Introductory Directions to the Court

The following instructions are designed for the average no-fault case involving an alleged breach of contract for failure to pay first-party benefits. Obviously, it is impossible to reflect on all current appellate cases or to anticipate future decisions. The ever-changing law in this area mandates vigilance for additions or deletions which aptly reflect the current status of appellate decisions.

Many facets of a no-fault benefits case are not in dispute. For instance, the applicable wage rate, if readily ascertainable, should be stipulated to and inserted into the various formulas for computation of benefits. It is recommended that the Court eliminate from jury consideration any stipulation as to fact or amount. It would certainly behoove the Court and parties to closely scrutinize all areas of potential agreement before commencing jury selection, so as to avoid unwieldy and prolonged trials.

The Court and parties should note that 2019 PA 22 amended the Michigan No-Fault Insurance Act (MCL 500.3101 et seq) and introduced, among other reforms, new PIP choice options that apply to allowable expense benefits payable pursuant to MCL 500.3107(1)(a). By way of example, the reforms made by 2019 PA 22 include potential caps on allowable expense coverage, allowable expense fee schedules, the potential for managed care policies and limitations on certain attendant care benefits. Many of these issues will be matters of law for the Court to decide, absent stipulation by the parties. It is strongly recommended that the Court and parties consider the ramifications of 2019 PA 22 on certain aspects of cases when fashioning jury instructions and verdict forms and endeavor to resolve any legal issues that are not stipulated to by the parties prior to jury selection. The allowable expense fee schedules do not apply when the accident took place prior to June 11, 2019. Andary v USAA Cas Ins Co, 512 Mich 207, 216; 1 NW3d 186 (2023).

Chapter 35 contains no instructions on setoffs from first-party benefits. In most cases, these issues will be resolved as questions of law. Jarosz v Detroit Automobile Inter-Insurance Exchange, 418 Mich 565; 345 NW2d 563 (1984); Perez v State Farm Mutual Automobile Insurance Co, 418 Mich 634; 344 NW2d 773 (1984); Thompson v Detroit Automobile Inter-Insurance Exchange, 418 Mich 610; 344 NW2d 764 (1984). The statutes authorizing setoffs from first party benefits are MCL 500.3109 (governmental benefits setoffs), and MCL 500.3109a (coordinated benefit setoffs).

Governmental benefits may only be set off against no-fault benefits if they “1) Serve the same purpose as the no-fault benefits, and 2) Are provided or required to be provided as a result of the same accident.” Jarosz, 418 Mich at 565; 345 NW2d at 563.

Social Security disability benefits and Social Security survivors’ benefits have been held to be proper setoffs, regardless of whether the insured elected or was offered coordinated benefits coverage. See O’Donnell v State Farm Mutual Auto Insurance Co, 404 Mich 524; 273 NW2d 829, appeal dismissed, 444 US 803; 100 S Ct 22; 62 L Ed 2d 16 (1979), and Profit v Citizens Insurance Co of America, 444 Mich 281; 506 NW2d 514 (1993). See also Wolford v Travelers Insurance Co, 92 Mich App 600; 285 NW2d 383 (1979). Also, Social Security disability payments to dependents of the injured worker are proper setoffs against work loss benefits. Thompson. (This may change if the injured wage earner and spouse are divorced. Thompson, 418 Mich at 617, fn 8; 344 NW2d at 766, fn 8).

Social Security old age benefits are not proper setoffs. Jarosz. Also, Social Security survivors’ benefits cannot be set off against that particular component of no-fault survivors’ loss benefits which represents replacement service expenses. Swanson v Citizens Insurance Co, 99 Mich App 52; 298 NW2d 119 (1980), vacated on other grounds 411 Mich 945; 308 NW2d 99 (1981), Cole v Detroit Automobile Inter-Insurance Exchange, 137 Mich App 603; 357 NW2d 898 (1984).

Worker’s compensation benefits have been held a proper setoff. See Mathis v Interstate Motor Freight System, 408 Mich 164; 289 NW2d 708 (1980). But federal worker’s compensation benefits which the insured was required to repay out of tort recovery could not be set off. Sibley v Detroit Automobile Inter-Insurance Exchange, 431 Mich 164; 427 NW2d 528 (1988). Also, if worker’s compensation will not be paid because the employer failed to obtain insurance coverage, there is no setoff. Perez. (In Perez, the Court in a three-Justice opinion construed the phrase “required to be provided” in MCL 500.3109 (1) to mean that an injured worker must use “reasonable efforts” to obtain governmental benefits that are available.) See also Joiner v Michigan Mutual Insurance Co, 137 Mich App 464; 357 NW2d 875 (1984), appeal after remand, 161 Mich App 285; 409 NW2d 807 (1987). See also Thacker v Detroit Automobile Inter-Insurance Exchange, 114 Mich App 374; 319 NW2d 349 (1982) (amount of setoff where employee voluntarily redeems worker’s compensation claim); Gregory v Transamerica Insurance Co, 425 Mich 625; 391 NW2d 312 (1986) (no-fault insurer can set off the amount of a plaintiff’s workers’ compensation redemption of medical expenses against its obligation to pay wage loss benefits); Luth v Detroit Automobile Inter-Insurance Exchange, 113 Mich App 289; 317 NW2d 867 (1982) (no setoff where federal employee elected accumulated vacation and sick leave rather than federal worker’s compensation). But see Krygel v City of Detroit, 135 Mich App 187; 353 NW2d 116 (1984) (setoff permitted where city of Detroit employee elected to receive City Charter benefits instead of worker’s compensation benefits.)

Medical and disability benefits received from the Army and Veteran’s Administration are proper setoffs. Bagley v State Farm Mutual Insurance Co, 101 Mich App 733; 300 NW2d 322 (1980). Amounts paid by the United States government for medical care for a member of the armed services may also be set off against medical no-fault benefits otherwise payable where neither the injured serviceman, his spouse, nor a relative domiciled in the same household owned an automobile insured under the no-fault act. Crowley v Detroit Automobile Inter-Insurance Exchange, 428 Mich 270; 407 NW2d 372 (1987). However, if the insurer does not offer the option of purchasing a coordinated benefits policy under MCL 500.3109a, then governmental medical care benefits paid to members of the armed services may not be offset under section 3109a. Tatum v Government Employees Insurance Co, 431 Mich 663; 431 NW2d 391 (1988).

Medical benefits provided under an out-of-state no-fault automobile insurance plan in compliance with the laws of that state may be set off as benefits under MCL 500.3109. DeMeglio v Auto Club Ins Ass’n, 449 Mich 33; 534 NW2d 665 (1995).

Medicare benefits are not proper setoffs under MCL 500.3109 but may be set off as a coordinated benefit under section 3109a. LeBlanc v State Farm Mutual Automobile Insurance Co, 410 Mich 173; 301 NW2d 775 (1981).

The Michigan no-fault law authorizes the use of an insurance policy endorsement which coordinates benefits provided by the act with other health and accident insurance benefits available through Blue Cross/Blue Shield, other medical insurance, other disability insurance, or sickness and accident benefits. Coordinated benefit endorsements apply only to duplicate claims for allowable expenses and work loss. LeBlanc; Nyquist v Aetna Insurance Co, 84 Mich App 589; 269 NW2d 687 (1978), aff’d, 404 Mich 817; 280 NW2d 792 (1979); Orr v Detroit Automobile Inter-Insurance Exchange, 90 Mich App 687; 282 NW2d 177, lv den, 407 Mich 865 (1979); Thomas v State Farm Mutual Automobile Insurance Co, 159 Mich App 372; 406 NW2d 300 (1987); Dean v Auto Club Insurance Ass’n, 139 Mich App 266; 362 NW2d 247 (1984); Sheeks v Farmers Insurance Exchange, 146 Mich App 361; 379 NW2d 493 (1985).

For cases resolving priority disputes between no-fault insurers and health insurance companies where both insurers have coordinated benefits provisions in their policies, making that policy secondary to the other, see Federal Kemper Insurance Co v Health Insurance Administration, Inc, 424 Mich 537; 383 NW2d 590 (1986); Michigan Mutual Insurance Co v American Community Mutual Insurance Co, 165 Mich App 269; 418 NW2d 455 (1987); Northern Group Services, Inc v Auto Owners Insurance Co, 833 F2d 85 (6th Cir 1987), cert denied, 486 US 1017; 108 S Ct 1754; 100 L Ed 2d 216 (1988); Benike v Scarborough Insurance Trust, 150 Mich App 710; 389 NW2d 156 (1986), lv denied, 425 Mich 882 (1986); West Michigan Heath Care Network v Transamerica Insurance Corp of America, 167 Mich App 218; 421 NW2d 638 (1988); US Fidelity & Guaranty Co v Group Health Plan of Southeast Michigan, 131 Mich App 268; 345 NW2d 683 (1983); Auto-Owners Insurance Co v Blue Cross & Blue Shield of Michigan, 132 Mich App 800; 349 NW2d 238 (1984). However, where the health insurer is an employee health benefit plan established under ERISA, a coordinated benefits provision in the plan making it secondary to no-fault policies is enforceable, thus making the no-fault insurer primary. Auto Club Insurance Ass’n v Frederick & Herrud, Inc, 443 Mich 358; 505 NW2d 820 (1993).

History

Amended January 1985, January 1988, February 1989, June 1989, February 1994, February 1999, October 2022, September 2025.