Opinion ID: 1815228
Heading Depth: 1
Heading Rank: 4

Heading: deductibility of workers' compensation benefits in cases involving redemptions

Text: The application of the no-fault offset provision to workers' compensation redemptions appears to be a matter of first impression in this Court. However, as indicated by the Court of Appeals certification of conflict pursuant to Administrative Order No. 1984-2, there are at least two decisions on this issue in the Court of Appeals, and these two decisions reach contrary results. The decision in the Court of Appeals in the instant case is to the effect that the amount `provided or required to be provided to plaintiff under the WDCA [i.e., the amount to be offset] is, at most, the amount which he received pursuant to the redemption agreement. 139 Mich App 330. The result reached in the case in conflict, Thacker v DAIIE, supra , and incidentally in a federal district court case, Moore v Travelers Ins Co, 475 F Supp 891 (ED Mich, 1979), was that the no-fault insurer might set off the amount the claimant would have collected had he continued to receive periodic workers' compensation payments for the full period, not merely the actual amount received under a redemption agreement. The Thacker opinion was followed by another Court of Appeals panel in James v Allstate Ins Co, 137 Mich App 222; 358 NW2d 1 (1984), lv den 419 Mich 946 (1984). In the instant case, the Court of Appeals panel relied to a considerable extent on this Court's opinion in Perez v State Farm Mutual Automobile Ins Co, 418 Mich 634; 344 NW2d 773 (1984), and the general policy favoring redemptions. 139 Mich App 330-331. In Perez, this Court said: The required to be provided clause of § 3109(1) means that the injured person is obliged to use reasonable efforts to obtain payments that are available from a workers' compensation insurer. If workers' compensation payments are available to him, he does not have a choice of seeking workers' compensation or no-fault benefits; the no-fault insurer is entitled to subtract the available workers' compensation payments even if they are not in fact paid because of the failure of the injured person to use reasonable efforts to obtain them. [418 Mich 645-646.] The Court of Appeals panel in the instant case misapprehended our holding in Perez. This Court in Perez created a very narrow exception to the literal language of the setoff statute by holding that workers' compensation payments are not deductible when they  are unavailable because the employer failed to obtain workers' compensation coverage.  (Emphasis added.) 418 Mich 650. The situation before us was explicitly discussed in Perez. Several of the cases discussed by the parties in their briefs are not pertinent where workers' compensation payments are unavailable to the injured worker because the employer failed to provide workers' compensation coverage. In Thacker v DAIIE, 114 Mich App 374; 319 NW2d 349 (1982), Moore v Travelers Ins Co, 475 F Supp 891 (ED Mich, 1979), and Luth v DAIIE, 113 Mich App 289; 317 NW2d 867 (1982), workers' compensation payments were available to the injured worker although they were not actually paid to him. In Thacker and Moore, the injured workers redeemed their workers' compensation claims for less than the total amount of available workers' compensation payments they would otherwise have received; in Luth, an injured federal employee elected, pursuant to the federal workers' compensation statute, 5 USC 8118(c), to utilize the sick and vacation days he had accumulated rather than to apply for available federal workers' compensation payments. [Emphasis added. 418 Mich 645, n 17.] In short, our holding in Perez has no direct bearing on the instant case. The Court of Appeals panel in the instant case preferred the policy of favoring redemptions over the reliance of the Thacker panel (114 Mich App 377) on the reasoning in O'Donnell v State Farm Mutual Automobile Ins Co, supra, p 546, that with respect to the offset provision an important objective of the Legislature was to reduce or contain the cost of no-fault insurance by eliminating some of the benefit duplication that would otherwise occur. The Thacker panel then pointed out that the O'Donnell Court thought this was particularly important where the no-fault insurance was compulsory. 114 Mich App 377. We believe the Thacker panel in its reliance on O'Donnell reaches the correct conclusion. See our discussion of Mathis in Part III. We also agree with the reasoning of the court in Moore, which held that under § 3109(1) the amount required to be paid ... should be offset rather than the redemption amount. 475 F Supp 894. That court noted that any other result would allow the Plaintiff to elect who, as between the no-fault and compensation carriers, to collect benefits from. This would disturb the legislatively established relative spheres of application of no-fault and compensation. Section 3109(1) clearly contemplates that the no-fault carrier should be liable only for the excess of its coverage over and above that potentially provided by the compensation carrier. [475 F Supp 894-895.] This result eliminates the need for judicial review of the allocation of settlement amounts and eliminates the incentive for the disabled worker and the workers' compensation carrier to apportion most of the total amount to medical expenses. Further, allowing a plaintiff to settle with the primary insurer and then to recover full wage loss benefits from the excess insurer would undermine the legislative desire to keep no-fault premiums as low as possible by eliminating double recoveries. [I]t would be counter-productive to allow an injured person to recover from the no-fault carrier benefits to which he has already surrendered all claim. [475 F Supp 895.] Allowing a double recovery of this type would discriminate inappropriately between those workers injured in automobile accidents at work and those injured in some other manner while at work. Claimants in both groups can redeem their claims against the workers' compensation insurer and thereby give up their rights to future benefits from that insurer. A worker injured in an automobile accident while at work also has the additional security of obtaining excess benefits from another insurer. However, all claimants injured at work should have the same incentives to maximize their recovery from the primary insurer. We see no reason to permit auto accident claimants to bargain for a workers' compensation settlement and then renew their claims for primary benefits against the secondary insurer, thus making a mockery of the settlement process. Of course, the no-fault insurer remains liable for any benefits due which are greater than the amounts which the workers' compensation system is required by statute to pay to disabled workers.