Auto Club Ins. Ass'n v. Frederick and Herrud, Inc., Docket No. 79289

• Decision Date: 26 December 1985
• Docket Number: Docket No. 79289
• Citation: 145 Mich.App. 722,377 N.W.2d 902
• Parties: AUTO CLUB INSURANCE ASSOCIATION, formerly known as D.A.I.I.E., Subrogee of Ali Chehab; Faysal Mazloum; Nouhad Jamil Bazzi; Hussein H. Habab; Nasri Jomaa; Ali K. Hashem; and Sami M. Alaouie, Plaintiff-Appellee, v. FREDERICK AND HERRUD, INC., a corporation, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 902

377 N.W.2d 902

145 Mich.App. 722

AUTO CLUB INSURANCE ASSOCIATION, formerly known as D.A.I.I.E., Subrogee of Ali Chehab; Faysal Mazloum; Nouhad Jamil Bazzi; Hussein H. Habab; Nasri Jomaa; Ali K Hashem; and Sami M. Alaouie, Plaintiff-Appellee, v. FREDERICK AND HERRUD, INC., a corporation, Defendant-Appellant.

Docket No. 79289.

Court of Appeals of Michigan.

Submitted June 10, 1985.

Decided Sept. 16, 1985.

Released for Publication Dec. 26, 1985.

John W. Kline, Southfield, and Gromek, Bendure & Thomas (Nancy L. Bosh, Detroit, of counsel), for plaintiff-appellee.

Rifkin & Kingsley, P.C. by James M. Rifkin, Detroit, for defendant-appellant.

Before DANHOF, C.J., and R.B. BURNS and V.J. BRENNAN, JJ.

DANHOF, Chief Judge.

Defendant appeals as of right from the order of summary judgment entered on June 25, 1984, declaring that plaintiff and defendant were equally responsible for the payment of no-fault benefits to their respective insureds. Plaintiff cross-appeals.

On August 25, 1982, plaintiff brought suit against defendant, alleging that seven named insureds were each insured under a no-fault insurance contract issued by it, which contracts contained "coordination-of-benefits" clauses. Plaintiff was obligated to pay medical benefits for injuries resulting from auto accidents involving the insureds unless the insureds were covered by another source which provided medical benefits. Each insured was also covered by a contract of accident insurance from defendant, which contract specifically provided that it would pay medical benefits for accidental injuries unless the insureds were covered by no-fault insurance, in which case no-fault would be primary.

In its complaint, plaintiff averred that during 1980-1981, each of the insureds sustained injuries in auto accidents and that claims for medical benefits were made against both plaintiff and defendant. According to plaintiff, both it and defendant denied the claims on the basis that other insurance was available. Plaintiff asserted that, despite the fact that it was not liable for benefits pursuant to the terms of its contracts, it paid the insureds an aggregate of $11,177.15 in benefits and demanded reimbursement from defendant, but defendant refused such. Plaintiff requested that the trial court enter a declaratory judgment that defendant was responsible for payment in the amount noted above.

Defendant answered the complaint, contending that under its insurance contract it was not responsible for the payment of benefits when there was applicable primary auto insurance coverage, such as plaintiff's, available at the time of the claim.

Defendant moved for summary judgment pursuant to GCR 1963, 117.2(1) [now MCR 2.116(C)(8) ], but argued its motion under both 117.2(1) and 117.2(3). The trial court determined that neither party was entitled to a judgment that the other party was solely responsible for the payment of benefits. Rather, the trial court determined that, because both contract provisions were unambiguous, the only proper remedy would be to hold each party responsible for the payment of one-half the benefits owed to the insureds. An order of summary judgment to this effect was entered on June 25, 1984. At issue is the apportionment of liability between the two insurers.

Defendant asserts that its policy was a medical insurance policy with a coordination-of-benefits provision which specifically stated that if the insured had no-fault auto insurance, the auto insurance carrier would be liable for no-fault benefits. Since the insureds in the instant case had no-fault insurance, defendant reasons that, under the clear language of its policy, plaintiff is primarily responsible for the payment of no-fault benefits.

Plaintiff, on the other hand, contends that, since no-fault insurance is compulsory and the health insurance provided by defendant is not, the coordination-of-benefits clauses in its policies should take precedence over and supersede the coordination-of-benefits clause in defendant's policy.

Section 3109a of the no-fault act, M.C.L. § 500.3109a; M.S.A. § 24.13109(1), requires insurers providing personal protection insurance to offer coordination-of-benefits options to their insureds, at correspondingly reduced rates, which "coordinate" recovery under multiple policies and seek to obviate the potential for double recovery, thereby serving to reduce insurance costs.

In Nyquist v. Aetna Ins. Co., 84 Mich.App. 589, 269 N.W.2d 687 (1978), aff'd 404 Mich. 817, 280 N.W.2d 792 (1979), this Court held that an insured could coordinate his no-fault insurance benefits with Blue Cross & Blue Shield benefits. Further, in LeBlanc v. State Farm Mutual Automobile Ins. Co., 410 Mich. 173, 301 N.W.2d 775 (1981), the Supreme Court held that an insured could also elect to coordinate his no-fault benefits with benefits provided under the Medicare program. Some confusion reigns, however, where the insurance policies at issue both contain coordination-of-benefits clauses.

In Farm Bureau Mutual Ins. Co. v. Horace Mann Ins. Co., 131 Mich.App. 98, 345 N.W.2d 655 (1983), lv. den. 419 Mich. 880 (1984), this Court held that it is absurd to assume "that where conflicting 'other insurance' provisions exist by reason of overlapping coverages of the same occurrence[,] the provisions of one policy must yield to the provisions of the other". 131 Mich.App. 103, 345 N.W.2d 655, quoting from Lamb- Weston Inc. v. Oregon Automobile Ins. Co., 219 Or. 110, 128, 341 P.2d 110, 118-119 (1959). This Court ruled that the conflicting clauses were to be declared repugnant and were to be rejected in toto. 131 Mich.App. 103-104, 345 N.W.2d 655. Once the conflicting clauses were disregarded, this Court found that both policies would clearly provide coverage and each insurer's liability would then be prorated based on the proportion of the combined policy limits represented by the limits of each insurer's policy. Farm Bureau, however, did not involve no-fault insurance.

In Mary Free Bed Hospital & Rehabilitation Center v. Ins. Co. of North America, 131 Mich.App. 105, 345 N.W.2d 658 (1983), lv. den. 419 Mich. 943 (1984), this Court relied upon Farm Bureau, supra, in reaching the same result. Mary Free Bed also did not involve no-fault insurance.

In United States Fidelity & Guaranty Co. v. Group Health Plan of Southeast Michigan, 131 Mich.App. 268, 345 N.W.2d 683 (1983), this Court again addressed the question of how conflicts between coordination-of-benefits clauses should be resolved. There, a no-fault insurance policy and the provisions of a group subscriber contract with a health maintenance organization were at issue. However, this Court found that there was no true conflict between the clauses because the plaintiff no-fault insurer's "excess clause" clearly indicated that benefits were not available if there was other insurance. On the other hand, the Court ruled that the defendant's "excess clause" only provided that its benefits "may be reduced" if other insurance was available. In addition, defendant's policy was unclear as to whether the claimant must merely qualify for or actually receive other benefits for the coordination-of-benefits provision to operate. Because of the clarity of plaintiff's excess clause, coupled with the ambiguity contained in defendant's, this Court concluded that the defendant should be held primarily liable. No reliance was placed on Farm Bureau, supra, or Mary Free Bed, supra.

In Federal Kemper Ins. Co., Inc. v. Health Ins. Administration, Inc., 135 Mich.App. 76, 351 N.W.2d 900 (1984), plaintiff was the claimant's no-fault insurance carrier at the time of the injury. The defendant provided the claimant with health insurance under a group policy. Plaintiff paid the claimant's medical bills arising out of an automobile accident, but defendant refused to reimburse it for those payments. Both the plaintiff and the defendant claimed that it was a secondary insurer relative to the other. The plaintiff's insurance contract provided that it would not pay benefits to the extent that benefits were paid or payable for allowable expenses under the provisions of any other insurance. On the basis of this Court's ruling in Farm Bureau, supra, the Kemper Court ruled that both the plaintiff and the defendant were liable for benefits to the claimant, prorated as to the proportion of the combined policy limits represented by the limits of each insurer's policy.

While the above-cited cases have reached reasonable results, we choose not to follow them here inasmuch as the legislative history surrounding the enactment of § 3109a does not appear to have been relied upon or addressed in those cases. In their briefs, the instant parties essentially argued various policy considerations in support of their respective positions, neither party seeking the result obtained in Farm Bureau, supra, and Kemper, supra, which prorated liability based on policy limits. At oral argument, however, plaintiff cited this Court's decision in Dean v. Auto Club Ins. Ass'n, 139 Mich.App. 266, 362 N.W.2d 247 (1984), which extensively discussed the legislative history of § 3109a. In reviewing this history as discussed in Dean, supra, and in LeBlanc v. State Farm, supra, and Nyquist v. Aetna, supra, we conclude that it evinces a clear legislative intent that the no-fault insurer provide only secondary coverage under § 3109a.

1974 House Bill 5724 was enacted into 1974 P.A. 72, the present M.C.L. § 500.3109a; M.S.A. § 24.13109(1). The analysis of HB 5724 prepared by the House Insurance Committee set forth several arguments in support of, and in opposition to, the bill. Each argument, however, proceeded from the premise that the coordination of benefits envisioned by the bill would make health and accident insurance, including that provided by Blue Cross & Blue Shield of Michigan, the primary coverage. The following concerns were expressed (and positions taken) in the analysis with respect...