Gregory v. Transamerica Insurance

391 N.W.2d 312, 425 Mich. 625

• Court: Michigan Supreme Court
• Decided: August 7, 1986
• Docket: Docket 75490
• Status: Published

Opinions

Williams, C.J.

This case involves the applicability of MCL 500.3109(1); MSA 24.13109(1), the offset provision of the no-fault insurance act, to a redemption agreement of a workers’ compensation claim. The specific question is whether the amount of the redemption or the amount of the full workers’ disability benefits for the full period of disability, as if there had been no redemption, shall be subtracted from the amount of the no-fault benefits. We hold that the latter amount is the proper subtraction and that such an agreement of redemption precludes the plaintiff from recovering from the no-fault insurer any amount for which the workers’ compensation carrier was primarily liable. Because we hold for the defendant on the merits, we express no opinion on the defendant’s objection to the procedure by which the plaintiff was awarded benefits in the trial court. The decision of the Court of Appeals is reversed.

I. FACTS

On October 7, 1980, the plaintiff was involved in an automobile accident while working for Wayne County. He received workers’ compensation benefits from October 27, 1980, until May 3, 1981, at which time disability was disputed and payments were discontinued. In addition, plaintiff received from the defendant no-fault insurer no-fault personal protection insurance benefits which were in excess of the workers’ compensation benefits for wage loss beginning on October 27, 1980. After May 3, 1981, the no-fault insurer continued to pay the same excess amount to the plaintiff, despite the fact that he was no longer receiving workers’ compensation benefits. This excess amount is not in issue in this case.

As to the workers’ compensation claim not paid since May 3, 1981, on April 20, 1982, the plaintiff settled with the workers’ compensation provider by agreeing to a $12,500 redemption of his claim. The redemption agreement provided that $12,000 of the total was allocated to past, present, and future medical expenses, and $500 to wage loss. Plaintiff then demanded full personal protection benefits for lost wages, minus the $500 allocated to wage loss in the redemption agreement, from defendant, retroactive to May 4, 1981, when workers’ compensation payments were stopped.

A hearing was conducted on August 20, 1982, in response to plaintiff’s request for an order to show cause why full personal protection benefits should not be paid by the defendant. At the conclusion of the hearing, the circuit court ruled that only the $500 allocated to wage loss in the redemption agreement could be offset by the no-fault insurer from the wage loss benefits payable under the no-fault act. Defendant was therefore ordered to pay full wage loss benefits, minus the $500, from the date of the termination of workers’ compensation benefits.

Defendant filed a motion for rehearing, challenging the lower court’s decision and objecting to the procedure by which the order was issued. This motion was denied. On December 3, 1984, the Court of Appeals affirmed the lower court’s decision on the merits, but did not consider defendant’s procedural objection. Gregory v Transamer-ica Ins Co, 139 Mich App 327; 362 NW2d 268 (1984) . The Court of Appeals then certified, by an order dated December 3, 1984, that its decision in Gregory allowing plaintiff to receive benefits from the no-fault insurer without subtraction of the full workers’ compensation benefits that would have been paid but for the redemption, on the one hand, was in conflict with the decision in Thacker v DAIIE, 114 Mich App 374; 319 NW2d 349 (1982), requiring such subtraction, on the other hand. This Court granted leave to appeal. 422 Mich 858 (1985) .

II. STATUTORY PROVISIONS

Both the workers’ compensation statutes and the no-fault insurance act provide benefits for loss of wage income due to an inability to work following an accident.¹

Of significance in this case is that the no-fault act also has an offset provision. The no-fault act provides that

[bjenefits 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). Emphasis added.]

III. OPERATION OF THE OFFSET PROVISION

The plain language of § 3109 obliges the no-fault insurer to subtract from benefits payable under that statute other benefits which are required by law to be paid for the injury. In Mathis v Interstate Motor Freight System, 408 Mich 164, 183; 289 NW2d 708 (1980), we held that this statute applies in cases involving workers’ compensation and no-fault benefits.

The workers’ compensation benefits are paid as a result of the same accident and duplicate in varying degrees the no-fault benefits otherwise due. . . . [T]his brings the workers’ compensation benefits within the scope of § 3109(1). [408 Mich 187.]

The offset statute, and this Court’s application of it, reflect a determination that the workers’ compensation system should be the primary insurer with respect to disabilities arising from an automobile accident at work.

The responsibility for workers’ compensation benefits rests first on the employer or workers’ compensation insurer, and the amount of that payment is to be deducted from the liability of the personal protection insurance carrier. [408 Mich 183.]

The decision to make the no-fault insurer only secondarily liable is premised on a belief that

[b]ecause the first-party insurance proposed by the [no-fault] act was to be compulsory, it was important that the premiums to be charged by the insurance companies be maintained as low as possible. [O’Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524, 547; 273 NW2d 829 (1979).]

One way to ensure lower premiums is " 'through the elimination of duplicative benefits recovery.’ ” 404 Mich 545 (quoting from the dissent of Williams, J.). See also Tebo v Havlik, 418 Mich 350, 367; 343 NW2d 181 (1984) ("In effect, the Legislature made a trade-off. Those who were required to participate in the no-fault scheme gave up the possibility of redundant recoveries, but they were intended to receive the benefit of lower insurance rates.”).

IV. DEDUCTIBILITY OF WORKERS’ COMPENSATION BENEFITS IN CASES INVOLVING REDEMPTIONS

The application of the no-fault offset provision to workers’ compensation redemptions appears to be a matter of first impression in this Court. However, as indicated by the Court of Appeals certification of conflict pursuant to Administrative Order No. 1984-2, there are at least two decisions on this issue in the Court of Appeals, and these two decisions reach contrary results. The decision in the Court of Appeals in the instant case is to the effect "that the amount 'provided or required to be provided to plaintiff under the wdca [i.e., the amount to be offset] is, at most, the amount which he received pursuant to the redemption agreement.” 139 Mich App 330.

The result reached in the case in conflict, Thacker v DAIIE, supra, and incidentally in a federal district court case, Moore v Travelers Ins Co, 475 F Supp 891 (ED Mich, 1979), was that the no-fault insurer might set off the amount the claimant would have collected had he continued to receive periodic workers’ compensation payments for the full period, not merely the actual amount received under a redemption agreement. The Thacker opinion was followed by another Court of Appeals panel in James v Allstate Ins Co, 137 Mich App 222; 358 NW2d 1 (1984), lv den 419 Mich 946 (1984).

In the instant case, the Court of Appeals panel relied to a considerable extent on this Court’s opinion in Perez v State Farm Mutual Automobile Ins Co, 418 Mich 634; 344 NW2d 773 (1984), and the general policy favoring redemptions. 139 Mich App 330-331. In Perez, this Court said:

The "required to be provided” clause of § 3109(1) means that the injured person is obliged to use reasonable efforts to obtain payments that are available from a workers’ compensation insurer. If workers’ compensation payments are available to him, he does not have a choice of seeking workers’ compensation or no-fault benefits; the no-fault insurer is entitled to subtract the available workers’ compensation payments even if they are not in fact paid because of the failure of the injured person to use reasonable efforts to obtain them. [418 Mich 645-646.]

The Court of Appeals panel in the instant case misapprehended our holding in Perez. This Court in Perez created a very narrow exception to the literal language of the setoff statute by holding that workers’ compensation payments are not deductible when they "are unavailable because the employer failed to obtain workers’ compensation coverage.” (Emphasis added.) 418 Mich 650. The situation before us was explicitly discussed in Perez.

Several of the cases discussed by the parties in their briefs are not pertinent where workers’ compensation payments are unavailable to the injured worker because the employer failed to provide workers’ compensation coverage. In Thacker v DAIIE; 114 Mich App 374; 319 NW2d 349 (1982), Moore v Travelers Ins Co, 475 F Supp 891 (ED Mich, 1979), and Luth v DAIIE, 113 Mich App 289; 317 NW2d 867 (1982), workers’ compensation payments were available to the injured worker although they were not actually paid to him. In Thacker and Moore, the injured workers redeemed their workers’ compensation claims for less than the total amount of available workers’ compensation payments they would otherwise have received; in Luth, an injured federal employee elected, pursuant to the federal workers’ compensation statute, 5 USC 8118(c), to utilize the sick and vacation days he had accumulated rather than to apply for available federal workers’ compensation payments. [Emphasis added. 418 Mich 645, n 17.]

In short, our holding in Perez has no direct bearing on the instant case.

The Court of Appeals panel in the instant case preferred the policy of favoring redemptions over the reliance of the Thacker panel (114 Mich App 377) on the reasoning in O’Donnell v State Farm Mutual Automobile Ins Co, supra, p 546, that with respect to the offset provision an important objective of the Legislature was "to reduce or contain the cost of no-fault insurance by eliminating some of the benefit duplication that would otherwise occur.” The Thacker panel then pointed out that the O’Donnell Court thought this was particularly important where the no-fault insurance was compulsory. 114 Mich App 377. We believe the Thacker panel in its reliance on O’Donnell reaches the correct conclusion. See our discussion of Mathis in Part in.

We also agree with the reasoning of the court in Moore, which held that under § 3109(1) "the amount required to be paid . . . should be offset” rather than the redemption amount. 475 F Supp 894. That court noted that any other result

would allow the Plaintiff to elect who, as between the no-fault and compensation carriers, to collect benefits from. This would disturb the legislatively established relative spheres of application of no-fault and compensation. Section 3109(1) clearly contemplates that the no-fault carrier should be liable only for the excess of its coverage over and above that potentially provided by the compensation carrier. [475 F Supp 894-895.]

This result eliminates the need for judicial review of the allocation of settlement amounts and eliminates the incentive for the disabled worker and the workers’ compensation carrier to apportion most of the total amount to medical expenses. Further, allowing a plaintiff to settle with the primary insurer and then to recover full wage loss benefits from the excess insurer would undermine the legislative desire to keep no-fault premiums as low as possible by eliminating double recoveries.

[I]t would be counter-productive to allow an injured person to recover from the no-fault carrier benefits to which he has already surrendered all claim. [475 F Supp 895.]

Allowing a double recovery of this type would discriminate inappropriately between those workers injured in automobile accidents at work and those injured in some other manner while at work. Claimants in both groups can redeem their claims against the workers’ compensation insurer and thereby give up their rights to future benefits from that insurer. A worker injured in an automobile accident while at work also has the additional security of obtaining excess benefits from another insurer. However, all claimants injured at work should have the same incentives to maximize their recovery from the primary insurer. We see no reason to permit auto accident claimants to bargain for a workers’ compensation settlement and then renew their claims for primary benefits against the secondary insurer, thus making a mockery of the settlement process. Of course, the no-fault insurer remains liable for any benefits due which are greater than the amounts which the workers’ compensation system is required by statute to pay to disabled workers.

CONCLUSION

For the foregoing reasons, we reverse the decisions of the circuit court and the Court of Appeals. We hold that a redemption agreement with the workers’ compensation carrier operates as a bar to further claims by the plaintiff against any insurer for primary wage loss benefits. The no-fault insurer remains liable for all claims which are in excess of the benefits available from the workers’ compensation carrier and which are covered by the no-fault statute.

Brickley, Boyle, and Riley, JJ., concurred with Williams, C.J.

1 Under workers’ compensation:

An employee, who receives a personal injury arising out of and in the course of employment by an employer who is subject to this act at the time of the injury, shall be paid compensation as provided in this act. [MCL 418.301; MSA 17.237(301).]

While the incapacity for work resulting from a personal injury is total, the employer shall pay, or cause to be paid as provided in this section, to the injured employee a weekly compensation of 80% of the employee’s after-tax average weekly wage, but not more than the maximum weekly rate of compensation, as determined under section 355. [MCL 418.351(1); MSA 17.237(351X1).]

Similarly, the no-fault insurance act provides that personal protection insurance benefits are payable for the following:

Work loss consisting of loss of income from work an injured person would have performed during the first 3 years after the date of the accident if he had not been injured .... Because the benefits received from personal protection insurance for loss of income are not taxable income, the benefits payable for such loss of income shall be reduced 15% unless the claimant presents to the insurer in support of his claim reasonable proof of a lower value of the income tax advantage in his case, in which case the lower value shall apply. The benefits payable for work loss sustained in a single 30-day period and the income earned by an injured person for work during the same period together shall not exceed $1,000.00, which maximum shall apply pro rata to any lesser period of work loss. The maximum shall be adjusted annually to reflect changes in the cost of living under rules prescribed by the commissioner but any change in the maximum shall apply only to benefits arising out of accidents occurring subsequent to the date of change in the maximum. [MCL 500.3107(b); MSA 24.13107(b).]