Michigan Supreme Court Rules on Retroactivity of 2019 No-Fault Amendments

On July 31, 2023, the Michigan Supreme Court held that the new fee schedule and attendant care limitations contained in MCL 500.3157 do not apply retroactively to PIP insureds who sustained accidental bodily injuries prior to the effective date of the 2019 No-Fault amendments.  In Andary et al v USAA Casualty Insurance Company and Citizens Insurance Company of America, the Court reasoned that the No-Fault insurance policy and disputed portions of the No-Fault Act existing at the time of the injury control the entitlement to PIP benefits, not the amended provisions.

In 2019, the Michigan Legislature made significant changes to the Michigan No-Fault Act, introducing tiered PIP coverages as an option to the previously required life-time medical expenses, as well as other changes.  The amendments at issue in this case regard MCL 500.3157, specifically the reduction in reimbursement rates and limitation of family-provided attendant care to 56 hours per week.  Reviewing the history of the No-Fault Act, the Michigan Supreme Court noted that, with this change, “this will often mean that necessary medical care can only be provided by a third-party agency or that accident victims who require 24-hour care must be moved into nursing homes or similar facilities because family members can no longer be compensated for providing care beyond the 56-hour cap.”  Footnote 6 advises that Amicus Briefs filed by the Michigan Osteopathic Association, the Brain Injury Association of Michigan, and individuals suffering catastrophic injuries from automobile accidents before 2019 noted that patients have died or experienced serious health declines since the implementation of these amendments because required care was often provided by family members and providers who have historically served this population are “understaffed and closing in large numbers.”

The combined cases include two catastrophically injured passengers from accidents in 2014 and 1990, who were covered persons, but not named insureds, under No-Fault policies providing life-time PIP medical benefits which reimbursed “all reasonable fees for reasonably necessary products and services and accommodations for a covered person’s care, recovery, or rehabilitation.”  Plaintiff Andary had been prescribed in-home attendant care services at 36 hours per day, due to needing multiple caregivers, with the services historically being provided by family members.  Plaintiff Krueger resided at the Plaintiff Eisenhower Center, a facility specializing in rehabilitative care for individuals suffering traumatic brain injuries, since 1997.

The Plaintiffs filed an 18-count Complaint against USAA and Citizens, the PIP insurers for Plaintiff Andary and Plaintiff Krueger, respectively.  At the circuit court, in lieu of answering the Complaint, the Defendants moved for summary disposition under MCR 2.116(C)(8), arguing that the 2019 No-Fault amendments were constitutional, that alleged privacy and property interests were not fundamental rights for due process or equal protection purposes, that alleged Contracts Clause violations were invalid because PIP benefits were governed by statute rather than by contract, and lack of standing.  The circuit court, framing the counts into Contracts Clause claims, substantive due process claims, and equal protection claims, ruled against the Plaintiffs.

The Plaintiffs, after being denied reconsideration by the circuit court and a bypass application by the Michigan Supreme Court before the Court of Appeals resolved their appeal, appealed each of the rulings in the Court of Appeals.  The Court of Appeals affirmed in part, reversed in part, and remanded the case to the circuit court for further proceedings.  The Court of Appeals held that the amendments to MCL 500.3157(7) and (10) cannot apply retroactively to an individual whose injury and right to No-Fault benefits vested before the effective date of the amendments.  Noting that its decision on retroactivity effectively granted Plaintiff Andary and Plaintiff Krueger full relief, they no longer had standing for the constitutional issues.  Regarding Plaintiff Eisenhower Center, the Court held that its claims could not be resolved at the early stage of proceedings and remanded its claim for discovery.

In the Court of Appeals, the dissenting opinion stated that the challenged amendments were not being applied retroactively since they only applied to care or services provided after the effective date, reasoning, in part, that the right to the benefit does not accrue until an expense is incurred.  Further, even if the amendments were being applied retroactively, it would be allowable since there was a clear legislative intent for retrospective application to such insureds.

In its analysis, the Michigan Supreme Court recognized that the Legislature may retroactively impair vested rights if it clearly manifests the intent for retroactive application.  Applying the four factor LaFontaine test, the Court determined that the application of the No-Fault Amendments would constitute a retroactive reduction of vested contractual rights to receive uncapped PIP benefits pursuant to the insurance policies and No-Fault Act at the time of injury.  However, it decided that the Legislature did not clearly state that it intended the new fee schedule or new attendant care limitations to apply retroactively to individuals with a vested contractual right to PIP benefits under the pre-amendment No-Fault statutes, thus those provisions cannot apply to any insured who was injured while covered by an insurance policy issued before June 11, 2019.

In reaching its decision, the Michigan Supreme Court distinguished the No-Fault Act as being both contractual and statutory, unlike the purely statutory workers compensation system with its presumption against retroactivity to avoid a vested right from preventing the legislature from changing an existing law.  The Court also reasoned that the scope of PIP benefits under a No-Fault policy and the No-Fault Act vests at the time of injury, rejecting the Defendants’ argument that it vests when medical care is provided.  In footnote 16, the Court recognized limited circumstances where an insurer could rescind a No-Fault policy after an accident occurs, citing Bazzi v Sentinel Ins Co, 502 Mich 390, 408-412 (2018), as an equitable remedy rather than an absolute right, in instances of material misrepresentation or fraud on the part of the insured, but emphasized this does not stand for the proposition that an insurance company can unilaterally change benefits owed for a properly purchased insurance policy after an accident.  The Court also relied on a 1918 United States Supreme Court decision, Von Hoffman v City of Quincy, 71 US 535, 550 (1866), and Michigan contract law, holding that the laws in place at the time a contract is executed form a part of the contract.  Emphasizing that the scope of PIP benefits vest at the time of an injury, the Court stated that “holding to the contrary would be nonsensical,” noting that a covered person is not required to continually renew a No-Fault policy or pay additional consideration to an insurer post-injury as a prerequisite to continue to receive PIP benefits after an accident.  In footnote 21, the Court disagreed with the dissent’s assertion that the contractual right held by PIP insureds was “less than a vested right” and suggestion that the right to receive PIP benefits for future medical expenses for catastrophic injuries was “a mere expectation,” stating that the reality was that the injuries would require significant medical care with the only uncertainties being the amount of the allowable medical expenses and whether the specific expenses or care were reasonable and necessary considering the nature of the injury.

On the constitutional issues, the Michigan Supreme Court held that Plaintiff Andary and Plaintiff Krueger lacked standing to challenge the prospective application of the 2019 amendments because, as held, they were not subject to those amendments.  The Court also found that Plaintiff Eisenhower Center, which did not plead such on its own behalf, lacked standing to challenge the prospective application of the limitation for family provided attendant care on behalf of nonparty past and present patients and medical providers.  In that Plaintiff Eisenhower Center did make due process and equal protection challenges to the prospective application of the reduced payment provisions, under a rational basis review, the Court found that the new fee schedule was reasonably and rationally related to the legitimate legislative purpose of lowering costs.

At footnote 30, the Michigan Supreme Court made sure to limit its decision to individuals entitled to PIP benefits as a named insured or a covered individual under a policy.  The Court expressly indicated that it was not deciding whether individuals with a purely statutory claim, such as under MCL 500.311(4) or MCL 500.3115, are entitled to the same protections.  This is a reference to the amendments changing priority for occupants and non-occupants, who are not covered under a PIP policy, to the assigned claims plan.

Joel Ashton, a partner in our Livonia office, focuses his practice on insurance defense, including Michigan No-Fault claims (PIP, automobile negligence, uninsured/underinsured motorist), as well as premises liability and general negligence; real estate and community association law; municipal law; and discrimination cases. His practice also includes the defense of contract and liability claims, contract interpretation issues, subrogation claims involving automobile, fire and casualty, commercial and related coverage. Mr. Ashton maintains an AV Preeminent Rating from Martindale-Hubbell, which is the highest possible rating an attorney can achieve for both ethical standards and legal ability. He may be reached at (734) 261-2400 or jashton@cmda-law.com.