THOMPSON v DETROIT AUTOMOBILE INTER-INSURANCE EXCHANGE
Docket No. 67794
Supreme Court of Michigan
Argued May 3, 1983. Decided March 12, 1984.
418 Mich. 610
In opinions by Justice Levin joined by Justice Kavanagh, and by Justice Ryan joined by Justice Boyle, the Supreme Court held:
Social security disability benefits received by dependents of an injured wage earner because of the wage earner‘s disability are required to be subtracted from no-fault work-loss benefits otherwise payable for the injury.
Justice Levin wrote:
1. The purpose of social security disability benefits is income replacement. When paid to dependents, the payments are calculated on the basis of the history of the injured worker‘s earnings, and have the same income-replacement effect as work-loss benefits provided by the no-fault act. Consistent with the legislative purpose of reducing the cost of providing no-fault
REFERENCES FOR POINTS IN HEADNOTES
[1-7] 7 Am Jur 2d, Automobile Insurance §§ 361, 368.
[1-4] 70 Am Jur 2d, Social Security and Medicare § 4.
Validity and construction of no-fault insurance plans providing for reduction of benefits otherwise payable by amounts receivable from independent collateral sources. 10 ALR4th 996.
[6] 7 Am Jur 2d, Automobile Insurance § 363.
Entitlement of child, spouse, parent, or other person to survivor‘s loss benefit under no-fault insurance acts. 12 ALR4th 974.
2. Both the no-fault and social security acts embody social welfare programs. No-fault premiums paid by the owners of motor vehicles to no-fault automobile insurers are governmentally mandated exactions that socialize the cost of providing work-loss benefits to all persons injured in automobile accidents, including those who have not contributed, or whose family members have not contributed, by the payment of premiums. The characterization of social security disability benefits to a worker‘s dependents as a social welfare program does not provide a reason for not subtracting the payments from no-fault work-loss benefits. The social security disability payments to dependents serve to replace loss of income from the disabled worker.
3. Because social security survivors’ benefits are required to be set off from no-fault benefits, failure to require setoff of social security disability benefits would have the anomalous result of providing both no-fault and social security benefits while a worker is alive and disabled, but setting off the social security benefits against the no-fault benefits when the worker dies of his injuries. The difference in the labels attached to the social security payments which are substantially identical in amount whether the payment is for disability or death should make no difference. There is no reason to believe that the Congress provided more than income replacement to dependents of a disabled worker while providing only income replacement to the dependents of a deceased worker.
Justice Ryan, joined by Justice Boyle, stated that in this case both no-fault work-loss benefits and social security disability benefits serve the same purpose and are paid as a result of the same accident. It is of no significance, in determining their purpose, that a portion of the social security benefits are paid to a worker‘s dependents. Each kind of benefit replaces in part the wages lost as a result of the breadwinner‘s injuries, to assure the family‘s economic survival. Under the no-fault act, the social security disability benefits must be deducted from no-fault work-loss benefits.
Reversed.
Justice Cavanagh, joined by Chief Justice Williams and Justice Brickley, dissented.
1. Social security disability benefits paid to a worker‘s family
2. Social security survivors’ benefits, in contrast, are subject to the setoff provisions of the no-fault act because they are intended to provide persons dependent upon a wage earner with protection against economic hardship occasioned by the loss of the wage earner‘s support. No-fault survivors’ benefits also are intended to compensate dependents of a decedent for the support which would have been received had the decedent lived. The fact that the setoff provisions of the no-fault act would be applicable upon the death of an injured worker receiving both work-loss and social security disability benefits does not require setoff while the insured is alive. At the time of the injured worker‘s death, a different type of benefit is payable, and it is not inconsistent to subject different types of benefit to different treatment. Even though in some instances an injured worker and his family may receive combined benefits in excess of the actual wages lost, government benefits which do not duplicate no-fault benefits cannot be set off under the no-fault act.
107 Mich App 256; 309 NW2d 228 (1981) reversed.
1. INSURANCE — NO-FAULT — SOCIAL SECURITY — DUPLICATION OF BENEFITS — SETOFF.
No-fault work-loss benefits are intended to replace income lost as a result of an inability to perform work because of an injury, and to the extent that social security disability benefits serve the same purpose as the no-fault benefits and are provided or are required to be provided as a result of the same accident, the no-fault act requires that they be subtracted from no-fault benefits (
2. INSURANCE — NO-FAULT — SOCIAL SECURITY — DUPLICATION OF BENEFITS — SETOFF.
Social security disability benefits paid to the spouse and children of an injured worker have the effect of replacing the income lost as a result of the worker‘s injury, and where social security benefits are provided or are required to be provided as a result of the same accident, they must be set off from no-fault work-loss benefits otherwise payable for the injury (
3. INSURANCE — NO-FAULT — SOCIAL SECURITY — DUPLICATION OF BENEFITS — SETOFF.
The characterization of social security disability benefits as a social welfare program is not a reason not to deduct such payments from no-fault work-loss benefits; both the no-fault and social security acts socialize losses, and the purpose of social security disability benefits, like that of no-fault work-loss benefits, is income replacement (
OPINION BY RYAN, J.
See headnote 2.
DISSENTING OPINION BY CAVANAGH, J.
4. INSURANCE — NO-FAULT — SOCIAL SECURITY — DUPLICATION OF BENEFITS.
Social security disability benefits paid to dependents of a disabled wage earner are not subject to the mandatory setoff provision of the no-fault act because those benefits do not duplicate work-loss benefits paid to an injured wage earner under the no-fault act (
5. INSURANCE — NO-FAULT — DUPLICATION OF BENEFITS.
Benefits provided or required to be provided by the laws of any state or the federal government may be subtracted from personal protection insurance benefits otherwise payable for an injury where the other benefits duplicate the personal protection benefits (
6. INSURANCE — NO-FAULT — SOCIAL SECURITY — DUPLICATION OF BENEFITS.
Social security survivors’ benefits are subject to the setoff provisions of the no-fault act because they duplicate in considerable degree and purpose the survivors’ benefits provided by the no-fault act (
7. INSURANCE — NO-FAULT — DUPLICATION OF BENEFITS.
The determination whether governmental benefits paid to a worker who is injured in an automobile accident serve the same purpose as no-fault benefits to which the worker is entitled requires a particularized assessment of the governmental benefits to identify the ultimate beneficiary, the nature of the benefits, the reason for paying them, and the events which caused entitlement (
Abood, Abood & Rheaume, P.C. (by William E. Rheaume), for the plaintiffs.
Gromek, Bendure & Thomas (by John A. Lydick) for the defendant.
LEVIN, J. (for reversal). The question presented is whether social security disability benefits that would not be paid to the dependents of a person injured in an automobile accident but for income lost as a result of the accident are required by § 3109(1) of the no-fault automobile liability act to be coordinated with work-loss benefits payable under the no-fault act. We would hold that coordination is required, and that social security disability payments to dependents are required to be subtracted from work-loss benefits.
I
On July 13, 1978, Francis Thompson was injured in an automobile accident. Detroit Automobile Inter-Insurance Exchange is the no-fault insurer obligated to pay him work-loss benefits. Francis Thompson also receives social security disability benefits pursuant to
Upon learning of the Thompsons’ receipt of social security disability payments, DAIIE reduced the monthly amount payable to Thompson by the aggregate amount of social security disability payments made to the Thompson family. Francis Thompson did not challenge DAIIE‘s reduction for
The circuit court granted the Thompsons’ motion for summary judgment, and the Court of Appeals affirmed. We would reverse.2
II
Section 3109(1) of the no-fault act provides:
“Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance payments otherwise payable for the injury.”3
The subtraction from no-fault work-loss benefits of social security disability benefits paid directly to Francis Thompson, the disabled worker, is not contested. All appear to agree that social security disability benefits, when paid to the injured worker, like the survivors’ benefits required to be subtracted in O‘Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524; 273 NW2d 829 (1979), app dis 444 US 803; 100 S Ct 22; 62 L Ed 2d 16 (1979), and the workers’ compensation benefits required to be subtracted in Mathis v Interstate Motor Freight System, 408 Mich 164; 289 NW2d 708 (1980), are “benefits” within the meaning of § 3109(1). The issue presented is whether social
Social security disability benefits to dependents are paid directly to the injured worker‘s spouse and children.4 Under the Social Security Act, a child only receives disability payments if he is dependent on the injured worker;5 any money the child receives in the form of social security payments is money he need no longer obtain from the disabled worker on whom he is dependent. Similarly, disability benefits are payable to a spouse6 only when Congress deems it to be difficult for the spouse to work either because the spouse is 62 years old or has a child in care;7 any money received in the form of social security disability payments is money that need no longer be obtained from the disabled worker.8
Before an automobile accident, then, the depen-
Social security disability payments to dependents are calculated on the basis of the disabled worker‘s past earnings record,10 and the maximum amount of payments that the family may receive is also based on the earnings history of the disabled worker.11 If these payments were to have some purpose other than replacing the injured worker‘s lost income, that purpose would not be served by tying disability payments to dependents to the past earnings record of the disabled worker.
III
The dissenting opinion acknowledges that social security disability payments, like no-fault work-loss benefits, provide “income insurance protec-
A
The United States Supreme Court has said that in providing for the payment of social security benefits to dependents the Congress “intended to provide persons dependent on the wage earner with protection against the economic hardship occasioned by loss of the wage earner‘s support“. Califano v Jobst, 434 US 47, 50; 98 S Ct 95; 54 L Ed 2d 228 (1977).16 The dissenting opinion does not explain what purpose social security disability payments to dependents serve other than replacing the lost wages of the disabled person,17 or why
This Court has held, despite the “social welfare” component that inheres in social security survivors’ payments,18 that survivors’ payments are required by § 3109(1) to be subtracted from no-fault work-loss benefits. O‘Donnell v State Farm Mutual Automobile Ins Co, supra. The failure to require a setoff of social security disability payments to dependents would yield the anomalous result that the payments to dependents are not subtracted as long as the injured worker is alive and disabled, but are subtracted under the rule of O‘Donnell, supra, when the injured worker dies from his injuries.
The dissenting opinion asserts that this result is not anomalous because “[a]t the time of the injured worker‘s death, a different type of benefit is payable, and it is not inconsistent to subject the benefit to a different treatment.”19 Yet it is but a truism that a different type of payment is made when the worker is disabled than when the worker
both payments are made because a loss of income from work has resulted from a worker‘s accident. Finally, disability caused by the same automobile accident triggers entitlement to both the no-fault work-loss benefits and the social security disability payments to dependents.
The dissenting opinion recognizes that the second criterion of the Jarosz test is also satisfied because the social security disability payments to dependents are provided as a result of the same accident. Post, p 628.
B
The social welfare program argument ignores that the no-fault act also embodies a social welfare program. Although the no-fault system is administered through insurance companies, premiums paid by the owners of motor vehicles to no-fault automobile insurers are governmentally mandated exactions that socialize the cost of providing work-loss benefits and medical payments to all persons injured in automobile accidents.
No-fault benefits for work loss and medical expense in respect to automobile accidents are payable although the injured person does not own (and no family member in the same household owns) an automobile, and thus although the injured person has not contributed (and no family member has contributed) to the no-fault system.21 Even if the injured person owns a motor vehicle and has not contributed to the no-fault system by insuring the vehicle, no-fault benefits are payable to him if he is injured in an accident not involving
The workers’ compensation act has frequently been referred to as the first, or one of the first, social welfare programs. That social welfare program is also largely administered through insurance companies and funded with insurance premiums. There, too, there is a trade-off of a cause of action in tort for benefits payable without regard to fault. Benefits under both programs are specified by statute, and premiums are expected to be determined on the basis of the insurer‘s loss experience.
The no-fault automobile liability act actually goes further than the workers’ compensation act in socializing losses. There is no cap on recoverable medical expense, and the maximum work-loss benefit is considerably higher than the maximum workers’ compensation benefit.24 No-fault benefits are payable when there is no insurance; this is accomplished through the assigned claims facility, which provides benefits when an owner or driver is not insured or cannot be identified. That facility provides a means of requiring persons who in fact contribute to the no-fault system to pay for those who do not, and functions like the Second Injury Fund by assessing all automobile insurers for the cost.25 Employees of an uninsured employer do not
An employer can seek to reduce his workers’ compensation premium cost by exercising care and reducing accidents. The most careful automobile owner must, however, pay premiums for losses caused by careless drivers who may collide with him or his automobile or a family member in the same household, and for losses caused by uninsured and unidentified drivers. Owners who have one household member and those who have many household members who do not generally drive the owner‘s automobile pay essentially the same no-fault insurance premiums.
No-fault premiums, then, like social security taxes, do not reflect only the cost expected to be imposed on the system by the person making the payment, but include amounts for costs expected to be imposed on the system by persons who do not contribute thereto or do so in amounts inadequate to provide the benefits they receive. Under the Social Security Act, survivors‘, retirement, and disability benefits are not payable unless the person claiming the benefit or person upon whom he is dependent contributed to the social security program,27 but there is no such limitation in the no-fault act.28
The no-fault automobile liability act may thus provide the most comprehensive and generous “social welfare program” yet enacted.
IV
In sum, the coordination provision of the no-
The decision of the Court of Appeals is reversed.
KAVANAGH, J., concurred with LEVIN, J.
RYAN, J. (for reversal). In Jarosz v DAIIE, 418 Mich 565, 577; 345 NW2d 563 (1984), we held that the criteria for determining whether governmental benefits “provided or required to be provided” must be deducted from no-fault work-loss benefits are:
1) Whether they serve the same purpose as the no-fault benefit, and
2) Whether they are provided or are required to be provided as a result of the same accident.
In this case, the no-fault work-loss benefits and the social security disability payments are both intended to relieve Mr. Thompson and his family of the economic hardship which would result from his inability because of his injuries to earn wages to support himself and his family.1 In addition, the event which triggered entitlement to both categories of benefits is the automobile accident which resulted in Mr. Thompson‘s incapacity. Both sets of benefits serve the same purpose and are paid as the result of the same income-impairing event, the auto accident. It is of no significance, for purposes
Since both sets of benefits serve the same purpose and are paid as a result of the same income-reducing event, the auto accident, they meet the test for the § 3109(1) setoff we laid down in Jarosz, supra.
I join, therefore, in the judgment to reverse the decision of the Court of Appeals.
BOYLE, J., concurred with RYAN, J.
CAVANAGH, J. (dissenting). Plaintiff Francis Thompson, while insured by the defendant, was injured in an automobile accident, which resulted in a disability preventing him from returning to work. As a result, he receives work-income loss benefits under the no-fault insurance act,
In computing the benefits owed to Francis Thompson under the no-fault act, the defendant reduced the monthly amount payable to him by the total amount of monthly social security payments made to each member of his family. Defendant claimed that its right to such a setoff exists under
Plaintiffs filed suit against the defendant con-
Section 3107 of the no-fault act provides for the payment of benefits to cover loss of income suffered by an injured person insured under the act. This controversy centers on an interpretation of § 3109(1) of the act, which states:
“Benefits provided or required to be provided under the laws of any state or the federal government shall be subtracted from the personal protection insurance benefits otherwise payable for the injury.”
MCL 500.3109(1) ;MSA 24.13109(1) .
In O‘Donnell v State Farm Mutual Automobile Ins Co, 404 Mich 524; 273 NW2d 829 (1979), we were asked to determine whether § 3109(1) requires a setoff of social security survivors’ benefits from the survivors’ receipt of benefits under the no-fault act. We concluded that § 3109(1) requires a setoff of social security survivors’ benefits when those benefits are paid as a result of the same accident which entitles the survivors of the insured decedent to benefits under the no-fault act because the governmental benefits duplicated in varying degrees the no-fault benefits also due.
“The history of § 3109(1) indicates that the Legislature‘s intent was to require a set-off of those government benefits that duplicated the no-fault benefits payable because of the accident and thereby reduce or contain the cost of basic insurance.” O‘Donnell, p 544.
In a case similar to the one before us now, we were asked to decide whether under § 3109(1) the defendant could deduct from no-fault wage-loss benefits otherwise due a portion of the social security old-age benefits being received by the plaintiff. Jarosz v DAIIE, 418 Mich 565; 345 NW2d 563 (1984). We held that the applicable test regarding whether governmental benefits provided or required to be provided must be deducted from no-fault benefits under § 3109(1) is whether the governmental benefits:
“1) Serve the same purpose as the no-fault benefits, and
2) Are provided or are required to be provided as a result of the same accident.” Jarosz, p 577.
Thus, the key to determining whether § 3109(1) requires a setoff of social security disability benefits for dependents from those benefits payable under the no-fault act is whether the social security benefits are payable as a result of the same accident and whether they are duplicative, i.e., whether they serve the same purpose as the no-fault benefits. In this case the social security benefits were payable as a result of the same accident so we turn our attention to the question of whether they serve the same purpose as the no-fault benefits due.
Plaintiffs counter that the social security disability benefits payable to a spouse or child of the wage earner are not duplicated in any form, to any degree, by any no-fault benefits and that therefore no deductions should be permitted from the wage benefits payable under the no-fault act. The no-fault benefits for which the defendant is responsible are payable only to Francis Thompson because the injured wage earner is the only person who qualifies for work-income loss benefits under § 3107(b). The amount of these benefits is determined solely on the basis of the injured worker‘s insurance coverage and wages; the amount of benefits is not affected by the worker‘s marital status or the number of dependent children.
The Court of Appeals agreed with the plaintiffs that the mandatory setoff provision of § 3109(1) is inapplicable because there is no duplication of benefits. The Court concluded that the purpose in
Jarosz, p 580, sets forth a four-point test to determine whether particular governmental benefits serve the same purpose as no-fault benefits:
“In every case, in order to determine whether the governmental and no-fault benefits serve the same purpose (criterion 1), a particularized assessment of the questioned governmental benefit is necessary to identify the ultimate beneficiary, the nature of the benefits, the reason for paying them, and the events triggering entitlement to them.”
We acknowledge that the nature of both benefits is the replacement of lost income and support. In addition, the triggering event is the same. However, analysis of the remaining points reveals that social security disability benefits paid to the worker‘s family serve a different purpose than no-fault work-loss benefits paid to the worker and are therefore not subject to setoff under § 3109(1).
As to the ultimate beneficiary, our brothers RYAN and LEVIN believe that the injured worker and the worker‘s family are the ultimate beneficiaries of both benefits. We disagree. No-fault benefits are paid only to the disabled worker. In contrast, social security disability benefits are paid separately both to the worker and to the dependent children and spouse of the worker. Benefits payable to a dependent child inure directly to the child despite the requirement of dependency status; no indices of parental ownership ever attach to such funds. See Mask v Mask, 95 NM 229; 620 P2d 883 (1980), and Fuller v Fuller, 49 Ohio App 2d 223; 360 NE2d 357 (1976). Benefits payable to
Unlike Justice LEVIN, we attach some significance to the fact that Congress purposely chose to pay a portion of the social security disability benefits to the worker and the remainder directly to the spouse and dependents, rather than making all payments to the worker. The wisdom of this division of payment is particularly evident where the worker and the worker‘s spouse are estranged or divorced and child support is not regularly provided by the worker. No-fault payments benefit dependents only indirectly, whereas disability payments benefit them directly.
The reasons for paying no-fault work-loss and social security disability benefits are also different. Work-loss benefits are provided to an injured insured worker to replace lost wages, subject to the limitations in § 3107(b). These benefits are not based upon the number of the insured worker‘s dependents. Section 3107(b) basically provides simple income insurance protection, which requires benefits to be computed to compensate the insured worker approximately dollar for dollar for the amount of wages lost because of the worker‘s injury or disability. No benefits are payable to the worker‘s dependents.
On the other hand, social security disability payments are based upon a more complex premise, including both income insurance protection and, to a certain extent, a social welfare program designed to provide at least subsistence payments to disabled workers as well as to their dependents. Weinberger v Wiesenfeld, 420 US 636, 647; 95 S Ct
Assuming that no-fault is also a social welfare program, it is a social welfare program vis-à-vis the injured worker only. Although the net effect of both work-loss and disability payments is generally to maintain the entire family‘s standard of living, the “purpose” and “effect” of particular benefits are not synonymous. Only the former must be considered in determining whether benefits are duplicative and subject to setoff under § 3109(1). Jarosz, supra, fn 9.
Our holding that social security disability benefits paid to the worker‘s family are not subject to the mandatory setoff provision in § 3109(1) does not conflict with our holding in O‘Donnell that social security survivors’ benefits are subject to such a setoff. As we noted in O‘Donnell, supra, p 546, social security survivors’ benefits are intended to provide persons dependent upon the wage earner with protection against the economic hardship occasioned by the loss of the wage earner‘s support. Survivors’ benefits payable under § 3108 of the no-fault act are also intended to compensate the dependents of the deceased for the support they would have received during their dependency had the injured worker not suffered the accidental bodily injury causing death.
Although in some instances an injured worker and his family may receive more from no-fault and disability payments than the actual wages lost, benefits which do not duplicate no-fault benefits cannot be set off under § 3109(1). The family‘s better financial position has no relation to the determination of whether the benefits duplicate one another. Jarosz, supra, fn 10.
The judgment of the Court of Appeals should be affirmed. Appellees should be permitted to tax costs.
WILLIAMS, C.J., and BRICKLEY, J., concurred with CAVANAGH, J.
Notes
“The insurance programs are contributory in nature and are designed to prevent public dependency by protecting workers and their families against common economic hazards.”
Therefore, the purposes of the two payments are the same.
“In every case, in order to determine whether the governmental and no-fault benefits serve the same purpose (criterion 1), a particularized assessment of the questioned governmental benefit is necessary to identify the ultimate beneficiary, the nature of the benefits, the reason for paying them, and the events triggering entitlement to them.”
All four of the criterion 1 factors stated in Jarosz suggest that social security disability payments to dependents serve the same purpose as work-loss benefits paid under the no-fault act.
First, the ultimate beneficiaries of both payments are the dependents of an injured worker. Second, the nature of both payments is a substitution for income lost as a result of a worker‘s accident. Third,