MI Supreme Court Affirms Court of Appeals Decision on No-Fault Auto Reform

Andary v. USAA Casualty Insurance Company 

• Opinion Issued: July 31, 2023

• Author: Justice Elizabeth M. Welch

• Liisa Speaker represented the Brain Injury Association of Michigan, an organization participating in the case as amicus curiae.

Holding: Individuals injured before the effective date of the 2019 amendments to the No Fault Act are not subject to the amendment’s fee schedule and in-home family provided care limitations. No Fault personal protection insurance (PIP) rights are both contractual and statutory and vest at the time of the accident. Retroactive application of the statute is not explicit in the statue and would destroy the contractual rights of the Plaintiffs. Therefore, the amendments do not apply to those injured while covered by an insurance policy issued before July 11, 2019.   

Facts: For over 50 years, Michigan has operated as a no-fault insurance state with insured individuals statutorily guaranteed “allowable expenses,” consisting of all reasonable charges incurred for reasonably necessary products, services, and accommodations for the person’s care, recovery, or rehabilitation. Included in these allowable expenses is attendant care, which allows for reimbursement of expenses incurred from caring for the injured person - whether provided by family, friends, or a commercial service. Prior to 2019, there was no cap on attendant care services. However, in 2019, the Legislature amended the No Fault Act to cap the reimbursement rates (the fee schedule) and the number of reimbursable hours of attendant care given by family and friend at 56 hours per week (in-home family-provided care).

Plaintiffs, two insured individuals who suffered catastrophic injuries as a result of motor vehicle accidents, receive attendant care from family and their co-plaintiff, the Eisenhower Center. The plaintiffs filed a complaint against the defendants, their insurers USAA Casualty and Citizens Insurance, seeking a declaratory judgment that the fee schedule and the limitation on in-home family-provided care do not apply to their treatment. Plaintiffs alleged that the amendments violated their rights under the Michigan Constitution’s Contracts Clause, Equal Protection Clause, and Due Process Rights. Defendants moved to dismiss the complaint, and the trial court granted the motion and dismissed the complaint.

On appeal, the Court of Appeals held that the amendments to the No Fault Act do not apply retroactively to Plaintiffs, who were injured prior to the effective date of the amendments. The Court of Appeals further held that retroactive application would violate the Contracts Clause. Finally, the Court of Appeals held that the individual Plaintiffs’ remaining constitutional arguments do not need to be addressed as the Contract Clause claim granted them full relief, but the Eisenhower Center’s claim could not be fully resolved under the rational basis standard.

Defendants appealed to the Supreme Court.

Key Appellate Rulings:

The 2019 Amendments to the No Fault Act do not apply retroactively to modify benefits obtained prior to the effective date of the amendments.

The Supreme Court first clarified several disputed aspects of the No Fault Act. First, the Court clarified that rights to PIP is both contractual and statutory in nature. Second, rights to PIP vest at the time of the motor vehicle accident. With the determination that Plaintiffs’ rights are vested, the Court determined if the amendments apply retroactively.

When determining if rights apply retroactively, courts consider four principles: (1) whether there is specific language providing for retroactive application, (2) the statute is not regarded as operating retroactive merely because it relates to an antecedent event, (3) the idea that retroactive application impairs vested rights and creates new duties, and (4) a remedial or procedural act no affecting vested rights may be retroactively applied where the injury is antecedent to the enactment of the statute.

Here, the statutes do not refer to whom they apply, but do reference only prospective application of the services provided. Therefore, there is no clear expression from the Legislature that the amendments were to apply retroactively. Second, although application of the statues necessarily indirectly relates to an antecedent event because it would impair Plaintiffs’ vested contractual rights. Third, the retroactive application would impair Plaintiffs’ vested contractual rights because it would alter the agreement for uncapped benefits under their insurance plans at the time of the injury. Finally, the fourth principle is inapplicable because the amendments are substantive in nature rather than procedural.

In sum, considering the retroactivity principles, the Supreme Court held that the 2019 amendments do not apply retroactively to insureds injured while covered by an insurance policy issued before July 11, 2019.

Justice Viviano’s Partial Concurrence and Partial Dissent

Justice Viviano dissented to conclude that the 2019 reforms apply to medical expenses and services stemming from pre-reform accidents. Therefore, the reforms do not create a retroactive application, but instead they are a prospective application. Justice Viviano substantially disagreed with the majority’s conclusion because he believed PIP benefits for future treatment are not vested rights. Thus, applying the reforms prospectively does not deprive the Plaintiffs’ of any vested rights.

Regarding the Contract Clause argument, Justice Viviano believed that there was little relevant impairment of the contractual relationship between Plaintiffs and Defendants because the amendments do not limit an insured’s entitlement to reimbursement for reasonable expenses. Even if the reforms did substantially impair contractual rights, Justice Viviano would uphold them because they are necessary for the public good and reasonably related to their legitimate objectives.

Justice Zahra’s Dissent

Justice Zahra wrote a separate dissent, joining Justice Viviano’s dissent in full except footnotes 2, 3, and 8. He further stated that he did not want to address the retroactivity principles framework both the majority and Justice Viviano applied because both sides used the same factors to reach different conclusions.