Opinion ID: 2228748
Heading Depth: 1
Heading Rank: 3

Heading: Equal Protection Case Analysis

Text: We find support for our conclusion of facial unconstitutionality in the case law as developed by the courts of this state. Indeed, both this Court and the Court of Appeals have earlier been faced with equal protection challenges to analogous governmental set-off schemes; these challenges were presented in both Fox v Employment Security Comm, 379 Mich 579; 153 NW2d 644 (1967), and Bowser v Jacobs, 36 Mich App 320; 194 NW2d 110 (1971). In Fox, weekly unemployment benefits were statutorily denied to those employees receiving total permanent, partial permanent, or temporary disability workers' compensation benefits. Recipients of workers' death benefits, specific loss benefits, and those employees who elected to accept a lump sum workers' compensation award, however, were statutorily permitted to receive weekly unemployment compensation. Justice T.M. KAVANAGH, writing for the majority, opined that the object of the disputed statutory scheme was to preclude the possibility of benefit duplication; this object was identified by the Court as a permissible legislative purpose. The distinction drawn by the Legislature between the two classes of potential weekly unemployment compensation recipients on the basis of a worker's eligibility for either permanent or temporary compensation as opposed to death benefits, specific loss benefits, and lump sum benefits, however, was held to be an impermissible, arbitrary classification scheme. This was so, the Court opined, because under the statutory scheme certain workers were permitted to obtain unemployment benefits while others similarly situated were not. Citing People v Chapman, 301 Mich 584; 4 NW2d 18 (1942), which quoted from Haynes v Lapeer Circuit Judge, 201 Mich 138; 166 NW 938 (1918), the Court stated: `Legislation which, in carrying out a public purpose for the common good, is limited by reasonable and justifiable differentiation to a distinct type or class of persons is not for that reason unconstitutional because class legislation, if germane to the object of the enactment and made uniform in its operation upon all persons of the class to which it naturally applies; but if it fails to include and affect alike all persons of the same class, and extends immunities or privileges to one portion and denies them to others of like kind, by unreasonable or arbitrary subclassification, it comes within the constitutional prohibition against class legislation.' 379 Mich 579, 589. Under the auspices of the traditional equal protection test, the Court held that the disputed statutory classification scheme denied plaintiffs equal protection despite its attempt to effectuate a permissible legislative objective of duplicative benefit elimination. While we are cognizant that Fox is not a direct analogue of the present action, we believe it persuasively offers support for the proposition that the classifications drawn here are violative of equal protection. In fact, we are of the opinion that the Fox Court went further than we are presently required to proceed in finding a governmental set-off scheme constitutionally infirm in that neither the unemployment nor workers' compensation beneficiaries made any financial contribution for their benefit rights whereas in the instant case the beneficiaries made contributions for all benefit rights. Further support for our ruling of facial unconstitutionality is found in the closely analogous case of Bowser v Jacobs, 36 Mich App 320; 194 NW2d 110 (1971) (now-Justice LEVIN, dissenting and recommending remand for further findings of fact). In Bowser, the Court of Appeals considered the equal protection viability of a statutory scheme under the Motor Vehicle Accident Claims Act. The disputed scheme operated to totally bar those employees entitled to workers' compensation from applying for benefits under that act. Those claimants similarly situated, but who had nonetheless secured voluntary collateral, private insurance, however, were permitted recourse against the fund. The majority agreed with the plaintiffs' concern that the classification was violative of traditional equal protection mandates. [25] Writing for the Court, Chief Judge LESINSKI stated: The legislative aim of this social legislation    is to compensate those injured by uninsured tortfeasors who would otherwise have had no source of recovery. But, as we have seen, some persons who have available avenues of recovery are permitted to reach the Fund but injured employees are not. We are constrained to agree that the legislature has arbitrarily carved out this class from those who have recourse to the Fund. This classification is one made without the force of compelling logic; we find it unconstitutionally discriminatory. 36 Mich App 320, 328. Defendant characterizes Bowser as inapt on the ground that the statutory scheme presently under consideration merely mandates a set-off in recovery while the Bowser statutory scheme required a total bar to recovery. We do not find this distinction persuasive, especially in view of the fact that in both Bowser and the case at bar the concern is one of statutory classification rather than the aggregate amount of an insured's recovery. We find the basis of the Bowser court's reasoning appropriate for consideration in the matter before us. Defendant's principal rebuttal to the Court of Appeals ruling of unconstitutionality rests upon the decision of the United States Supreme Court in Richardson v Belcher, 404 US 78; 92 S Ct 254; 30 L Ed 2d 231 (1971) (Justices Douglas, Marshall and Brennan dissenting). We find this arguable, but distinguishable and not persuasive. The facts presented in Richardson required the United States Supreme Court to consider a traditional equal protection challenge to  224 of the Social Security Act. The disputed statutory scheme required the set-off of state and Federal workers' compensation benefits against Federal Social Security disability benefits. Those similarly situated but entitled to voluntary, private benefits, however, were not required to maintain a similar set-off. The Supreme Court, in a 4 to 3 decision, ruled that the difference in treatment accorded these two classes was not constitutionally infirm considering the peculiar legitimate legislative purpose sought to be furthered by the scheme, i.e., the affirmance and encouragement of state workers' compensation schemes. Justice Stewart writing for the majority in Richardson stated: It is self-evident that the offset reflected a judgment by Congress that the workmen's compensation and disability insurance programs in certain instances served a common purpose, and that the workmen's compensation programs should take precedence in the area of overlap.       The original purpose of state workmen's compensation laws was to satisfy a need inadequately met by private insurance or tort claim awards. Congress could rationally conclude that this need should continue to be met primarily by the States, and that a federal program that began to duplicate the efforts of the States might lead to the gradual weakening or atrophy of the state programs. 404 US 78, 82-84. We are convinced that Richardson is manifestly distinguishable from the case at bar. First, the United States Supreme Court's ruling specifically relied on the Federal-state relationship and the congressional desire not to encroach upon a state program. That policy is obviously not present in the instant case. Second, factually the two situations under comparison markedly differ. This is so in two pivotal respects. The first significant factual distinction centers on the fact that Richardson concerned the set-off relationship of two non-beneficiary contributory systems from which the insured would benefit gratuitously, whereas the instant case concerns the set-off relationship of two beneficiary contributory systems. Unlike the situation posed in Richardson, this Court is not required to rule on a legislative classificatory attempt to eliminate redundant, free transfer payments; rather, we are faced with a manifestly distinguishable attempt to set off insured-financed governmental benefits against insured-financed private no-fault coverage. The second significant factual distinction involves the circumstance that the Richardson scheme sought to set off a disability benefit against a disability benefit, whereas the scheme under review seeks to set off a longevity benefit against a disability benefit. We find this dissimilarity compelling. Third, we find Richardson distinguishable in terms of the legislative purposes sought to be accomplished by the statutory schemes engineered by the United States Congress and the Michigan Legislature. Reduced to their common denominator, both schemes have as an apparent legitimate purpose the elimination of duplicative recovery. This elimination was sought to be achieved by these two legislative bodies, however, through two entirely different vehicles. Indeed, in Richardson, Congress enacted a set-off provision as a vehicle to reduce the Federal government's risk on its own Federal, governmental fund. Here, unlike Richardson, the Michigan Legislature has enacted a set-off as a vehicle to reduce the private insurance industry's risk on a private insurance fund. In essence, the  3109(1) scheme operates to either partially or completely discharge private contractual, no-fault obligations while the Richardson scheme operated to discharge public obligations created and controlled by Congress pursuant to its general welfare powers. On the basis of the foregoing analysis of Richardson, we are persuaded that the majority's reasoning and holding therein is not dispositive of the case before us as suggested by defendant. [26] We are further persuaded that the conceptual analysis offered in both Fox and Bowser is both appropriate for our present consideration and supportive of our finding of facial unconstitutionality. VII. DUE PROCESS CHALLENGE Plaintiffs additionally contend that the  3109(1) statutory scheme is facially unconstitutional as it confiscates property in the form of personally financed premium payments without due process of law. In support of this contention, plaintiffs forward essentially the same analysis as provided in their equal protection challenge to  3109(1). Defendant similarly rests upon the same analysis it proffered to rebut plaintiffs' equal protection challenges. We have consistently opined that the over-all objective of the No-Fault Act is to adequately, assuredly, and promptly compensate victims of automobile accidents for certain economic losses. We have likewise determined that the statutory scheme engineered by  3109(1) has as its permissible purpose either the elimination of duplicative recovery or the reduction of premium costs for all insureds. It is beyond peradventure that payment of personal protection insurance benefits as well as the payment of governmental benefits under the no-fault scheme are triggered by an injury arising from a compensable automobile accident and resulting in economic loss to the insured. Yet, the broad statutory language of  3109(1) irrationally permits the set-off of non-accident as well as accident related governmental benefits. Indeed, the unqualified, overbroad language of  3109(1) indicates the absurd result that not only may the insurer subtract insured subsidized accident-related Social Security benefits as here, but the insurer may also set off e.g., Federal, state, municipal and employee pension and disability plans, veterans' benefits, and other non-automobile casualty related benefits paid from a governmental fund and financed by the recipient insured. No doubt, were we to hold this section constitutional, we could envision an insurer setting-off an insured's governmental pension benefits awarded because of the insured's employment longevity, against the insurer's no-fault liability for injury occasioned in an automobile accident. It is clear from the above example that the language of this scheme is unconstitutionally overbroad and devoid of means rationally related to an otherwise legitimate legislative purpose. VIII. CONCLUSION We find that the elimination of duplicative benefits and the maintenance or reduction of premium costs are permissible exercises of the legislative judgment. We are not persuaded, however, that either the classifications drawn or the means selected by the Legislature to effectuate this judgment through the enactment of  3109(1) reasonably relate to these otherwise legitimate governmental purposes. Accordingly, we find the statutory scheme of  3109(1) to facially deny plaintiffs both due process and equal protection of the laws. Having found  3109(1) facially unconstitutional, we likewise find the contract provision invalid as offensive to public policy. See, e.g., State Farm Mutual Automobile Ins Co v Shelly, 394 Mich 448; 231 NW2d 641 (1975). Although the Court of Appeals found  3109(1) to be of no effect as of the date of its enactment, we hold that in the interests of justice our declaration of unconstitutionality must be given only limited retroactive effect. We, therefore, hold the ruling announced today to be applicable to: (i) the instant case and all lower court cases presently pending which have raised this issue but in which a decision has not been rendered; (ii) all appropriate future cases in which this section is disputed subsequent to the date of this opinion; (iii) those cases in which a retrial is to occur after the date of this opinion because of remand on any other issue where the  3109(1) set-off issue has been raised; and (iv) those cases pending on appeal or eligible for appeal after the date of this opinion in which this issue has been adequately preserved. We affirm the Court of Appeals finding of unconstitutionality and order entry of judgment consistent with this opinion. No costs, a public question being involved.