Case of the Day: No-Fault Law - PIP— Coordination of benefits

Where a defendant insurance company was awarded summary disposition on a plaintiff’s claim for no-fault personal protection insurance (PIP) benefits, that ruling must be reversed, as it was error for the lower court to find that the defendant’s coverage was secondary to the plaintiff’s health insurance and wage disability insurance under a self-funded plan organized under ERISA.

“Plaintiff-appellant, Christina George, … was injured in a motor-vehicle crash, but she did not have a policy of no-fault insurance available to her in her household. Accordingly, she filed a claim for no-fault personal protection insurance (PIP) benefits through the assigned claims plan, which assigned her claim to Allstate. George also had health insurance and wage disability insurance under a self-funded plan organized under the Employee Retirement Income Security Act (ERISA), 29 USC 1001 et seq.

“After George filed her complaint against [defendant] Allstate asserting that it was primarily responsible for payment of her first-party PIP benefits, Allstate moved for partial summary disposition. Allstate asserted that because the ERISA plan was a benefit source that covered the same loss, it was entitled to a set-off under MCL 500.3172(2). In response, George asserted that MCL 500.3172(2) was preempted by the ERISA. The trial court, however, reasoned that because George’s no-fault benefits were only available through the assigned claims plan and not a no-fault insurance policy, the state law, MCL 500.3172(2), was not preempted by the ERISA. Accordingly, the court granted partial summary disposition in favor of Allstate, ruling that Allstate was secondary and that the ERISA plan was primary for medical expenses and wage-loss benefits. 

“Our Supreme Court has previously addressed whether MCL 500.3109a was preempted by the ERISA. In doing so, the Court recognized that under MCL 500.3109a ‘a no-fault insurer is secondarily liable for insurance coverage where there is any other form of health care coverage and where the insurers both sought to escape liability through the use of competing coordination-of-benefits clauses.’ Auto Club Ins Ass’n v Frederick & Herrud, Inc (After Remand), 443 Mich 358, 383-384; 505 NW2d 820 (1993), citing Fed Kemper Ins Co, Inc v Health Ins Admin, Inc, 424 Mich 537, 546; 383 NW2d 590 (1986). In Auto Club Ins Ass’n, the ERISA plan and the no-fault policy contained competing coordination-of-benefits clauses; therefore, under MCL 500.3109a and Federal Kemper, the no-fault policy would have been secondary to the ERISA plan.

“Our Supreme Court, however, determined that under principles of federal preemption, ‘MCL 500.3109a does not reach an ERISA plan with a COB clause where that clause is unambiguous.’ Auto Club Ins Ass’n, 443 Mich at 387-388.

“The ERISA plan in Auto Club was self-funded. In American Med [Security, Inc v Allstate Ins Co, 235 Mich App 301, 306-07; 597 NW2d 244 (1999)], this Court declined to extend the ruling in Auto Club to cases where the ERISA plan was not self-funded.

“Consequently, in order to preempt a state law on a coordination-of-benefits issue, an ERISA plan must be self-funded, American Med, 235 Mich App at 306-307, and contain an unambiguous coordination of benefits clause, Auto Club, 443 Mich at 389.

“On appeal, Allstate seeks to avoid application of Auto Club by noting that, in that case, there were two competing COB clauses: one in the ERISA plan and one in the applicable no-fault policy. Allstate correctly points out that there is only one policy in this case: the ERISA plan. However, like a COB clause, MCL 500.3172(2) provides for the coordination of benefits. Specifically, it establishes that where duplicative benefits are available, i.e., where benefits from multiple sources cover the loss, the assigned-claims insurer is entitled to a set-off, i.e., the insurer is not primarily liable. Therefore, in this case, there is a state law expressly providing that George’s ERISA plan is primary whereas the ERISA plan expressly disavows primacy under these circumstances. Because George’s ERISA plan is self-funded and because it contains an unambiguous COB clause, Allstate is primarily liable for the benefits at issue here. To hold to the contrary would have the direct effect of dictating the terms of the ERISA plan, which the state is not permitted to do under federal law.”

George v. Allstate Insurance; MiLW 07-100907, 8 pages; Michigan Court of Appeals published per curiam; Letica, J., M.J. Kelly, J., Boonstra J.; on appeal from Wayne Circuit Court; Stacey L. Heinonen for appellant; Michael D. Phillips for appellee.