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Supremes: No-Fault Reforms Don’t Apply Retroactively

August 8, 2023

Article courtesy MIRS News for SBAM’s Lansing Watchdog e-newsletter

Michigan’s 2019 no-fault auto insurance reforms do not apply retroactively, the Michigan Supreme Court held Monday meaning the cost-cutting restraints put in the law do not apply to those catastrophically injured before 2019.

In a 5-2 opinion from Justice Elizabeth Welch, the court affirmed a lower court’s holding that the legislature didn’t clearly indicate the statute applies retroactively, clarifying that neither statute applies to insureds injured while covered by a policy before the law’s passage on June 11, 2019.

The majority held that those injured prior to 2019 have both contractual and statutory protections that vested when they were injured.

“The insurance policies and the disputed portion of the no-fault statutes that existed when (Ellen) Andary and (Philip) Krueger were injured controlled their entitlement to PIP benefits, not the amended provisions enacted by 2019 PA 21 and 2019 PA 22,” Welch wrote.

Rep. Julie Rogers (D-Kalamazoo) said Monday’s decision is a “welcome relief to crash survivors and their families. Patients should have never been subjected to a loss of health care and necessary services to treat these terrible injuries when they had a pre-existing contract with their insurance companies for this coverage before the 2019 change in the law.

“It is an absolute tragedy that people have suffered, some have even died, because of this misinterpretation of the law and our state constitution.”

Justice David Viviano dissented, holding the majority’s decision “undermines the Legislature’s efforts to address one of the most significant issues facing the state” and will result in the cost-reducing effects of the reform not being “fully … felt for many decades.”

Viviano wrote: “The result is troubling, not just for what it means in this case but also for what it portends.”

Justice Brian Zahra joined Viviano’s dissent except he declined to address the validity of the retroactivity framework set forth in the unanimous opinion of LaFontaine Saline Inc. v. Chrysler Group LLC.

Andary was injured by a drunken driver in 2014 and Krueger was injured in a 1990 pickup crash. They challenged the constitutionality of the reform’s 56-hour limitation for in-home family attendant care and the fee schedule limitations regarding attendant care services.

The high court heard oral arguments in March.

The plaintiffs’ attorneys argued the health portion of the no-fault act is a statutory right set by the legislature.

At issue were the cost restraints provided for in the law — such as limiting reimbursable family care to 56 hours a week and cutting care provider fees 45%.

In related news, Michigan was found last week to have the nation’s highest car insurance rates for the third straight year, according to the car insurance comparison shopping website Insurify.

The average car insurance rate in Michigan is $2,766, well over the national average cost of car insurance of $1,668.

Michigan also has one of the fastest-rising premiums with a 31% increase between 2022 and the first six months of 2023. Only New Mexico, Nevada and New Jersey have seen car insurance rates rise quicker.

In 2019, the Republican-led legislature passed the legislation with bipartisan support and Gov. Gretchen Whitmer signed it into law.

A study commissioned by the Brain Injury Association of Michigan (BIAMI) from the nonprofit Michigan Public Health Institute found that as of April 2022, the 45% cut in catastrophic care and 56-hour per-week cap on family-provided attendant care included in the 2019 law had caused nearly 7,000 patients to be discharged from care and the loss of more than 4,000 health care jobs as well as the closure of more than 30 businesses.

The high court heard oral arguments in March.

The majority said it was “not necessary” to analyze whether retroactive application of the public acts unconstitutionally impaired the plaintiffs’ vested contract rights under the state Constitution, which vacates a portion of the appeals court’s opinion that held even if the legislature expressed intent, the contracts clause of the state Constitution prevents insurers from reneging on their agreed upon level of care.

Reaction to the ruling was swift with support from the BIAMI, Michigan Brain Injury Provider Council (MBIPC), Michigan Health & Hospital Association, Michigan HomeCare & Hospice Association, American Civil Liberties Union of Michigan (ACLU) and CPAN, formerly known as The Coalition Protecting Auto No-Fault, which is a coalition of medical groups and consumer groups.

The decision came too late for Brian Woodward, who died earlier Monday before the opinion, which was created before 5 p.m. Friday, was announced.

Woodward was injured in a 1983 car crash and became quadriplegic.

Michigan’s old no-fault law allowed Woodward to live a meaningful, productive life for decades, the ACLU said.

Nichole Shotwell, BIAMI’s president and CEO, called the retroactive application a “terrible injustice,” adding that the ruling allows survivors and their loved ones to “finally breathe a sigh of relief and begin to reclaim what has been taken from them.”

The ruling, however, leaves survivors injured after 2019 with “limited access to needed and medically prescribed care,” Shotwell noted.

The Insurance Alliance of Michigan called Monday’s decision a “huge setback” because it means Michigan drivers will lose out on billions.

“A medical fee schedule for auto insurance, similar to private health insurance, Medicare and Medicaid has been a huge benefit to consumers because it reins in rampant overcharging by medical providers and brings fairness, common sense and transparency to the broken auto no-fault system,” said Executive Director Erin McDonough. “Today, the court let down consumers across Michigan and opened the floodgates for overcharging for medical procedures and higher rates.”

The MBIPC said a legislative fix is still needed, a sentiment the Insurance Alliance echoed as it encouraged the legislature to “protect that important cost control and consumer protection” and the BIAMI said it is imperative the legislature “enact a reasonable and fair fee schedule that enables rehabilitation providers to remain in business and provide the quality, compassionate care that survivors deserve.”

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