Michigan Supreme Court: No-Fault Changes Are Not Retroactive

Amendments to Michigan’s no-fault law passed by the state legislature in 2019 do not allow auto insurers to cut fees or limit hours of attendant care provided to auto accident victims who were injured before the changes took effect, the Michigan Supreme Court decided Monday.

The high court ruled in a 5-2 decision that the changes to personal injury protection benefits were not retroactive, but also rejected a challenge by a catastrophic care provider that argued the changes were unconstitutional even for no-fault claimants injured after the new law took effect.

Consumer advocates say the decision affects thousands of auto-accident victims who otherwise would have seen drastic reductions in the number of hours of attendant care provided to them. Also, medical providers treating those claimants would have been subject to new fee schedules that aim to bring charges for care more in line with what is paid to patients with private health insurance or are covered through workers’ compensation.

“The Supreme Court has issued a strong affirmation that accident victims who were injured prior to the passage of the new law cannot have the rights and benefits they purchased through their auto insurance premiums stripped away by this legislation,” Tim Hoste, president of the consumer group CPAN, said in a press release.

The National Association of Mutual Insurance Companies and the Insurance Alliance of Michigan argued in an amicus brief that no-fault benefits were created by statute and therefore can be amended by state lawmakers without interfering with contractural rights of the insured. The brief says lawmakers passed reforms to bring down Michigan’s auto no-fault rates, which “made the Car Capital of the World into the most expensive place to drive a car.”

Two crash survivors, Ellen M. Andary and Philip Krueger filed suit against USAA Casualty Insurance Co. and Citizens Insurance Co. in Ingraham County Circuit Court in October 2019, shortly after the no-fault reform bill passed the legislature and before its major provisions took effect.

Andary suffered a brain injury that left her severely disabled when she was struck by a drunk driver in December 2014. She requires services from multiple caregivers, requiring 36 hours of care in total each day.

Krueger was injured in 1990 when he was a passenger in a pickup that crashed. In 1997 he became a resident of the Eisenhower Center, a rehabilitation facility in Ann Arbor.

The no-fault reforms limited attendant care rendered in an injured person’s home to 56 hours a week, a change that would have radically reduced the amount of in-home care provided to Andary. The majority opinion says for practical purposes, many accident victims who require 24-hour care would have to be moved to nursing homes because their family members would no longer be compensated.

The reforms also limited treatment and occupational training charges to 190% of the maximum charge allowed by Medicare. For services for which Medicare does not have a reimbursement limit, fees are capped at 52.5% of the average amount billed.

A county court judge granted a motion to dismiss Andary’s and Krueger’s lawsuit, but a panel with the Michigan Court of Appeals reversed in a 2-1 decision. The appellate panel ruled that the 56-hour limit for attendant care and fee schedule do not apply retroactively to crash survivors injured before the law took effect. The charges must still be “reasonable,” as required by the statute as it existed before the 2019 changes, the high court said.

The Court of Appeals also rejected the plaintiffs’ argument that applying the law prospectively would violate the rights of current and future auto accident victims. The appellate court, however, did decide to allow discovery for the Eisenhower Center’s argument that the prospective changes would violate its due process and equal protection rights.

The Supreme Court vacated that portion of the Court of Appeals ruling.

“Curbing escalating PIP benefits costs and lowering insurance premiums are legitimate governmental objectives, and the new fee schedules contained in (the statute) are reasonably and rationally related to accomplishing these objectives regardless of their effectiveness or wisdom,” the opinion says.

The decision says nothing in the legislation says that the fee schedule and hours-of-service provisions should apply to crash victims who injured before the law took effect. A retroactive application would interfere with insureds’ vested contractual rights, the majority said.

Justices David F. Viviano and Brian K. Zahra wrote separate dissenting opinions. Both said that placing limits on fees and hours of services does not interfere with insureds’ contractual rights.

“The result today is that through an erroneous interpretation of the statute, aided by resort to vague and disputed concepts that seem only to serve as cover for fairness concerns, the majority has impeded the Legislature’s effort to address an important issue in our state,” Viviano wrote.

The release of the Supreme Court decision sadly coincided with the death of Brian Woodward, auto crash survivor who advocated for the rights of other disabled auto crash victims. CPAN said in its press release that Woodward died early Monday morning.

CPAN said Woodward became a quadriplegic in a 1983 car crash but was able to obtain a college degree and work as a computer analyst for Ford Motor Co. because of Michigan’s no-fault law. The organization said Woodward lost his home and his caregivers because of changes to the law. That assertion could not be confirmed on Monday.

A few days before his death, Woodward was interviewed by podcaster Charlie LeDuff from his hospital bed.

“It was totally wrong to pull the rug out from under us, and there’s 18,000 people who were affected,” Woodward said. “They were wrongly affected, and most of Michigan does not know what happened to them.”