Plaintiff Health Care Association Workers Compensation Fund, a worker’s compensation self-insurer group, brought this suit to challenge the constitutionality of a portion of MCL 500.2016. 1 Specifically, plaintiff challenges the constitutionality of the addition of language to MCL 500.2016(l)(a) and (3) precluding a worker’s compensation self-insurer group from conditioning the payment of a dividend, i.e., a payout of money from surplus funds to an employer member, on continued participation in the group. The circuit court denied plaintiffs motion for summary disposition and entered judgment in favor of defendant. Plaintiff appeals as of right, and, although we do not conclude that the statute at issue is unconstitutional on its face or as applied, we do conclude that defendant’s interpretation of the statute constitutes retroactive application. We affirm in part, reverse in part, and remand.
SUBSTANTIVE FACTS AND PROCEDURE
Plaintiff is a self-insurer group that contracts annually with member employers to fund worker’s compensation liability. Plaintiff sought in the circuit court to prohibit defendant, the director of the Bureau of Work er’s Compensation in the former Department of Consumer and Industry Services (now the Worker’s Compensation Agency in the Department of Labor and Economic Growth), from enforcing the additional provisions in MCL 500.2016(1)(a) and (3). Particularly, in its complaint, plaintiff sought declarative and injunctive relief with regard to its contention that the language in MCL 500.2016 precluding it from withholding dividends, i.e., refunds of surplus funds, from an employer who decided to discontinue participation with plaintiff was unconstitutional, either in its entirety or as applied to contracts that preexisted the enactment of the pertinent statutory language. After entertaining oral argument, the circuit court issued an opinion rejecting plaintiffs challenges to the constitutionality of MCL 500.2016.
Now, on appeal, three of the four issues presented by plaintiff constitute facial challenges to the constitutionality of the relevant provisions of MCL 500.2016, while plaintiffs remaining issue more narrowly challenges the constitutionality of the application of those provisions to contracts that were entered into before January 4,1999, the effective date of
The resolution of a summary disposition motion is reviewed de novo.
Corley v Detroit Bd of Ed,
i
First, plaintiff argues that the circuit court erred when it denied plaintiffs request for a declaratory judgment that the amendments to MCL 500.2016 create a new obligation in violation of article 1, § 10 of the Michigan Constitution of 1963.
MCL 500.2016 provides, in relevant part:
(1) In addition to other provisions of law, the following practices as applied to worker’s compensation insurance including worker’s compensation coverage provided through a self-insurer’s group are defined as unfair methods of competition and unfair and deceptive acts or practices in the business of insurance:
(a) As a condition of receiving a dividend for the current or a previous year, requiring an insured to renew or maintain worker’s compensation insurance with the insurer beyond the current policy’s expiration date or requiring a member to continue participation with a worker’s compensation self-insurer group.
(3) This section also applies to worker’s compensation self-insurers’ groups.
Const 1963, art 1, § 10, the Contract Clause of the Michigan Constitution, provides that no law “impairing the obligation of contract shall be enacted.” The federal Contract Clause, US Const, art I, § 10, similarly provides that no state shall “pass any. . . Law impairing the Obligation of Contracts .. . .”
The purpose of the Contract Clause “is to protect bargains reached by parties by prohibiting states from enacting laws that interfere with preexisting contractual arrangements.”
Studier v Michigan Pub School Employees’ Retirement Bd,
A three-pronged test is used to analyze Contract Clause issues. The first prong considers whether the state law has operated as a substantial impairment of a contractual relationship. The second prong requires that legislative disruption of contractual expectancies be necessary to the public good. The third prong requires that the means chosen by the Legislature to address the public need be reasonable.
In re Certified Question (Fun 'N Sun RV, Inc v Michigan),
Obviously, application of MCL 500.2016 to contracts entered into by plaintiff before the effective date of the amendments could impair some contracts that plaintiff had entered into because it precludes plaintiff from enforcing contractual provisions that would allow it to withhold dividends from a former member who has ceased participation with plaintiff. But we conclude it unnecessary to ultimately determine whether the im
pairment of contract caused by the pertinent language in MCL 500.2016 constitutes a substantial impairment. As we mentioned earlier, even a statute that substantially impairs a contractual provision does not violate the Contract Clause if there is a significant and legitimate public purpose for the regulation and the means adopted to implement the legislation are reasonably related to the public purpose.
Wayne Co Bd of Comm’rs, supra
at 164. Importantly, in the context of resolving a Contract Clause issue, our Supreme Court has noted the principle that “ ‘[a]s is customary in reviewing economic and social regulation . . . courts properly defer to legislative judgment as to the necessity and reasonableness of a particular measure.’”
Romein v Gen Motors Corp,
The pertinent language of MCL 500.2016 serves the purpose of fostering competition in the market for worker’s compensation coverage by precluding a self-insurer group from conditioning receipt of a dividend, i.e., a refund of surplus funds, on continued participation with the group. While this might not benefit worker’s compensation recipients directly, lower costs to employers and competition generally benefit employers throughout the economy and thereby indirectly aid the state economy in the aggregate. Indeed, it seems that the Legislature could reasonably view eliminating unduly anticompetitive practices as serving the public interest. See, e.g.,
Bristol Window & Door, Inc v Hoogenstyn,
Further, requiring a member of a self-insurer group to forfeit its proportionate share of surplus funds in distribution of dividends as a consequence of leaving the self-insurer group could also reasonably be viewed as an unduly anticompetitive act if a group has no legitimate business interest worthy of protection. Effectively abrogating contractual provisions allowing such a withholding of dividends from employers who cease participation in the group could likewise be viewed by the Legislature as reasonably necessary to bring an immediate end to an unduly anticompetitive practice.
We conclude that the pertinent language of MCL 500.2016 does not violate the federal or Michigan Contract Clause as applied because, granting appropriate deference to legislative judgment, there is a significant and legitimate public purpose for such an impairment of contract and the means adopted to implement the legislation are reasonably related to the public purpose.
Within this issue, plaintiff also makes an argument to the effect that the Legislature may not have intended the relevant amendments made by
The interpretation and application of a statute is a question of law that this Court reviews de novo.
Macomb Co Prosecutor v Murphy,
During the course of oral argument, the parties agreed that participants in the plan that had both paid into the plan and left the plan before adoption of the amendments (i.e., their contracts expired before the effective date of the amendments) are not encompassed in the class of participants affected by the statute. As such, those participants are not entitled to reimbursement because the statute is inapplicable. Additionally, the parties agreed that the statute does apply to those participants who entered into contracts after the effective date of the amendments. Thus, those participants are entitled to reimbursement because the statute is applicable. The parties only disagree regarding those participants that had active annual contracts both before and after the effective date of the amendments. Each of the parties argues that the statutory language is clear and supports its individual interpretation of the statute.
Defendant interprets the statute to allow the Bureau of Worker’s Compensation to apply the statute to contract years before the adoption of the amendments, specifically pointing to the language “current or a previous year” in MCL 500.2016(l)(a). Plaintiff refers to the same language, but argues that the language means that the statute can only be applied to current or previous contract years commencing after adoption of the amendments. After scrutinizing the plain language of the statute, and carefully considering the interpretations offered by the parties, we agree with the latter interpretation.
Contrary to defendant’s assertions, this case does involve the retroactive application of legislation. While defendant asserts that the Bureau of Worker’s Compensation is properly applying the relevant provisions of MCL 500.2016 with regard to the obligations of worker’s compensation self-insurer groups as of the effective date
ii
Plaintiff next argues that the circuit court erred when it denied plaintiffs request to enjoin defendant from enforcing the amendments of MCL 500.2016. We find portions of plaintiffs argument regarding this issue somewhat convoluted. However, plaintiff appears to argue that the language of MCL 500.2016 applicable to worker’s compensation self-insurer groups is somehow invalid or unconstitutional because the Legislature can only regulate such self-insurer groups in the Worker’s Disability Compensation Act (WDCA), MCL 418.101 et seq., or because the remainder of the Insurance Code is only concerned with the activities of insurance companies. We have found no plausible reason to conclude that any part of MCL 500.2016 is invalid on either basis.
While MCL 500.2016 is part of the Insurance Code, plaintiff has not presented, and we have not discovered, any constitutional provision that could reasonably be interpreted as either precluding the Legislature from adopting regulations applicable to worker’s compensation self-insurer groups or that requires the Legislature to only regulate such self-insurer groups in the WDCA. Rather, the Legislature has general plenary power to enact legislation subject only to prohibitions of federal law or the Michigan Constitution.
People v Cooper,
Plaintiff also indicates that MCL 500.2016 is inconsistent with other statutory provisions, particularly other provisions within the Insurance Code. Even if that assertion were accurate, and to whatever extent it is accurate, this would not render MCL 500.2016 invalid or unconstitutional. Rather, it might require the use of certain statutory construction tools or application of principles for interpreting ambiguous statutes. See
Jones v Enertel, Inc,
Plaintiff also contends that defendant does not have authority to enforce provisions of MCL 500.2016 against worker’s compensation self-insurer groups such as plaintiff. Plaintiff begins by asserting that the enforcement of Insurance Code provisions is entrusted to the Insurance Commissioner, but the Insurance Commissioner does not have authority to regulate a worker’s compensation self-insurer group because the Insurance Commissioner only has authority to regulate parties
It is true, from our reading of the Insurance Code, that there is no provision that expressly states that the Insurance Commissioner has authority to regulate worker’s compensation self-insurer groups. Also, it seems essentially undisputed that such self-insurer groups have not historically been considered to be engaged in the business of insurance so as to be normally subject to regulation by the Insurance Commissioner. Nevertheless, when
By the plain language of MCL 500.2016, a worker’s compensation self-insurer group such as plaintiff employs an unfair method of competition and engages in an unfair or deceptive act or practice “in the business of insurance” if it commits the proscribed act of withholding payment of a dividend on the basis of an employer’s discontinuance of participation with the self-insurer group. Accordingly, even if a worker’s compensation self-insurer group is not considered to be engaged in the business of insurance for any other purpose, by the express language of MCL 500.2016 it is engaged in a proscribed practice in the business of insurance if it engages in the conduct it is prohibited from committing by MCL 500.2016(l)(a).
As we stated earlier, MCL 500.2028 grants the Insurance Commissioner power, with probable cause, to examine and investigate the affairs of a person engaged in the business of insurance to determine if the person
has engaged in an unfair method of competition or unfair or deceptive act or practice prohibited by MCL 500.2016. A “[p]erson” is defined for purposes of the Insurance Code to include “any other legal entity.” MCL 500.114. Clearly, (1) plaintiff is a legal entity, and (2) by the applicable statutory language it would be engaged in the business of insurance if it violated MCL 500.2016(l)(a). For these reasons, we conclude that, when
However, on August 25,1999, when Executive Order No. 1999-5
2
went into effect, Governor John Engler transferred the relevant authority of the Insurance Commissioner over worker’s compensation
All the authority, powers, duties, functions, grants and responsibilities of the Insurance Bureau to determine unfair methods of competition and unfair and deceptive acts or practices as applied to workers’ compensation coverage provided through a self-insurer’s group, provided for in [1998 PA 457 ], being [MCL 500.2016], are hereby transferred to the Bureau of Workers’ Disability Compensation.
Plaintiff argues in cursory fashion that the Governor could not amend the law by executive order to transfer enforcement power from one department to another
department. This argument is erroneous. Under Const 1963, art 5, § 2, the Governor has the authority to transfer power “ ‘within, among or across’ ” executive departments.
Straus v Governor,
hi
Plaintiff argues that the circuit court erred in denying plaintiffs request for a declaratory judgment because the enactment of the portion of
No law shall embrace more than one object, which shall be expressed in its title. No bill shall be altered or amended on its passage through either house so as to change its original purpose as determined by its total content and not alone by its title.
The Title-Object Clause states that a law may not embrace more than one object.
Pohutski, supra
at 691.
The object of a law is its general purpose or aim. The “ ‘one object’ ” provision is to be “construed reasonably, not in so narrow or technical a manner that the legislative intent is frustrated.”
Id.
Also, our Supreme Court has stated in the context of a Title-Object Clause issue that “ ‘all possible presumptions should be afforded to find constitutionality.’”
Id.
at 690, quoting
Advisory Opinion re Constitutionality of
Plaintiffs argument depends on characterizing the regulation of worker’s compensation
We conclude that the inclusion in
iv
Finally, plaintiff argues that the circuit court erred in denying plaintiffs request for a declaratory judgment because the enactment of the part of
Const 1963, art 4, § 25 provides: “No law shall be revised, altered or amended by reference to its title only. The section or sections of the act altered or amended shall be re-enacted and published at length.”
Plaintiffs argument depends on its contention that the language added to MCL 500.2016 by
CONCLUSION
Application of the pertinent language of MCL 500.2016 to conduct occurring after the effective date of its enactment, but related to contracts entered into before that date, does not violate the Contract Clauses of the federal or state constitution. However, when the statute is interpreted and applied as suggested by defendant, it does constitute a retroactive application of the statute. Plaintiff has not established that the Legislature lacked the power to regulate worker’s compensation self-insurer groups in the Insurance Code or that defendant does not have the power to enforce MCL 500.2016 against such self-insurer groups. And plaintiff has not established that
Affirmed in part, reversed in part, and remanded for entry of an order consistent with this opinion. We do not retain jurisdiction.
Notes
As amended by
This executive order represents the promulgation of Executive Reorganization Order No. 1999-3 and is codified at MCL 418.3.
Such an executive order is subject to being blocked by a legislative veto mechanism, Straus, supra at 534, but Executive Order No. 1999-5 was not blocked by legislative veto.