Wysocki v. Detroit Automobile Inter-Insurance Exchange , 77 Mich. App. 565 ( 1977 )

77 Mich. App. 565 (1977) 258 N.W.2d 561

WYSOCKI
v.
DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE

Docket No. 29314.

Michigan Court of Appeals.

Decided August 22, 1977.

Burdick & McNeill, P.C., for plaintiff.

Selby, Dickinson, Pike, Mourad & Brandt (by Ronald R. Hanlon), for defendant.

Before: BEASLEY, P.J., and V.J. BRENNAN and J.R. McDONALD,^[*] JJ.

V.J. BRENNAN, J.

Plaintiff Andrew Wysocki, Jr., filed a complaint and petition for order to show cause on March 19, 1976, to prevent defendant Detroit Automobile Inter-Insurance Exchange from reducing benefits payable to plaintiff under its policy of insurance. Plaintiff contended that a provision of the Michigan no-fault act which provides for the deduction of governmental benefits from the personal protection insurance benefits provided by the act was unconstitutional. MCLA 500.3109(1); MSA 24.13109(1). Plaintiff also contended that the policy provision to the same effect was contrary to the spirit and intent of the law and was thus unenforceable.

In the hearing on June 18, 1976, before circuit judge James Montante, the trial court declared MCLA 500.3109(1); MSA 24.13109(1) unconstitutional. Judge Montante further held that "Defendant having relied on the contract provision and the approval of same by the Insurance Commissioner of the State of Michigan, and the Court having held MCLA 500.3109(1) unconstitutional, said contract provision is invalid and unenforceable".

The facts involved in this appeal have been stipulated by the parties and approved as a settled record by the trial court. Plaintiff was injured in an automobile accident on October 13, 1974. At the time of the accident, he carried a policy of insurance with defendant which provided for personal injury protection benefits pursuant to the Michigan no-fault act. Plaintiff was paid $1,982.50 monthly as work loss benefits.

Subsequently, plaintiff was determined to be totally disabled by the Social Security Administration and was awarded Social Security benefits of $451 per month. Pursuant to MCLA 500.3109(1); MSA 24.13109(1), defendant proceeded to deduct the amount of Social Security benefits available to plaintiff from the amount of work loss benefits defendant was previously paying. A specific provision of the insurance policy also allowed for such deduction.

Plaintiff filed this action to prevent the reduction in benefits by defendant. In holding for the plaintiff, Judge Montante stated:

"It is hereby declared that MCLA 500.3109(1) is unconstitutional for the reasons set forth by Judge Horace W. Gilmore on Pages 84 through 92 of his Opinion in Catherine Shavers, et al vs. Frank J. Kelly, Attorney General of the State of Michigan, et al, Civil Action No. 73-248-068-CZ, and for the reasons set forth on Pages 256 through 261 of Catherine Shavers, et al, Plaintiffs' Court of Appeals Brief submitted in said case;

"It is further declared that Defendant having relied on the contract provision and the approval of same by the Insurance Commissioner of the State of Michigan, and the Court having held MCLA 500.3109(1) unconstitutional, said contract provision is invalid and unenforceable."

On appeal, defendant brings two allegations of error. We will address each as presented.

We must first decide whether MCLA 500.3109(1); MSA 24.13109(1) violates the Equal Protection provisions of the United States and Michigan Constitutions.

The provision under attack by plaintiff provides as follows:

"Benefits 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." MCLA 500.3109(1); MSA 24.13109(1).

In deciding for plaintiff, the trial court in the instant case relied upon the reasoning set forth by Wayne County Circuit Judge Horace W. Gilmore in Shavers v Attorney General, 73-248-068-CZ. However, we note that this Court has since then reversed Judge Gilmore's holding that MCLA 500.3109(1); MSA 24.13109(1) violates the Equal Protection Clauses of the United States and Michigan Constitutions. We stated there:

"Plaintiffs have made no showing that the provisions of the no fault act dealt with [including MCLA 500.3109(1)] * * * have or are likely to work to their disadvantage. A decision on the issues decided * * * was not ``necessary to guide plaintiffs' future conduct in order to preserve [their] legal rights'. Welfare Employees Union v Civil Service Comm, supra [28 Mich App 343; 184 NW2d 247 (1970)], 28 Mich App at 350. It was, therefore, inappropriate for the trial court to include [the provisions] in its judgment." Shavers v Attorney General, 65 Mich App 355, 363; 237 NW2d 325 (1975), lv granted, 396 Mich 869 (1976).

We discussed the proper standard to apply to the no-fault act in determining whether that act violates equal protection of the law in Schigur v Secretary of State, 73 Mich App 239, 248; 251 NW2d 567 (1977). We commented there:

"Since our system of no fault insurance legislation is undeniably still in the experimental stage, we conclude that we must apply the traditional equal protection test in the present case.

"Two statements of that test were endorsed by the Supreme Court in Alexander v Detroit, 392 Mich 30; 219 NW2d 41 (1974):

"``(1) Are the enactment's classifications based on natural distinguishing characteristics and do they bear a reasonable relationship to the object of the legislation? * * *

"``(a) Are all persons of the same class included and affected alike or are immunities or privileges extended to an arbitrary or unreasonable class while denied to others of like kind?' 392 Mich at 35-36. (Citations omitted.)

"See also Shavers v Attorney General, 65 Mich App 355; 237 NW2d 325 (1975), lv granted, 396 Mich 869 (1976), for its discussion of equal protection challenges to several provisions of the no-fault act." Schigur v Secretary of State, supra at 248.

Generally, legislative classification should be presumed valid, as the Legislature has broad discretion in distinguishing between different classes. Manistee Bank & Trust Co v McGowan, 394 Mich 655, 666-667; 232 NW2d 636 (1975). However, legislative classification must not be arbitrary or unreasonable. Such classification must be germane to the object of the legislation, and must be made uniform in its operation upon all persons of the class to which it naturally applies. Fox v Employment Security Commission, 379 Mich 579, 588-589; 153 NW2d 644 (1967).

We were faced with a similar problem recently in O'Donnell v State Farm Mutual Automobile Insurance Co, 70 Mich App 487; 245 NW2d 801 (1976), lv granted, 397 Mich 848 (1976). In O'Donnell, plaintiffs were the wife and children of a man killed in an automobile accident. Decedent was covered by a no-fault insurance policy by defendant, and plaintiffs were dependents of decedent for purposes of survivors loss benefits.

Plaintiffs were entitled to the maximum benefits of $1,000 per 30-day period for three years after decedent's death as permitted by the no-fault act, MCLA 500.3108; MSA 24.13108. However, from the monthly maximum benefits amount, defendant deducted $560, the sum plaintiffs received in Social Security benefits. This deduction was made pursuant to MCLA 500.3109(1); MSA 24.13109(1). Plaintiffs challenged the constitutionality of the no-fault provision.

We held that the section was patently unreasonable and discriminatory and stated:

"In Bowser v Jacobs, 36 Mich App 320; 194 NW2d 110 (1971), this Court was concerned with the constitutionality of a section of the Motor Vehicle Accident Claims Act which prevented those covered by workmen's compensation from recovering under the Act. The plaintiffs were injured while in the course of their employment, by uninsured motorists. They received workmen's compensation and sought recovery against the uninsured motorist fund. The Secretary of State sought dismissal of the suits, relying upon a section of the Act which barred recovery by an injured person if he was covered by workmen's compensation. It was demonstrated that those who had private insurance coverage were not similarly barred from recovery against the fund. This Court struck down the legislative classification as unconstitutionally discriminatory. Like the legislative classification in Bowser, § 3109(1) which allows personal protection benefits plus private insurance benefits to one group, but deducts from personal protection benefits anything received from a government program is arbitrary and unreasonable. We find no legitimate purpose for establishing such a distinction which arbitrarily discriminates against those who receive certain government benefits.

"We find MCLA 500.3109(1); MSA 24.13109(1) to be unconstitutional." O'Donnell v State Farm Insurance, supra at 497-498.

We see no reason to deviate from the result and reasoning expressed here. Therefore, we do not hesitate in again affirming the unconstitutionality of MCLA 500.3109(1); MSA 24.13109(1). The trial court's decision must be sustained.

Defendant also asserts that, notwithstanding the unconstitutionality of this provision, the contract of insurance in existence between the parties controlled the rights of the parties, thus sustaining the particular pre-existing provision in plaintiff's contract.

The policy of insurance issued by defendant to plaintiff contained a condition under limited liability which provided for deduction of benefits provided or required to be provided under the laws of any state or the Federal government from the personal protection insurance benefits otherwise payable for bodily injury. Both parties agree that the provision is virtually identical to MCLA 500.3109(1); MSA 24.13109(1).

In O'Donnell, we reached the following holding:

"We find MCLA 500.3109(1); MSA 24.13109(1) to be unconstitutional. As such, the act is void and of no effect as of the date of enactment. Briggs v Campbell, Wyant & Cannon Foundry Co, 379 Mich 160; 150 NW2d 752 (1967). As such, the statute confers no rights upon and affords no protection to defendant. Norton v Shelby County, 118 US 425, 442; 6 S Ct 1121; 30 L Ed 178 (1886). Defendant's argument, that the set-off provision in the insurance contract was the result of a bargain reached by contracting parties and thus is not affected by the validity or invalidity of § 3109(1), is egregious. The terms of the statute are mandatory. Without the ``sanction' of such a statute, the contract provision is patently offensive to public policy, and as such, the provision is invalid.

"The set-off provision in the contract is void." O'Donnell v State Farm Insurance, supra at 498-499.

See also State ex rel Terbovich v Board of Commissioners of Wyandotte County, 161 Kan 700; 171 P2d 777 (1946); State ex rel Taylor v Carolina Racing Association Inc, 241 NC 80; 84 SE2d 390 (1954).

We find defendant's claim of error without merit. The trial court is sustained.

Affirmed. Costs to be paid by defendant-appellant.

NOTES

[*] Circuit judge, sitting on the Court of Appeals by assignment.