New England Mut. Life Ins. Co. v. Gray

• Decision Date: 18 March 1986
• Docket Number: No. 84-1678,84-1678
• Citation: 786 F.2d 406
• Parties: NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, a Massachusetts Corporation, Plaintiff-Appellant, v. Dennis A. GRAY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 406

786 F.2d 406

NEW ENGLAND MUTUAL LIFE INSURANCE COMPANY, a Massachusetts

Corporation, Plaintiff-Appellant, v. Dennis A. GRAY, Defendant-Appellee.

No. 84-1678.

United States Court of Appeals, Sixth Circuit.

Argued Jan. 10, 1986.

Decided March 18, 1986.

Mark W. McInerney, Houghton, Potter, Sweeney, & Brenner, Detroit, Mich., for plaintiff-appellant.

Richard C. Elconin, Monroe, Mich., for defendant-appellee.

John D. Pirich, Miller, Canfield, Paddock & Stone, Lansing, Mich., for amicus curiae: Health Ins. Ass'n of America.

Before MERRITT, JONES and NELSON, Circuit Judges.

MERRITT, Circuit Judge.

In this diversity case requiring interpretation of Michigan's complex insurance code, plaintiff-appellant New England Mutual Life Insurance Co. appeals the District Court's decision finding Michigan positive law applicable rather than Minnesota law. As a result, the District Court held that a "reimbursement" provision contained in a New England group health insurance policy issued in Minnesota did not allow New England to obtain reimbursement from a beneficiary of the policy who had received payments from two insurers for the same covered expenses. Because we believe that the District Court inappropriately applied Michigan law rather than Minnesota law to this policy, we reverse and remand.

I.

On August 1, 1978, New England issued a group health insurance policy covering employees of North Star Steel Co. North Star is headquartered in Minnesota.

The policy states that the "jurisdiction of issue" is the state of Minnesota and provides "THE POLICY IS DELIVERED IN THE Jurisdiction of Issue, and is governed by the laws of that jurisdiction." The policy also contains a "reimbursement" provision that grants New England the right to recover from an insured any proceeds recovered from a third party for injuries for which the third party was liable and for which New England has paid benefits.

Plaintiff-appellee Gray, a Michigan resident, was employed by North Star at its plant in Monroe, Michigan. He was covered by the group policy and had received a "certificate of insurance" in Michigan, but he had not received a copy of the group policy. On August 4, 1982, Gray was injured in a collision between the motorcycle he was driving and another vehicle. He made claims on the group policy for his medical expenses, and New England paid $41,561.20. Trans-Automotive Insurance Co. ("Trans-Auto"), the no-fault insurer of the other vehicle involved in the accident, ¹ paid Gray $36,140.40 for the same expenses New England paid on and $31,775.00 for other expenses. Gray has made claims for these other expenses to New England, but New England has refused to pay.

On August 26, 1983, New England sued Gray in the United States District Court for the Eastern District of Michigan, under diversity jurisdiction, seeking reimbursement of $36,140.40 and a declaratory judgment to the effect that New England is not required to pay additional claims for expenses for which Trans-Auto has paid. The parties entered into a stipulation of facts and made cross-motions for summary judgment. The stipulation of facts did not make clear the involvement of Trans-Auto; the stipulation merely stated that Trans-Auto was statutorily obligated to pay.

II.

On June 22, 1984, Judge Joiner of the District Court for the Eastern District of Michigan entered his opinion denying New England's motion for summary judgment and granting Gray's motion. New England Mutual Life Insurance Co. v. Gray, 590 F.Supp. 615 (E.D.Mich.1984). New England appeals this decision, and the Health Insurance Association of America has filed a brief as amicus curiae.

A.

The District Court ruled that New England could not enforce the reimbursement provision against Gray because New England has not had the policy approved by the Michigan Commissioner of Insurance. Michigan Compiled Laws section 500.3606(2) provides that "[n]o [group disability insurance] policy ² may be issued or delivered in this state unless a copy of the form shall have been filed with the commissioner and approved by him." See also section 500.2242 to the same effect. The New England policy (as distinct from the certificate) was issued and delivered in Minnesota, not in Michigan. However, the District Court held as a matter of law that "when an insurer issues a group disability policy, beneficiaries of which live and are employed in Michigan, and sends a certificate of insurance to the beneficiary/employees in this state, it has 'issued or delivered' a policy of insurance in this state, and must therefore comply with the terms of M.C.L.A. 500.3606." 590 F.Supp. at 618.

New England points out that the certificate of insurance is distinct and different from the insurance policy under the terms of the policy and argues that the District Court did not follow precedent from the United States Supreme Court and from Michigan courts in reaching its holding on this issue. In Boseman v. Connecticut General Life Insurance Co., 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036 (1937), the Supreme Court was presented with the argument that delivery of a certificate of insurance in Texas on an insurance policy issued in Pennsylvania made the laws of Texas applicable to the insurance policy. The Court rejected the argument, holding that the certificate was not part of the policy and that its delivery in Texas had no bearing on the question of whether Texas law should apply. ³

We have discovered no precedent in which a Michigan court has expressly decided whether section 500.3606 applies to out-of-state-issued group policies covering insured employer's Michigan employees. In Detroit Greyhound Employees Credit Union v. Aetna Life Insurance Co., 7 Mich.App. 430, 151 N.W.2d 852 (1967), rev'd on other grounds, 381 Mich. 683, 167 N.W.2d 274 (1969), the Michigan Court of Appeals dealt implicitly with this issue. The case involved a group annuity contract issued outside of Michigan and a certificate delivered to a beneficiary in Michigan. The court adopted Boseman and held that the law to be applied was not that of Michigan. By holding that the law of Michigan did not apply, the court implicitly decided that section 500.3606 (a specific provision of that law) did not apply either.

There may be valid reasons for applying the approval requirement of section 500.3606 to group disability insurance policies issued outside Michigan when some of the beneficiaries of those policies reside in Michigan. However, the Michigan legislature and courts have not extended the approval requirement to out-of-state-issued policies, and Detroit Greyhound implicitly holds that approval of out-of-state policies is not required. Given the well-established requirement that a federal district court apply the substantive law of the forum state in a diversity action, the District Court should have held that section 500.3606 does not require that New England's policy be approved by the Michigan Commissioner of Insurance. In other words, New England did not, under the facts of this case, "issue or deliver" its group policy in Michigan within the meaning of section 500.3606(2).

B.

The District Court's second basis for holding that New England was not entitled to reimbursement was that New England had failed to conform its "reimbursement" provision to the coordination of benefits provisions mandated by the Michigan Insurance Code. Judge Joiner observed, we think correctly, that by this suit New England was attempting to use the policy's reimbursement provision to render itself only secondarily liable to all co-insurers. He held that an insurer who seeks to coordinate payment of benefits with co-insurers must do so by adopting the provisions set out in sections 500.3438 and 500.3440 of the Michigan Insurance Code. These sections specify the provisions that an insurer may use to coordinate benefits, and the New England policy's reimbursement provision does not conform to these sections. The District Court held that New England could not obtain reimbursement, citing Siller v. Employers of Wausau, 123 Mich.App. 140, 333 N.W.2d 197 (1983) for the proposition that an insurer whose coordination of benefits provision does not conform to sections 500.3438 and 500.3440 is not entitled to any coordination whatsoever.

The District Court's holding in this respect appears to contradict the implicit holding in Detroit Greyhound. Further, sections 500.3438 and 500.3440 do not govern coordination of benefits in New England's policy. The insurance code sections cited by the District Court are in the chapter dealing with individual disability insurance policies. Judge Joiner held that these sections were made applicable to New England's group policy by section 500.3610. However, unknown to Judge Joiner, two months before the District Court's opinion, section 500.3610 was amended to read, "[E]very policy of group disability insurance shall contain the applicable provisions required in sections 3406 through 3446, except sections 3438 and 3440." (Emphasis shows April 18, 1984 amendment.) ⁴ Thus, the amendment specifically excludes sections 500.3438 and 500.3440 from incorporation into the Michigan Insurance Code's chapter on group disability policies. Section 500.3610 does not impose the requirements of the coordination of benefits sections on group disability insurance policies.

On appeal Gray takes the position that this amendment to section 500.3610, which was enacted after Gray's accident and his subsequent insurance claims, should not be applied retroactively. If the amendment should be applied prospectively only, Gray would argue that the District Court's holding on incorporation of the coordination of benefits sections was correct because the holding concerned preamendment events. ⁵

There is, however, no need to rule on the question of retroactive application of this amendment. Before the 1984 amendment, section 500.3610 stated, "[e]very policy of group disability insurance...