Accident Fund v. Baerwaldt
| Decision Date | 19 August 1982 |
| Docket Number | No. G 81-224.,G 81-224. |
| Citation | 545 F. Supp. 1030 |
| Parties | ACCIDENT FUND, a Legal Entity Authorized by the Michigan Legislature Pursuant to 1912 PA 10 (First Extra Session) Part V, § 1; 1915 CL 5477, Ward Ellison and Max Grost, individually, Elston-Richard Storage Company and Russell Jameson, individually, Plaintiffs, v. Nancy A. BAERWALDT, Commissioner of Insurance of the State of Michigan, Richard A. Ross, Personnel Director of the State of Michigan, and William S. Ballenger, Director of the Department of Licensing and Regulation of the State of Michigan, Defendants. |
| Court | U.S. District Court — Western District of Michigan |
Theodore W. Swift, David C. Coey, Frank J. Nerat, Jr., Lansing, Mich., for plaintiffs.
Harry G. Iwasko, Jr., Louis Porter, Asst. Attys. Gen., Lansing, Mich., for defendants.
In this case, the Michigan Attorney General has moved the Court for Summary Judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure, positing the following issue for resolution: Is the State Accident Fund an agency or instrumentality of the State of Michigan?
Plaintiffs' Complaint for Injunctive and Declaratory Relief alleges, inter alia, a violation by Defendants of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. § 1001 et seq, and is predicated upon an alleged interference by Defendants with an "Employee's Pension Trust and Plan" presently maintained by the State Accident Fund. It is well settled that the provisions of ERISA do not apply to "governmental plans," 29 U.S.C. § 1003(b)(1), as defined in 29 U.S.C. § 1002(32), which includes: "a plan established or maintained for its employees by ... the government of any State or political subdivision thereof, or by any agency or instrumentality of any of the foregoing." Hence, if the State Accident Fund is an agency or instrumentality of the State of Michigan, the provisions of ERISA do not apply.
Unfortunately, the Court cannot look to any decisions of the Michigan Supreme Court or Court of Appeals for guidance on the immediate question, as there is an absolute paucity of case authority on the issue. Indeed, considerable research discloses only a series of opinions of the State Attorney General on the subject, the latest of which was released in December, 1976 (O.A.G. 1976, No. 5147) and concluded that the State Accident Fund did fall within the parameters of a state agency or instrumentality. After analyzing and reflecting upon the briefs submitted and research undertaken, I am persuaded that the State Attorney General is not in error.
Both parties have undertaken extensive reviews of the statutory background of the State Accident Fund, which need not be repeated here. It is important though, to note that the State Accident Fund was created in 1912 as Part I of the first Michigan Worker's Compensation Act, 1912 P.A. 10 (First Extra Session) Part V § 1.
Under this Act, an employer in this state could make a choice between four methods of payment of workers' compensation claims: (1) self-insurance; (2) insurance through a liability insurer; (3) an employers insurance association; and, (4) "(t)o request the Commissioner of Insurance of the State of Michigan to assume the administration of the disbursement of such compensation ... and the collection of the premiums and assessments necessary to pay the same as provided in part five hereof". Part V outlined the requirements for creation of the State Accident Fund and its administration:
SECTION 1. Whenever five or more employers, ... shall in writing request the Commissioner of Insurance so to do, he shall assume charge of levying and collection from them such premium and dividends as may from time to time be necessary to pay the sums which shall become due their employees, ... as compensation under the provisions of this act, and also the expense of conducting the administration of such funds; and shall disburse the same to the persons entitled to receive such compensation under the provisions of this act: Provided, however, that neither the Commissioner of Insurance nor the State of Michigan shall become or be liable or responsible for the payment of claims for compensation under the provisions of this act beyond the extent of the funds so collected and received by him as hereinafter provided.
Section 2 of Part V sets forth the responsibility of the Commissioner of Insurance when a duly executed petition was received from five or more employers, as outlined in Section 1.
The Commissioner of Insurance shall immediately upon assuming the administration of the collection and disbursement of the moneys referred to in the preceding section, cause to be created in the State treasury a fund to be known as `accident fund'. Each such employer shall contribute to this fund to the extent of such premiums or assessments as the commissioner shall deem necessary to pay the compensation accruing under this act to employes of such employers ... the Commissioner of Insurance shall give a good and sufficient bond in the sum of Twenty-five Thousand Dollars, executed by some surety company..., covering the collection and disbursement of all moneys that may come into his hands under the provisions of this Act. The premium on said bond shall be paid out of the general funds of the State or on order of the Auditor General. Said bond must be approved by the board of State auditors. (Emphasis supplied).
Part V of the Act further indicated that the "accident fund" was to "ultimately become neither more nor less than self-supporting"; the premiums or adjustments levied for such purpose being subject to readjustment periodically by the Commissioner of Insurance as may become necessary (Section 3). In collecting these premiums, the Commissioner of Insurance was charged with the discretion to classify the sundry establishments of employers, according to the nature of the business engaged in and the probable risk of injury to employees. As part of this responsibility, the Commissioner was empowered to determine the amount of premiums or assessments which the employers would be required to pay into the "accident fund," and could prescribe when and in what manner these premiums and assessments had to be paid. This determination, moreover, was subject to reassessment by the Commissioner of Insurance to allow for changes in circumstances. The only limitation to this power of assessment being that; "such premiums ... shall be levied on a basis that shall be fair, equitable and just as among such employers." (Section 4). If in the event of a default by an employer in the payment of any contribution, premium or assessment required as aforestated by the Commissioner of Insurance, the sum due; "shall be collected by an action at law in the name of the State as plaintiff, ..." (Section 5, emphasis supplied). A civil action in the name of the State may also be maintained if an employer refuses to allow the Commissioner of Insurance to inspect the books, records, and payrolls of the employer for the purpose of ascertaining any information the Commissioner; "may require in the administration" of the "accident fund" (Section 8).
To effectuate the purposes of the Act, the Commissioner of Insurance in Section 9 was authorized to: "employ such deputies and assistants and clerical help as may be necessary, and as the board of State auditors may authorize, for the proper administration of said funds and the performance of the duties imposed upon him by the provisions of this act." Compensation for these employees was fixed by the board of State auditors, but all salaries and expenses were charged to and paid out of the accident fund. The ability to terminate the employment of any employee of the Fund rested with the Commissioner of Insurance.
This statutory framework, except for a few minor permutations, remained entirely under the control of a state official, up to and including the present enabling act, M.C.L. § 418.701 et seq; M.S.A. § 17.237(701) et seq, which allows that the State Accident Fund is: "created to provide workmen's compensation insurance for employers under the supervision of the commissioner of insurance, ..." Section 701 goes on to state:
Upon compliance with the rules concerning insurance adopted by the commissioner, membership in and coverage by the Fund shall be provided to employers subject to this act who shall request such membership and coverage of the Fund in writing. Thereupon the accident fund shall assume charge of levying and collection from the employers such premiums or assessments as may be necessary from time to time to pay the sums which become due under the provisions of this act and also the expense of administration; and shall disburse such sums in accordance with the provisions of this act. Neither the commissioner nor the state shall be liable or responsible for the payment of claims for compensation under the provisions of this act beyond the extent of the sums so collected and received.
The entire statutory scheme is appended hereto as Appendix A. Noteworthy within the provisions of the Act is the enabling language which permits the Commissioner of Insurance to employ such deputies, assistants and clerical help as may be necessary, and as the advisory board may authorize for the proper administration of the accident fund and the performance of the duties imposed upon the Commissioner of Insurance by the provisions of the Act. These employees may be terminated in the sole discretion of the Commissioner of Insurance, although they are compensated at rates fixed by the advisory board. Significantly, the fund itself is still retained in the treasury of the State of Michigan.
It is against this background, that the Court must determine whether the State Accident Fund is a state agency or instrumentality. The appellate courts of Michigan have not directly addressed the instant question, however, relevant case authority is available and supplies the appropriate...
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Certified Question, In re
...district court against the Commissioner of Insurance, seeking a ruling that the fund was not a state agency. Accident Fund v. Baerwaldt, 545 F.Supp. 1030 (W.D.Mich.1982). The board did not prevail on this issue; however, several policyholders who joined in the suit as plaintiffs enjoyed mor......
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...Univ., 663 F.Supp. 289, 292 (E.D.Pa.1987) (ERISA exempts plans "established by state and local governments"); Accident Fund v. Baerwaldt, 545 F.Supp. 1030, 1038 (W.D.Mich.1982) ("ERISA do[es] not apply to a pension plan established by the State"). Viewing the "established or maintained" cla......