Auto Club Ins. Ass'n v. Hill

430 N.W.2d 636, 431 Mich. 449

• Court: Michigan Supreme Court
• Decided: October 7, 1988
• Docket: 80966, (Calendar No. 7)
• Status: Published

Opinions

Archer, J.

We granted leave to appeal to decide whether the threshold requirements of MCL 500.3135(1); MSA 24.13135(1)¹ apply when a motorist seeks benefits for noneconomic loss under the uninsured motorist provision of his no-fault policy. As a preliminary issue, we must determine the scope of tort liability of any uninsured motorist for noneconomic damages arising from an automobile collision.

We hold that uninsured motorists are subject to tort liability for noneconomic loss only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement. MCL 500.3135; MSA 24.13135. On the basis of the insurance agreement between the parties at bar, we hold that the insured party is not entitled to damages for noneconomic loss unless his injuries meet the threshold set forth in § 3135. Therefore, we reverse the judgment of the Court of Appeals and remand this case to the trial court for further proceedings not inconsistent with this opinion.

i

On April 9, 1981, the vehicle of defendant-appellee Gregory J. Hill was struck from the rear by an uninsured motorist. Mr. Hill filed a claim with his automobile insurance provider, plaintiff-appellant Auto Club Insurance Association (acia), for damages for noneconomic loss suffered as a result of the collision. This claim was pursuant to the following provision of his no-fault insurance contract with acia:

Uninsured Motorists Coverage.

We will pay damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle. Bodily injury must be caused by accident and arise out of the ownership, operation, maintenance or use of the uninsured motor vehicle.

Mr. Hill’s claim was denied. Pursuant to a clause in the insurance policy, the dispute was submitted for arbitration. The arbitration panel awarded defendant $11,000, inclusive of damages for noneconomic loss.

The acia petitioned the Circuit Court of the Eighteenth Judicial Circuit to vacate the award of the arbitration panel. The petition asserted that the defendant had not alleged that he sustained injuries that met the threshold requirements as set forth in § 3135 for receipt of damages for noneconomic loss.² Defendant Hill responded with a petition to affirm the award. The latter petition was granted.

Plaintiff sought relief in the Court of Appeals. The Court of Appeals affirmed the finding of the circuit court.³ Plaintiff-appellant’s subsequent motion for rehearing was denied.

The acia now seeks relief in this Court. We granted leave to appeal limited to the issue whether the threshold requirements of MCL 500.3135(1); MSA 24.13135(1) apply when an insured motorist seeks benefits for noneconomic loss under the uninsured motorist provision of a no-fault policy.⁴_

II

In order to give proper effect to §3135,⁵ this Court must enforce the clear and unambiguous language of the statute as drafted by the Legislature. In Browder v Int’l Fidelity Ins Co, 413 Mich 603, 611; 321 NW2d 668 (1982), this Court stated:

A basic rule of statutory construction is that where the Legislature uses certain and unambiguous language, the plain meaning of the statute must be followed. [Citations omitted.]

This Court may not impose its view of the best means to achieve a legislative purpose. In construing a statute, this Court must discern the intent of the Legislature in enacting the relevant provision. In doing so, we must first look to the language of the statute itself. Thornton v Allstate Ins Co, 425 Mich 643; 391 NW2d 320 (1986). After considering the language and general scope of the act, we may determine legislative intent in light of the purpose it seeks to accomplish or the evil it seeks to remedy. Longstreth v Gensel, 423 Mich 675; 377 NW2d 804 (1985).

A

Section 3135(1) of the no-fault act provides:

A person remains subject to tort liability for noneconomic loss . . . only if the injured person has suffered . . . serious impairment of body function .... [MCL 500.3135(1); MSA 24.13135(1).]

This section unambiguously governs liability for noneconomic loss, as distinguished from damages for economic loss which the no-fault insurer is liable to pay under §§ 3107 to 3110 of the act.⁶ Bradley v Mid-Century Ins Co, 409 Mich 1, 62; 294 NW2d 141 (1980). The section also clearly specifies to whom its terms apply. The Legislature did not qualify the term “person” with any distinction between persons insured and those who are uninsured.⁷

In contrast, § 3135(2) governs general tort liability. It applies only where the required no-fault coverage is in effect: "[T]ort liability arising from the ownership, maintenance or use [of a properly insured vehicle]⁸ is abolished” except under certain specific enumerated circumstances, including damages for noneconomic loss "as provided and limited in subsection (1).” MCL 500.3135(2)(b); MSA 24.13135(2)(b).

Defendant-appellee Hill contends that the exception to the abolition of tort liability in § 3135(2)(b) circumscribes the scope of tort immunity granted in § 3135(1). He argues that the reference to § 3135(1) in § 3135(2)(b) imposes a requirement of no-fault insurance for immunity from tort liability for below threshold noneconomic loss. We find no basis for adopting such a strained construction of the tort immunity granted in § 3135(1).

B

There is no qualification in the language of § 3135(1) referring to § 3135(2). Although the same general subject, i.e., tort liability, is treated in both subsections, they apply to two distinct types of liability. Subsection (1) governs immunity from tort liability for noneconomic loss. Subsection (2) abolishes general tort liability with several enumerated exceptions.

The reference in § 3135(2)(b) to § 3135(1) does not change the meaning of § 3135(1) itself. That reference limits the subsection 2(b) exception from the abolition of tort liability for noneconomic loss to above-the-threshold noneconomic loss. Thus, the reference to § 3135(1) merely obviates the need to enumerate the circumstances under which tort liability for noneconomic loss is excepted from the general abolition of tort liability contained in § 3135(2). In other words, if not for the reference to § 3135(1) in § 3135(2)(b), the latter subsection would read: "damages for noneconomic loss, if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement.”

If the Legislature had intended to qualify the tort immunity granted in § 3135(1) by requiring proper no-fault insurance,⁹ it could have expressly done so as it did with respect to the tort immunity granted in § 3135(2). __

C

Our construction of § 3135 is consistent with the policies and legislative purpose underpinning its promulgation.

The basic goal of the personal injury provisions of the no-fault insurance act is to provide individuals injured in motor vehicle accidents assured, adequate and prompt reparation for certain economic losses. Babbitt v Employers Ins of Wausau, 136 Mich App 198; 355 NW2d 635 (1984). This Court has held, however, that the Legislature’s purpose in establishing the alternative criteria of death, permanent serious disfigurement or serious impairment of body function as prerequisites for collection of noneconomic damages, "was simply to weed out from the tort system claims for injuries less severe than the criteria.” Byer v Smith, 419 Mich 541, 546; 357 NW2d 644 (1984). The Legislature intended to bar “any recovery whatsoever for noneconomic loss unless the injury is serious and [to relieve] the courts of the burden of litigation where the injury is not serious.” Id. at 545.

m

In addition to its consistency with this Court’s interpretation of legislative policy, we find direct support in case law for our construction of § 3135.

In Bradley v Mid-Century Ins Co, supra, the Court resolved a series of companion cases involving certain contractual limitations in uninsured motorist endorsements of automobile insurance policies. In parts ii and in of the Bradley opinion, the Court discussed the relationship between uninsured motorist coverage and first-party benefits under the no-fault act.

A

In part n of Bradley, the Court discussed and decided whether uninsured motorist coverage under more than one policy could be stacked to provide recovery for damages sustained in an accident which occurred after the enactment of the no-fault act and the simultaneous repeal of the uninsured motorist amendment of the Insurance Code, MCL 500.3010; MSA 24.13010. Bradley, supra at 46-60. The plaintiff in part ii, Gary Davidson, argued that "antistacking provisions” contained in his automobile insurance policy were violative of public policy. The Court held that the clauses at issue were enforceable. Id. at 54.

In discussing the purposes and policy involved in promulgation by the Legislature of the no-fault insurance act, the Court made several observations relevant to resolution of the issue at bar. The Court analyzed the purpose of uninsured motorist coverage before and after the passage of the no-fault act. Prior to promulgation of the act, uninsured motorist coverage was designed to protect the integrity of the Motor Vehicle Accident Claims Fund. Id. at 52. Under the no-fault system, however, uninsured motorist coverage is a substitute for residual liability insurance. The Court stated:

[U]ninsured motorist coverage . . . provides some compensation in cases where the victim has suffered severe (above-the-threshold) injuries and there is no residual liability coverage to provide compensation for pain and suffering and excess economic loss.

We are persuaded that the Legislature repealed the uninsured motorist amendment not because it assumed there would be no uninsured motorists, but because after the passage of no-fault a person injured by an uninsured motorist had a source of recovery for all damages except pain and suffering and excess economic loss.

True, no-fault benefits may be insufficient to fully compensate one injured by a negligent uninsured motorist. But no accident victim is permitted, under the no-fault act, to recover for below threshold pain and suffering .... [Id. at 52-54.]

Thus, in part ii of Bradley, this Court distinguished between loss compensable by the basic no-fault benefits, i.e., economic loss, and damages for pain and suffering and excess economic loss, compensable in cases of "severe (above-the-threshold) injuries.”

In part m of its opinion, the Bradley Court addressed the question whether an insurer could offset first-party benefits paid under the no-fault act from the policy limits of uninsured motorist protection without regard to the total damages that would be payable by the uninsured motorist or the nature of those damages, i.e., economic or noneconomic. This Court reiterated its view that uninsured motorist coverage under the no-fault act is a substitute for residual liability insurance:

Under the no-fault motor vehicle liability act an insured may collect from his insurer for work loss and medical expenses without regard to fault. He may sue the negligent tortfeasor for excess economic loss and, if the threshold of injury is met, for noneconomic loss. The statute requires that motorists carry residual liability insurance in addition to no-fault insurance to provide a source of recovery to persons severely injured as a result of driver negligence. If a motorist is uninsured he may be sued for all economic loss as well as above-threshold non-economic loss.

A purpose of the no-fault act is to provide a contractual right of action against one’s own insurer for wage loss and medical expenses arising from a motor vehicle accident. A tort action for non-economic and excess economic loss was preserved in cases of severe loss. The Legislature has thus divided an injured person’s loss into two categories — loss for which the no-fault insurer is liable and loss for which the tortfeasor is liable. No-fault insurance provides security for the first type; uninsured motorist coverage, which presupposes that the insured is entitled to recovery under the tort system, provides security for the second type — it is offered to protect against being left with a worthless claim against an uninsured motorist. [id. at 61-62. Emphasis added.]

Because of this distinction between economic losses compensable under basic no-fault coverage and those losses compensable pursuant to an uninsured motorist endorsement, the Court held that the set-off clause could not be enforced in the manner that the insurer sought:

In providing insurance against the uninsured motorist, the insurer promises the insured that his right of action for greater than threshold injuries will not be worthless if the tortfeasor turns out to be uninsured.

If the tortfeasor is insured or otherwise collectible, the insurer paying no-fault benefits has a statutory right to reimbursement for benefits theretofore paid by it only out of a recovery for those economic losses. So, too, if the insurer contracts to make good for an uninsured motorist— coverage complementary and supplementary to the basic no-fault policy and standing in the place of third-party residual liability insurance — the insurer and the insured should have corresponding rights relative to amounts recoverable under an uninsured motorist endorsement; the insurer should be permitted a set-off only to the extent a recovery duplicates benefits it has already paid.

The insured is entitled to payment under the "all sums recoverable” language of the uninsured motorist endorsement for all economic and above the threshold non-economic loss for which an uninsured motorist would be liable. [Id. at 63-64. Emphasis added.]

Because the set-off clause failed to note the distinction between types of damages, the Court found the clause to be either defectively ambiguous or inconsistent with the reasonable expectations of the insured. Id. at 60-61.

Defendant-appellee argues that the Bradley Court’s description of the nature and scope of uninsured motorist coverage is mere dicta. We disagree. This Court’s conclusion that the set-off clause was unenforceable was squarely on the basis of the differences between first-party no-fault benefits and compensation for noneconomic losses pursuant to uninsured motorist coverage. We found that the insurer’s interpretation of the policy would nullify the effect of uninsured motorist coverage in precisely those situations in which it was intended to apply:

Unless voluntarily purchased uninsured motorist coverage provides meaningful protection for severe, above-threshold, injuries without regard to what the insurer is required to pay under the mandatory no-fault coverage, it serves no apparent purpose in the context of a no-fault statute mandating the payment of benefits. If the set-off were enforced in the manner the insurers seek, no-fault benefits paid would reduce uninsured motorist coverage dollar for dollar. As soon as the insurer has paid out $20,000 in no-fault benefits, there would be no recovery whatsoever under the uninsured motorist endorsement. [Id. at 64.]

We find this Court’s interpretation of the nature and scope of uninsured motorist coverage in Bradley to be consistent with our interpretation of the extent of immunity from tort liability granted in § 3135(1) of the no-fault act.

c

Defendant-appellee asserts that in Citizens Ins Co v Tuttle, 411 Mich 536; 309 NW2d 174 (1981), the Court defined the scope of tort liability for noneconomic damages to include compensation for below-threshold injuries. In that case, Mr. Tuttle’s cow, which was running loose on the highway, was involved in a collision with a tractor and trailer. Citizens Insurance Company brought an action in tort against Donald Tuttle to recover the cost of repairs paid to its insured for damages resulting from the collision. This Court was faced with the question whether tort liability arising out of conduct other than the ownership, maintenance or use of a motor vehicle was abolished by the no-fault act. We held that the tort liability abolished by the no-fault act is only such liability as arises out of the tortfeasor’s ownership, maintenance or use of a motor vehicle. This does not include tort liability which arises out of other conduct, such as the negligent keeping of cattle. Id. at 546-547.

Defendant-appellee supports his argument on the basis of the following language in Tuttle:

Moreover, subsection (2) abolishes tort liability arising from the ownership, maintenance or use only of vehicles for which the required no-fault insurance or other security has been obtained. The policy apparently expressed in so conditioning the abolition of tort liability upon the obtaining of no-fault coverage is that a person is to be relieved of tort liability only upon participating, through the payment of premiums, in a system for spreading the costs of compensating vehicular injuries without regard to fault. To extend the abolition of tort liability to non-motorist tortfeasors would be to incorporate into the no-fault system the costs of providing personal protection insurance benefits to motorists, passengers and pedestrians injured by non-motorist tortfeasors without incorporating offsetting premiums from non-motorist tortfeasors, since non-motorist tortfeasors are not required to purchase no-fault insurance with respect to their conduct as non-motorists.

. . . The non-motorist tortfeasor is the equivalent of the uninsured motorist and should be treated similarly. Both are outside the basic no-fault system of allocating the costs of accidents and both remain subject to tort liability. [Id. at 546-547. Emphasis added.]

Defendant-appellee asserts that the uninsured motorist in this case has paid no premium and has not supported the underlying no-fault act. He argues that the acia, standing in the shoes of the uninsured motorist, is therefore outside the basic no-fault system and should remain subject to liability for damages without regard to the threshold requirements of § 3135.

We find this argument to be unpersuasive. The question before the Court in Tuttle involved the liability of a nonmotorist tortfeasor. The Court analogized the nonmotorist tortfeasor to an uninsured motorist who enjoys no tort immunity for economic damages because he has not contributed to the insurance premium pool which funds first-party economic benefits. Id. at 546-547. We find this rationale to be limited to liability for economic damages.

The analogy in Tuttle was on the basis that "[b]oth [the nonmotorist tortfeasor and the uninsured motorist] are outside the basic no-fault system of allocating the cost of accidents and both remain subject to tort liability.” Id. This basis for withholding tort immunity for economic damages does not apply to noneconomic damages because recoveries for noneconomic damages are not provided by the basic no-fault system for allocating the cost of accidents. There is no logical basis for imposing greater liability for noneconomic damages upon a person because of his failure to fund the basic no-fault system, which pays for only economic damages.¹⁰

Indeed, in § 3102 of the act, the Legislature has provided penalties for those who own or operate motor vehicles without the required security. MCL 500.3102; MSA 24.13102. Also, the owner or registrant of an uninsured motor vehicle cannot collect first-party benefits if that motor vehicle is involved in an accident. MCL 500.3113(b); MSA 24.13113(b). This express provision of penalties for violation of the terms of the no-fault act indicates that the Legislature has expressed the extent to which it will punish violators. Without an express authorization for penalties in addition to those found in §§ 3102 and 3113 of the act, we decline to construe the statute in a manner that would further penalize uninsured motorist tortfeasors.

iv

The insurance agreement between the parties at bar provided that in the event of a collision with an uninsured motorist the defendant would be entitled to "damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle.” An uninsured motorist is not liable for noneconomic loss unless the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement. Accordingly, we hold that the defendant in this case is not entitled to damages for noneconomic loss unless his injuries meet the threshold requirement.¹¹

CONCLUSION

We hold that, pursuant to MCL 500.3135(1); MSA 24.13135(1), uninsured motorists are subject to tort liability for noneconomic loss only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement. Our review of the terms of the insurance agreement upon which the defendant’s claim was based compels us to hold that he is not entitled to compensation for his noneconomic loss unless his loss meets the threshold requirement. We reverse the judgment of the Court of Appeals and remand this case to the trial court for further proceedings not inconsistent with this opinion.

Riley, C.J., and Brickley, Boyle, and Griffin, JJ., concurred with Archer, J.

1 A person remains subject to tort liability for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement.

2 In DiFranco v Pickard, 427 Mich 32; 398 NW2d 896 (1986), this Court established a standard for determining whether a particular injury constitutes a serious impairment of bodily function sufficient to qualify for damages for noneconomic loss. A serious impairment of body function under the no-fault act need not be an impairment of the entire body function or of an important body function. The threshold requires inquiry into what body function, if any, was impaired because of injuries sustained in a motor vehicle accident, and whether the impairment was serious. The focus of the inquiry is not on the injuries, but on how the injuries affected a particular body function. The Court stated:

In determining whether the impairment was serious, several factors should be considered: the extent of the impairment, the particular body function impaired, the length of time the impairment lasted, the treatment required to correct the impairment, and any other relevant factors. An impairment need not be permanent to be serious. [Id. at 39-40.]

3 Auto Club Ins Ass’n v Hill, unpublished opinion per curiam of the Court of Appeals, decided February 23, 1987 (Docket No. 85828). The issues considered by the Court of Appeals were essentially two-fold: (1) whether an uninsured motorist who does not contribute to the no-fault reparation system is entitled to the same tort immunity for below threshold injuries as a motorist who contributes to the no-fault reparation system, and (2) whether an arbitration decision may be vacated where a split of authority exists, precluding any substantial error of law apparent on the face of the award and where the result is legally sound.

There were two separate rationales. The per curiam opinion held that the limitations on liability contained in the no-fault act "are available only to those who have obtained the required no-fault insurance or other security.” Id. at slip op, p 4. The Court reasoned that the insurer had stepped into the shoes of the uninsured motorist, thereby losing the protections of the act’s limitations of liability. In a separate opinion, Judge Danhof concurred in the judgment on the basis of the absence of clear error in the arbitration panel’s decision. Judge Danhof stated:

[Bjecause there is a split of authority in our Court, I cannot say that the arbitrator made an error of law in following Jones v DAIIE, 124 Mich App 363; 335 NW2d 39 (1983), lv den 418 Mich 878 (1983) [holding that the threshold does not apply to uninsured motorists]. [Id. at slip op, p 5.]

In an apparent reconciliation of the two rationales for upholding the judgment of the court below, the per curiam opinion stated:

Further, in so holding, we cannot find that the arbitrators made an error of law in following Jones. [Id. at slip op, p 4.]

4 429 Mich 858 (1987).

5 The relevant portions of the no-fault act are as follows:

(1) A person remains subject to tort liabUity for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function, or permanent serious disñgurement.

(2) Notwithstanding any other provision of law, tort liability arising from the ownership, maintenance, or use within this state of a motor vehicle with respect to which the security required by section 3101(3) and (4) was in effect is abolished except as to:

(a) Intentionally caused harm to persons or property. Even though a person knows that harm to persons or property is substantially certain to be caused by his or her act or omission, the person does not cause or suffer such harm intentionally if he or she acts or refrains from acting for the purpose of averting injury to any person, including himself or herself, or for the purpose of averting damage to tangible property.

(b) Damages for noneconomic loss as provided and limited in subsection (1).

(c) Damages for allowable expenses, work loss, and survivor’s loss as defined in sections 3107 to 3110 in excess of the daily, monthly, and 3-year limitations contained in those sections. The party liable for damages is entitled to an exemption reducing his or her liability by the amount of taxes that would have been payable on account of income the injured person would have received if he or she had not been injured.

(d) Damages up to $400.00 to motor vehicles, to the extent that the damages are not covered by insurance. An action for damages pursuant to this subdivision shall be conducted in compliance with subsection (3). [MCL 500.3135; MSA 24.13135. Emphasis added.]

6 The dissent cites the Uniform Motor Vehicle Accident Reparations Act as the model for the Michigan no-fault act. It is true that a different result than that reached today would be required pursuant to the provisions of the uniform act. It is also true that in drafting the Michigan no-fault act, our Legislature adopted the uniform act almost word for word. However, in a major departure, the Legislature added § 3135(1), which has no counterpart in the uniform act. In crafting this totally new provision to govern liability for noneconomic loss, the Legislature made clear its intention to create a threshold so that persons sustaining minor injuries would be compensated only for economic loss.

7 In dissent, Justice Cavanagh argues that use of the word "remains” in § 3Í35(1) indicates that § 3135(2) excludes uninsured motorists from the benefit of the tort immunity granted in § 3135(1). He states:

Only those — insureds—whose tort liability has been abolished under subsection (2) could have liability for noneconomic loss that "remains” under subsection (1). Persons whose tort liability has not been abolished — uninsureds—could not have liability that "remains.” [Post, p 468.]

We disagree for several reasons. First, as stated in the text, the Legislature did not qualify its use of the term "person” when it designated those who would receive the benefit of the tort immunity granted in subsection (1). Second, the Legislature clearly stated that such a " 'person’ remains subject to tort liability for noneconomic loss . . . only if the injured person [meets the threshold].” Third, Justice Cavanagh adopts an overly restrictive meaning of the term "remains.” It is doubtful that the Legislature would use such a circuitous means of distinguishing between insured and uninsured motorists in subsection (1) when it could have easily and more clearly made this distinction by using a term or phrase other than "person,” which is the broadest legal term of art possible for reference to those legal entities subject to damage suits for noneconomic loss caused by ownership, maintenance, or use of a motor vehicle. Fourth, subsection (1) precedes subsection (2) and is separate from the enumerated exceptions to the abolition of tort liability found in the latter provision. This indicates that subsection (1) is independent of subsection (2) .

8 As required by MCL 500.3101(3), (4); MSA 24.13101(3), (4).

9 See n 8.

10 The dissent also cites Citizens Ins Co v Tuttle, albeit without explanation. Post, p 470. No attempt is made in the dissent to respond to the distinctions we find between this case and the circumstances in Tuttle.

11 Mr. Hill did not argue, in this Court or in the courts below, that his insurance agreement with the acia was defectively ambiguous for failing to explicitly exclude liability for damages for noneconomic loss unless the injury sustained were above the threshold requirements of § 3135.