Jarosz v. Detroit Auto. Inter-Insurance Exchange

• Decision Date: 12 March 1984
• Docket Number: No. 6,INTER-INSURANCE,Docket No. 68003,6
• Citation: 345 N.W.2d 563,418 Mich. 565
• Parties: Joseph W. JAROSZ, Plaintiff-Appellant, v. DETROIT AUTOMOBILEEXCHANGE, Defendant-Appellee. Calendar
• Court: Michigan Supreme Court

Page 563

345 N.W.2d 563

418 Mich. 565

Joseph W. JAROSZ, Plaintiff-Appellant, v. DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE, Defendant-Appellee.

Docket No. 68003.

Calendar No. 6.

Supreme Court of Michigan.

Argued May 3, 1983.

Decided March 12, 1984.

Kelman, Loria, Downing, Schneider & Simpson by Michael L. Pitt, Detroit, for plaintiff-appellant.

Dickinson, Mourad, Brandt, Hanlon & Becker by A.J. Galsterer, Jr., Detroit, for defendant-appellee; Gromek, Bendure & Thomas by Carl L. Gromek, Nancy L. Bosh, Detroit, of counsel.

RYAN, Justice.

This case presents still another variation of the application of § 3109(1) of the no-fault insurance act. ¹

Section 3109(1) provides:

"Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury."

The primary issue is whether a portion of the social security old-age benefits being received by the appellant is the type of governmental benefit which, under § 3109(1), must be deducted from no-fault wage loss benefits otherwise due.

We hold, on the facts of the case, that it is not and reverse the judgment of the Court of Appeals.

I

On June 27, 1977, plaintiff Joseph W. Jarosz, then 64 years of age, was injured while riding in a motor vehicle that was struck broadside. His injuries disabled him from working as a manager for Borman Foods where he had been paid $285 per week. As a result, DAIIE, his no-fault insurer, began paying him work loss benefits under § 3107 of the no-fault act, correctly computed at 85% of his $285 weekly salary. On November 1, 1977, after turning 65 years of age, Mr. Jarosz began mandatory retirement pursuant to company policy. At about the same time, he applied for and began receiving social security retirement benefits of $455.20 per month, the amount to which he was entitled as an unemployed retiree.

On March 25, 1978, after learning of Mr. Jarosz's retirement, DAIIE terminated the payment of work loss benefits. Shortly thereafter, Mr. Jarosz furnished the insurance company with proof that, but for the accident, he would have gone to work for Supreme Steel Company on November 1, 1977, earning $200 per week. DAIIE therefore resumed the payment of work loss benefits, retroactive to March 26, 1978.

In September, 1978, the insurer learned that Mr. Jarosz was receiving the full social security benefits for a retiree who has no work-related income. Ordinarily, retirees over 65 years of age may work full-time and receive social security retirement benefits; however, as wages increase, benefits are reduced according to a statutory formula. The formula calls for the deduction of $1 for every $2 earned over a specified amount. See 42 U.S.C. § 403(b); 20 C.F.R. 404.401-404.467. Upon learning that Mr. Jarosz was receiving social security benefits computed for a person who was unemployed, DAIIE took the position that it was entitled to deduct from the no-fault work loss benefits the amount by which the social security benefits would have been reduced had appellant been earning $200 a week and collecting social security benefits. Mr. Jarosz believed that no deduction was permissible and protested the insurance company's deduction of work loss benefits. When the dispute could not be resolved amicably, Mr. Jarosz filed suit in the circuit court. In May, 1979, DAIIE tendered a check to appellant for an amount which represented a deduction for asserted overpayment of work loss benefits. Appellant returned the check uncashed.

Appellant moved for summary judgment pursuant to GCR 1963, 117.2(3), claiming that there was no genuine issue concerning the material fact that DAIIE was not entitled to deduct any amount from no-fault benefits upon the basis of the amount of social security benefits he was entitled to receive. The trial court denied the motion by letter, and on March 13, 1980, granted the defendants' corresponding motion for summary judgment, declaring:

"[T]he defendant can take into account social security benefits received by plaintiff to the extent that plaintiff is made whole, as it is the intent of the law to put the injured party in the same position that he would have been had there been no injury."

Mr. Jarosz appealed.

In the Court of Appeals and before this Court, the insurer argued that this case turns upon the correct interpretation and application of § 3107 which defines the meaning of "work loss" and mandates the payment of no-fault work loss benefits. According to appellee, a correct computation of Mr. Jarosz's "loss of income" for purposes of determining the amount of work loss benefits due under § 3107 would reveal that his income actually increased as a result of the accident. This is so, appellee argues, because the combination of full social security benefits and no-fault work loss benefits computed on the basis of a loss of $200 per week salary is greater than the total of $200 per week salary and the reduced social security benefits for a working retiree, which is what he would have received had he not been injured and had been working at Supreme Steel.

Since, according to DAIIE, one of the purposes of the no-fault act is to restore an injured party to the position in which he would have been had he not been injured, but no better position, the no-fault work loss benefits due under § 3107 should be reduced to an amount which, when taken together with the full social security benefits appellant is receiving, would restore him to the position in which he would have been had there been no accident. DAIIE claims that the financial effect upon Mr. Jarosz of reducing the no-fault benefits is identical to the result that would obtain had appellant not been injured and had been receiving social security benefits in the reduced amount to which he would have been entitled if he had earned wages of $200 per week.

The Court of Appeals preferred to rest its analysis and decision upon § 3109(1), but concluded that the insurer's proposed result was correct: DAIIE was entitled under § 3109(1) to subtract from the no-fault work-loss benefits otherwise due an amount equal to the portion of social security benefits representing the differential described above because that amount duplicated the no-fault work-loss benefits. ²

We granted appellant's application for leave to appeal. ³

Like the Court of Appeals, we think this litigation is correctly analyzed under § 3109(1) of the no-fault act and not § 3107. Nevertheless, in Part III, we will address DAIIE's § 3107 theory.

II

While we have not considered a case involving facts precisely duplicating those presented by this case, resolution of the legal problem, as we perceive it, does not require us to navigate entirely uncharted waters. We have considered the application of § 3109(1) in other factual settings, ⁴ and in each case we have been required, as we are here, to determine whether governmental benefits of various kinds must be deducted from no-fault personal protection income benefits otherwise due. To repeat, § 3109(1) provides:

"Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury."

The specific question we are required to decide in this case is whether the social security old-age benefits Mr. Jarosz is receiving are the kind of governmental benefits the Legislature intended to be subtracted from no-fault benefits. In answering that question, we take this occasion to delineate a standard or test by which such benefits may be identified in future cases.

A

Certainly not all "[b]enefits provided or required to be provided under the laws of any state or the federal government" must be subtracted from no-fault personal protection insurance benefits otherwise due. Some governmental benefits bear no relationship whatever to no-fault benefits or to the reason no-fault benefits are paid. Benefits bearing no such relationship are not subject to setoff. Our task is to find a formula by which governmental benefits which are required to be set off under § 3109(1) can be distinguished from those which are not. The task was begun in O'Donnell v. State Farm Mutual Automobile Ins. Co., 404 Mich. 524, 273 N.W.2d 829 (1979). We agree with the Court of Appeals and the parties before us today that O'Donnell established the analytical framework from which the standard we seek may be derived. In O'Donnell, as in this case, we were confronted with claims that a setoff of governmental benefits against no-fault benefits violated the Equal Protection and Due Process Clauses of the state and federal constitutions. ⁵ In O'Donnell, social security survivors' benefits were involved; here, old-age retirement benefits are involved. We held that social security survivors' benefits were properly deductible from no-fault survivors' benefits under § 3109(1). We were led to that conclusion by a two-step analytical approach: first, we determined whether social security survivors' benefits were the kind of "[b]enefits provided or required to be provided under the laws of any state or the federal government" that the Legislature declared must be subtracted from no-fault benefits under § 3109(1). Second, having decided that they were, we determined whether the legislatively mandated subtraction was constitutional.

In making the first determination in O'Donnell, p. 544, 273 N.W.2d 829, we observed that

"[t]he history of § 3109(1) indicates that the Legislature's intent was to require a setoff of those government benefits that duplicated the no-fault benefits payable because of the accident and thereby reduce or contain the cost of basic insurance."

It was plain, we thought, that survivors' benefits under the federal Social Security Act served substantially the same purpose as no-fault insurance survivors' benefits. Both were...