the amendment]. MCL 500.3157(10) similarly offers nothing to suggest that it applies only to attendant care rendered for accidents occurring after the [amendment]’s effective date. Nowhere does the statute mention the date or timing of the injury for which the treatment or training is being provided. To make matters clearer still, MCL 500.3157(14) states that “Subsections (2) to (13) apply to treatment or rehabilitation occupational training rendered after July 1, 2021.” No qualification is made with regard to the date of injury.MCL 500.2111f provides another strong textual indication that the reforms apply to pre-effective date policies. . . . MCL 500.2111f(8) demonstrates how th[e required rate] reductions are to be achieved, i.e., from application of the reforms to medical expenses arising out of earlier accidents. The reference to accidents before July 2, 2021, would be largely, if not completely, meaningless if the Legislature had not intended [the amended] MCL 500.3157 to apply to pre-effective date policies. Moreover, MCL 500.3157(8) fits perfectly with the plain language of MCL 500.3157, which clearly applies to pre-effective date policies. . . .
* * *
[I]t is simply inaccurate to say that the statute is silent on this point. The ordinary meaning of the new language of MCL 500.3157 plainly covers all future expenses and services, which, of course, includes those arising from pre-reform accidents. MCL 500.3157(14) confirms this reading, and MCL 500.2111f(8) removes all doubt.
Finally, the dissent rejected the majority’s reliance on the notion that the Legislature must not have intended for the amended § 3157 to apply to persons injured before the amendment due to the Michigan Supreme Court’s disdain for retroactive laws, noting that the Legislature has the authority to pass retroactive laws unless restricted by the Constitution. The dissent then dismissed the plaintiffs’ assertion that applying the amended § 3157 to persons injured before the amendment would violate the Contract Clause, noting that the Contract Clause does not apply to legislatively regulated contracts, such as contracts for no-fault insurance or workers’ compensation insurance, because people buy such contracts knowing that the statute governing the contractual relationship may be amended. Moreover, the dissent explained that even if the Contract Clause did apply to policies of no-fault insurance, application of the amendment to persons injured in motor vehicle accidents before the amendment would not significantly impair any vested rights and, even if it did, such impairment does not violate the Contract Clause because the Legislature had a rational basis for doing so; i.e., reducing the cost of no-fault insurance policies.
Unfortunately for no-fault insurers, the dissent did not carry the day. Thus, the Supreme Court majority’s affirmance of the Court of Appeals’ holding in Andary that the amended § 3157 cannot be applied to persons injured before the amendment means that no-fault insurers must begin (or continue) paying persons injured before June 11, 2019, as though the fee and hour limitations do not apply. This is so despite the fact that no-fault insurers were ordered by the Legislature, via § 2111f(8), to reduce the rates they charge because – as that statute expressly states – the fee and hour limitations in the amended § 3157 are supposed to apply to such persons.
[1] Significantly, the Supreme Court majority overlooks the fact that MCL 500.3110(4) has existed since the inception of the no-fault act and, thus, was in place when both Andary and Krueger’s injuries occurred. Moreover, as the majority’s analysis admits, § 3110(4) was necessarily a part of the policies (i.e., contracts) under which Andary and Krueger sought allowable expense PIP benefits. Thus, “the law in place at the time” that the policies were issued and at the time that Andary and Kreuger’s injuries occurred was that their right to receive “P[IP] benefits payable for accidental bodily injury accrue[d] not when the injury occur[red] but as the allowable expense . . . is incurred.” In short, the Supreme Court majority’s reference to “the well-settled [common] law” that rights vest when injuries occur completely overlooks the fact that the Legislature had rendered that common law rule inapplicable to claims for allowable expense PIP benefits from the very inception of the no-fault act in 1973.
[2] Having concluded as a matter of statutory interpretation that the amended § 3157 was not intended by the Legislature to apply to persons who were injured before the amendment, the Supreme Court majority deemed moot and thus declined to address the plaintiffs’ assertion that applying the amended § 3157 to persons injured before the amendment would violate the Contract Clause.
The Court also declined to address the plaintiffs’ assertions that applying the amended § 3157 to persons injured after the amendment would violate the Equal Protection and Due Process clauses, reasoning that the plaintiffs lack standing to lodge such challenges. However, the majority did note that, even if plaintiffs had standing, application of the so-called “fee schedules” contained in the amended § 3157(2) & (7) to persons injured after the amendment would not run afoul of the Equal Protection and Due Process clauses because the Legislature had a rational basis for implementing the so-called “fee schedules.”
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
