Michigan Court of Appeals to Hear Oral Argument on Constitutionality of No-Fault Reform

In 1964, Bob Dylan released the song, “The Times They Are A-Changin.’” Politically charged, he has said it was written with a specific message and a targeted audience. Beyond his initial intent, the lyrics have found widespread application, including being cited by Steve Jobs at the unveiling of the Apple Macintosh computer in 1984, used in an ad for the Bank of Montreal in the mid ‘90s, and played over the opening credits in the 2009 movie Watchmen.

In 2019, the times – or should I say, the law – was “a-changin” when the Michigan Legislature reformed the state’s No-Fault Act. Some changes were effective as of June 11, 2019; other changes were, or will be, gradually introduced thereafter. Shortly after the enactment of the June 2019 changes, the lawsuit of Andary, et al v USAA Casualty Insurance Company, et al was filed in the Ingham County Circuit Court.

The plaintiffs challenged the constitutionality of two aspects of the 2019 amendments: (1) the 56-hour limitation for in-home family provided attendant care (i.e., MCL 500.3157(10)); and (2) the fee schedule limitations regarding the attendant care services provided (i.e., MCL 500.3157(7)). The insurer defendants filed a motion to dismiss in response to this lawsuit, which was granted by the trial court. After a motion for reconsideration and a motion to amend the complaint were later denied, the plaintiffs filed an appeal with the Michigan Court of Appeals.

On June 7, the Michigan Court of Appeals will hear oral argument in Andary. Ultimately, the appellate court will decide whether they believe the 2019 amendments were constitutional. In other words, they will decide whether 2019 amendments remain intact or whether, in some form or fashion, the No-Fault Act will be a-changin again. What follows in this post is a high-level overview of the arguments made by the parties and what interested parties can expect moving forward.

Trial Court

In Andary, both plaintiffs had been severely injured because of two separate motor vehicle accidents. One plaintiff received attendant care from her family and friends; the other plaintiff had been a longtime patient at a medical center dedicated to, among other things, rehabilitation for folks suffering from traumatic brain injuries. The rehabilitation center was also a named plaintiff to the litigation.

Because their respective motor vehicle accidents occurred before the 2019 amendments, the plaintiffs argued that they had a vested contractual right to the Personal Injury Protection (PIP) benefits as of the dates of the accidents. Therefore, they argued that application of the 2019 amendments to the No-Fault Act amounted to a retroactive application that is unconstitutional and in violation of Michigan contract law. Furthermore, they assert that any future application of the changes is also unconstitutional, relying on the equal protection and due process clauses.

The insurer defendants argued that the 2019 amendments are given a presumption of constitutionality that plaintiffs cannot overcome. Bolstering this argument was the insurer defendants’ position that rational basis review (i.e., a lessened standard of review) applies to the plaintiffs’ challenges regarding constitutionality. Part and parcel of that argument, the insurer defendants argued that the plaintiffs’ rights did not qualify as fundamental rights under the Constitution. Finally, the insurer defendants argued that the plaintiffs did not possess vested contractual rights because PIP benefits are statutory and can be revoked or modified at the will of Legislature.

Ultimately, the Ingham County Circuit Court sided with the insurer defendants, granted their motion and dismissed the case. In an opinion entered by the trial court on Nov. 13, 2020, it found that the No-Fault Act continued to be a valid exercise of the state’s power; that the 2019 amendments were reasonably related to a legitimate government interest in reducing no-fault insurance costs; that the contract clause does not protect the plaintiffs from underlying changes to the statutory scheme of the No-Fault Act; and neither the due process clause nor the equal protection clause support a finding that the 2019 amendments were unconstitutional.

About three months later, on Feb. 18, 2021, the trial court denied the plaintiffs’ motion for reconsideration and motion to amend the complaint. Regarding the motion for reconsideration, the trial court did not feel that any new issues were raised. Nor did it find that palpable error had been committed. As for the motion to amend the complaint, the trial court primarily relied on its belief that an amended complaint would be futile. Thereafter, the plaintiffs filed their appeal with the Michigan Court of Appeals.

Briefing in the Court of Appeals

The initial briefing in the appellate court did not vary wildly from the issues briefed before the trial court other than the argument by the plaintiffs citing a recent unpublished decision, Jones v Esurance Insurance Company. The plaintiffs pointed to the Jones opinion to support their contention that the 2019 amendments could not be applied retroactively. Specifically, they highlighted that the court in Jones refused to apply one of the 2019 amendments that added a tolling provision to the One-Year Back Rule.

The insurer defendants responded by arguing that the 2019 amendments were not being applied retroactively. Rather, the limitations applied prospectively to reimbursement claims after July 1, 2021.

Because of the procedural posture of the appeal, the plaintiffs had an opportunity to file a reply brief – an opportunity that they did not have in the trial court. Most of their reply is spent discussing the relatively recent Michigan Supreme Court’s decision in Buhl v City of Oak Park. The plaintiffs’ feel that the Buhl decision provides the support needed for the appellate court to find that the 2019 amendments should not be applied retroactively; namely, that the Supreme Court would not retroactively apply changes to the Governmental Tort Liability Act to a tort claim whereby the person was injured before its enactment.

Finally, the plaintiffs conclude their reply by briefly addressing three separate issues: (1) that the insurer defendants’ reliance on the case of Romein v General Motors Corp and workers’ compensation amendments is misplaced because workers’ compensation insurance is purchased by the employer and not by the individual; (2) that the plaintiffs’ rights were vested on the date of accident, that any argument about the 2019 amendments reducing insurance costs would not apply to the plaintiffs as the premiums for their benefits have already been paid, and that, as a result, the 2019 amendments amount to a retroactive application; and (3) that there should be no distinction between the fact that the plaintiffs are not “named insureds” on the insurance but, instead, are resident relatives.

Upcoming Oral Argument

All eyes will be on the appellate court on June 7 when the parties argue their respective positions. As previously mentioned, the appellate court is tasked to determine whether it believes the 2019 amendments are constitutional. If the appellate court sides with the insurer defendants and affirms the decision of the trial court, the 2019 amendments presumably will stand as written.

If the appellate court sides with the plaintiffs and finds that the 2019 amendments are unconstitutional, considerable uncertainty may ensue. As of right now, it is unclear what such a ruling would mean for the 2019 amendments moving forward.

What we do know as a near certainty is that this case is destined for argument in front of the Michigan Supreme Court, especially if the appellate reverses and finds the amendments unconstitutional. Until that time, we will keep your apprised of the appellate process as it unfolds.

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