Morgan v. Citizens Ins. Co.

Annotate this Case

432 Mich. 640 (1989)

442 N.W.2d 626

MORGAN v. CITIZENS INSURANCE COMPANY OF AMERICA

Docket No. 81755, (Calendar No. 9).

Supreme Court of Michigan.

Argued October 5, 1988.

Decided July 18, 1989.

Sloan, Benefiel, Farrer, Newton & Glista (by James Thomas Sloan, Jr., and Gary C. Newton) for the plaintiff.

*643 Lilly, Domeny & Byrne (by Joseph A. Byrne, Jr.) for the defendant.

LEVIN, J.

The principal question presented is whether plaintiff William Morgan's no-fault automobile insurer, defendant Citizens Insurance Company of America, is relieved of responsibility under § 3109(1)[1] of the no-fault automobile liability act for the payment of medical expenses incurred by Morgan in a nonmilitary hospital if Morgan could have obtained the medical service without charge at a military hospital.

The no-fault act preserves to the injured person a choice of medical service providers. Section 3109(1) does not deprive an injured person, who may be eligible to obtain service in kind in a military hospital, of such choice of medical service providers.

The purpose of § 3109(1) is to eliminate duplicative benefits provided or required to be provided under federal or state law and thereby reduce the cost of no-fault automobile insurance. Because of differences in quality and service, medical service provided in kind by a governmental source may not be duplicative of medical service obtainable in the private sector with the no-fault medical expense benefit.

I

William Morgan was injured in an automobile accident on his way to National Guard training. Citizens is the no-fault insurer. Morgan's initial medical expenses were paid by the federal government *644 because he was on military service when the accident occurred.

Nine months after the accident, Morgan experienced pain, sought treatment at a nonmilitary hospital, and was advised to undergo surgery for a ruptured disc. He did so, and incurred medical expense exceeding $10,000. Morgan sought payment of this expense by Citizens. Citizens refused and Morgan commenced this action. During the pendency of this litigation, he submitted bills for this expense to the National Guard, which denied payment.

The circuit judge granted Citizens' motion for summary disposition on the basis of § 3109(1) of the no-fault act which requires that benefits provided or required to be provided under the laws of the federal government be subtracted from the benefits otherwise payable by the no-fault insurer.

The judge declared that Morgan did not have the option under the act of obtaining nonemergency medical care in a nonmilitary hospital and seeking payment from a no-fault insurer when the federal government is required by law to provide the medical service at a military hospital. He also said that Morgan failed to show that he used reasonable efforts to obtain repayment from the federal government of the expense he had incurred at a nonmilitary hospital.

The Court of Appeals in affirming observed that in Crowley v DAIIE, 428 Mich 270; 407 NW2d 372 (1987), this Court declared that amounts paid by the federal government for medical care provided a member of the armed forces pursuant to 10 USC 1071 is a benefit provided under the laws of the federal government required under § 3109(1) to be subtracted from no-fault benefits otherwise payable *645 to the injured person.[2] The Court also noted Perez v State Farm Mutual Automobile Ins Co, 418 Mich 634; 344 NW2d 773 (1984), where this Court ruled that benefits required to be paid to a worker injured in a motor vehicle accident as workers' compensation, but which will not be paid because the employer did not have workers' compensation coverage, are not required under § 3109(1)[3] to be subtracted from no-fault work-loss benefits. The Court of Appeals said that in Perez the workers' compensation benefits "were unavailable to the plaintiffs."[4] The Court of Appeals also found significant this Court's decision in Gregory v Transamerica Ins Co, 425 Mich 625, 634-636; 391 NW2d 312 (1986), where the Court held that the workers' compensation disability benefits payable for the full period of disability rather than the lesser amount paid in redemption of the insurer's liability to pay such benefits should be subtracted from the amount of the no-fault benefits payable to a worker injured in an automobile accident during the course of his employment.

The Court of Appeals interpreted the decisions of this Court as "indicating that a no-fault insurer may offset primary insurance benefits except when injured persons fail to receive benefits through no fault of their own."[5] The Court said that Morgan might have been entitled to medical benefits provided by the military if he had received treatment at a military hospital. He did not have a choice of having nonemergency surgery performed at a nonmilitary hospital and seeking payment by the no-fault insurer. The Court of Appeals declared that *646 to allow recovery from Citizens "would defeat the purpose of the setoff provision by allowing plaintiff to choose which insurance would pay for his medical treatment."[6]

II

We agree with the Court of Appeals that Morgan did not have the option under the no-fault act of choosing "which insurance would" pay his medical expense. If federal law obliged the federal government to pay or reimburse Morgan for the expense of his medical treatment in a nonmilitary hospital, Citizens was not, by reason of § 3109(1), obliged to do so.

We do not agree, however, with the Court of Appeals or the circuit judge that Morgan was precluded from seeking payment of expense incurred in a nonmilitary hospital simply because he could have had the surgical procedure performed in a military hospital.

The act speaks of benefits provided or required to be provided under the laws of any state or the federal government, and states that such benefits shall be subtracted from the benefits otherwise payable for the injury.[7] The benefits required to be subtracted are generally dollar amounts. When § 3109(1) has heretofore been invoked, the benefits sought to be deducted generally were dollar benefits.[8] Section 3109(1) requires the subtraction of *647 governmental dollar benefits from the dollar amount of no-fault benefits governmental benefit dollars from no-fault insurer dollars.

A person injured in an automobile accident is not required under § 3109(1) to avail himself of whatever medical service in kind a governmental source may provide.[9] Governmental medical service may not be comparable in quality and service with the doctor or hospital service that the injured person purchased or may be able to purchase with the no-fault dollar. Hospitals and doctors are not fungible. There are good hospitals and some that are not, good doctors and some that are not. The Legislature did not intend that however legitimate the injured person's concern regarding the quality of the governmental service in kind even if the medicine practiced at the hospital or the doctor is questionable, debatable, or notoriously bad it is nevertheless a benefit as a matter of law within the meaning of § 3109(1).

The no-fault act preserves to injured persons a *648 reasonable choice of hospitals and physicians although this may add to the premium cost of no-fault insurance. The no-fault insurer cannot, in the name of reducing the premium cost, require an injured person to obtain medical service from a particular provider.[10]

Section 3109(1) does not mandate the offset of all governmentally provided benefits, only duplicative benefits:[11]

The history of § 3109(1) indicates that the Legislature's intent was to require a set-off of those government benefits that duplicated the no-fault benefits payable because of the accident and thereby reduce or contain the cost of basic insurance. [O'Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524, 544; 273 NW2d 829 (1979). Emphasis added.][[12]]

It is by the offsetting of duplicative benefits that § 3109(1) "thereby reduce[s] or contain[s] the cost of basic insurance." (Emphasis added.) It is not within the purpose of § 3109(1) to require the offset of governmental benefits that are not duplicative.

A surgical procedure performed in a military hospital may not, because of differences in quality and service, be duplicative of the medical service that an injured person could obtain and pay for with the no-fault medical expense benefit through the exercise of the choice in medical service providers preserved to injured persons under the no-fault act.

*649 III

Citizens asserts alternatively that Morgan might have obtained payment by the federal government of the cost of the medical services had he applied formally for such payment. Citizens filed with its motion for summary disposition the affidavit of a captain stating that he was familiar with Morgan's claim for medical expenses allegedly resulting from the automobile accident; that at the time of the alleged injury Morgan was in the line of duty, thereby entitling him to payment of medical expenses if he complied with all applicable Army and National Guard regulations; and that his claim for medical expenses was denied by the National Guard for two reasons: (a) nonemergency medical care in a civilian medical facility is not authorized without written or verbal authorization from the chief, National Guard Bureau, or his designee, and such authorization had not been asked for or granted; (b) medical documentation indicating that the automobile accident was the cause of the herniated disc had not been furnished.

Morgan filed an affidavit stating that he was admitted to a hospital nine months after the automobile accident and was told he needed an operation to remove a disc in his neck, that he spoke to a staff sergeant about the operation who called back later stating that the military would not pay for the operation because it was elective surgery. There was attached to the affidavit a communication from a colonel in an Army personnel center located in Virginia repeating that the request for medical claim payment was denied for the reasons stated in the affidavit of the captain filed by Citizens.

It appears that Morgan had been advised to have an operation by a physician and desired to do *650 so. It is unclear what would have been involved in formally requesting payment by the federal government of the medical expense incurred in having the operation performed by the surgeon Morgan chose in the nonmilitary hospital he chose. It is unclear what delays would have occurred or whether the request would have been granted. The Legislature did not impose under § 3109(1) on injured persons the burden of obtaining authorization from a governmental source before proceeding with medical treatment that the injured person has been advised by his physician is necessary.

The injured person is, however, obliged to submit a request for payment from the governmental source and provide whatever documentation may reasonably be required. The no-fault insurer has the burden of establishing that had he done so benefits would have been paid or payable.

Reversed and remanded to the circuit court for further proceedings consistent with this opinion.

CAVANAGH, ARCHER, and GRIFFIN, JJ., concurred with LEVIN, J.

BRICKLEY, J. (dissenting).

The central issue in this case is whether the term "benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the [no-fault insurance benefits]" under § 3109(1)[1] of the no-fault act only applies to dollar amount benefits, or whether it also applies to services provided in kind by the government in its own hospitals.[2]

*651 The lead opinion provides a somewhat contingent response to this question by stating that the purpose of § 3109(1) is to "eliminate duplicative benefits" and that

[b]ecause of differences in quality and service, medical service provided in kind by a governmental source may not be duplicative of medical service obtainable in the private sector with the no-fault medical expense benefit. [Emphasis supplied. Ante, p 643.]

The majority adds to this the rationale that

[t]he benefits required to be subtracted are generally dollar amounts. When § 3109(1) has heretofore been invoked, the benefits sought to be deducted generally were dollar benefits. Section 3109(1) requires the subtraction of governmental dollar benefits from the dollar amount of no-fault benefits governmental benefit dollars from no-fault insurer dollars. [Ante, pp 646-647.]

In response, I find no support, in law or in logic, that a given surgical procedure in a military hospital is not "duplicative" of a similar procedure in any other medical facility in terms of the overall purpose of the no-fault act.

It is certainly true that in a military hospital, as in any medical facility, a given service may be of inferior quality, and that by not having a choice under a given government benefit program an insured may at least lose the opportunity to exercise *652 discretion in an attempt to affect the quality of the chosen services. Also, although it is not the goal of the act that "the no-fault act preserves to the injured person a choice of medical service providers," the act certainly does in its effect, in most cases, leave to the insured the choice of where to take advantage of medical services. Unlike the United States military, no-fault insurers are not in the business of owning and operating large-scale medical facilities. Of course, all of this sidesteps the central issue here whether or not § 3109(1) has a different effect.

Nowhere in the no-fault act is it provided that it is the goal, purpose, or preference of the act to preserve in all instances a choice of where medical services should be provided. The majority, in a conclusory manner, merely states that "[s]ection 3109(1) does not deprive an injured person, who may be eligible to obtain service in kind in a military hospital, of such choice of medical service providers." Ante, p 643. This statement begs the very question we must answer in this case.

I would hold that the benefits in kind in this case are governmental benefits under § 3109(1) "provided or required to be provided" and, accordingly, can be subtracted from the defendant insurer's liability under the policy.[3]

The conclusion of the majority suggests that the Legislature, in using the words "benefits ... under the laws of ... the federal government" was unaware of the major sources of governmental benefits, and military hospitals in particular, a *653 suggestion I think is implausible. To the contrary, there can be no doubt that the Legislature intended to avoid any evasion of the opportunity to have governmental benefits fully taken advantage of to effectuate a setoff for the no-fault insurer wherever such alternate benefits existed. The best evidence of that is the language of § 3109(1) that mandates that not only "benefits provided" but that "benefits ... required to be provided" also can be taken advantage of by the no-fault insurer. We have often in other settings discussed the legislative intent of the words "required to be provided," but we have probably never had a better example of its purpose. See Perez v State Farm Mutual Automobile Ins Co, 418 Mich 634; 344 NW2d 773 (1984).

It is exactly in this setting where the "benefits provided" have been declined by the insured that the additional words "required to be provided" make the difference between the insured being able to frustrate the purpose of § 3109(1) by bypassing the "benefits provided" in kind and requiring the no-fault insurer to pay for the costs the insured incurred which could have been provided under federal law. By including the term "required to be provided," the Legislature has stated that whether the benefits are taken or not, the fact that they are required to be provided is sufficient to allow the no-fault insurer to receive credit for the benefits which were available to the insured.

Furthermore, the fact that not only benefits that are provided can be "subtracted" from the no-fault benefits, but that benefits that are not provided or received but "required to be provided" can be subtracted from the no-fault insurer's benefits, forces the conclusion that "subtracted" is not intended to be confined to the interpretation offered *654 by the majority. See ante, pp 646-647. It is obvious that "subtracted" means that the no-fault insurer should not have to pay for what the insured did receive or could have received. The majority interpretation that "subtraction" in § 3109(1) is in this situation confined to dollar amounts would render the words "or required to be provided" a nullity because the value of benefits not received, but that could have been received, could not be set off.[4]

When the "benefits provided ... under the laws of any state or the federal government" are provided in kind, rather than as reimbursement for expenses incurred, then under § 3109(1) no "subtraction" is required because no costs have been incurred. Similarly, no costs having been incurred, the no-fault carrier is also free of obligation to reimburse. However, to allow the insured to decline benefits in kind and to incur the costs of treatment outside the "benefits provided or required to be provided by law," and then not to allow the subtraction of those benefits would, in my judgment, be a clear frustration of the specific intent of § 3109(1) and the overall goal of the no-fault automobile insurance scheme. It is the intent of § 3109(1) that benefits provided by law be taken advantage of to lessen the cost of no-fault insurance. This effort to lower the costs of no-fault insurance is one of the stated goals of the no-fault insurance act generally. Shavers v Attorney General, 402 Mich 554; 267 NW2d 72 (1978); LeBlanc v State Farm Mutual Automobile Ins Co, 410 Mich 173; 301 NW2d 775 (1981).

*655 Simply stated, it would defeat the obvious intention of the Legislature to suggest that the no-fault insurer can take advantage of money received by the insured from government benefits but not service provided in kind by the government in place of money.

RILEY, C.J., concurred with BRICKLEY, J.

BOYLE, J., concurred only in the result reached by BRICKLEY, J.

NOTES

[1] provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury. [MCL 500.3109(1); MSA 24.13109(1).]

[2] Morgan v Evans, 163 Mich App 115; 413 NW2d 747 (1987).

[3] See n 1 for text of § 3109(1) requiring the subtraction of benefits provided under the laws of any state or the federal government.

[4] Morgan, supra, p 118.

[5] Id., p 119.

[6] Id.

[7] The "required to be provided" clause and the term "subtracted" have no bearing on whether a service in kind is a "benefit" within the meaning of § 3109(1).

[8] See O'Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524; 273 NW2d 829 (1979) (social security survivors benefits); Mathis v Interstate Freight, 408 Mich 164; 289 NW2d 708 (1980) (workers' compensation benefits); LeBlanc v State Farm Mutual Automobile Ins Co, 410 Mich 173; 301 NW2d 775 (1981) (medicare benefits); Jarosz v DAIIE, 418 Mich 565; 345 NW2d 563 (1984) (social security old age benefits); Thompson v DAIIE, 418 Mich 610; 344 NW2d 764 (1984) (social security disability benefits received by dependents); Gregory v Transamerica Ins Co, 425 Mich 625; 391 NW2d 312 (1986) (amount paid pursuant to a redemption of workers' compensation benefits).

See also Crowley v DAIIE, 428 Mich 270; 407 NW2d 372 (1987) (amounts paid by the federal government for or medical care furnished a member of the armed forces).

[9] We express no opinion whether an injured person who has contracted for a reduced premium under § 3109a (MCL 500.3109a; MSA 24.13109[1]), and thus has voluntarily agreed that other insurance will be primary for medical benefits, may seek recovery from a no-fault insurer unless he was unable to obtain medical care from a facility designated, pursuant to the contract with the primary insurer, by the primary insurer.

Similarly, we express no opinion whether, if Morgan contracted for a reduced premium under § 3109a on the basis of medical benefits available through his employment by the federal government, he voluntarily agreed that such benefits would be primary and may not seek recovery from Citizens unless he was unable to obtain medical care from a facility designated by the federal government which, in that hypothesis, has or may have, in effect, become the primary insurer for the purpose of coordination under § 3109a.

[10] But see n 9 concerning § 3109a.

[11] If the injured person accepts service in kind, he cannot be heard to say that it is not a duplicative benefit.

[12] See also Jarosz v Detroit Automobile Inter-Ins Exchange, 418 Mich 565, 578; 345 NW2d 563 (1984); Perez v State Farm Mutual Automobile Ins Co, 418 Mich 634, 641; 344 NW2d 773 (1984).

[1] MCL 500.3109(1); MSA 24.13109(1).

[2] I assume, as does the majority, that the plaintiff could have availed himself of the services of a military hospital, but that he declined to do so. Because I disagree with the majority that he could decline such services in a military hospital and collect the costs of those same services in a nonmilitary hospital from his insurer, I do not find it necessary to determine whether the insured plaintiff could have collected for his services in a nonmilitary hospital from the federal government. I do point out, however, that it was not until the beginning of the lawsuit when the plaintiff was asked in a deposition whether he had made an effort to seek reimbursement from the federal government and he answered that he had not, that he subsequently made the effort and secured the response referred to by the majority.

[3] There is nothing in the record or the arguments of this case suggesting that the benefits in kind at the military hospital were below standard or objectionable. I would not discount the possibility in an appropriate case of the validity of an argument that benefits in kind were sufficiently below standard that they in effect were not benefits at all, thus making § 3109(1) inapplicable. This is not such a case.

[4] It is my understanding that most policies do not specify dollar benefits, but rather specify medical procedures, hospital stay, homecare nursing, and similar descriptions of medical benefits. Because the costs of those benefits tend to be standardized, at least when they are being reimbursed by major carriers, "subtracting" benefits received or required to be received, rather than dollars, from those provided by the no-fault carrier insurance policy would not be a difficult task.