Smith v. Physicians Health Plan, Inc.

• Decision Date: 29 March 1994
• Docket Number: No. 14,Docket No. 95960,14
• Citation: 514 N.W.2d 150,444 Mich. 743
• Parties: John W. SMITH, individually and as next friend of Michelle Smith, a minor, Plaintiff-Appellee, v. PHYSICIANS HEALTH PLAN, INC., Defendant-Appellant. Calendar
• Court: Michigan Supreme Court

Page 150

514 N.W.2d 150

444 Mich. 743

John W. SMITH, individually and as next friend of Michelle Smith, a minor, Plaintiff-Appellee, v. PHYSICIANS HEALTH PLAN, INC., Defendant-Appellant.

Docket No. 95960

Calendar No. 14.

Supreme Court of Michigan.

Argued Nov. 3, 1993.

Decided March 29, 1994.

[444 Mich. 745] George T. Sinas, David R. Brake, Sinas, Dramis, Brake, Boughton & McIntyre, P.C., Lansing, for plaintiff-appellee, John W. Smith.

[444 Mich. 746] David D. Waddell, Kathleen E. Kane, Fraser, Trebilcock, Davis & Foster, P.C., Lansing, for defendant-appellant.

Ronald E. McNulty, for amicus curiae, American Community Mut. Ins. Co.

OPINION

BRICKLEY, Justice.

This case presents the question whether M.C.L. § 500.3109a; M.S.A. § 24.13109(1) ¹ requires health insurers whose policies contain coordination of benefits clauses to reimburse an insured for medical expenses paid by an automobile no-fault insurer under a policy in which the insured elected uncoordinated medical coverage. We find no intent by the Legislature when it mandated that no-fault carriers make available coordinated coverage at a reduced cost to correspondingly prohibit health insurers from including coordination of benefits clauses in the coverage provided by the health insurance policy. We therefore hold, as a matter of contract interpretation, that a no-fault insured is not entitled to receive duplicate payment for medical expense where the insured had elected uncoordinated benefits under his no-fault policy, but his health insurance policy contained a coordination of benefits clause. ²

I

Plaintiff's minor daughter, Michelle Smith, was seriously injured on January 31, 1987, when her sixteen-year-old sister lost control of the automobile she was operating. No-fault automobile insurance policies, issued by State Farm Mutual Automobile Insurance Company, covered the vehicle and the driver. Both policies were uncoordinated, meaning the no-fault automobile insurance would pay benefits regardless of whatever other insurance the insured may have. Plaintiff paid a higher premium for the uncoordinated policies than he would have paid had he selected coordinated no-fault automobile insurance.

At the time of the accident, John Smith had health insurance issued by Physicians Health Plan, a health maintenance organization. This group health insurance was provided by Mr. Smith's employer, Meijer, Inc. Michelle was entitled to benefits under the PHP coverage by virtue of her father's employment. The certificate of coverage for the health care plan contained a coordination of benefits clause. ³

For the most part, Michelle was treated by hospitals and doctors who participated with the Physicians Health Plan. Those hospitals and physicians were reimbursed by the no-fault insurance carrier. ⁴ Mr. Smith sought payment from PHP in the same amount. Relying on the coordination of benefits clause, PHP denied the claim.

II

Following PHP's rejection of plaintiff's claim, plaintiff brought suit against the plan for the cash value of the medical expenses incurred by Michelle. The trial court granted plaintiff partial summary disposition pursuant to MCR 2.116(C)(10), no genuine issue of material fact, regarding the issue of liability. The trial court held that where the no-fault automobile coverage was uncoordinated, the health insurer was required to make a cash payment to the insured. Otherwise, the court reasoned, the purchase of uncoordinated no-fault coverage would be meaningless. A trial was held on the issue of damages, and the plaintiff was awarded $155,897.72.

The Court of Appeals affirmed the decision of the trial court. It held that unless a health insurer can demonstrate it lowered the premium charged to reflect the insured's uncoordinated no-fault automobile insurance, then the health insurer cannot rely on the coordination of benefits clause included in the policy. 196 Mich.App. 617, 493 N.W.2d 480 (1992). We granted leave to appeal. 443 Mich. 868, 506 N.W.2d 871 (1993).

III

The Court of Appeals decision is premised on an incorrect interpretation of the legislative purpose in enacting M.C.L. § 500.3109a; M.S.A. § 24.13109(1). The legislative intent was to provide individuals with an opportunity to reduce premiums if they already had health insurance that covered automobile accidents. The purpose was not to provide a guarantee of double recovery regardless of whatever provisions might be contained in other insurance contracts.

Ascertaining the collective intent motivating the Legislature when a statute is enacted is by its very nature inexact. We have noted on past occasions that § 3109a was written to contain insurance and health care costs and to eliminate duplicate recovery. Federal Kemper Ins. Co., Inc. v. Health Ins. Administration, Inc., 424 Mich. 537, 551, 383 N.W.2d 590 (1986), overruled in part Auto Club Ins. Ass'n v. Frederick & Herrud, Inc., 443 Mich. 358, 505 N.W.2d 820 (1993); LeBlanc v. State Farm Mutual Automobile Ins. Co., 410 Mich. 173, 206, 301 N.W.2d 775 1981), overruled on other grounds Jarosz v. Detroit Automobile Inter-Ins. Exchange, 418 Mich. 565, 345 N.W.2d 563 (1984).

The Court of Appeals extends the reach of § 3109a beyond a reasonable interpretation of the purposes of the Legislature. The statute expressly regulates the availability of coordinated no-fault coverage. Such coverage must be made available at a reduced rate to individuals who have other health insurance that covers automobile accidents. The statute explicitly controls no-fault insurance. With the exception of our limited holding in Federal Kemper, supra, it is a misconstruction of the statute to sweep regulation of "other health and accident insurance" that the insured may have into the no-fault act. ⁵

A

At the time it was originally enacted, there was no provision for coordinated coverage in the no-fault act. An individual with health insurance from another source that covered injuries caused by automobile accidents had to buy the same uncoordinated no-fault policy and pay the same premium as the individual with no other insurance. The aim of the no-fault act was to make minimum insurance mandatory. Section 3109a amended the act to provide a mechanism that offered lower premiums to those individuals who were already covered for medical expenses arising out of automobile accidents.

The legislative history of § 3109a was explored in Federal Kemper, supra, 424 Mich. pp. 546-549, 383 N.W.2d 590. In addition to considering a report on HB 5724 (enacted as § 3109a), which was prepared by the Analysis Section of the House Insurance Committee, the Court relied on a letter to Governor William G. Milliken from Daniel J. Demlow, the Commissioner of Insurance, that urged support for the bill, stating individuals would have the ability to select deductibles on the basis of their existing health and accident insurance if the new law were adopted. Id., p. 548, 383 N.W.2d 590.

The option of choosing between uncoordinated or coordinated no-fault automobile insurance does not exist for an individual who does not have underlying health or accident insurance that applies to automobiles. That individual must pay the higher premium for uncoordinated no-fault insurance. Therefore, the individual who is unemployed or does not have employment that provides health insurance must purchase uncoordinated no-fault insurance. Coordination of no-fault benefits, with its concomitant reduction in premiums, is only available to an insured who has health insurance in place.

While this is not the first case to require an interpretation of the effect of § 3109a on health insurance, it is the first opportunity this Court has had to determine the outcome when a no-fault insurance policy is uncoordinated and a health plan is coordinated.

It is when both the no-fault automobile insurance and the health insurance are uncoordinated policies that multiple recovery is possible for the insured. Haefele v. Meijer, Inc., 165 Mich.App. 485, 418 N.W.2d 900 (1987), remanded on different issues 431 Mich. 853, 425 N.W.2d 691 (1988).

In the situation where health insurance is uncoordinated and the insured has elected to coordinate the no-fault insurance, the Court of Appeals has held that health insurance is primary and there cannot be duplicate recovery. Wiltzius v. Prudential Property & Casualty Co., 139 Mich.App. 306, 361 N.W.2d 797 (1984). This is a reasonable result. That result is consistent with the scheme the Legislature set forth in making coordinated no-fault coverage available. The insured receives the coverage the premiums were based upon.

Another possible combination of coverage occurs when both the health insurance and the no-fault policies purport to coordinate coverage. It is likely that the majority of consumers with other health insurance find themselves in this category. In Federal Kemper Ins. Co., Inc., supra, we held that when an insured opts to coordinate no-fault coverage with health insurance pursuant to M.C.L. § 500.3109a; M.S.A. § 24.13109(1), the health insurer is primarily liable for the payment of medical expenses.

In deciding Federal Kemper, we found implicit in § 3109a a legislative intent to hold health insurers primarily liable despite coordinated benefits clauses when the insured has selected coordinated no-fault insurance. A contrary holding would have nullified the legislative option of having no-fault available at a reduced rate. Health insurers would have been able to unilaterally shift the risk of medical expenses as a result of automobile accidents to the no-fault system even though the insured elected coordinated coverage. Rates for coordinated coverage would have been identical to uncoordinated rates. Because the intent of the Legislature was to provide a way to reduce premiums for those individuals who already had medical coverage, the coordination of benefits clause in the no-fault insurance policy is given effect.

B

Unlike Federal Kemper, supra,...