Monday, July 27, 2009

Michigan's Car Owners Socked for $693 Million -- By the Supreme Court!

It's summer. The governor and the legislature are missing in action, so the Supreme Court is taking a swing at hammering Michigan's citizens. Their weapon? US Fidelity Insurance & Guaranty Company v Michigan Catastrophic Claims Association II, which overturned a Supreme Court decision rendered in the same case just seven months earlier and will impose $693.8 million in additional costs on Michigan's car owners.

Here are the facts of the case: Daniel Migdal suffered catastrophic injuries in a 1981 car accident. Due to the nature and extent of his injuries, he required 24-hour nursing care. Daniel's father sued USF&G to recover the costs of the attendant care, and they agreed that USF&G would pay $54.84 an hour for the care. USF&G then applied to the Michigan Catastrophic Claims Association for reimbursement.

The Michigan Catastrophic Claims Association (MCCA) was created by statute in 1978. Michigan's no-fault law provides unlimited lifetime coverage for medical expenses which result from auto accidents. The MCCA reimburses insurance companies for every claim paid in excess of a threshold amount. The insurance company initially pays the entire claim, but is reimbursed by the MCCA for the excess medical costs.

All auto insurance companies operating in Michigan are assessed to cover catastrophic medical claims occurring in Michigan. Those assessments are generally passed on to auto insurance policyholders. The 2009-2010 assessment is $124.89 per vehicle.

The MCCA refused to pay the total amount requested by USF&G on the grounds the amounts were unreasonable, agreeing only to pay $22.05 per hour for attendant care. USF&G sued the MCCA, and the Supreme Court ruled that "when a member insurer's policy only provides coverage for 'reasonable charges,' the MCCA has authority to refuse to indemnify unreasonable charges." This was the USF&G I decision, issued on December 29, 2008.

Here's another interesting twist to the Migdal story. Daniel's father stated a company, Medical Management, to make a profit from the attendant care paid by USF&G. From the $54.84/hour payments, Medical Management paid the nurses actually providing the care an average of $32/hour, including benefits, and kept the rest of the payments for itself. In 2003, Medical Management earned about $200,000 in profits.

Under USF&G I, Michigan's car owners did not have to pay for Medical Management's profits, nor did they have to pay outrageous premiums to support unreasonable payouts. All that changed on January 1, 2009, when Cliff Taylor left the bench, replaced by the victor in last November's election, Diane Hathaway. The liberals (Hathaway, Elizabeth Weaver, Michael Cavanagh, and Chief Justice Marilyn Kelly) now outnumber the conservatives (Maura Corrigan, Stephen Markman, and Robert Young).

The change in court composition motivated USF&G to leap into action. It filed a motion for rehearing (very seldom granted), expressly on the grounds that the court's membership had changed, reasoning (correctly, as it turned out) that the membership change would produce a flip-flop in the court's conclusions. USF&G argued, apparently unashamed:

[T]his Court's practice of granting rehearing requests based on nothing more than a view of a majority of the Justices that the Court's original opinion is incorrect . . . is as it should be, given this Court's status as a court of last resort.

This argument ignores Supreme Court precedent dating to 1883, and is a view with which the current majority apparently agrees. So, the court granted the motion for rehearing, and reversed itself, holding that the MCCA is required to reimburse insurers for all costs incurred in paying for catastrophic claims, regardless of whether the costs are reasonable. This was USF&G II, issued on July 21, less than 7 months after USF&G I.

How does this affect you? If you own a car, you pay insurance premiums. You are required by law to have catastrophic injury coverage. The MCCA determines what that will cost each year, then assesses the insurance companies doing business in Michigan. The insurers then pass the assessment on to their insured drivers, who pay it in the form of a premium. If the MCCA's liability is unlimited, the premiums go up.

And go up they already have. After the court granted USF&G's motion for rehearing, the MCCA did an actuarial study to calculate the impact of the decision eventually issued by the court. As a consequence of the court's decision, the MCCA has increased its assessment by 19 percent, or $693.8 million dollars.

This is a tax increase of over $693 million, perpetrated by the Michigan Supreme Court, and on what basis? Under the applicable rules, there was no basis for a rehearing, and the Supreme Court's majority opinion is nothing more than the previous dissent, re-titled and logically incoherent.

It's tough to do business in Michigan, and liberals are making it even more expensive to live here.


  1. Thanks, Pack. I haven't exactly been burning up the internet lately, so it's nice to get some positive feedback.

    The Wiz

  2. I guess I'll have to rethink that move back to Michigan! So you don't have to get the spare room ready for me, Wiz!

  3. It is really unfortunate for Michigan’s car owners that they will have to bear an additional cost of $693.8 million due to a landmark judgement made by supreme court in a case of US Fidelity Insurance & Guaranty Company v Michigan Catastrophic Claims Association II. This amount is passed on from car insurance companies to owners as the insurance premiums which is mandatory as per law to have catastrophic injury coverage. It proves that the MCAA’s liability is endless & the premiums may go up any time. However car insurers can again sought for the advice from personal injury lawyers so that a detailed insight can be get into its intricacies. For more information visit Personal injury lawyers .

  4. This amount is passed on from car insurance companies to owners as the insurance premiums which is mandatory as per law to have catastrophic injury coverage. For more information visit Personal Injury Attorney Houston.

  5. Your summaries are always top-notch. Thanks for keeping us apprised. I’m reading every word here.

    lexus parts

  6. That looked so awesome. Would love to spend a weekend at the hotel with my 21 yr old daughter and a day just like yours at the Spa. It did look like heaven!