Certified Question, In re
| Decision Date | 19 December 1989 |
| Docket Number | No. 82968,82968 |
| Citation | 433 Mich. 710,449 N.W.2d 660 |
| Parties | . PREFERRED RISK MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION, Defendant-Appellant. Supreme Court of Michigan |
| Court | Michigan Supreme Court |
The United States Court of Appeals for the Sixth Circuit has certified, pursuant to MCR 7.305(B), the following question to this Court:
"Does the Motor Vehicle Personal and Property Protection Act, Mich Comp Laws Ann §§ 500.3101-.3179 [MSA 24.13101-24.13179], require the Michigan Catastrophic Claims Association to indemnify member insurers for losses paid in excess of $250,000 to insureds who are not residents of the State of Michigan but who were injured as a result of an automobile accident occurring in the State of Michigan?"
We have accepted the certification, 1 and now hold that the no-fault act does not require the Michigan Catastrophic Claims Association (CCA) to indemnify its member insurers for losses paid to insureds who are not considered residents of this state. We note, however, that in the context of this question as certified, we understand the term "resident" to refer not only to those insureds who actually live within this state and who must therefore purchase no-fault automobile insurance policies written in this state which provide the compulsory security requirements of M.C.L. § 500.3101(1); M.S.A. § 24.13101(1) for the owners or registrants of motor vehicles required to be registered in this state, but also to certain insureds who do not live within this state but who are nonetheless required to register, and thus insure, their vehicles in this state.
The Catastrophic Claims Association is an organization comprising all insurance companies who write insurance in this state. It was created by the Legislature in 1978 in response to concerns that Michigan's no-fault law provision for unlimited personal injury protection benefits placed too great a burden on insurers, particularly small insurers, in the event of "catastrophic" injury claims. 2 Its primary purpose is to indemnify member insurers for losses sustained as a result of the payment of personal protection insurance benefits beyond the "catastrophic" level, which has been set at $250,000 for a single claimant. M.C.L. § 500.3104; M.S.A. § 24.13104 governs its operation.
In practice, the CCA acts as a kind of "reinsurer" for its member insurers. Initially, § 3104(1) requires membership in the CCA as a condition of authority to write insurance in this state for all insurers "engaged in writing insurance coverages which provide the security required by section 3101(1) within this state...." 3 Membership in the CCA entitles the insurer to indemnification for certain losses under § 3104(2), which provides in full:
4
Like any insurer, the CCA charges each of its members a premium for the coverage it provides, which is based on the number of car years of insurance the member writes in Michigan. 5
In this case, plaintiff Preferred Risk paid Michigan no-fault benefits in excess of $250,000 to an Illinois resident whom it had insured under a policy written in that state, but who was injured in an automobile accident in Michigan. Plaintiff's insured was a passenger in a car owned and insured by a Michigan resident.
Plaintiff's liability for such benefits is not contested here. The parties agree that § 3163(1) of the no-fault act required plaintiff, as an insurer authorized to write insurance in this state, to provide Michigan no-fault benefits to its insured in the event that he traveled to Michigan and was injured in an automobile accident. 6 The parties also agree that § 3114(1) of the no-fault act, which requires that the insured first seek personal protection benefits from his own insurer, established plaintiff as the primary insurer in this case.
There is also no question that at the time of this claim plaintiff was a member insurer of the CCA. A member need not write all of its automobile liability insurance in this state, although some do, and while it also wrote insurance coverages in other states, plaintiff was clearly "engaged in writing insurance coverages which provide the security required by section 3101(1) within this state." 7
Plaintiff eventually paid over $340,000 in personal injury protection benefits to the claimant in this case. It applied to the CCA for indemnification for the amount over $250,000, reasoning that while it had provided insurance coverage to an Illinois resident, for an Illinois-registered vehicle, it had paid Michigan no-fault benefits, which should be reimbursable under § 3104(2). The CCA denied plaintiff's application, however, claiming that under its plan of operation 8 reimbursement was limited to losses paid out "under policies of insurance issued to residents of the State of Michigan...." 9
Following the denial of its claim by the CCA, plaintiff instituted the present action in the United States District Court for the Eastern District of Michigan (Southern Division). Both parties moved for summary judgment. Plaintiff claimed that since it was a member insurer who had paid benefits under the Michigan no-fault system in excess of $250,000, the CCA was obligated under § 3104(2) to provide it with "indemnification for 100% of the amount of ultimate loss" it had sustained over that amount, regardless of the nonresident status of its insured, and it was required to accept such indemnification. The "resident only" requirement imposed by the CCA in its plan of operation, plaintiff argued, conflicted with the language and purpose of § 3104, and was beyond the CCA's authority to impose.
The CCA argued in response that its plan of operation, including its limitation of indemnification to coverages written for residents of this state, was a valid interpretation of § 3104. Specifically, the CCA claimed that the Legislature had left it up to the association to determine, through its plan of operation, which particular policies were subject to indemnification under § 3104, and that its limitation of indemnification to policies written for residents was in any event consistent with § 3104(7)(d), which allows it to charge premiums only on the basis of insurance coverages written in this state.
The district court granted summary judgment in favor of Preferred Risk. The association appealed in the United States Court of Appeals for the Sixth Circuit which, after oral argument, granted its motion to certify the question to this Court. The question as certified asks whether the CCA must indemnify its member insurers for losses suffered over $250,000 under policies issued to insureds who are not "residents" of this state but who were injured here.
We believe that the CCA has properly interpreted the indemnification requirement of § 3104(2). For the reasons set forth below, we conclude that § 3104(2) requires indemnification only when the member insurer has paid benefits in excess of $250,000 under a policy which was written in this state to provide the security required by § 3101(1) of the no-fault act for the "owner or registrant of a motor vehicle required to be registered in this state...." The CCA, whose policy of restricting indemnification to "residents of this state" is the subject of this dispute, has acknowledged that for purposes of indemnification under § 3104(2) it considers all owners or registrants of motor vehicles required to be registered here to be "resident[s] of the State for purposes of the Act," regardless of whether they actually live within this state. 10 With this acknowledgment in mind, we must conclude, in answering the question as certified, that the CCA is required to indemnify member insurers only for losses paid to "residents" of this state.
We wish, however, to emphasize that the analysis which follows in support of this conclusion is based solely upon our interpretation of the Catastrophic Claims Act itself. In particular, we emphasize that our analysis does not rest upon any finding by this Court that the association's plan of operation constitutes a "reasonable interpretation" of § 3104 in light of the Legislature's deference to its expertise in this area. In our opinion, the Legislature did not leave it up to the CCA to decide who will receive indemnification. As plaintiff aptly argues, the requirement in § 3104(2) that the CCA "shall provide" indemnification for losses in excess of $250,000 can hardly be called deferential. Thus, while we agree with the CCA's interpretation of § 3104(2)'s indemnification requirement, we do so on the basis of the language of the statute itself. 11
The question before the Court essentially asks on which coverages will the CCA be liable for indemnification in the event of a catastrophic loss. The answer to that question lies, of course, within § 3104(2), which again provides in relevant part:
"The association shall provide and each member shall...
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