The plaintiffs in a recent case were two people who suffered traumatic injuries in auto accidents before 2019. They were provided uncapped lifetime medical care covered by personal protection insurance (PIP) benefits under insurance policies and consistent with Michigan’s No-Fault Act. On appeal, they argued that the 2019 amendments of MCL § 500.3157 shouldn’t impact services and care they were already given and that had been reimbursable prior to the changes to the No-Fault Statute.
What were the Changes to Michigan’s No-Fault Statutes?
In 2019, the Michigan Legislature made wholesale changes to the state’s no-fault statutes. The amendments that are directly at issue here are primarily contained in MCL § 500.3157. The relevant portions of the amended statute state:
(1) Subject to subsections (2) to (14), a physician, hospital, clinic, or other person that lawfully renders treatment to an injured person for an accidental bodily injury covered by personal protection insurance, or a person that provides rehabilitative occupational training following the injury, may charge a reasonable amount for the treatment or training. The charge must not exceed the amount the person customarily charges for like treatment or training in cases that do not involve insurance.
(2) Subject to subsections (3) to (14), a physician, hospital, clinic, or other person that renders treatment or rehabilitative occupational training to an injured person for an accidental bodily injury covered by personal [*20] protection insurance is not eligible for payment or reimbursement under this chapter for more than the following:
(a) For treatment or training rendered after July 1, 2021 and before July 2, 2022, 200% of the amount payable to the person for the treatment or training under Medicare. [Decreasing the amount payable to 190% by July 2023.]
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(7) If Medicare does not provide an amount payable for a treatment or rehabilitative occupational training under subsection (2), (3), (5), or (6), the physician, hospital, clinic, or other person that renders the treatment or training is not eligible for payment or reimbursement under this chapter of more than the following, as applicable:
(a) For a person to which subsection (2) applies, the applicable following percentage of the amount payable for the treatment or training under the person’s charge description master in effect on January 1, 2019 or, if the person did not have a charge description master on that date, the applicable following percentage of the average amount the person charged for the treatment on January 1, 2019:
(i) For treatment or training rendered after July 1, 2021 and before July 2, 2022, 55%. [Decreasing the amount payable to 52.5% by July 2023.]
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(10) For attendant care rendered in the injured person’s home, an insurer is only required to pay benefits for attendant care up to the hourly limitation [56 hours per week] in section 315 of the worker’s disability compensation act of 1969, 1969 PA 317, MCL 418.315. This subsection only applies if the attendant care is provided directly, or indirectly through another person, by any of the following: [family members, household members, and preexisting social or business relations.]
(11) An insurer may contract to pay benefits for attendant care for more than the hourly limitation under subsection (10).
Insurance policies providing for less than uncapped PIP benefits weren’t available until July 2, 2020, and the new fee schedules didn’t become effective until July 2, 2021. The challenged 2019 amendments dramatically reduced reimbursement rates for services rendered to automobile accident victims and limited the ability of family members and friends to be compensated for providing round-the-clock care to those who have suffered catastrophic injuries in an automobile accident.
Family-provided services needed beyond 56 hours wouldn’t be reimbursed by a no-fault insurer without a new contractual agreement entered into after the effective date of the amendments. For practical purposes, this frequently means that necessary medical care can only be provided by a third-party agency or that accident victims who require 24-hour care must be moved into nursing homes or similar facilities because family members can no longer be compensated for providing care beyond the 56-hour cap.
Also, the 2019 no-fault amendments created a new provision in the Insurance Code—MCL § 500.2111f that says, in relevant part:
(1) Before July 1, 2020, an insurer that offers automobile insurance in this state shall file premium rates for personal protection insurance coverage for automobile insurance policies effective after July 1, 2020.
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(8) An insurer shall pass on, in filings to which this section applies, savings realized from the application of [MCL 500.3157(2) to (12)] to treatment, products, services, accommodations, or training rendered to individuals who suffered accidental bodily injury from motor vehicle accidents that occurred before July 2, 2021. An insurer shall provide the director with all documents and information requested by the director that the director determines are necessary to allow the director [*23] to evaluate the insurer’s compliance with this subsection. After July 1, 2022, the director shall review all rate filings to which this section applies for compliance with this subsection.
The current dispute concerned the new fee schedules and the attendant care limitations contained in MCL 500.3157(7) and (10).
How Do the 2019 No-Fault Act Amendments Apply to Prior Injuries?
To determine whether the 2019 amendments to the No-Fault Act apply to the plaintiffs, Justice Elizabeth M. Welch said that the Supreme Court must determine whether application of the amendments to them would be an issue of retroactive application of the law. If the plaintiffs possessed vested rights to PIP benefits at pre-amendment levels and applying these amendments would impair those rights, then application of the changes would be retroactive. Thus, the Supreme Court had to determine the source of the parties’ rights that were alleged to predate and be affected by the 2019 amendments.
The Michigan Supreme Court had to analyze whether, as the plaintiffs argued, the scope of PIP benefits under a no-fault policy of insurance and the governing law vests at the time of injury. The defendants argued that the scope of PIP benefits didn’t vest at the time of injury because a claim for a specific amount of PIP benefits doesn’t accrue until medical care is provided. The Supreme Court said that although defendants were correct about the accrual of a specific claim for payment of PIP benefits, the scope of available PIP benefits under an insurance policy vests at the time of injury. The Court opined that it’s well settled that, as a matter of general contract law, the law in place at the time a contract is entered into is tied to the contract terms:
[T]he obligation of a contract consisted in its binding force on the party who makes it. This depends upon the laws in existence when it is made. They are necessarily referred to in all contracts, and form a part of them, as the measure of obligation to perform them by the one party and right acquired by the other.
The Supreme Court found that the plaintiffs’ rights to PIP benefits under the applicable no-fault insurance policies vested, at the latest, when their injuries occurred and they first became eligible for PIP benefits. This was also when the insurers’ legal obligation to pay PIP benefits for all reasonable and necessary medical expenses at the statutorily mandated minimum level, as incorporated into the insurance contract, was triggered.
Are the 2019 No-Fault Amendments Retroactive?
Even though the plaintiffs’ contractually provided PIP benefits vested at the time of their injury, the Supreme Court was still required to consider whether the 2019 amendments retroactively modified these uncapped lifetime benefits. In a recent case, the Court noted its legal framework for determining whether a modified statute applies retroactively:
Retroactive application of legislation ” ‘presents problems of unfairness . . . because it can deprive citizens of legitimate expectations and upset settled transactions.’ ” We have therefore required that the Legislature make its intentions clear when it seeks to pass a law with retroactive effect. In determining whether a law has retroactive effect, we keep four principles in mind. First, we consider whether there is specific language providing for retroactive application. Second, in some situations, a statute is not regarded as operating retroactively merely because it relates to an antecedent event. Third, in determining retroactivity, we must keep in mind that retroactive laws impair vested rights acquired under existing laws or create new obligations or duties with respect to transactions or considerations already past. Finally, a remedial or procedural act not affecting vested rights may be given retroactive effect where the injury or claim is antecedent to the enactment of the statute.
The Supreme Court held that that while only treatment and services rendered after July 1, 2021 are subject to the amendments at issue, some of the amendments arguably applied to a class of persons injured before that date. At the earliest, the amendments applied to those who were injured while covered by an insurance policy issued on or after June 11, 2019 (the general effective date of the amendments). At the latest, the amendments applied to those who were injured while covered by an insurance policy issued after July 1, 2020, that incorporated the requirements of the 2019 amendments.
The Supreme Court concluded that application of the 2019 amendments of MCL 500.3157(7) and (10) to the plaintiffs would constitute a retroactive reduction of their vested contractual rights to receive uncapped PIP benefits pursuant to the insurance policies and incorporated statutes that existed when they were injured.
Therefore, neither MCL §§ 500.3157(7) nor (10) applied to insureds injured while covered by an insurance policy issued before June 11, 2019. Andary v. USAA Cas. Ins. Co., 2023 Mich. LEXIS 1153 (Mich. July 31, 2023)
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