Ellen M Andary v. Usaa Casualty Insurance Company

Citation: Not availableDocket: 356487

Court: Michigan Court of Appeals; August 25, 2022; Michigan; State Appellate Court

Original Court Document: View Document

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If marked "FOR PUBLICATION," this opinion is subject to revision until final publication in the Michigan Appeals Reports. The case involves Ellen M. Andary and Philip Krueger, both legally incapacitated individuals, represented by their conservators, against USAA Casualty Insurance Company and Citizens Insurance Company of America. The central issue is whether recent amendments to Michigan's no-fault act, specifically MCL 500.3101 et seq., which limit reimbursement for personal protection insurance, can be applied retroactively to individuals injured before these amendments took effect on June 11, 2019. The court concludes that the Legislature did not intend for these amendments to apply retroactively to pre-amendment accidents. Furthermore, even if such intent were established, applying the new limitations would violate the Contracts Clause of the Michigan Constitution by substantially impairing existing no-fault insurance contracts.

Historically, Michigan's no-fault act has required PIP policies to cover all reasonable charges for an injured person's care and rehabilitation. Prior to the amendments, reimbursement was limited only by what was deemed reasonable and customary, with no cap on family-provided attendant care. The 2019 amendments introduced fee schedules that cap reimbursements for services not covered by Medicare and limit family-provided attendant care to 56 hours per week. Plaintiffs assert their vested rights under the insurance policies in effect at the time of their accidents, arguing that the new limitations violate both the Contracts Clause and their constitutional rights to equal protection and due process.

Defendants opted for a motion for summary disposition under MCR 2.116(C)(8), arguing that Andary’s and Krueger’s injuries, regardless of their occurrence date, fall under the new limitations of MCL 500.3157, which they claim does not violate the Contracts Clause or other constitutional provisions. They contended that no further factual development was needed to address the plaintiffs’ constitutional challenges against the future application of the 2019 amendments. The trial court granted the defendants’ motion for summary disposition on all counts and denied the plaintiffs' request to amend their complaint to include a breach-of-contract claim, leading to the current appeal.

The core issue on appeal is whether MCL 500.3157(7) and (10) are intended to apply retroactively to injuries that occurred prior to the effective date of 2019 PA 21. Legal principles dictate that statutes are presumed to be prospective unless the Legislature clearly indicates retroactive intent. The court analyzes the clarity of legislative intent regarding retroactivity based on the statute's context. Defendants argue that the intent for retroactive application is evident in the amendments; however, they fail to cite explicit language supporting this claim within the no-fault act. The 2019 PA 21 specifies a future effective date of June 11, 2019, without mentioning retroactivity, suggesting a prospective application. Furthermore, the defendants’ reliance on MCL 500.2111f, which pertains to rate-setting rather than defining benefits or payments, does not substantiate their argument for retroactive application. The statute merely requires insurers to pass savings on to future rates, without imposing the limits from MCL 500.3157 on injuries occurring before its effective date.

MCL 500.2111f does not clearly indicate an intent for retroactive application of new benefit limits. The defendants failed to identify any explicit or implicit language in Chapter 31 that mandates applying benefit reductions to individuals injured before the effective date of 2019 PA 21. Legislative intent to apply new limitations retroactively cannot be assumed based on a rate-setting provision that lacks such a mandate. The viewpoint aligns with the Michigan Department of Insurance and Financial Services (DIFS) Director’s comments during a town hall, clarifying that benefits vest on the accident date, meaning individuals injured under the previous law retain their unlimited coverage. Despite this, the DIFS has submitted an amicus brief supporting the defendants, which does not reconcile with the Director’s statements regarding legislative intent. Legislative analyses of 2019 PA 21 do not mention retroactive application of the new limits. The defendants' assertion that retroactivity is irrelevant because the benefit reductions apply only to claims made post-amendment conflicts with the principle established in LaFontaine Saline, Inc v Chrysler Group, LLC, which involved determining applicable limits based on effective dates of statutes and agreements rather than retroactive application.

The Supreme Court determined that rights against encroachment by like-line dealers are statutory and assessed whether the amended statute applied retroactively to dealerships established before the 2010 amendment. The Court found no legislative intent for retroactive application, as the amended statute lacked explicit language indicating such intent. The Court rejected the dealer's argument that retroactivity was irrelevant since the protections were invoked post-amendment, asserting that applying a nine-mile limit instead of a six-mile limit would be retroactive, creating new liabilities tied to past transactions. The analysis focused on whether the amended statute would impair existing rights or create new obligations concerning prior agreements. Retroactive application is generally avoided to prevent unfairness and disruption of settled transactions. In this case, the application of MCL 500.3157(7) and (10) to individuals injured before the effective date of 2019 PA 21 could significantly impair pre-amendment rights. Prior to the amendment, accident victims expected unlimited lifetime PIP benefits based solely on reasonable and necessary charges, as defined in pre-amendment no-fault policies. The new limitations on care and reimbursements drastically alter these expectations, affecting long-term care for severely injured individuals and their families who have relied on these benefits for decades.

Reliance on the promise of unlimited Personal Injury Protection (PIP) benefits has led some individuals to forgo purchasing alternative insurance for catastrophic injuries, while family members have sacrificed employment and income to provide care at home. More than 17,000 victims of auto accidents prior to legislative amendments would face reduced benefits if these amendments were applied retroactively. Insurers stand to benefit financially without any obligation to the insured, as they have already collected sufficient premiums to cover unlimited benefits. The ongoing claims arise from accidents that occurred before the amendment’s effective date, and the PIP policies in question guarantee unlimited benefits, creating settled expectations for victims. 

Contrary to defendants' claims, PIP benefits are not purely statutory; they are enforceable contractual rights established by the policies sold, which promise lifetime care. The no-fault act serves as a minimum coverage guideline but does not negate the contractual nature of the policies. Defendants' argument that plaintiffs could not reasonably rely on the benefits is dismissed, as the cases cited (Lahti v Fosterling and Romein v Gen Motors Corp) are distinguishable. Unlike those cases involving workers’ compensation—which is strictly statutory—the PIP policies confer specific contractual rights to care and reimbursement. The unique legislative history of the workers' compensation cases, particularly the retroactive application upheld in Romein, does not parallel the context of PIP benefits and the rights of the injured plaintiffs.

The employer contested the 1987 amendment to the no-fault act, claiming it violated due process by altering the employer's liability during a time when benefit coordination was allowed. The Supreme Court clarified that this amendment aimed to rectify what the Legislature deemed an erroneous judicial interpretation of the 1981 act, categorizing it as remedial. However, the court rejected the defendants' characterization of the 2019 amendments as "remedial," arguing that they represented extensive changes to a long-standing statutory framework that affected the entire state population rather than correcting a narrow issue or misinterpretation.

The court distinguished between the permissibility of retroactive increases in workers' compensation benefits and the potential constitutional issues surrounding retroactive reductions. It noted that the 2019 amendments led to significant cuts in benefits, which could not be assumed to be reasonable or expected by plaintiffs, given the stability of the no-fault scheme over decades. The court emphasized that the amendments lacked a clear intent for retroactive application, as neither the amended MCL 500.3157 nor other provisions explicitly indicated that they would affect individuals injured prior to the amendments' effective date. Thus, plaintiffs had a legitimate reliance on the prior statutory framework regarding medical expense reimbursement, and the presumption against retroactivity was not overcome by the language found in the amendments.

Retroactive application of the amendments to the no-fault act would disrupt the settled rights and expectations of injured plaintiffs under the pre-amendment act, based on their premium payments for the defendants' obligation to cover all reasonable medical charges. Consequently, the amendments cannot be applied retroactively. 

Even with a hypothetical legislative intent for retroactive application, such an action would violate the Contracts Clause of the Michigan Constitution, which prohibits laws that impair existing contractual obligations. A three-part balancing test is used to evaluate potential violations: 1) determining if a change in law substantially impairs a contractual relationship; 2) assessing if the legislative disruption serves a public good; and 3) evaluating whether the legislative means are reasonable.

The trial court denied the plaintiffs' motion to amend their complaint to include a breach of contract claim, citing futility, which was deemed an error, as the defendants' refusal to provide contracted benefits constituted a clear breach. However, this breach claim is rendered moot by the court's rulings. 

The analysis indicates a substantial impairment of the plaintiffs' rights under their no-fault policies, which guaranteed reimbursement for reasonably necessary services without fee schedules or caps on attendant care hours. Retroactive application of specific statutory amendments would significantly reduce reimbursements and limit family-provided care hours, undermining the core benefits of the insurance contract. This situation parallels a previous ruling where the reduction of contracted salaries for teachers was found to violate the Contracts Clause, as it explicitly required employers to forgo agreed-upon wages, reflecting a direct impairment of contractual rights rather than incidental legislative impact.

The no-fault act raises significant concerns regarding the impairment of contractual rights, particularly in this case where the fee schedules and attendant-care cap are central to the amendments. The document asserts that the impairments are substantial, effectively negating many contractual duties owed by one party after the other has fulfilled their obligations. For such legislative impairments to be upheld, there must be evidence of (1) a significant public purpose and (2) a reasonable relationship between the means used and that purpose.

While the defendants acknowledge that the amendments are intended to lower no-fault insurance premiums, they fail to justify the retroactive application of these changes to individuals injured prior to the amendments. The retroactive application could drastically reduce previously unlimited Personal Injury Protection (PIP) benefits without a demonstrated necessity for achieving the goal of lowering premiums. The document argues that allowing insurers to keep premiums for benefits that are no longer fully available constitutes a windfall for the insurance companies and does not serve a legitimate public purpose.

The document concludes that the retroactive application of the amendments violates the Contracts Clause of the Michigan Constitution, as it severely impairs the lifetime benefits promised under existing policies. Additionally, plaintiffs assert that the application of specific statutes (MCL 500.3157(7) and (10)) to all victims of motor vehicle accidents infringes their due process and equal protection rights. Defendants counter that plaintiffs lack standing to challenge these provisions, as standing requires a legally protected interest that is at risk of adverse effects.

The standing doctrine evaluates whether a litigant's interest is sufficient for effective advocacy. When standing is challenged, the focus is on whether the correct party is involved, not the justiciability of the issue. In this case, Andary and Krueger initially had a direct interest in the prospective application of amendments but lost their standing for further challenges after receiving full relief for injured plaintiffs. Consequently, their claims regarding the constitutional implications of these amendments were dismissed.

Eisenhower Center, however, maintains a distinct and palpable injury related to the amendments' prospective application and thus has standing to challenge their constitutionality. The court noted that while the constitutionality of the amendments is justiciable, the current record is insufficient to address these constitutional challenges. As per precedent, the court may require a trial to establish necessary factual determinations regarding the legislative judgment's rational basis. Therefore, the case is remanded for further discovery to assess the constitutional validity of the no-fault amendments applied prospectively. The court affirmed in part, reversed in part, and did not award costs, with no party prevailing entirely.