Appeals Court: 2019 No-Fault Insurance Changes Do Not Apply Retroactively | Speaker Law
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Appeals Court: 2019 No-Fault Insurance Changes Do Not Apply Retroactively

Posted on Wednesday, September 7, 2022

The changes to Michigan’s no-fault law limiting the payment of personal injury protection (PIP) benefits do not apply to car crash victims who were injured before the changes went into effect on June 11, 2019, the Michigan Court of Appeals has ruled.

In Andary v USAA Casualty Ins Co, et al. (Docket No. 356487), the Court of Appeals examined whether 2019 PA 21, which amended the No-Fault Act (MCL 500.3101, et seq.), applied retroactively. Specifically, MCL 500.3157 was amended to cap a medical provider’s reimbursement amount as follows:

  • MCL 500.3157(7) limits a provider’s reimbursement for services not covered by Medicare to 55 percent of the fees charged as of January 1, 2019.
  • MCL 500.3157(10) limits the reimbursable hours of family-provided attendant care to 56 hours a week.

The plaintiffs, Ellen Andary and Philip Krueger, are permanently disabled after sustaining traumatic brain injuries in motor vehicle crashes. Plaintiff-Andary requires around-the-clock attendant care, most of which is handled by her family at home. Plaintiff-Krueger resides at Eisenhower Center, also a plaintiff in the case. Eisenhower Center provides inpatient rehabilitation services to persons with traumatic brain injuries. Most of the patients at Eisenhower Center are auto accident victims and the services provided are reimbursable through no-fault insurance.

The plaintiffs brought this action in Ingham County Circuit Court after the defendants, USAA Casualty Insurance Company and Citizens Insurance Company, refused to pay no-fault insurance benefits. The plaintiffs argued:

  • they are not subject to the fee limits because they were injured before the effective date of the no-fault changes and the limits should not be applied retroactively.
  • the amendments violate the Contracts Clause of the Michigan Constitute because they have contractual rights under their insurance policies, and these rights were in effect at the time they were injured.
  • the amendments violate auto accident victims’ constitutional rights to equal protection and due process.

The Ingham County Circuit Court dismissed the plaintiffs’ claims, finding the limits in MCL 500.3157 applied retroactively and did not violate the state Constitution. The plaintiffs appealed.

The Court of Appeals reversed in a 2-1 published opinion. “We conclude that [the amendments] do not [apply retroactively] because the Legislature did not clearly demonstrate an intent for the amendments to apply retroactively to persons injured in pre-amendment accidents,” the majority said. “We further conclude that even if retroactive intent had been demonstrated, imposing the new limits would substantially impair no-fault insurance contracts entered into before the amendments’ effective date, and therefore would violate the Contracts Clause of the Michigan Constitution.”

Judge Douglas B. Shapiro wrote the majority opinion, joined by Judge Sima G. Patel.

Judge Jane E. Markey dissented, saying the no-fault changes apply retroactively and the plaintiff’s constitutional claims were “not sustainable.”

The defendants have appealed the decision to the Michigan Supreme Court.

Lansing appellate attorney Liisa Speaker, who filed an amicus brief on behalf of the Brain Injury Association of Michigan, is hopeful the Michigan Supreme Court will hear the case. “There are many people seriously injured in auto accidents who are being denied the care they need because of insurance companies’ interpretation of the new no-fault law,” she says.

No Retroactive Application

In its analysis, the Court of Appeals first addressed whether the Legislature intended MCL 500.3157(7) and (10) to apply retroactively to persons injured before June 11, 2019. According to the majority, case law says the Legislature’s “expression of intent” that a statute should apply retroactively “must be clear, direct, and unequivocal” from the context of the statute itself.

The plaintiffs maintained the 2019 no-fault amendments did not include any language indicating the changes should be applied retroactively. The defendants, however, asserted that legislative intent for retroactive application should be implied by MCL 500.2111f - a new provision included at the time of the no-fault changes that covers premium rate reduction requirements for PIP coverage.

The Court of Appeals majority rejected the defendants’ argument, finding that MCL 500.2111f “merely defines how premium rates are to be determined” under the new no-fault system. The majority also rejected the defendants’ claim that the rate setting language in MCL 500.2111f(8) showed intent for the changes to apply retroactively. This section of the statute “does not mandate that the limits on benefits provided in MCL 500.3157 shall be applied to persons injured before its effective date. And the claim that it does so by implication is very weak,” the majority observed. “The statute merely provides that if there are such savings, they must be used to reduce future rates. Whether such savings will occur is not defined by this statute.”

According to the majority, if the Legislature had wanted to overcome the presumption against retroactive application of the amendments, “it surely could have expressed its intent plainly, directly and unequivocally, but it did not do so.” Therefore, the majority said it would “not find legislative intent to apply the new benefit limitations to those injured prior to 2019 PA 21’s effective date based solely on a rate-setting provision that does not mandate it.”

In addition, the majority rejected the defendants’ claim that the no-fault amendments were “remedial” because the original statute needed to be changed to lower rates and benefits. “To call that ‘remedial’ legislation is far too broad a use of the term,” the majority wrote. “The amendments were not aimed at a narrow problem regarding a technical or procedural difficulty or an attempt to correct what the legislature viewed as an erroneous judicial interpretation of an existing statute. Rather, they enacted far-reaching alterations to a statutory scheme that had stood for 50 years and on which virtually the entire population of the state relied. It is a broad policy-based change, not a remedial statute.”

In conclusion, the  majority emphasized that the amended version of MCL 500.3157 includes “no ‘clear, direct, and unequivocal’ … expression of intent to have subsections (7) and (10) apply retroactively, i.e., to individuals who were injured before its effective date, even as to services provided after its effective date,” the majority said.

“Nor is such language found elsewhere in the amended no-fault act,” the majority explained. “MCL 500.2111f(8) is insufficient to overcome the presumption of retroactivity when it is located in a separate chapter of the insurance code and does not directly call for retroactive application. Further, retroactive application would alter the injured plaintiffs’ settled rights and expectations under the pre-amendment no-fault act, which were obtained in exchange for premiums based on defendants’ obligation to pay all reasonable charges not subject to fee schedules or caps. For these reasons, we conclude that the amendments at issue in this case may not be applied retroactively to the injured plaintiffs.”

Contracts Clause Violation

Next, the Court of Appeals majority noted that, even if it had found the Legislature intended for the no-fault amendments to apply retroactively, it would still hold that retroactive application violates the Contracts Clause of the Michigan Constitution.

“[W]e conclude that there is a substantial impairment of the injured plaintiffs’ rights under the policies,” the majority wrote. “If MCL 500.3157(7) is applied retroactively, … reimbursement for services not compensable by Medicare will be reduced by at least 45 percent, despite being reasonably necessary for the injured party. The practical effect is that many providers will no longer be able to offer these services. Similarly, retroactive application of MCL 500.3157(10) will greatly limit the number of reimbursable hours for attendant care that may be performed by family. Again, there was no attendant-care cap under plaintiffs’ policies at the time of the respective accidents.”

The retroactive application of the no-fault amendments “will permanently slash the paid-for insurance benefits that are at the heart of the parties’ contract,” the majority observed. “The fee schedules and attendant-care cap are at the core of the no-fault amendments. In sum, the impairments are more than substantial; they wholly remove numerous duties to be performed by one party to the contract after the other party has fully performed their duties under the contract. Accordingly, we conclude that the impairment of contract is severe.”

In summary, the majority stated: “[T]he lifetime unlimited benefits that the insurers were paid for will be severely impaired if the amendments are given retroactive effect. Defendants have not shown that retroactive application of the amendments is necessary to accomplish the goal of lowering no-fault policy premiums. Nor have defendants explained how applying the amendments to those injured before the amendments’ effective date is reasonable, especially considering that the relevant premiums have already been paid in full. Accordingly, we conclude that retroactively applying the amendments violates the Contracts Clause of the Michigan Constitution.”

Due Process & Equal Protection

The Court of Appeals then turned to the plaintiffs’ claim that applying MCL 500.3157(7) and (10) to past, present and future auto-accident victims would violate victims’ due process and equal protection rights. Meanwhile, the defendants maintained that the plaintiffs did not have standing to seek this kind of relief.

“At the time they filed their declaratory action, Andary and Krueger had a direct interest in the question of prospective application,” the majority said. “We therefore disagree with the trial court’s conclusion that they lacked standing at that time. However, because our decision regarding retroactivity provides full relief to the injured plaintiffs, they no longer have any personal interest in whether prospective application of the amendments can survive constitutional scrutiny.”

Because the plaintiffs’ ability to obtain full PIP benefits “renders them without a distinct and palpable interest in the amendments’ future application, we affirm dismissal of Andary’s and Krueger’s claims that prospective application would violate their constitutional rights,” the majority explained. “This does not mean, however, that the constitutionality of 2019 PA 21’s prospective application is not justiciable. To the contrary, Eisenhower Center, as a provider of care and services to catastrophically injured accident victims, clearly retains a distinct and palpable injury that our decision regarding retroactive application does not resolve. Accordingly, we reverse the trial court’s decision to dismiss Eisenhower Center’s claims on the basis of standing. Nevertheless, we cannot now resolve the constitutional challenges given the lack of an adequate record, even on rational basis review.”

Based on the foregoing, the majority remanded the case “for discovery necessary to determine whether the no-fault amendments, even when applied only prospectively, pass constitutional muster.”

Dissenting Opinion

In her dissent, Judge Markey said that although she is “not unsympathetic” to the plaintiffs’ situations, the judiciary should not interfere with the Michigan Legislature’s actions.

“When MCL 500.2111f(8) is read in conjunction with MCL 500.3157, it becomes abundantly clear that the Legislature envisioned and intended that MCL 500.3157 be applied to accidents and injuries arising before June 11, 2019,” Judge Markey wrote. “MCL 500.2111f(8) expressly references and effectively incorporates MCL 500.3157. And both statutes were encompassed by the 2019 legislative amendments of the no-fault act. MCL 500.2111f(8) mandates insurers to pass on savings realized from the application of MCL 500.3157(2) to (12) to the motor-vehicle accidents at issue in this litigation. Even if no savings are realized, it does not change the fact that Legislature indicated its intention that MCL 500.3157 be applied to accidents occurring before June 11, 2019. Indeed, the majority’s ruling essentially circumvents and renders meaningless, to a great extent, the dictates of MCL 500.2111f(8). … In sum, I would hold that when MCL 500.2111f(8) is read in conjunction with MCL 500.3157, it becomes amply clear that the Legislature intended that MCL 500.3157 be applied to accidents and injuries arising before June 11, 2019.”

Regarding the plaintiffs’ Contracts Clause argument, Judge Markey said the amendment of MCL 500.3157, as applied to auto accident accidents that happened before June 11, 2019, “was reasonably related to a significant and legitimate public purpose linked to promoting the public good.” She continued by noting that, on its face, the Legislature’s stated purpose for enacting the no-fault amendments, which “constitutes economic legislation,” was “significant, reasonable, and legitimate, serving the public good. This is especially true in light of the deference that must be given to the Legislature in such matters. … I find nothing arbitrary or irrational about the Michigan Legislature taking steps to make no-fault insurance, which is mandatory for owners or registrants of motor vehicles, … as affordable as possible for as many Michiganders as possible, especially where it is generally known that Michigan drivers had paid the highest auto insurance rates in the country. … I conclude as a matter of law that imposing fee schedules and other limitations on PIP coverage in relation to accidental bodily injuries occurring before June 11, 2019, was reasonable.”

Therefore, “the legislative changes made to MCL 500.3157 apply to automobile accidents that occurred before June 11, 2019,” Judge Markey concluded. “I also find that the claim alleging a violation of the Contracts Clause is not sustainable. I further conclude that the due process and equal protection claims fail as a matter of law, assuming standing, but for purposes of this dissent, it is unnecessary to set forth my reasoning. Accordingly, I would affirm the trial court’s ruling granting summary disposition in favor of defendants.”

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