STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 6111

December 13, 1982

INSURANCE:

No-fault work loss benefits--deduction of social security disability benefits actually received

An insurer is not authorized to require as a condition precedent to the continued payment of work loss benefits under the no-fault act that an injured person apply for social security disability benefits.

An insurer is authorized to deduct social security disability benefits from the work loss benefits payable to an insured person only if the social security disability benefits are received.

Honorable Richard A. Young

State Representative

The Capitol

Lansing, Michigan

You have requested my opinion on the following question:

Materials submitted with the request disclose that some insurers deduct from no-fault wage loss benefits the amount of social security disability benefits to which they unilaterally determine the claimant to be entitled, regardless of whether the claimant applies for the latter benefits.

1956 PA 218, c 31, Sec. 3107, as added by 1972 PA 294; MCLA 500.3107; MSA 24.13107, states:

To recover under the no-fault act for work loss, it is merely required that the claimant demonstrate that he or she is unable to continue at the previous employment as a direct consequence of a motor vehicle related injury. Nawrocki v Hawkeye Security Insurance Co, 83 Mich App 135; 268 NW2d 317 (1978), lv den 406 Mich 896 (1979).

However, 1956 PA 218, Sec. 3109(1); MCLA 500.3109(1); MSA 24.13109(1), provides that:

The Michigan Supreme Court upheld the constitutionality of 1956 PA 218, Sec. 3109(1), supra, in O'Donnell v State Farm Mutual Automobile Insurance Co, 404 Mich 524, 543-547; 273 NW2d 829 (1979). The court held that 1956 PA 218, Sec. 3109(1), supra, requires a set-off for federal social security survivors' benefits received. However, O'Donnell, supra, did not deal with a set-off of social security benefits not received. Nevertheless, some insurers require all claimants receiving no-fault 'work loss' benefits to make application for social security disability benefits as a condition precedent to the payment of work loss benefits. Further, some insurers deduct an amount they determine to be the social security benefit 'required to be provided' the insured.

The Michigan Supreme Court also considered 1956 PA 218, Sec. 3109(1), supra, in Workman v Detroit Automobile Inter-Insurance Exchange, 404 Mich 477, 501-502; 274 NW2d 373 (1979), wherein the question was whether the reduction of benefits authorized by 1956 PA 218, Sec. 3109(1), supra, applied to potential medicaid benefits under the social welfare act. 1939 PA 280; MCLA 400.1 et seq; MSA 16.401 et seq. The court noted that the benefits in question had been 'provided' but concluded that the insurance company may not subtract such benefit amount from the work loss payments because in that case the insured was not 'medically' indigent, as required under 1939 PA 280, supra, and, therefore, the insured was not actually eligible for such medicaid benefits. The court stated:

Thus, Workman, supra, stands for the proposition that even government benefits which are provided may not necessarily be subtracted from work loss benefits if the benefits are either not required to be provided, or the government is authorized to recapture the previously paid benefits. The determination that benefits are required to be provided is thus, as in Workman, supra, a question of legal interpretation. The law which provides the statutory criteria for entitlement to social security disability benefits is set forth in the federal social security act, 42 USC 423(d)(1) and (2), (1968), as amended, as follows:

Thus, in order to be entitled to social security disability benefits, a person must be unable to engage in any substantial gainful activity for at least 12 months. The disability must be of such severity that the person is not only unable to do his or her previous work but cannot, considering his or her age, education, and work experience, engage in any other kind of substantial gainful work which exists in the national economy. Moreover, while a person injured in an automobile accident may immediately collect work loss benefits under 1956 PA 218, Sec. 3107(b), supra, because of having suffered loss of income from work the injured person would have performed, that injured person may not collect social security disability benefits unless unable to do any kind of substantial gainful work which exists in the national economy for at least 12 months, regardless of where such work exists or whether there was even a specific job vacancy or whether the person would be hired if application were made for the work. The intent of the federal test is to eliminate from consideration for benefits all persons able to do any kind of work anywhere in the national economy.

It is noted that the Michigan Supreme Court stated in Shavers v Attorney General, 402 Mich 554, 578-579; 267 NW2d 72 (1978):

The decision by insurance companies to refuse or reduce work loss payments unless the accident victim applies for and pursues social security disability benefits denies the victim assured, adequate and prompt reparation for his or her economic losses. Work loss benefits should begin immediately upon the determination of the amount to which the victim is entitled. An insurance company does not have the unilateral right to offset what it contemplates to be the amount the victim may be entitled to receive from some other governmental sources. The criteria administered by the Secretary of Health and Human Services are different from all those for entitlement to work loss benefits. An insurer may grant the immediate work loss benefits conditioned upon an assignment from the beneficiary of the social security disability payments actually received. However, the insurer could not unilaterally deduct from the work loss benefits those amounts which it alleges are required to be provided under federal law.

Since an eligible person may be entitled to permanent social security disability benefits while being entitled to work loss benefits for a maximum of three years, there is an incentive for such person to pursue social security disability benefits. To the extent that insurance companies require all work loss beneficiaries to apply for social security disability benefits, unlike other conditions which an insurer may require under the provisions of the no-fault act, such requirement is not legally authorized.

1956 PA 218, c 31, Sec. 3141; MCLA 500.3141; MSA 24.13141, provides that an insurer may require written notice of loss to be given as soon as practicable after an accident involving a motor vehicle. 1956 PA 218, c 31, Sec. 3142; MCLA 500.3142; MSA 24.13142, states that personal protection insurance benefits are payable as loss accrues and are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. 1956 PA 218, c 31, Sec. 3151; MCLA 500.3151; MSA 24.13151, authorizes the insurer to require where it is material to a claim that the insured submit to mental or physical examinations by physicians. 1956 PA 218, c 31, Sec. 3158; MCLA 500.3158; MSA 24.13158, provides that an employer must furnish forthwith a sworn statement of the earnings, since the time of the accidental bodily injury and for a reasonable period before the injury, of the person upon whose injury the claim is based. Furthermore, 1956 PA 218, c 31, Sec. 3158(2); MCLA 500.3158(2); MSA 24.13158(2), requires physicians, hospitals and other medical institutions to furnish forthwith a written report of the history, condition, treatment and dates and costs of treatment of the injured person and permit inspection and copying of its records regarding the history, condition, treatment and dates and costs of treatment. Thus, it is clear that the no-fault act provides specific mechanisms for insurers to determine their obligation to provide work loss benefits, but there is no specific authorization to require an insured to apply for social security disability benefits.

On the other hand, an insurer may encourage an injured person to apply for social security disability benefits and may facilitate the application by assisting the person in preparation and pursuance of such disability benefits. While 1956 PA 218, c 31, Sec. 3109(1), supra, authorizes the deduction from the amount of personal protection insurance benefits payable for the injury either benefits provided or 'required to be provided under the laws of . . . the federal government,' only the Secretary of Health and Human Services may determine, subject to judicial review, whether under the attendant facts an applicant is eligible to receive social security disability payments so that social security disability benefits are required to be paid the applicant. 42 USC 416(1) (1980). The Legislature has not authorized an insurer to make this decision and until the Secretary of Health and Human Services makes the decision that social security disability payments are to be provided to the applicant, no deduction therefor may be made by the insurer.

It is my opinion, therefore, that a no-fault insurer is not authorized, as a condition precedent to the continued payment of work loss benefits under the no-fault act, to require an injured person to apply for social security disability benefits. It is my further opinion that an insurer is not authorized to deduct from work loss benefits payable to an injured person social security disability benefits unless actually received.

Frank J. Kelley

Attorney General