ACE AMERICAN INSURANCE CO V MICHIGAN CATASTROPHIC CLAIMS ASSN
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STATE OF MICHIGAN
COURT OF APPEALS
AMERICAN HOME ASSURANCE COMPANY,
Plaintiff-Appellant,
v
FOR PUBLICATION
June 15, 2010
9:05 a.m.
No. 287153
Oakland Circuit Court
LC No. 2007-088192-NF
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellee.
ACE AMERICAN INSURANCE COMPANY,
Plaintiff-Appellant,
v
No. 292539
Oakland Circuit Court
LC No. 2008-091278-CZ
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellee.
Advance Sheets Version
Before: BANDSTRA, P.J., and BORRELLO and SHAPIRO, JJ.
PER CURIAM.
These consolidated appeals involve the extent to which defendant, the Michigan
Catastrophic Claims Association (MCCA), is required to indemnify member insurers for no-fault
personal protection insurance (PIP) benefits paid to or on behalf of an injured claimant when the
policyholder is responsible to pay a deductible pursuant to a term of the insurance contract
between the member insurer and the policyholder. In each of these consolidated appeals, the
trial court determined that the member insurer cannot include amounts that the policyholder is
required to pay as a deductible in calculating the member insurer’s “ultimate loss” to determine
if it has reached the statutory threshold to be considered a catastrophic claim and therefore
eligible for indemnification from the MCCA. In Docket No. 287153, plaintiff American Home
Assurance Company appeals as of right an order granting summary disposition in favor of the
MCCA under MCR 2.116(C)(10). In Docket No. 292539, plaintiff ACE American Insurance
Company (AAIC) also appeals as of right an order granting summary disposition in favor of the
MCCA under MCR 2.116(C)(10). For the reasons set forth in this opinion, we hold that member
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insurers may include amounts that a policyholder is required to pay as a deductible in calculating
their ultimate loss. However, the MCCA is entitled to reimbursement up to the entire amount
paid to member insurers for all deductible monies received by the member insurers, and the
MCCA may initiate an action against policyholders for payment of a deductible if the insurer
fails to do so. Accordingly, we affirm in Docket No. 287153, but we reverse and remand for
further proceedings consistent with this opinion in Docket No. 292539.
I. FACTS AND PROCEDURAL HISTORY
A. DOCKET NO. 287153
On December 26, 2007, American Home filed a complaint against the MCCA, seeking
reimbursement of $380,863.66 in PIP benefits paid to an injured claimant. According to the
complaint, American Home issued a no-fault policy to Cassens Transport Company for the
period of September 30, 2003, through September 30, 2004. American Home alleged that
between August 23, 2004, and June 20, 2007, it paid PIP benefits totaling $705,863.60 to
claimant Jeffrey Olson after Olson was injured when the motorcycle he was driving struck a
Cassens vehicle insured under the no-fault policy. American Home alleged that pursuant to
MCL 500.3104(2)(c), the MCCA was obligated to reimburse it for the portion of the “ultimate
loss” exceeding $325,000 and that it was therefore entitled to reimbursement in the amount of
$380,863.66. According to American Home, the MCCA denied its claim for reimbursement
because “the existence of a deductible in an insurance policy decreases the ‘ultimate loss’
specified in the No-Fault Act . . . .” American Home sought a judgment against the MCCA in
the amount of $380,863.66, which included the entire amount it paid the claimant over the
statutory threshold of $325,000 applicable to the policy at issue, without any reduction for the
deductible paid by Cassens.
In May 2008, the MCCA moved for summary disposition under MCR 2.116(C)(10),
arguing that American Home was not entitled to indemnification under MCL 500.3104(2)(c)
because it had not incurred an ultimate loss in excess of $325,000. According to the MCCA, the
no-fault policy issued by American Home to Cassens required the insured to pay a $500,000
deductible. The MCCA further asserted that American Home could not include the amount of
the deductible, which Cassens had paid, to achieve the statutory threshold of $325,000 under
MCL 500.3104(2)(c) and that because Cassens paid the $500,000 deductible,1 American Home’s
financial loss was only $205,863. Thus, the MCCA argued that it had no statutory responsibility
to reimburse American Home because American Home’s ultimate loss did not reach the statutory
threshold of $325,000. The MCCA also argued that even if American Home had initially paid
PIP benefits to Olsen that exceeded the $325,000 statutory threshold and had been reimbursed by
the MCCA, once it received payment of the deductible from Cassens, American Home would
have been required under article X, § 10.06 of the MCCA’s plan of operation to turn the
1
The MCCA submitted documentary evidence that American Home admitted that the insurance
policy had a $500,000 deductible and that Cassens paid the deductible in full.
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deductible payment over to the MCCA until American Home sustained an ultimate loss
exceeding $325,000.
American Home filed a brief in response to the MCCA’s motion for summary
disposition, asserting that it was obligated to pay PIP benefits to the claimant irrespective of any
deductible that Cassens was required to pay under the terms of the no-fault insurance policy.
Predicated on this analysis of its statutory obligation, American Home asserted that it was
entitled to summary disposition and entry of a judgment in the amount of $380,863.66 against
the MCCA because the MCCA’s indemnification obligation under MCL 500.3104(2)(c) had
been triggered. In addition, American Home argued that article X, § 10.06 of the MCCA’s plan
of operation did not apply to deductible reimbursements that it received from Cassens because
Cassens was not a “third party” under § 10.06.
The trial court granted the MCCA’s motion for summary disposition and denied
summary disposition for American Home. In so doing, the trial court determined that the
MCCA’s indemnification obligation was only owed to its member insurers and that the MCCA
was permitted, under MCL 500.3104, to consider the deductible paid by a policyholder in
calculating the ultimate loss subject to indemnification. The trial court reasoned that the
insurer’s ultimate loss could not include amounts that the insurer received from the policyholder
as payment for a deductible because the deductible reduced the amounts actually paid by the
insurer. The trial court also determined that § 10.06 of the MCCA’s plan of operation confirmed
that a member insurer must sustain an actual loss in excess of the statutory threshold. In
reaching that determination, the trial court reasoned that an insured is a third party within the
meaning of § 10.06 because the plan of operation addresses the relationship between the member
insurer and the MCCA, not the relationship between an insurer and its insured. Therefore, the
trial court stated, “Any other entity is a third party, including the insured.” Ultimately, the trial
court concluded that American Home’s receipt of the $500,000 deductible reduced its ultimate
loss to $205,863, which did not meet the statutory threshold of $325,000 under MCL
500.3104(2)(c).
B. DOCKET NO. 292539
On May 2, 2008, AAIC filed a complaint for declaratory relief against the MCCA after
the MCCA denied AAIC’s claim for indemnity under MCL 500.3104(2). According to the
complaint, AAIC had issued a no-fault insurance policy to Waste Management, Inc.2 for a oneyear period on January 1, 2006. Alice Cobb, a pedestrian, was injured on July 25, 2006, when a
vehicle that was owned and operated by Waste Management struck her. AAIC alleged that it
had paid more than $2 million in PIP benefits to or on behalf of Cobb since 2006. AAIC sought
indemnification from the MCCA for amounts greater that the $375,000 statutory threshold
applicable to the policy under MCL 500.3104(2)(e). However, the MCCA denied AAIC’s claim.
In a letter written to AAIC on January 15, 2008, the MCCA stated, “Please note that we do not
2
We observe that neither of the policyholders in this case, Cassens and Waste Management, was
self-insured.
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reimburse for allocated loss expenses which appear to be considered in your deductibles.” The
MCCA further stated that in light of the deductibles in Waste Management’s insurance policy,
AAIC had not reached the statutory threshold, and the MCCA was not yet required to begin
reimbursements. In its complaint, AAIC claimed that the MCCA was required under MCL
500.3104(2) and the MCCA’s plan of operation to reimburse it for payments over $375,000.
Accordingly, AAIC sought a declaratory judgment that it was entitled to reimbursement from the
MCCA.
The MCCA moved for summary disposition under MCR 2.116(C)(10). It argued that it
was not required to reimburse member insurers for amounts that the insurer was not obligated to
pay. According to the MCCA, Waste Management’s insurance policy contained provisions
requiring it to pay a deductible, which AAIC elected not to enforce. Thus, the MCCA contended
that to the extent that the deductible was not collected because of AAIC’s decision not to enforce
a contractual right to reimbursement from Waste Management, AAIC’s statutory obligation to
pay the claimant’s PIP benefits was not triggered. The MCCA also contended that AAIC’s
decision not to enforce the deductible meant that AAIC did not suffer an “ultimate loss” that was
reimbursable under MCL 500.3104(2).
The MCCA attached to its motion portions of the insurance policy issued by AAIC to
Waste Management.
According to the “quota share deductible endorsement,” Waste
Management was required to pay a $1 million deductible for each accident. The endorsement
also provided that AAIC’s quota share limit for the first $4 million per accident in excess of the
$1 million deductible was 40 percent, while Waste Management’s corresponding quota share
deductible was 60 percent. The endorsement further stated that for the next $5 million in excess
of the $4 million, AAIC’s quota share limit was 50 percent, and Waste Management’s
corresponding quota share deductible was also 50 percent. Additionally the endorsement
provided that AAIC’s “obligation to pay damages under this policy applies only to the amount of
‘losses’ in excess of the ‘Deductible per Accident’ and within the ‘Quota Share Limit’ stated in
the Schedule . . . .” To secure its deductible obligations under the insurance policy, Waste
Management agreed to provide AAIC with an irrevocable letter of credit.
In support of its motion for summary disposition, the MCCA also submitted documentary
evidence in which AAIC claimed a total loss of $2,168,193.22. According to the MCCA,
because of the $1 million deductible, and because of Waste Management’s responsibility to pay
its quota share deductible of 60 percent of the first $4 million after the $1 million deductible,
AAIC was only obligated to pay $467,277.29 of the claimed $2,168,193.22 loss.3 Although
AAIC elected to pay the $1 million deductible and Waste Management’s 60 percent of the first
$4 million, AAIC was under no legal obligation to do so. Therefore, the MCCA argued, those
amounts could not be included in determining AAIC’s ultimate loss.
3
$2,168,193.22 less $1 million for Waste Management’s “Deductible Per Accident” equals
$1,168,193.22.
AAIC’s 40 percent share of $1,168,193.22 is $467,277.29.
Waste
Management’s 60 percent share of $1,168,193.22 is $700,915.93.
-4-
AAIC also moved for summary disposition. In relevant part, AAIC argued that the
MCCA was obligated by MCL 500.3104(2) to indemnify it for PIP payments paid or payable to
or on behalf of the claimant, without consideration of Waste Management’s contractual
obligation to pay a deductible. AAIC alleged that, at the time of the motion, it had paid more
than $2,659,883.76 to the claimant. AAIC further argued that the MCCA’s plan of operation did
not permit it to refuse to reimburse AAIC.
The trial court granted summary disposition in favor of the MCCA. In so ruling, the trial
court determined that AAIC’s ultimate loss under MCL 500.3104 “refer[s] to the no-fault
insurer’s actual financial detriment” and that “[b]ecause Plaintiff has the right to seek
reimbursement from its insured for most of the PIP benefits it has paid for Ms. Cobb’s claim,
Plaintiff has suffered a financial detriment only for its share of the claim, as determined by the
Quota Share Deductible endorsement, that exceeds $375,000.” The trial court further stated that
the language of the insurance policy issued to Waste Management “places the ultimate financial
obligation for a significant portion of Ms. Cobb’s benefits on Waste Management, not [AAIC],”
and that AAIC
would be obligated to pay the portion of the claim subject to the deductibles only
if [AAIC] is unable to obtain reimbursement from its insured—a scenario that is
highly unlikely given that the policy required Waste Management to provide an
irrevocable letter of credit as security for its obligations.
The trial court also articulated the mathematical formula to be used to calculate the MCCA’s
obligation to reimburse AAIC. However, because AAIC’s complaint sought a declaratory
judgment regarding the MCCA’s obligation to reimburse it, not money damages, the trial court
did not calculate the amount of reimbursement the MCCA owed AAIC.
II. STANDARD OF REVIEW
This Court’s review of a trial court’s grant of summary disposition pursuant to MCR
2.116(C)(10) is as follows:
This Court reviews de novo a trial court’s grant or denial of summary
disposition under MCR 2.116(C)(10). Spiek v Dep’t of Transportation, 456 Mich
331, 337; 572 NW2d 201 (1998). A motion brought under MCR 2.116(C)(10)
tests the factual support for a claim. Downey v Charlevoix Co Rd Comm’rs, 227
Mich App 621, 625; 576 NW2d 712 (1998). The pleadings, affidavits,
depositions, admissions, and any other documentary evidence submitted by the
parties must be considered by the court when ruling on a motion brought under
MCR 2.116(C)(10). Downey, supra at 626; MCR 2.116(G)(5). When reviewing
a decision on a motion for summary disposition under MCR 2.116(C)(10), this
Court “must consider the documentary evidence presented to the trial court ‘in the
light most favorable to the nonmoving party.’” DeBrow v Century 21 Great
Lakes, Inc (After Remand), 463 Mich 534, 539; 620 NW2d 836 (2001), quoting
Harts v Farmers Ins Exch, 461 Mich 1, 5; 597 NW2d 47 (1999). A trial court has
properly granted a motion for summary disposition under MCR 2.116(C)(10) “if
the affidavits or other documentary evidence show that there is no genuine issue
in respect to any material fact, and the moving party is entitled to judgment as a
-5-
matter of law.” Quinto v Cross & Peters Co, 451 Mich 358, 362; 547 NW2d 314
(1996). [Clerc v Chippewa Co War Mem Hosp, 267 Mich App 597, 601; 705
NW2d 703 (2005), remanded on other grounds 477 Mich 1067 (2007).]
To the extent that the issues in this case require this Court to interpret insurance contracts
and engage in statutory interpretation, these are questions of law that we review de novo.
Healing Place at North Oakland Med Ctr v Allstate Ins Co, 277 Mich App 51, 55; 744 NW2d
174 (2007).
III. ANALYSIS
The first issue that this Court must decide involves the scope of the MCCA’s statutory
responsibility under MCL 500.3104(2) to indemnify member insurers for PIP benefits paid to or
on behalf of their policyholders; specifically, we must decide whether the MCCA can consider
the payment of a deductible by a policyholder or the insurer’s failure to demand compliance with
a deductible provision in an insurance contract in determining whether the member insurer has
sustained an ultimate loss that meets the applicable statutory threshold under MCL 500.3104(2).
The Michigan no-fault act, MCL 500.3101 et seq., requires Michigan drivers to maintain
automobile insurance. MCL 500.3101(1) provides, “The owner or registrant of a motor vehicle
required to be registered in this state shall maintain security for payment of benefits under
personal protection insurance, property protection insurance, and residual liability insurance.”
Under the no-fault act, insurers are required to pay or reimburse their insured’s lifetime medical
expenses. Farmers Ins Exch v Titan Ins Co, 251 Mich App 454, 456; 651 NW2d 428 (2002).
Furthermore, “[t]here is no dollar limit on an insurer’s liability for medical, hospital, and
rehabilitation benefits under the statute[.]” League Gen Ins Co v Mich Catastrophic Claims
Ass’n, 435 Mich 338, 340; 458 NW2d 632 (1990). The lack of a dollar limit on insurers’
liability for PIP benefits potentially exposes insurers to enormous liability in cases in which
injuries are severe. Id. Therefore, the Legislature created the MCCA “in response to concerns
that Michigan’s no-fault law provision for unlimited personal injury protection benefits placed
too great a burden on insurers, particularly small insurers, in the event of ‘catastrophic’ injury
claims.” In re Certified Question (Preferred Risk Mut Ins Co v Mich Catastrophic Claims
Ass’n), 433 Mich 710, 714; 449 NW2d 660 (1989). The MCCA is not a no-fault insurer of its
member insurers; rather, it is an indemnitor for benefits paid by member insurers in excess of the
statutory thresholds established in MCL 500.3104(2). United States Fidelity & Guaranty Co v
Mich Catastrophic Claims Ass’n (On Rehearing), 484 Mich 1, 17-18; 773 NW2d 243 (2009).
An insurer must belong to the MCCA in order to write insurance in this state, MCL 500.3104(1);
In re Certified Question, 433 Mich at 715, and the insurer must pay premiums to be a member of
the MCCA, MCL 500.3104(7)(d) and (e).
The MCCA’s duty to indemnify its member insurers is triggered by different threshold
amounts, which are based on the date the insurance policy was issued or renewed. MCL
500.3104(2)(a) through (k). In relevant part, MCL 500.3104(2) provides:
The [MCCA] shall provide and each member shall accept indemnification
for 100% of the amount of ultimate loss sustained under personal protection
insurance coverages in excess of the following amounts in each loss occurrence:
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* * *
(c) For a motor vehicle accident policy issued or renewed during the
period July 1, 2003 to June 30, 2004, $325,000.00.
* * *
(e) For a motor vehicle accident policy issued or renewed during the
period July 1, 2005 to June 30, 2006, $375,000.00.
MCL 500.3104(7)(a) provides that “[t]he [MCCA] shall . . . [a]ssume 100% of all liability as
provided in [MCL 500.3104(2)].” “Ultimate loss” is defined as “the actual loss amounts that a
member is obligated to pay and that are paid or payable by the member, and do not include claim
expenses.” MCL 500.3104(25)(c).
We must construe portions of MCL 500.3104 in order to determine whether the MCCA
can consider payment of a deductible by a policyholder or an insurer’s failure to demand
compliance with a deductible provision in an insurance contract when calculating whether a
member insurer has sustained an ultimate loss sufficient to meet the statutory threshold for
indemnification.
A. DOCKET NO. 287153
In the case of American Home, American Home paid the claimant PIP benefits totaling
$705,863.60. Although the insurance policy between American Home and Cassens contained a
clause requiring Cassens to pay a $500,000 deductible, MCL 500.3105(1)4 obligates insurers to
pay PIP benefits regardless of a policyholder’s payment of a deductible or the existence of a
deductible clause in the insurance policy. Because American Home was obligated to pay and did
pay $705,863.60, the ultimate loss under MCL 500.3104(25)(c) was $705,863.60. That amount
clearly exceeded the $325,000 statutory threshold, which would have obligated the MCCA to
pay American Home the excess amount of $380,863.80. Thus, the trial court erred by
concluding that an insurer’s ultimate loss did not include amounts the insurer received from the
policyholder as payment for the deductible.
However, we conclude that the trial court’s result was ultimately correct because under
article X, § 10.06 of the MCCA’s plan of operation,5 a member insurer must turn over to the
4
“The no-fault act mandates that insurers ‘pay benefits for accidental bodily injury arising out of
the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle.’” Cruz v
State Farm Mut Auto Ins Co, 241 Mich App 159, 164; 614 NW2d 689 (2000), aff’d 466 Mich
588 (2002), quoting MCL 500.3105(1).
5
MCL 500.3104(17) provides:
Not more than 60 days after the initial organizational meeting of the board
[of directors of the MCCA], the board shall submit to the commissioner for
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MCCA any amount it recovers from a third party for which the member has already been
reimbursed by the MCCA. Section 10.06 provides:
Recovery from Other Sources. Whenever a Member recovers from a
third party an amount for which it has already been reimbursed by the
Association, the Member shall promptly turn such recovered monies over to the
Association to the extent of any reimbursement theretofore received, provided
that the Board may permit a Member to retain therefrom such amount as the
Board deems reasonable and necessary attorney fees and litigation costs incurred
in connection with obtaining the recovery from the third party.
Thus, because Cassens paid the $500,000 deductible pursuant to its contract with American
Home, had the MCCA indemnified American Home for the $380,863.80 American Home paid
above the statutory threshold, it would have been entitled to receive that amount back in
reimbursement from the $500,000 American Home received from Cassens.
We disagree with American Home’s argument that Cassens is not a third party under
§ 10.06. We conclude that for purposes of indemnification by the MCCA of a member insurer,
an insurer’s policyholder is a third party and that member insurers are required to turn over to the
MCCA amounts received from their policyholders as payment of a deductible.
The plan of operation does not address the contractual relationship between an insurer
and a policyholder. The plan of operation is required by statute and mandates that the MCCA’s
board establish a plan of operation to “provide for the economical, fair, and nondiscriminatory
administration of the association and for the prompt and efficient provision of indemnity.” MCL
500.3104(17). Furthermore, under MCL 500.3104(1), insurers in Michigan “shall be a member
of the [MCCA] and shall be bound by the plan of operation of the [MCCA] . . . .” Similarly,
MCL 500.3104(20) provides that insurers in Michigan are “bound by and shall formally
subscribe to and participate in the plan approved as a condition of maintaining [their] authority to
transact insurance in this state.” Thus, the plan of operation addresses the relationship between
the MCCA and its member insurers rather than the contractual relationship between an insurer
and its policyholder.
Policyholders are not members of the MCCA and are not bound by its plan of operation.
Thus, at least for the purposes of § 10.06, a policyholder constitutes a “third party.”6 Because
policyholders are third parties under § 10.06, any amounts received by an insurer as a deductible
approval a proposed plan of operation consistent with the objectives and
provisions of this section, which shall provide for the economical, fair, and
nondiscriminatory administration of the association and for the prompt and
efficient provision of indemnity.
6
This Court has previously implicitly found that an insurer constitutes a “third party” under
§ 10.06. See Farmers Ins Exch, 251 Mich App at 458-459 (holding that § 10.06 applies to an
insurer’s recoupment of money from another insurer).
-8-
from a policyholder must be turned over to the MCCA if it indemnified the insurer for an
ultimate loss amount that included amounts that the policyholder was required to pay as a
deductible. Therefore, Cassens is a third party and its payment of its deductible constituted
recovered monies that American Home was required to turn over to the MCCA up to the amount
that American Home was reimbursed.
Therefore, we hold that although American Home’s ultimate loss was $705,863.60,
which obligated the MCCA to pay that portion of the loss above the $325,000 statutory
threshold, MCL 500.3104(2)(c), to American Home, American Home’s receipt of the $500,000
deductible from Cassens required American Home to reimburse the same amount to the MCCA,
§ 10.06, thereby cancelling out both obligations. Accordingly, we conclude that the trial court
properly granted summary disposition to the MCCA, having reached the right result, albeit for
the wrong reason. See Taylor v Laban, 241 Mich App 449, 458; 616 NW2d 229 (2000).
B. DOCKET NO. 292539
The case involving AAIC is factually different from the case involving American Home.
The insurance contract between American Home and its policyholder contained a deductible, and
the insured in that case paid the deductible as required by the insurance contract. In contrast,
although the insurance contract between AAIC and its policyholder required the payment of a
deductible, AAIC did not seek to enforce that provision, and the policyholder did not, in fact, pay
the deductible.
AAIC argues that the deductible must be included in calculating its ultimate loss because
the full PIP amounts are payable by AAIC to the claimant regardless of the existence of the
deductible provision in the insurance policy. As discussed above, this is the proper
understanding of “ultimate loss,” so AAIC’s ultimate loss was the more than $2 million in
benefits that it paid. Thus, AAIC’s payments exceeded the $375,000 statutory threshold in MCL
500.3104(2)(e), thereby triggering the MCCA obligation to repay AAIC the amounts above that
threshold. However, given that AAIC elected not to recover these monies, this is not the end of
the analysis because such a result would allow insurance companies to claim that they have no
duty to reimburse the MCCA for monies that the insurer is legally entitled to receive pursuant to
its contract with its policyholder. This would permit insurers to offer commercial policies with
high deductibles and lower premiums and advise potential insureds that they would never have to
pay the deductible because the MCCA would ultimately be responsible for those amounts. The
MCCA was not set up to subsidize large commercial deductibles, and we decline to create a
system that would require it to do so.
Insurers and policyholders are free to negotiate the terms of their insurance contracts. In
this case, AAIC negotiated a policy that required the policyholder to pay a large deductible and
to assume the risk of a large percentage of any loss in excess of the deductible. AAIC therefore
negotiated a policy that rendered the policyholder responsible for paying a significant portion of
any PIP claim arising under the policy. The policyholder was contractually bound to comply
with these provisions of the policy. Under such circumstances, we hold that the MCCA is
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subrogated to the rights of the insurer and may bring action against the policyholder for the
amount of the deductible if the insurer fails to do so and that the MCAA may recover the costs of
such an action from the insurer.7
Because we hold that the MCCA was obligated to repay AAIC for the amounts it paid out
in excess of the $375,000 statutory threshold, we must reverse the trial court’s grant of summary
disposition. Although the trial court noted that Waste Management was required to provide
AAIC with an irrevocable letter of credit to secure its contractual obligations under the insurance
policy, whether AAIC can or will receive reimbursement has not been briefed, and we cannot
determine this issue on the record before us. Accordingly, we remand this case back to the trial
court for such a determination. If it is clear that AAIC will receive the $1 million deductible and
the additional 60 percent of the next $4 million in benefits due from Waste Management under
its policy and, therefore, would be required to reimburse the MCCA, the trial court may decline
to order the MCCA to make payment only to have it reimbursed. In the event that it is not clear,
the trial court may order the MCCA to make payment to AAIC. Using the formula articulated by
the trial court to calculate the MCCA’s obligation to indemnify AAIC, AAIC would be entitled
to indemnification from the MCCA in the amount of $288,954.8 Should AAIC fail to seek its
deductible from Waste Management, the MCCA may elect to take action against Waste
Management and seek reimbursement of the costs of that action from AAIC.
IV. CONCLUSION
For the reasons stated, we hold that the ultimate loss to an insurer under MCL 500.3104
includes deductible amounts due from the policyholder under the insurer’s PIP policy. However,
7
We believe that our holding is not only consistent with the statutory and contractual provisions
at issue, but carefully balances the interests of the parties and protects both sides from various
inequities. By our concluding that the ultimate loss includes deductible amounts, the MCCA is
required to make payment regardless of the deductible provisions, so that if a deductible is
unrecoverable, the insurer has not lost those funds. Thus, insurers are protected when they are
unable to collect a deductible because of the policyholder’s insolvency. At the same time,
however, by holding that deductible amounts received by an insurer are reimbursable to the
MCCA and that the MCCA may initiate an action to recover the deductible from the
policyholder if the insurer fails to do so, we protect the MCCA from having to pay out amounts
for which it is rightfully entitled to reimbursement.
8
The trial court ordered that the MCCA use the following formula to determine its obligation to
reimburse AAIC:
(i)
(ii)
(iii)
subtracting the $1,000,000 Waste Management deductible;
calculating 40% of the next $4,000,000 in benefits; and
subtracting $375,000 from that 40% share.
Application of this formula is as follows: $2,659,883.76 minus $1,000,000 equals $1,659,883.76.
Forty percent of $1,659,883.76 is $633,954; $633,954 minus $375,000 equals $288,954.
-10-
to the extent that the insurer has received or in the future receives payment for the deductible,
article X, § 10.06 of the MCCA’s plan of operation requires that those monies be returned to the
MCCA up to the amount that the MCCA reimbursed the insurer. Finally, to the extent that an
insurer fails to seek payment of a deductible due and owing under its insurance contract, the
MCCA is subrogated to the rights of the insurer and may bring an action against the policyholder
for the amount of the deductible and may seek reimbursement of the costs involved from the
insurer.
Accordingly, we affirm in Docket No. 287153 and reverse and remand for additional
proceedings consistent with this opinion in Docket No. 292539. No taxable costs are awarded
under MCR 7.219, a question of public significance being involved. We do not retain
jurisdiction.
/s/ Richard A. Bandstra
/s/ Stephen L. Borrello
/s/ Douglas B. Shapiro
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