Appendix — O'Donnell v. State Farm Mutual Automobile Insurance
Supreme Court brief1979
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‘Supreme Court, Ua
FILED
IN THE
Supreme Court of the United States
October Term, 1978
—_o ——-
No -3i" 135 19
cnannidgrenains
HEATHER ELIZABETH O’DONNELL, and KATHLEEN ANNE
O’DONNELL, MICHAEL BRENT O’DONNELL, and
TIMOTHY HUGH O’DONNELL, by their next friend,
HEATHER ELIZABETH O’DONNELL,
Appellants,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY, an Illinois Insurance Corporation,
Appellee.
sliiteiataiai
AN APPEAL FROM THE SUPREME COURT OF MICHIGAN
—_ ———_
JURISDICTIONAL STATEMENT APPENDIX
+
CALDER, KIRKENDALL AND LOGEMAN
ROBERT E. LOGEMAN (P23789)
Counsel for Appellants
301 West Michigan Avenue
Suite Four Hundred
Ypsilanti, Michigan 48197
EUGENE F. BLACK
Coe-counsel for Appellants
2700 Strawberry Lane
Port Huron, Michigan 48060
Interstate Brief & Record Co., Wurlitzer Bldg., 1509 Broadway, Detroit, MI 48226
962-8745 962-8746
'
w
TABLE OF CONTENTS
Page
Michigan Supreme Court Opinion
NEOreY DURIOM 20 ines ccc ccencensececens Al
Dissenting Opinions ........cncccccrecnseces A20
Michigan Supreme Court January 4, 1979,
og Gere rr reer ree A64
Michigan Supreme Court March 8, 1979, Order
Denying Rehearing ...............ceeeeeeees A65
Michigan Court of Appeals Opinion
Majority Opinions ......cccccccsscccceees A66,A73
Dissenting Opinions ... 0. cvccccssccsnevcess A76
Trial Court Order Granting Defendant a
Summary Judgment .........cccccccsccceeves A83
Notice of Taking Appeal to the Supreme Court of
Uae CITRON HORNED nn cece s secre nnnevccevases A85
Affidavit of Service Regarding Notice of Taking
PINE 6 ince ts Seccbearecesectaeheneccdveticess A87
Constitutional Provisions and Statutes Involved . A89
US Compt Amt MEV, Sec 2... ccs cccnvcccccescess A89
ee 3 | eee ree eer rer rere reer e A89
NOUN wes coop Cp he ce Disaesengh vies A89-A90
MCLA 500.3105(1), (2), (3)... cccvcccccvcccvvnes A90
GA OU DOU ccc svsnencsrsecscctavesecsates A91
Oe ID c orecc es cenecensstocrencres A91-A92
ee ea. ee rare A92
Page
1973 N.Y. Laws, Chp. 13 §671(2)(b) ............. A92
1974 Pa. Laws, Ne. 176, G20Gfa) 2... osc csccccees A93
1973 Hawaii Sess. Laws, Act 203, Sec. 294-5 ..... A93
1973 Nev. Stats, Vol 1, Chapter 530, §12, §33 .... A94
ISVS Ky. Acts, Chp. S55 GENE) oo. ce csncccccuns A94
1973 N.J. Laws, Chapter 70, §6 ..............0.. A95
1973 Utah Laws, Chap. 55, §7(3) .............45. A95
1971 Fla. Laws, Vol 1, at p. 1361-1362 ........... A95
H.R. 1597, 95th Cong., Ist Sess. (1977), §210,
DP. FF oc ccanevdVeceseeeu wee sak ane A%
S. 354, 94th Cong., 2d Sess. (1975) §208, p. 90-91. A%6
H.R. 5149, 95th Cong., Ist Sess. (1977) §208,
DD. GHGS 2 ois weicniace du us oun Cee A%-A97
H.R. 2300, 95th Cong., Ist Sess. (1977) §2(16),
a ge SETTTEAT Ee ee A97
H.R. 2508, 95th Cong., Ist Sess. (1977) §3(9),
he SEETETEET r A97,A98
H.R. 13048, 95th Cong., 2d Sess. (1978) §109,
a SETTER A99
S. 1381, 95th Cong., 2d Sess. (1977) §109, p. 41-42 A99
IN THE
Supreme Court of the United States
October Term, 1978
inti
No. ---
icine
HEATHER ELIZABETH O’DONNELL, and KATHLEEN ANNE
O’DONNELL, MICHAEL BRENT O’DONNELL, and
TIMOTHY HUGH O’DONNELL, by their next friend,
HEATHER ELIZABETH O’DONNELL,
Appellants,
v.
STATE FARM MUTUAL AUTOMOBILE INSURANCE
COMPANY, an Illinois Insurance Corporation,
Appellee.
—_e ———_
AN APPEAL FROM THE SUPREME COURT OF MICHICAN
———_o ——_
JURISDICTIONAL STATEMENT APPENDIX
°
Al
OPINION
(State of Michigan
Supreme Court
(Filed January 4, 1979)
HEATHER ELIZABETH O’DONNELL and
KATHLEEN ANNE O’DONNELL, MICHAEL BRENT
O’DONNELL and TIMOTHY HUGH O’DONNELL, by
their next friend, HEATHER ANNE O’DONNELL,
Plaintiffs-Appellees, v STATE FARM MUTUAL
AUTOMOBILE INSURANCE COMPANY, an _ Illinois
Insurance Corporation, Defendant-Appellant. No 58833.
BEFORE THE ENTIRE BENCH
M. S. COLEMAN, J. (To reverse)
Section 3109(1)' of the Michigan No-Fault Insurance
Act? requires that the amount of benefits payable i nder
any no-fault insurance policy must be reduce’ 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.* The Court
of Appeals ruled in a 2 to 1 decision that § 3109(1) was
unconstitutional.* 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
A2
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 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.» We conclude that
§ 31091) 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 gavernment 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.
I
Plaintiffs’ decedent was killed in an automobile
accident in 1974. Plaintiffs qualified for survivors’
benefits under certain subdivisions of § 402° of the
Federal Social Security Act? which provide for the
A3
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 death.® 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.’””
The no-fault policy, issued by the defendant to the
decédent. 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* * *.”"!”
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'' of the No-Fault Act.
A4
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.'? The defendant appealed and we
granted leave to appeal. )
I]
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 US 144,
154; 58 S Ct 778; 8&2 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 NW 608 (1936).’’'4
Ina
A5
footnote at the very end of this passage, further
guidance was offered as to the limited nature of the
Court’s role:
The
‘See Ferguson v Skrupa, 372 US 726, 730-731; 83
S Ct 1028; 10 L Ed 2d 93 (1963), where the
United States Supreme Court stated:
“‘TCJourts 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’’.’ ’’'®
proper test for judging socioeconomic legislation
such as the No Fault Act was also stated in Shavers
4
“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 US 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.’ “’'®
A6
This test recognizes and preserves the constitutional
principle of separation of powers, which 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* * *’ ”’.!7
“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 — they go to the expediency of the
law, and not to its constitutionality.”’'8
The responsibility for drawing lines in a society as
complex as ours — of identifying priorities, weighing
the relevant considerations and choosing between
competing alternatives — 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.’’!”
A7
Nor is it necessary that the Legislature deal with
every aspect of a problem at the same time:
‘“TW]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’ * * *.’’7°
In short, we do not sit ‘‘as a superlegislature to judge
the wisdom or desirability of legislative policy
determinations’’.2! 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.’’??
Ill
In order to facilitate analysis of whether 3 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 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.
A8
Section 3109(1) states:
‘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.’’?5
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 Department 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’’.2* Subsequent
bills did contain set-off provisions.?> The final version
of § 3109(1) was similar to an amendment suggested by
the Commissioner.?° According to the 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’’.?”
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’’.?8
A9Y
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:
“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” * *.’’°”
The survivors’ benefits received pursuant to § 402 of the
Social Security Act were likewise paid as a result o the
decedent’s fatal accident and served substantially the
same purpose as the no-fault benefits:
“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 DeCastro, 429 US 181,
185-186. Generally speaking, therefore, the
categories of secondary beneficiaries were
Al0
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.)*”
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 ana 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 not violate the Due
Process Clause of the state or Federal constitutions.
IV
The remaining question is whether § 31091)
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
All
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.*! 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 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 econumic 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.
Al2
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 set-off $1000 required to
cover income loss and family needs — all to be
purchased with after tax — as opposed to tax — 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 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.
Al3
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, supra, 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’’*?
In time the Legislature may decide that the benefits
originally associated with §3109(1) have 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 — 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 — requires us to hold that
§ 3109(1) is constitutional.
Al4
Vv
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
§ 3109a3 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.”
Althought the Legislature did not choose to make 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.
Al5
Section 3109a promotes the valid legislative objeciive
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.
VI
Our brethren have raised the specter of Boettner v
State Farm Mutual Insurance Co, 388 Mich 482; 201
NW2d 795 (1972), and Blakeslee v Farm Bureau Mutual
Insurance Co, 388 Mich 464; 201 NW2d 786 (1972), in a
footnote to their opinion.*+ 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 — 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 decision so
long as it is supported by some rational basis.
Vil
In Richardson v Belcher, 404 US 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 th
challenge that we face today. The Federal Social Security
Act required a set-off of worker’s compensation benefits
from the social security benefits otherwise due, but did
not also require an analogous set-off of private benefits.
Al6
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.
s' Mary S. Coleman
‘s/ James L. Ryan
s) Thomas Giles Kavanaugh
s) Charles L. Levin
Al7
OPINION FOOTNOTES
' MCL 300.3109(1); MSA 24.13109(1).
+ 70 Mich App 487; 245 NW2d 801 (1976).
5 Const 1963, art 1, § 17; US Const, AM XIV.
® 42 USC 402.
7 42 USC 401 et seq.
* 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,
andor subdivision g, mother’s benefits.
* MCL 500.3109(1); MSA 24.13109(1).
‘0 Appellant's appendix, p 12a.
't MCL 500.3108; MSA 24.13108.
Al18
12 70 Mich App 492-500; 245 NW2d 802-806.
13 397 Mich 848 (1976).
14 Shavers, supra, 613-614.
'S Id, fn 38, p 614.
‘© Id, 612-613.
17 Dandridge v Williams, 397 US 471, 485; 90S Ct 1153; 25 L Ed 2d
491 (1970); Weinberger v Salfi, 422 US 749, 769; 95S Ct 2457; 45 L Ed
2d 522 (1975).
18 Sears v Cottrell, 5 Mich 250, 254 (1858).
'‘% Massachusetts Board of Retirement v Murgia, 427 US 307, 314; 96
S Ct 2562; 49 L Ed 2d 520 (1976), Ohio Bureau of Employment Services
v Hodory, 431 US 471, 489; 97 S Ct 1898; 52 L Ed 2d 513 (1977).
20 Katzenbach v Morgan, 384 US 641, 657; 86 S Ct 1717; 16 L Ed
2d 828 (1966), New Orleans v Dukes, 427 US 297, 305; 96 S Ct 2513;
49 L Ed 2d 511 (1976).
21 New Orleans v Dukes, supra, 303.
22. McAvoy v HB Sherman Co, 401 Mich 419, 439; 258 NW2d 414
(1977).
Al9
23) MCL 500.3101(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.
28 Opinion of Williams, J, p— fn 13.
2% MCL 500.3108; MSA 24.13109.
30 Califano v Jobst, 434 US 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 ——, fn 20.
38 Richardson, supra, 84.
A20
OPINION
(State of Michigan
Supreme Court)
Heather Elizabeth O’Donnell, and Kathleen Anne
O’Donnell, Michael Brent O’Donnell and Timothy Hugh
O’Donnell, by their next friend, Heather Elizabeth
O’Donnell, Plaintiffs-Appellees, v State Farm Mutual
Automobile Insurance Company, an Illinois insurance
corporation, Defendant-Appellant. No. 58833
BEFORE THE ENTIRE BENCH
WILLIAMS, J.
This summary judgment case squarely raises both the
facial equal protection and due process! viability of
§ 3109(1) of the No-Fault Insurance Act,? 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.’
MCL 500.3109; MSA 24.13109.
A similar set-off, however, is not likewise mandated
with respect to an insured’s directly financed private,
collateral insurance benefits.* 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
A21
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 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.°
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
difference between a contributory governmental benefit
program and a contributory private benefit program;
both, therefore, should be treated similarly.
A22
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 pre-
mium 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
legisiatively 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 benefit 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.
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
A23
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 insure nce
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, 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 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’ reversal of the trial court’s
grant of summary judgment to defendant insurer with
respect to the constitutionality of this scheme.
A24
es:
FACTS
Gary O'Donnell was fatally injured in an automobile
collision on February 19, 1975. 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 to recover
survivors’ benefits not to exceed $1,000 per 30-day
period. Section 3]08 of the No-Fault Act® 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; * * *”’ (See
Appellant’s Appendix, p 12a)
This reduction in payments mandated by paragraph
(5) (a) of defendant's insurance policy is similarly
A25
et
mandated by § 3109(1) of the No-Fault Act, which
states: ’
“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.” MCL 500.3109(1); MSA
24.13109(1).
Plaintiffs qualified for federal Social Security
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 (Appellee’s Brief, p 2).
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 (Appellant's Appendix, pp
2a-5a). 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 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
A26
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 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 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
iails 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, is not itself
engaged in state action; consequently, any claim
that the contract is itself unconstitutional is
unsupportable as a matter of law.” (Appellant's
Appendix, pp 14a- 15a)
A27
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) —
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 any state or the federal government — did not
bear a rational relationship to a “‘legitimate purpose”
and arbitrarily discriminated ‘‘against those who recive
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.
A28
I.
GENERAL ISSUES PRESENTED
After a thorough review of the exhaustive pleadings
submitted in this case, we perceive the following
issues:
(1)
(2)
(3)
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 Defendants breached any of the
provisions of said contract’’;!°
Whether the trial court erred in granting for
defendant a summary judgment with respecf to
Count II of plaintiffs’ complaint (requesting
declaratory judgment with respect to whether the
statutory scheme established by § 31091) is
violative of due process and equal protection) on
the ground that defendant “is not itself engaged
in state action”;'' and
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 eyual
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
A29
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.
Ill.
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 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 US 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
US 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 US 244; 83 S Ct 1119; 10 L
A30
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
schome under § 3109(1) violates the due process and
equal protection clauses of the Michigan and United
States Constitutions.
IV.
PLAINTIFFS’ CONSTITUTIONAL ATTACK ON THE
§ 31091) 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 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.
A31
We articulated the applicable ‘‘traditional’’ due
process test in the following terms: 4
“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.” 402 Mich 554, 612.
Further, citing the United States Supreme Court's
admonitions in United States Dept of Agriculture v
Moreno, 413 US 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 means that the
Legislature may not take what may be termed a
‘natural class of persons’, split that class in two,
and then arbitrarily 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
A32
classifying, and it is sufficient if a classification
is practical and not palpably arbitrary. Orient Ins
Co v Daggs, 172 US 557; 19S 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 § 31091), 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 either the statutory scheme
or classification matrix drawn under § 31091) is
reasonably related to the legislative purpose of
correcting the evil that is rationally identified.
A33
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 Ceneral, 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 econcmic
losses”. 402 Mich 554, 578-579.'? 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, 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
A34
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)'* and the majority of those cases
considering the constitutionality of this scheme. '4
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.'5 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 drawn
by the Legislature is without the force of requisite logic
A35
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. '°
VI.
EQUAL PROTECTION CHALLENGE
The gravamen of plaintiffs’ 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 which rationally justify
the disparate treatment afforded these two classes. The
only apparent distinction between these classes — the
source of the collateral benefits — 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.
A36
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.'’ Additionally, defendant attempts to
distinguish and rebut plaintiffs’ legal authority on the
basis of Richardson v Belcher, 404 US 78; 92 S Ct 254; 30
L Ed 2d 231 (1971), attempts ‘« factually distinguish
mandatory governmental and voluntary private
insurance benefits,'* 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. '%
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
separaie 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 pey the same premium dollar for
identical maximum personal protection no-fault
coverage, (ii) both classes have received a common
A37
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).°
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.*’ 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, MCLA 500.3109a; MSA 24.13109(1), provides
for an optional set-off of private, collateral insurance
benefits at the election of the insured, while § 3109(1)
mandates such a set-off whether the governmental
benefit recipient desires such a subtraction or not.
A38
There is no logic to support this difference in an
attempt to eliminate duplicative recovery.??
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:
“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 effect of this section is to permit a no-fault insured
who has engaged collateral, private insurance 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.
A39
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.”
Further, proceeding from an analysis of § 3109(1)
alone, we are similarly convinced that the burden of
effectuating the permissible premium cost reduction
objective unconstitutionally rests solely upon the
governmental benefit class of no-fault insureds. Ur like
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 receiv® and hold
private insurance benefits. **
A40
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
worker’s compensation benefits. Recipients of worker's
death benefits, “specific loss” benefits, and those
employees who elected to accept a “lump sum”
worker’s compensation award, however, 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
—
A4l
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 NW 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 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
A42
unemployment nor worker’s 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 worker’s 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.?5 Writing for
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 ernployees 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.
A43
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 US 78; 92 S Ct 254; 30 L Ed 2d 231 (1971)
(Justices Douglas, Marshall and Brennan dissenting).
We find this arguable, but distinguishable and not
persuasive.
The facts presented in Richardson required the Un.ted
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 worker's 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 worker’s compensation schemes.
A44
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 US 78, 82-84.
We are convinced that Richardson is manifestly
distinguishable from the case at bar.
First, the United States Supreme Court’s ruling
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
A45
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 di inguishable 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, Congress enacted a set-off provision as a
vehicle to reduce the federal gover:iment’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.
A46
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.?° 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 § 31091). 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
A47
ure
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 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.
A48
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).
Althqugh 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; ili) 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
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.
is) G Mennen Williams
is) John W. Fitzgerald
/s/ Blair Moody, Jr.
A49
OPINION FOOTNOTES
' US Const, Am XIV; Const 1963, art 1, § 2 (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 § 31091) is unconstitutional on its face, see Borden's Farm
Products Co, Inc v Baldwin, 293 US 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 US 194; 55S 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, 40.’ 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 iegal arguments
is alone sufficient to support a judicial declaration of
unconstitutionality.
’ This set-off is made against an insured’s § 3108 no-fault
personal protection benefits. “we
4 Compare MCL 500.3109a; MSA 24.13109(1) which provides in
pertinent part:
“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. * * *”
A50
* 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
Aor.”
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 sécured 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).
° 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.
A51
*
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.
* Section 3108 of the No-Fault Act provides:
“Personal protection insurance benefits are payable for a
survivois’ 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.
A52
‘0 Appellant's Appendix, p 14a.
'' Appellant’s Appendix, p 15a.
'2 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.
'* 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 ]
(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
A53
(fn. 13 cont'd.)
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 — with the exception
of Social Security benefits — 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 subtracted
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 Bil! 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. 91) 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
A54
(fn. 13 cont'd.)
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 § 31091) as adopted.
Admittedly addressed only to Governor Milliken, Commissioner
Van Hooser’s comments make clear that the purpose of the § 31091)
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 /udicial Attempt to Amend
Michigan's No-Fault Act, 1977 DCL Rev 187.
'* Greene v State Farm Mutual Automobile Ins Co, 83 Mich App
505; 268 NW2d 703 (1978); Hawkins v Auto-Ow. rs 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).
'S 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.”
A55
16
In its brief, defendant asserts yet a third purpose allegedly
justifying the classification matrix employed by § 31091).
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’, Appellant’s Brief, p 17, 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 of
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 § 31091) 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.
'7 Actually, it is difficult to conceive of no-fault benefits as
“secondary”. Since al! 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.
A56
'8 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 mo-fault insurance a secondary, rather than a
primary source for compensating auto crash victims for economic
loss}’’. Appellant's Brief, 32. 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. Appellant's
Brief, 31-38.
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.
'% Section 3109a, MCL 500.3109a; MSA 24.13109(1) provides in
pertinent part:
“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. * * *”
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”.
A57
(fn. 19 cont'd.)
Defendant asserts that the injection of § 3109a into the
composition of the general set-off scheme alleviates any
constitutional infirmity of 7 scheme. Defendant's principal
argument in this regard appears to center on the notion that, read in
conjunction, §§ 31091) 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 collatera!
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.
A58
(fn. 19 cont'd.)
Second, u, ormity 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 31091), 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 bnefit
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.
70 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
A59
(fn. 20 cont'd.)
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 § 31091) 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 § 31091), an
equally erroneous conclusion that all insureds are permissibly
A60
(fn. 23 cont'd.)
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 § 31091) statutory scheme; rather,
unconstitutionally disparate classification once again clearly emerges
from this feigned veil of uniformity.
*4 See Manistee Bank & Trugt 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 “reascnable 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
A6él
(fn. 24 cont'd.)
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 tor 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.
A62
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 worker's
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 SW2d 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.
*» 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, bythe 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.
A63
OPINION |
(State of Michigan
Supreme Court)
(Filed )
Heather Elizabeth O’Donnell, and Kathleen Anne
O’Donnell, Michael Brent O’Donnell and Timothy Hugh
O'Donnell, by their next friend, Heather Elizabeth
O’Donnell, Plaintiffs-Appellees, v State Farm Mutual
Automobile Insurance Company, an Illinois insurance
corporation, Defendant-Appellant. No. 58833.
BEFORE THE ENTIRE BENCH
BLAIR MOODY, JR., J. (Concurring with Williams, J.)
I agree with the general analysis employed by Justice
Williams and therefore sign his opinion. However, |
reserve judgment concerning the scope of the
Legislature’s intent to avoid duplicative recovery and
any distinction between’ contributive and
non-contributive governmental benefits.
is) Blair Moody, Jr.
A64
ORDER OF REVERSAL
(State of Michigan In the Supreme Court)
Heather Elizabeth O’Donnell and Kathleen Anne
O’Donnell, Michael Brent O’Donnell and Timothy Hugh
O’Donnell, by their next friend, Heather Anne
O'Donnell, Plaintiffs-Appellees, v State Farm Mutual
Automobile Insurance Company, an Illinois Insurance
Corporation, Defendant-Appellant. 58833.
Present the Honorable Thomas Giles Kavanagh, Chief
Justice, G. Mennen Williams, Charles L. Levin, Mary S.
Coleman, John W. Fitzgerald, James L. Ryan, Blair
Moody, Jr., Associate Justices.
This cause having been brought to this Court by
appeal from the decision of the Court of Appeals and
having been argued by counsel and due deliberation
having been had thereon by the Court, IT IS HEREBY
ORDERED that the judgment of the Court of Appeals
be REVERSED. No costs are to be taxed.
CERTIFICATION
STATE OF MICHIGAN — ss.
I, Harold Hoag, Clerk of the Supreme Court of the
State of Michigan, do hereby certify that the foregoing
is a true and correct copy of an order entered in said
court in said cause; that | have compared the same with
the original, and that it is a true transcript therefrom,
and the whole of said original order.
IN TESTIMONY WHEREOF, I have hereunto set my
hand and affixed the seal of said Supreme Court at
Lansing, this 9th day of March in the year of our Lord
one thousand nine hundred and seventy-nine.
's/ Jacqueline B. Mosse, Deputy Clerk.
A65
ORDER DENYING REHEARING
(State of Michigan in the Supreme Court)
Rehearing No. 469 Heather Elizabeth O’Donnell, and
Kathleen Anne O’Donnell, Michael Brent O’Donnell and
Timothy Hugh O’Donnell by their next friend, Heather
Elizabeth O’Donnell, Plaintiffs-Appellees, v State Farm
Mutual Automobiie Insurance Company, an Illinois
insurance corporation, Defendant-Appellant. 58833
At A Session Of The Supreme Court Of The State Of
Michigan, Held at the Supreme Court Room, in the City
of Lansing, on the 8th day of March in the year of our
Lord one thousand nine hundred and seventy-nine.
Present the Honorable Mary S. Coleman, Chief
Justice, Thomas Giles Kavanagh, G. Mennen Williams,
Charles L. Levin, John W. Fitzgerald, James L. Ryan,
Blair Moody, Jr., Associate Justices
In this cause a motion for rehearing is considered
and, on order of the Court, it is hereby DENIED.
CERTIFICATION
State of Michigan—ss. |
I, Harold Hoag, Clerk of the Supreme Court of the
State of Michigan, do hereby certify that the foregoing
is a true and correct copy of an order entered in said
court in said cause; that I have compared the same with
the original, and that it is a true transcript therefrom,
and the whole of said original order.
IN TESTIMONY WHEREOF, | have hereunto set my
hand and affixed the seal of said Supreme Court at
Lansing, this 8th day of March in the year of our Lord
one thousand nine hundred and seventy-nine.
's/ Jacqueline B. Mosse, Deputy Clerk.
A66
OPINION
(State of Michigan
Court of Appeals)
Heather Elizabeth O’Donnell, and Kathleen Anne
O'Donnell, Michael Brent O’Donnell, and Timothy
Hugh O’Donnell, by their next friend, Heather Anne
O’Donnell, Plaintiffs-Appellants, v. State Farm Mutual
Automobile Insurance Company, an Illinois insurance
corporation, Defendant-Appellee. No. 25429
Before: Bashara, P.J., and V. J. Brennan and T. M.
Burns, J].
T. M. BURNS, J.
Plaintiffs are the wife and children of Gary
O'Donnell, who was fatally injured in an automobile
accident. Mr. O’Donnell was covered by a no-fault
automobile insurance policy issued by the defendant,
and plaintiffs are dependents of decedent for purposes
of survivor's loss benefits.
Decedent’s insurance policy provided that the
maximum survivor's loss benefits would not exceed
$1,000 per 30-day period and that the amount payable
by the insurance company would be reduced by
amounts paid or payable to the survivors under state or
federal law.
Plaintiffs were entitled to the maximum benefits of
$1,000 per 30-day period for three years after decedent's
death as permitted by the no-fault act (MCLA 500.3108;
MSA 24.13108). From the monthly maximum benefits
amount, however, defendant deducted $560, the sum
plaintiffs received in social security benefits. This
deduction was made pursuant to MCLA 500.3109(1);
MSA 24.13109(1), which provides as follows:
“Benefits provided or required to be provided
under the laws of any state or the federal
A67
government shall be subtracted from the
personal protection insurance benefits otherwise
payable for the injury.”
Plaintiffs thus received $440 per month instead of the
$1,000 per month figure set out in the insurance policy.
Plaintiffs filed a complaint in circuit court alleging the
defendant breached the insurance contract by not
paying the full $1,000 per month in benefits. Plaintiffs
also sought a declaration of rights relative to the
constitutionality of § 3109 of the no-fault act, which
provides for the deduction of governmental benefits
from the personal protection insurance benefits.
Defendant filed a motion for summary judgment,
alleging that plaintiffs failed to state a claim upon
which relief could be granted in that the reduction of
benefits under the policy was in compliance with state
law. Defendant also asserted that the policy constituted
a contract between private parties and that since no
state action was involved, no claim of constitutional
violation could be maintained. ,
The trial court granted defendant's motion for
summary judgment. The order stated that the complaint
failed to state a cause of action for the reasons that no
breach of any provision of the contract was alleged, and
that defendant, in complying with the no-fault act, was
not engaged in state action and, therefore, any claim
that the contract itself was unconstitutional was not
supported as a matter of law.
On appeal, plaintiffs argue that the trial court erred
reversibly in granting summary judgment and contend
that § 3109 of the no-fault act is unconstitutional.
A68
It is argued that MCLA 500.3109(1); MSA 24.13109(1)
violates the equal protection guarantees of the U.S. and
Michigan Constitutions. This Court has recently
enunciated the standard of review of legislation claimed
to be so defective. See Shavers v Attorney General, 65
Mich App 355; — NW2d — (1975). Cf. Manistee Bank &
Trust Co v McGowan, 394 Mich 655; 232 NW2d 636
(1975), and Fox v Employment Security Commission, 379
Mich 579; 153 NW2d 644 (1967).
Generally, legislative classification should be
presumed valid, as the Legislature has broad discretion
in distinguishing between different classes. “The
Legislature must be free to experiment without being
required to attain ‘mathematical nicety’ in its
formulation of remedies to social and economic
problems.”’ Manistee Bank & Trust Co v McGowan, supra,
at 680; 232 NW2d at ——. But legislative classification
must not be arbitrary or unreasonable, it must be
germane to the object of the legislation, and it must be
made uniform in its operation upon all persons of the
class to which it naturally applies. Fox v Employment
Security Commission, supra.
“Even under the minimum scrutiny test
applied when innovative legislation § is
challenged on equal protection grounds, the
legislation must be examined to see if its
classifications are reasonable, and bear some
reasonable relationship to the object of the
legislation. While it is not the judiciary’s task to
second-guess legislative wisdom or to speculate
on the possibility of more precise line-
drawing by the Legislature, the decision on
reasonableness cannot be avoided.” Shavers v
Attorney General, supra at 369; — NW2d at —.
A69
In the Shavers v Attorney General challenge of the
no-fault act, Judge Gilmore of the Wayne County
Circuit Court found that § 3109(1) violates the equal
Protection clauses of the U.S. and Michigan
Constitutions. In this Court’s decision in Shavers, we
vacated that ruling because the question was not
properly justiciable. In the instant case, however, we
are squarely faced with a “case of actual controversy”
concerning the validity of § 3109(1).
The effect of § 3109(1) is to reduce no-fault benefits
by any compensation paid under any state or federal
laws, such as workmen’s compensation and _ social
security benefits. Thus, no-fault recovery is reduced by
governmental collateral sources but not by any private
insurance sources. The basic purpose of no-fault is to
insure compensation of persons injured in automobile
accidents. But the effect of § 3109(1) is to allow both
no-fault benefits and private insurance benefits to those
who have such private insurance, yet reduces no-fault
benefits by any benefits received under a governmental
program. Thus, those who have no private insurance or
who cannot afford such insurance receive fewer benefits
because of that fact. We find this section to be patently
unreasonable and discriminatory.
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, the reduction
of the cost of insurance is a proper basis for legislative
classification and prohibitive cost was a problem that
needed solution. But the fact that a problem exists does
not permit arbitrary means of solving it and assuming
that § 31091) reduces costs, such savings alone do not
justify an essentially arbitrary classification. Manistee
Bank & Trust Co v McGowan, supra, at 677; — NW2d —.
Cf. Grace v Howlett, 51 Ill 2d 478; 283 NE2d 474, 478
(1972).
A70
Section 3109(1) is very broad — it covers any
collateral governmental source. No-fault systems in
other states include collateral source set-off provisions,
but in Illinois and Florida, for example, the set-off
provisions apply only to workmen’s compensation
benefits. It might be argued that the latter type of
set-off provision is reasonable because the workmen's
compensation benefits are provided without cost to the
beneficiary while private collateral source benefits are
not.' Cf. Grace v Howlett, supra, Chief Justice
Underwood, dissenting. The argument is persuasive.
Section 3109(1), however, is not limited to governmental
benefits provided without cost to the beneficiary. The
provision requires reduction of recovery by benefits
which are in a very real sense “paid for’’ by the
“insured”, such as under social security, or benefits
which are in the nature of employee benefits to
government employees and veterans.? In this case the
' This type of no-fault set-off provision (reducing no fault
benefits by workmen's compensation benefits received) has been
upheld by the Florida Supreme Court. Lasky v State Farm Insurance
Co, 296 So 2d 9, 21 (S Ct Fla, 1974)
2 In Richardson v Belcher, 404 US 78; 92 S Ct 254; 30 L Ed 2d 231
(1971), the U.S. Supreme Court held that § 224 of the Social Security
Act, which provides for the reduction of social security disability
benefits to any person also receiving workmen's compensation, is
not unconstitutional as making an arbitrary discrimination between
workmen's compenstion benefits and disability compensation from
private insurance or from tort claim awards. Significant in
Richardson is the Court's implicit holding that as long as there is a
legitimate purpose served by a set-off provision, the provision will
not be considered an invidious classification because inapplicable to
recipients of private benefits.
But in the case at bar, grave doubts exist as to presence of a
legitimate purpose being served by the set-off provision. It is said
that the purpose of § 31091) is to prevent duplicative recovery of
benefits. What is legitimate about that? It is asserted that the
provision reduces the cost of no-fault coverage, but there has not
been a hint of proof presented to this Court to so prove. Aided only
by personal experience, one is inclined to conclude that the
“lowered” costs are illusory.
A71
beneficiary's no-fault benefits are reduced by
governmental insurance the insured has paid for but
not by private insurance for which he has paid. While
this raises a fundamental due process issue (see ¢.g.,
Flemming v Nestor, 363 US 603; 80 S Ct 1367; 4 L Ed 2d
1435), the principal evil of § 31091) is its arbitrary
application. Those who can afford private insurance to
supplement no-fault benefits are permitted duplicative
recovery while those who cannot afford such are denied
duplicative recovery.
An analogous problem has existed under the
uninsured motorist systems. Courts have held that
policy exclusions reducing an insured’s recovery by
amounts paid out of workmen’s compensation funds
and disability benefit laws are invalid and against
public policy. See e.g., Allied Mutual Insurance Company
v Larriva, 19 Ariz App 385; 507 P2d 997 (1973).* In
Traveler's Insurance Co v National Farms Union Property
& Casualty Co, 252 Ark 624, 632; 480 SW2d 585, 591
(1972), the Court stated:
“The right claimed by [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.’
* 24 ALR 2d 1353 covers the point.
* The “windfall” claim may not be entirely correct as,
presumably, the insurer has considered the set-off provision in
setting its rates.
A72
In Bowser v Jacobs, 36 Mich App 320; 194 NW2d 110
(1971), this Court was concerned with the
constitutionality of a section of the Motor Vehicle
Accident Claims Act which prevented those covered by
workmen’s compensation from recovering under the
act. The plaintiffs were injured while in the course of
their employment by uninsured motorists. They
received workmen’s compensation and sought recovery
against the uninsured motorist fund. The secretary of
state sought dismissal of the suits, relying upon a
section of the act which barred recovery by an injured
person if he was covered by workmen's compensation.
It was demonstrated that those who had private
insurance coverage were not similarly barred from
recovery against the fund. This Court struck down
the legislative classification as unconstitutionally
discriminatory. Like the legislative classification in
Bowser, § 31091) which allows personal protection
benefits plus private insurance benefits to one group,
but deducts from personal protection benefits anything
received from a government program is arbitrary and
unreasonable. We find no legitimate purpose for
establishing such a distinction which arbitrarily
discriminates against those who receive certain
governmental benefits.
We find MCLA 500.3109(1); MSA 24.13109(1) to be
unconstitutional. As such, the act is void and of no
effect as of the date of enactment. Briggs v Campbell,
Wyant & Cannon, 379 Mich 160; 150 NW2d 752 (1967).°
* See 16 CJS, Constitutional Law, § 101.
A73
As such, the statute confers no rights upon and affords
no protection to defendant. Norton v Shelby County, 118
US 425, 442; 6 S Ct 1121; 30 L Ed 178 (1886).
Defendant's argument that the set-off provision in the
insurance contract was the result of the bargain reached
by contracting parties and thus is not affected by the
validity or invalidity of § 31091) is egregious. The
terms of the statute are mandatory. Without the
“sanction” of such a statute, the contract provision is
patently offensive to public policy and as such, the
provision is invalid.°
The set-off provision in the contract is void. This
cause is remanded to the trial court for entry of
judgment in plaintiffs’ favor. No costs.
6
See, e.g., State ex rel Terbovich v Board of Comm'rs of Wyandotte
County, 161 Kan 700; 171 P2d 777 (1946), State ex rel Taylor v Carolina
Racing Association, 241 NC 80; 84 SE2d 390 (1954).
OPINION
(State of Michigan
Court of Appeals)
Heather Elizabeth O’Donnell, and Kathleen Anne
O'Donnell, Michael Brent O’Donnell, and Timothy
Hugh O'Donnell, by their next friend, Heather Anne
O’Donnell, Plaintiffs-Appellants, v State Farm Mutual
Automobile Insurance Company, an Illinois insurance
corporation, Defendant-Appellee. Docket # 25429.
Before Bashara, P.J., and V. J. Brennan and T. M.
Burns, JJ.
V. J. BRENNAN, J., Concurrence with Judge T. M.
Burns’ Opinion.
I concur with Judge T. M. Burns’ opinion.
A74
I see no corollary as to who gets what or is getting what
from various sources whether they be social
security, stock dividends, insurance policies, etc., when
it comes down to insurance benefits received as a result
of injuries incurred from accidents.
‘
The insurance companies successfully lobbied “no
fault’’' under the guise of necessary legislation which
would inevitably greatly reduce insurance costs which
they could and would pass on to the public in the form
of reduced policy premiums.
I have yet to see the lower premiums but have,
unfortunately, on the contrary seen increased premiums
for the same coverage. These so-called savings have not
been passed on to the public — and there are, no
doubt, some savings present as the insurance
companies, under this provision, now have picked up
“Uncle Sam” and the state government as their partners
in underwriting these policies.
Before ‘‘no fault’’ there was no reduction or
subtraction in jury verdicts of amounts received from
social security or other state or federal government
benefits.
The provision reads:
‘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.” MCLA 500.3109(1); MSA
24.13109(1).
' Personal and Property Protection and Residual Liability
Insurance Act, MCLA 500.3101 through 500.3179; MSA 24.13101
through 24.13179.
A75
From the way it reads one could concur that all
former state and federal employees on retirement could
have subtracted from their accident insurance proceeds
the amount of their monthly pension.
Why the provision in the first place; is a person on
social security more susceptible to accidents than one
who is not? Is social security's purpose to compensate
our senior citizens for prospective accident cost needs?
How about a deduction from the deduction in favor of
the recipient for the contributions by the recipient into
the social security fund over the many years before he
or she became eligible for social security. These
observations are bordering on the obscure yet they
could follow from the logic behind the present law.
As a matter of judgment I can find no reasonableness
in this legislative classification.
I, too, would declare the set-off provision in the
contract as void.
A76
OPINION
(State of Michigan
Court of Appeals)
Heather Elizabeth O’Donnell, and Kathleen Anne
O’Donnell, Michael Brent O’Donnell, and Timothy
Hugh O’Donnell, by their next friend, Heather Ann
O’Donnell, Plaintiffs-Appellants, v State Farm Mutual
Automobile Insurance Compan, an Illinois insurance
corporation, Defendant-Appellee. No. 25429.
Before: Bashara, P.J., and V.J. Brennan, and T.M.
Burns, JJ.
Bashara, P.J., dissenting.
I respectfully dissent.
A brief review of the facts is necessary to this
discussion. Plaintiff's decedent was fatally injured in an
automobile collision on February 19, 1975. The decedent
was insured under a no-fault automobile insurance
policy issued by the defendant. The policy provided in
relevant part:
“(5) the 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; * * *.”
A77
The reduction in payments allowed by paragraph
(5)(a) of the insurance policy is provided for in MCLA
500.2101(1); MSA 24.13109(1), which states:
(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.”
The plaintiffs qualified for the maximum survivors
loss of $1,000 per 30 day period. They also qualified for
social security benefits of approximately $550 per
month. Pursuant to paragraph (5)(a) of the insurance
policy, the defendant reduced the insurance benefits
$550 and paid the plaintiff approximately $450 per
month.
Plaintiffs brought this action to recover the difference.
Count I of plaintiff's complaint alleged breach of
contract. Count II requested declaratory judgment
that MCLA 500.3101(1); MSA 28.13109(1), was
unconstitutional as a violation of equal protection and
due process of law and veid as incorporated in the
insurance policy.
Defendant moved for summary judgment on both
counts grounded on GCR 1963, 117.2(1) and (3).
Defendant failed to file a supporting affidavit.
Consequently, the trial court only considered whether
the complaint failed to state a claim upon which relief
could be granted. GCR 1963, 117.2(1).
The court held that count I failed to allege facts
constituting breach of contract because the insurance
contract provided for a reduction in benefits in the
amount ‘‘required to be provided under the laws of any
A78
state or federal government.” The court further ruled
that count II failed to state a claim because the contract
was between private parties. Therefore, a constitutional
attack could not be sustained, where there existed no
state action.
A motion for summary judgment brought under GCR
1963, 117.2(1) merely tests the legal sufficiency of the
claim as determined from the pleadings alone. Todd v
Biglow, 51 Mich App 346, 349; 213 NW2d 733 (1974), lv
den 391 Mich 816 (1974), 1 Honigman & Hawkins (2d
ed), Committee Notes to GCR 1963, 117, p 353, 355. For
the purposes of that motion, both at the trial and
appellate ievels, every well pled allegation in the
complaint is assumed to be true. Bielski v Wolverine
Insurance Co, 379 Mich 280, 283; 150 NW2d 708 (1967).
The test is whether the plaintiff's claim, on the
pleadings, is so clearly unenforceable as a matter of law
that no factual development can possibly justify a right
to recovery. Crowther v Ross Chemical & Mfg Co, 42
Mich App 426, 431; 202 NW2d 577 (1972).
I am of the opinion the trial judge correctly ruled 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. Shelly v Kraemer, 334 US 1; 68 S Ct 836; 92 Led
1161 (1947). The Fourteenth Amendment applies to all
state legislation which impairs due process or denies
equal protection. Civil Rights Cases, 109 US 3, 11; 3S Ct
18; 27 Led 835 (1883).
A79
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 US 244; 83
S Ct 1119; 10 L Ed 323 (1963). I believe the trial judge
erred in determining there was no state action, and
consequently failing to consider the constitutional
questions raised.
Appellate courts should not decide constitutional
questions not passed upon by the trial court. Cortez v
International Union, United Automobile, Aircraft &
Agricultural Workers of America (UAW-CIO), 339 Mich
446, 453; 64 NW2d 636 (1954), Wilson v Boyer, 269 Mich
197, 199; 256 NW2d 854 (1934). In my opinion the
proper procedure is to remand to the trial judge for
consideration of the constitutional questions raised in
the action for declaratory judgment.' However, because
my brothers found it necessary to consider the
constitutional question of equal protection, I feel
compelled to respond.
A classification must be reasonable not arbitrary, so
that all persons similarly situated are treated alike. Reed
v Reed, 404 US 71, 76; 92 SCt 251; 30 L Ed 2d 225
(1971), F. S. Royster Guano Co v Virginia, 253 US 412,
415; 40 S Ct 560; 64 L Ed 989 (1920). The equal
protection clause does not deny the state the power to
treat different classes of persons in different ways.
' A remand seems particularly appropriate in light of the
Majority’s statement at p 7 n 2, that no proof was presented that
MCLA 500.2109; MSA 24.13109, results in cost reduction. No proofs
were presented because the dispute was resolved summarily without
consideration of the constitutional question.
A80
Railway Express Agency v New York, 226 US 106; 69S Ct
463; 93 L Ed 533 (1949). Barbier v Connolly, 113 US 27;
5 SCt 357; 28 L Ed 923 (1885). The grossest
discrimination can sometimes lie in treating things that
are different as though they were exactly alike. Jenness v
Fortson, 403 US 431, 442; 91 S Ct 1970; 29 L Ed 2d 554
(1971). ;
The majority has correctly determined that a
discrimination exists under MCLA 500.3109(1); MSA
24.13109(1), which requires public benefits to be setoff
against no-fault insurance proceeds, while mandating
no such reduction for private insurance benefits. The
majority reasons that if the purpose of the provision is
to reduce costs by eliminating duplicative recovery,
such a classification is unreasonable and arbitrary, as it
only operates on those who receive public benefits.
In my opinion the majority has combined two
different classes and treated them as if they were alike.
The same error occurred in Richardson v Belcher, 404 US
578; 92 S Ct 254; 30 L Ed 2d 231 (1971). In Richardson
the appellee attacked the Social Security Act, § 224, 79
Stat 406 (1968), 42 USC 424a, which permitted reduction
of his social security benefits in the amount of
workmen's compensation benefits received by him.
Appellee claimed the statute violated the Due Process
Clause of the Fifth Amendment, US Const, Am V,?
because it discriminated between those disabled
employees who received workmen’s compensation and
those who received compensation from _ private
insurance.
> The Federal Government's duty under the Due Process Clause
of the Fifth Amendment includes guaranteeing all citizens equal
protection of the laws. Bolling v Sharpe, 347 US 497; 74S Ct 693; 98
L Ed 884 (1954).
A81
The United States Supreme Court rejected any
Suggestion that the classes were alike. The government
benefits were all part of a statutory scheme to insure a
minimum threshold of recovery and to provide for
needs not previously met by private insurance. The
Court determined the classification could be justified by
the conclusion of Congress that federal duplication of
benefits could gradually weaken or atrophy state
workmen’s compensation systems. Furthermore, the
Court refused to consider whether the purposes of
Congress might have been better served had the offset
provisions been extended to private insurance on the
grounds that it would exceed their constitutional
authority.
“In the area of economics and social welfare, a State
does not violate the Equal Protection Clause merely
because the classifiction 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.’ ”
Dandridge v Williams, 397 US 471, 485; 90 S Ct 1153; 25
L Ed 2d 491 (1970).
Social security as well as other governmental
programs, such as workmen's compensation, benefits
are part of an overall statutory scheme established as a
matter of public policy to provide minimum
compensation for all persons otherwise qualifying for
benefits under the programs. See Lasky v State Farm
Insurance Co, 296 So 2d 9, 21 (Fla 1974), reh den, 43
Fordham L R 379, 396. These programs were intended
to fill a void not adequately covered by private
insurance. See Richardson v Belcher, supra, 404 US 83-84.
As such, a rational basis exists for distinguishing the
classes.
A82
The legislature could rationally conclude that
reduction of no-fault proceeds to the extent one receives
public benefits would eliminate duplicate recovery and
reduce costs. Whether the legislature should have gone
further by providing an offset for private insurance is
not for us to consider under our limited function as a
reviewing court under the constitution. Richardson v
Belcher, supra, 202 US 84. The Equal Protection Clause
does not preclude the State from taking one step at a
time, addressing itself to the phase of the problem that
seems most acute, while neglecting other phases of the
problem. Geduldig v Aiello, 417 US 484, 495; 94 SCt
2485; 41 L Ed 2d 256 (1974), Williamson v Lee Optical Co,
348 US 843, 849; 75 S Ct 461; 99 L Ed 563 (1955).
Assuming arguendo the Majority is correct that the
classes are indistinguishable, their analysis still does
not justify the conclusion that there is a deprivation of
equal protection of the law. San Antonio Independent
School District v Rodriguez, 411 US 1, 20; 93 S Ct 1278, 36
L Ed 2d 16 (1973), reh den 411 US 959; 93 S Ct 1919; 36 L
Ed 2d 418 (1973), analyzed prior precedent to determine
the common characteristics of classes discriminated
against by inability to pay. The Court stated:
“The individuals, or groups of individuals,
who constituted the class discriminated against
in our prior cases shared two distinguishing
characteristics: because of their impecunity they
were completely unable to pay for some desired
benefit, and as a consequence, they sustained an
absolute deprivation of a meaningful opportunity to
enjoy that benefit.” (Emphasis supplied.)
That is not the case here. Under the statutory scheme
everyone participating in no-fault is entitled to certain
minimum benefits. The fact that some individuals are
unable to purchase private insurance is of no moment.
A83
As long as everyone has an opportunity to enjoy a
minimum statutory benefit, there is no absolute
deprivation. Any discrimination that might exist is
insufficient to justify invoking the equal protection
clause.
| would reverse the trial judge’s summary judgment
as to count II] and remand for independent
consideration of the constitutionality of MCLA
500.2109(1); MSA 24.13109(1).
ORDER GRANTING DEFENDANT'S
MOTION FOR SUMMARY JUDGMENT
(State of Michigan
In the Circuit Court for the County of Washtenaw)
(Filed August 19, 1975)
Heather Elizabeth O'Donnell; et al., Plaintiff, vs State
Farm Mutual Automobile Insurance Company, an
Illinois Insurance Company, Defendant. File Number:
75 10205 CK.
At a session of said Court held in the City of Ann
Arbor, Michigan this 19th day of August, 1975.
Present: The Honorable ROSS W. CAMPBELL
Circuit Judge
Defendant's Motion for Summary Judgment having
come on to be heard and oral argument having been
held and conclusions of law having been entered by the
A84
Court with respect to the legal issues raised in
Defendant’s motion, such conclusions of law being
more specifically stated as follows:
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, is not itself
engaged in state action; consequently, any claim that
the contract is itself unconstitutional is unsupportable
as a matter of law.
IT IS HEREBY ORDERED AND ADJUDGED that
Defendant's Motion for Summary Judgment be, and the
same hereby is, granted.
is) Ross W. Campbell
Circuit Court Judge
Approved as to Form Only:
CALDER AND KIRKENDALL DeVINE AND DeVINE
By /s/ Robert E. Logeman By: /s) Allyn D. Kantor
Attorney for Plaintiff Attorneys for Defendant
A85
NOTICE OF APPEAL TO THE SUPREME COURT OF
THE UNITED STATES
(State of Michigan
In the Supreme Court)
On Appeal from the Court of Appeals
(L.C. No. 72 10205 CK - C.0.A. No. 25429)
(Filed May 1, 1979)
Heather Elizabeth O’Donnell, and Kathleen Anne
O'Donnell, Michael Brent O’Donnell and Timothy Hugh
O'Donnell, by their next friend, Heather Elizabeth
O'Donnell, Plaintiffs-Appellees, vs State Farm Mutual
Automobile Insurance Company, an Illinois insurance
corporation, Defendant-Appellant. Supreme Court No.
58833.
Notice is hereby given that HEATHER ELIZARETH
O'DONNELL, and KATHLEEN ANNE O’DONNELL,
MICHAEL BRENT O’DONNELL and TIMOTHY HUGH
O’DONNELL, by their next friend, HEATHER
ELIZABETH O’DONNELL, the Plaintiffs-Appellees in
the Michigan Supreme Court, hereby appeals as
appellants to. the Supreme Court of the United States
from the final judgment of the Supreme Court of the
State of Michigan, reversing the Court of Appeals and
affirming the trial court’s entry of Summary Judgment,
entered in this action on January 4, 1979, and which a
A86
timely motion for rehearing was denied in an order
dated March 8, 1979.
This appeal is taken pursuant to 28 U.S.C. §1257(2).
's) Robert E. Logeman (co-counsel with
‘Eugene F. Black in the U.S.
Supreme Court)
as counsel for Plaintiffs- Appellees
in the Michigan Supreme Court and for
Appellants in the United States
Supreme Court
301 West Michigan Avenue
Suite Four Hundred
Ypsilanti, Michigan 48197
Telephone (313) 482-7168
Twenty-Second Judicial Circuit
Washtenaw County, Michigan—ss.
I hereby certify that the foregoing is a true copy of
the original on file in this Court and cause. Valid Only
With Embossed Seal.
Dated: 5-1-79
ROBERT M. HARRISON
County Clerk
By /si/ Marjorie S. Gensley
Deputy
A87
AFFIDAVIT OF SERVICE
(State of Michigan
In the Supreme Court)
On Appeal from the Court of Appeals
State of Michigan
County of Washtenaw—ss.
I, ROBERT E. LOGEMAN, depose and say that I am
an attorney in the office of CALDER, KIRKENDALL
AND LOGEMAN, P.C., an attorney of record for
HEATHER ELIZABETH O’DONNELL, and KATHLEEN
ANNE O’DONNELL, MICHAEL BRENT O’/DONNELL
and TIMOTHY HUGH O’DONNELL, by their next
friend HEATHER’ ELIZABETH O’DONNELL,
Appellants in the United States Supreme Court and
Plaintiffs-Appellees in the Michigan Supreme Court,
and that on May Ist, 1979, pursuant to Rule 33, Rules of
the Supreme Court, I served three copies of the attached
Notice of Appeal to the Supreme Court of the United
States on each of the parties required to be served
herein, as follows:
On STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, an Illinois Insurance
Corporation, Defendant/Appellant in the Michigan
Supreme Court and Appellee in the United States
Supreme Court, by mailing the copies in a duly
addressed envelope, with first class postage prepaid, to
BODMAN, LONGLEY & DAHLING, by Theodore
Souris and James R. Buschmann, co-counsel of record
for said STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, an Illinois Insurance
Corporation, at their office at 34th Floor, 100
Renaissance Center, Detroit, Michigan 48243.
A88&
On STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY, an Illinois Insurance
Corporation, Defendant-Appellant in the Michigan
Supreme Court and Appellee in the United States
Supreme Court, by mailing the copies in a duly
addressed envelope, with first class postage prepaid, to
DeVINE, DeVINE, KANTOR & SERR, by Allyn D.
Kantor, co-counsel of record for said STATE FARM
MUTUAL AUTOMOBILE INSURANCE COMPANY, an
Illinois Insurance Corporation, at their office at 300
National Bank & Trust Building, Ann Arbor, Michigan
48108. ©
ALL PARTIES REQUIRED TO BE SERVED HAVE
BEEN SERVED.
/s) ROBERT E. LOGEMAN
co-counsel with Eugene F. Black, of
the United States Supreme Court Bar
Subscribed and sworn to before me this Ist day of May,
1979,
is) Cheryl L. Poland, Notary Public
Washtenaw County, State of Michigan
My commission expires: 4-25-81
Twenty-Second judicial Circuit
Washtenaw County, Michigan—ss.
I hereby certify that the foregoing is a true copy of
the original on file in this Court and cause. VALID
ONLY WITH EMBOSSED SEAL.
Dated: 5-1-79
ROBERT M. HARRISON, County Clerk
By /s)/ Maynie S. Gensley
Deputy
A89
CONSTITUTIONAL PROVISIONS AND
OTHER STATUTES INVOLVED
US CONST AM XIV, Sec 1
All persons born or naturalized in the United
States, and subject to the jurisdiction thereof, are
citizens of the United States and of the State
wherein they reside. No State shall make or
enforce any law which shall abridge the
privileges or immunities of citizens of the
United States; nor shall any State deprive any
person of life, liberty, or property, without due
process of law; nor deny to any person within its
jurisdiction the equal protection of the laws.”’
MCLA 500.3101(1)
“The owner or registrant of a motor vehicle
required to be registered in this state shall
maintain security for payment of benefits under
personal protection insurance, property
protection insurance, and residual liability
insurance. Security shall be in_ effect
continuously during the period of registration of
the motor vehicle.”
Vol. 28, 1978-1979 Supplement, at 178
MCLA 500.3102
“(1) A nonresident owner or registrant of a
motor vehicle not registered in this state shall
not operate or permit the vehicle to be operated
in this state for an aggregate of more than 30
days in any calendar year unless he continuously
maintains security for the payment of benefits.
A90
(2) An owner or registrant of a motor vehicle
with respect to which security is required who
operates the motor vehicle or permits it to be
operated upon a public highway in this state
without having in full force and effect security
complying with this section or sections 3101' or
3103? is guilty of a misdemeanor. Any other
person who operates a motor vehicle upon a
public highway in this state with the knowledge
that the owner or registrant does not have
security in full force and effect is guilty of a
misdemeanor. A _ person convicted of a
misdemeanor under this section shall have his
license and, if an owner or registrant, his
registration revoked and may be fined not less
than $100.00 nor more than $500.00 or
imprisoned for not more than 1 year or both.”
(footnotes omitted.)
Vol. 28, 1978-1979 Supplement, at 181
MCLA 500.3105(1), (2), (3)
“(1) Under personal protection insurance an
insurer is liable to pay benefits for accidental
bodily injury arising out of the ownership,
operation, maintenance or use of a motor vehicle
as a motor vehicle, subject to the provisions of
this chapter.
(2) Personal protection insurance benefits are
due under this chapter without regard to fault.
(3) Bodily injury includes death resulting
therefrom and damage to or loss of a person's
prosthetic devices in connection with the
injury.”
Vol. 28, 1978-1979 Supplement, at 182
A91
MCLA 500.3108
“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.”
Vol. 28, 1978-1979 Supplement, at 184
MCLA 500.3109(a)
“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
A92 »
policy the spouse of the insured and any relative
of eithcr domiciled in the same household.”
P.A. 1956, No. 218, § 3100a, added by P.A. 1974,
No. 72, § 1, Eff. June 3, 1974.
Vol. 28, 1978-1979 Supplement, at 186
MCLA 500.3110(1), (a), (c)
(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... .
(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.”
Vol. 28, 1978-1979 Supplement, at 185
1973 N.Y. Laws, Chp. 13, § 671 (2) (b)
2. ‘first party benefits’ means payments to
reimburse a person for basic economic loss
on account of personal injury arising out of
the use or operation of a motor vehicle in
this state, less:
(b) amounts recovered or recoverable on
account of such injury under state or
federal laws providing social security
disability benefits, or workman’s
compensation benefits; and... .
1973 N.Y. Laws, Vol. 1, at p. 5 - 7
A93
1974 Pa. Laws, No. 176, § 206(a) Net loss.
(a) General. — Except as provided in section
108(a) (3) of this act, all benefits or advantages
(less reasonably incurred collection costs) that an
individual receives or is entitled to receive from
social security (except those benefits provided
under Title XIX of the Social Security Act and
except those medicare benefits to which a
person’s entitlement depends upon use of his
so-called ‘‘life-time reserve’’ of benefit days)
workmen’s compensation, any State-required
temporary, nonoccupational disability insurance,
and all other benefits (except the proceeds of life
insurance) received by or available to an
individual because of the injury from any
government, unless the law authorizing or
providing for such benefits or advantages makes
them excess or secondary to the benefits in
accordance with this act, shall be subtracied.
from loss in calculating net loss.
1974 Pa. Laws, Vol. 1, at p. 511 - 512
1973 Hawaii Sess. Laws, Act 203, Sec. 294-5
Sec. — -5(b) All no fault benefits shall be paid
secondarily and net of any benefits a person
receives because of the injury from social
security laws, workman’s compensation laws,
public assistance laws, and any medical or health
insurance policy applicable.
1973 Hawaii Sess. Laws, at p. 385
A94
1973 Nev. Stats, Vol. 1, Chapter 530, § 12, § 33
§ 12 “Net benefits payable’ means benefits
payable less all assistance or advantages a
person receives or is entitled to receive from
Social Security, the railroad retirement act,
workman’s compensation or under the
federal employer liability act as calculated in
section 33 of this act.
1973 Nev. Stat, Vol. 1, at 824
§ 33 All assistance or advantages a person
receives or is entitled to receive from social
security, the railroad retirement act,
workman’s compensation or under the
federal employer liability act by reason of an
injury arising out of the use or maintenance
of a motor vehicle are subtracted from
benefits payable in calculating net benefits
payable. Basic reparation benefits are
primary in relation to all other insurance.
1973 Nev. Stat, Vol. 1, at p. 830
1974 Ky. Acts, Chap. 385 § 12(1)
(1) All benefits or advantages a person
receives or is entitled to receive because of
injury from social security and workman’s
compensation are subtracted in calculating net
loss.
1974 Ky. Acts, at p. 756
A95
1973 N.J. Laws, Chapter 70, § 6
6. Collateral source. The benefits provided
in section 4a,b,c,d, and e, shall be payable as
loss accrues, upon written notice of such loss
and without regard to collateral sources, except
that benefits collectible under workman's
compensation insurance, employees temporary
disability benefit statutes and medicare provided
under federal law, shall be deducted from the
benefits collectible under section 4a,b,c,d, and e.
1972 N.J. Laws, Vol 1, at p. 220
(Note § 4a medical expenses, 4b income loss, 4c
essential services, 4d survivors loss)
1973 Utah Laws, Chap 55, § 7(3)
7(3) The benefits payable to any injured person
under section 6 of this act shall be reduced by:
a. Any benefits which that person
receives or is entitled to receive as a result
of an accident covered in this act under any
workman’s compensation plan or any
similar statutory plan; and
b. Any amounts which that person
receives or is entitled to receive from the
United States or any of its agencies because
of military enlistment, duty or service.
1973 Utah Laws, at p. 144
1971 Fla. Laws, ch 71 - 252 § 7 (4)
(4) Benefits; when due. — Benefits due from
an insurer under §§ 627.730-627.741 shall be
primary, except that benefits received under any
workmen’s compensation law or Medicaid as
provided under 42 USC 1396 et seq., shall be
credited against the benefits provided by
subsection (1) and shall be due and payable as
loss accrues, upon receipt of reasonable proof of
such loss and the amount of expenses and loss
incurred which are covered by the policy issued
under §§ 627.730 - 627.741.
1971 Fla. Laws, Vol 1, at p. 1361-1362
+
A%
H.R. 1597, 95th Cong., Ist Sess. (1977), § 210, p. 37
§210 (b) NET LOSS. — An approved State
plan shall provide that —
(1) All benefits (less reasonably
incurred collection costs) that an individual
receives, or is entitled to receive, from social _
security (except those benefits provided
under title XIX of the Social Security Act);
workmen’s compensation; any State-
required temporary, nonoccupational
disability insurance; all other benefits
(except the proceeds of life insurance)
received by or available to an individual
because of the injury from any government;
and all benefits received by or available to
an individual under an assigned claims
program under section 207(c) (2) (unless the
law authorizing or providing for such
benefits or advantages makes them excess or
secondary to no fault benefits) shall be
subtracted from loss in calculating net loss.
S. 354, 94th Cong., 2d Sess. (1975) § 208 p.
90-91
H.R. 5149, 95th Cong., Ist Sess. (1977) §208, p. 62-63
§ 208 (a) GENERAL. — Except as provided in
paragraph (3) of subsection (a) of 108 of this
Act, all benefits or advantages (less
reasonably incurred collection costs) that an
individual receives or is entitled to receive
from social security (except those benefits
provided under title XIX of the Social
Security Act), workmen's compensation, any
State-required temporary, nonoccupational
disability insurance, and all other benefits
(except the proceeds of life insurance)
received by or available to an individual
because of the injury from any government,
H.R.
2
A97
unless the law authorizing or providing for
such benefits or advantages makes them
excess or secondary to the benefits in
accordance with this Act, shall be subtracted
from loss in calculating net loss.
300, 95th Cong., Ist Sess. (1977), § 2(16), p. 5-6
8
5
a
(16) The term ‘‘net economic loss’
means, in the case of injury or death,
economic loss reduced (but not below zero)
by the amount of any benefit or payment
received (or legally entitled to be received
and actually available to the claimant) for
losses resulting from such injury or death
from any of the following sources —
(A) any public health insurance or plan;
(B) any private insurance or plan
containing explicit provisions making its
benefits primary to any benefits under a
qualifying no-fault policy.
H.R. 2508, 95th Cong., Ist Sess. (1977), § 3(9), p. 5-6
§3 (9) The term “net economic loss’’ means,
in the case of injury or death, ‘‘economic
loss” reduced (but not below zero) by the
amount of:
(A) Taxes which would have been
payable on the amount which would have
been earned but for such injury or death;
and
A98
(B) Any benefit or payment received, or
entitled to be received, for losses resulting
from such injury or death under any
provision of law or any insurance or other
source of benefits; except, benefit or
payment received, or entitled to be received
(i) in discharge of familial obligations of
support;
(ii) by way of succession at death:
(iii) as proceeds of life insurance;
(iv) as gratuities, or
(v) as proceeds of any contract, policy of
disability, health and accident, or
other insurance or other source of
benefits containing an_ explicit
provision making its benefits
supplemental to those in accordance
with the provisions of section 5(a) of
this Act, or making the benefits under
section 5(a) deductible from the
benefits under such contract, policy or
other insurance or source.
If any contract, policy of disability, health and
accident, or other source of benefits does not provide
that its benefits shall be supplemental to those under
section 5(a) of this Act or that the benefits under said
section 5(a) shall be deducted from its benefits,
economic loss shall be reduced by the amount of any
benefit or payment received, or entitled to be received,
from such contract, policy or other insurance or source.
A99
H.R. 13048, 95th Cong., 2d Sess. (1978), § 109 p. 36
S. 1381, 95th Cong., 2d Sess. (1977), p. 41-42
§ 109 (b) REDUCTION FOR BENEFITS
RECEIVED FROM GOVERNMENTS. — An
approved State plan shall provide that all
benefits (less reasonably incurred collection
costs) that an individual receives pursuant to
entitlement, or is entitled to receive, with respect
to an injury, from —
(1) social security (except benefits under
title XIX of the Social Security Act);
(2) workmen’s compensation;
(3) temporary nonoccupational disability
insurance that is required by a State; and
(4) any government (except the proceeds
of government life insurance);
shall be subtracted in calculating basic no-fault
benefits, unless the law authorizing or providing
for those benefits makes them secondary to or
duplicative of no-fault benefits.
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.