Heinzv.Chicago Road Investment Co.

Michigan Court of AppealsApr 12, 1996
216 Mich. App. 289 (Mich. Ct. App. 1996)
216 Mich. App. 289549 N.W.2d 47

Docket Nos. 169059, 169075.

Submitted November 14, 1995, at Detroit.

Decided April 12, 1996, at 9:05 A.M.

Turner and Turner, P.C. (by Matthew L. Turner), for the plaintiffs.

O'Leary, O'Leary, Jacobs, Mattson Perry (by John P. Jacobs), for the defendant.

Before: GRIBBS, P.J., and NEFF and J.J. McDONALD, JJ.

Circuit judge, sitting on the Court of Appeals by assignment.


In Docket No. 169059, plaintiffs appeal from the judgment of the circuit court awarding plaintiffs $70,034.77. The amount awarded represents the jury's verdict of $198,000, minus worker's compensation benefits received by Mr. Heinz, and then reduced by fifty percent as a result of plaintiff Robert Heinz' comparative negligence. Plaintiffs contend that the trial court erred in reducing the jury's verdict by the amount of the worker's compensation benefits under MCL 600.6303(1); MSA 27A.6303(1). We disagree and thus affirm the trial court's decision to reduce the jury's verdict by the amount of the specific worker's compensation benefits.

In Docket No. 169075, defendant appeals as of right from the same order of the circuit court, claiming that the court erred in failing to reduce plaintiffs' jury award by an additional $80,227.25, the amount plaintiffs received as a redemption of other worker's compensation claims. We agree, reverse this part of the court's ruling, and remand.


Mr. Heinz was injured in 1988 in a slip and fall accident as he was leaving his employer's building. As a result of his injuries, he received worker's compensation benefits in the amount of $19,824.25 for medical expenses and $38,106.21 for lost wages. In addition, for the sum of $80,227.25, Mr. Heinz redeemed all other worker's compensation claims arising out of the 1988 slip and fall. As part of the redemption, Mr. Heinz' worker's compensation provider waived any lien on future judgments obtained by plaintiffs for the injuries sustained by Mr. Heinz.

After receiving the worker's compensation benefits, plaintiffs sued defendant, the owner of the building, for negligence. Following trial, the jury returned the verdict in favor of plaintiffs. The jury's award was itemized in the following manner: $128,000 in lost wages, $20,000 for medical expenses, $40,000 in general damages, and $10,000 for loss of consortium.

Before the judgment was entered on the jury's verdict, defendant, pursuant to MCL 600.6303; MSA 27A.6303, sought to have Mr. Heinz' award reduced by the amount of worker's compensation benefits he had received.

Ultimately, the trial court determined that the amount of worker's compensation benefits Mr. Heinz received for medical expenses and lost wages could be offset against the jury's award. The court also held, however, that because it could not be determined how the $80,227.25 was apportioned, if at all, i.e., what portions compensated Mr. Heinz for future and past medical expenses, future and past wage loss, or other expenses or losses, that amount could not be offset against plaintiffs' recovery.

Neither party disputes the trial court's method of setting off these amounts from the jury's award before reducing plaintiffs' jury award by Mr. Heinz' comparative negligence. See MCL 600.6306; MSA 27A.6306.

It is from this order that plaintiffs and defendant appeal as of right.


In Docket No. 169059, plaintiffs challenge the validity of MCL 600.6303; MSA 27A.6303, which abrogates the common-law collateral-source rule. Plaintiffs base their challenge on a number of grounds, none of which we find to be persuasive.


Before MCL 600.6303; MSA 27A.6303 was enacted in 1986, the common-law collateral-source rule provided that compensation from a source other than another tortfeasor, for example, worker's compensation benefits, did not operate to reduce the damages recoverable from the wrongdoer. See McMiddleton v. Otis Elevator Co., 139 Mich. App. 418, 429; 362 N.W.2d 812 (1984).

MCL 600.6303(1); MSA 27A.6303(1), however, provides:

In a personal injury action in which the plaintiff seeks to recover for the expense of medical care, rehabilitation services, loss of earnings, loss of earning capacity, or other economic loss, evidence to establish that the expense or loss was paid or is payable, in whole or in part, by a collateral source shall be admissible to the court in which the action was brought after a verdict for the plaintiff and before a judgment is entered on the verdict.


Plaintiffs first argue that the statute is contradictory, ambiguous, and in derogation of common law and, thus, that the lower court erred in failing to construe strictly the statute to provide that worker's compensation benefits are not to be offset from a jury's verdict. We disagree.


Statutory interpretation is a legal issue, which this Court reviews de novo. See Smeets v. Genesee Co. Clerk, 193 Mich. App. 628, 633; 484 N.W.2d 770 (1992).

The primary goal of judicial interpretation of statutes is to ascertain and give effect to the intent of the Legislature. People v. Stanaway, 446 Mich. 643, 658; 521 N.W.2d 557 (1994). If the plain and ordinary meaning of a statute's language is clear, judicial construction is normally neither necessary nor permitted. Lorencz v. Ford Motor Co., 439 Mich. 370, 376; 483 N.W.2d 844 (1992). If reasonable minds can differ concerning the meaning of a statute, however, judicial construction is appropriate. Folands Jewelry Brokers, Inc. v. City of Warren, 210 Mich. App. 304, 307; 532 N.W.2d 920 (1995).

One rule of statutory interpretation provides that well-settled common-law principles are not to be abolished by implication, and when an ambiguous statute contravenes the common law, it must be interpreted so that it makes the least change in the common law. Marquis v. Hartford Accident Indemnity (After Remand), 444 Mich. 638, 652-653; 513 N.W.2d 799 (1994). At the same time, however, this Court is instructed to avoid any construction that would render a statute, or any part of it, surplusage or nugatory. Altman v. Meridian Twp, 439 Mich. 623, 635; 487 N.W.2d 155 (1992).


Plaintiffs argue that the definition of collateral source, found in MCL 600.6303(4); MSA 27A.6303(4), is contradictory and ambiguous. That subsection provides:

As used in this section, "collateral source" means benefits received or receivable from . . . worker's compensation benefits. . . . Collateral source does not include . . . benefits paid by a person, partnership, association, corporation, or other legal entity entitled by law to a lien against the proceeds of a recovery by a plaintiff in a civil action for damages

Because the worker's compensation provider is entitled to such a lien, plaintiffs argue that this subsection is contradictory because the first sentence defines the term collateral source to include worker's compensation benefits, while the second sentence, by referencing a lien, excludes worker's compensation benefits from the definition of collateral source. Thus, plaintiffs would have us hold that worker's compensation is not included as a collateral source, because any other interpretation would abolish a common-law principle by implication.

We disagree because, as the trial court found, this statute can be construed so that none of it is rendered nugatory. We find that the second sentence of subsection 4 is an exception to the first: worker's compensation is a collateral source so that a plaintiff's recovery, and a defendant's responsibility to pay damages, are diminished unless there is a valid lien with respect to the plaintiff's recovery. In the latter case, the plaintiff is entitled to, and the defendant must pay, the full amount of the jury verdict because the plaintiff's recovery is subject to the valid lien. In either circumstance, the plaintiff's recovery would be identical, and double recovery would be avoided.

To construe the statute in the manner argued by plaintiffs would require reading out of the statute the requirement that worker's compensation benefits are considered a collateral source. In other words, plaintiffs' proposed construction is contrary to the express terms of the statute and would not be favored even if those statutory terms are in conflict with the common law. See Barker Bros Construction v. Bureau of Safety Regulation, 212 Mich. App. 132, 140; 536 N.W.2d 845 (1995).


Plaintiffs also challenge the statute on a number of constitutional grounds. Whether a statute is constitutional is a question of law, which this Court reviews de novo. In re Lafayette Towers, 200 Mich. App. 269, 273; 503 N.W.2d 740 (1993).


Plaintiffs first allege that the statute effects an unconstitutional taking of property without just compensation. U.S. Const., Ams. V, XIV; Const. 1963, art. 10, § 2. We disagree.

In order to succeed in this argument, plaintiffs must establish that they enjoyed some cognizable interest in some affected item of private property. Michigan Soft Drink Ass'n v. Dep't of Treasury, 206 Mich. App. 392, 402; 522 N.W.2d 643 (1994). Such property is everything over which plaintiffs have exclusive control or dominion. Charles Murphy, MD, PC v. Detroit, 201 Mich. App. 54, 56; 506 N.W.2d 5 (1993).

Plaintiffs have failed to prove a cognizable interest in this case. Initially, plaintiffs do not argue that their cause of action against defendant created a protectable property right; rather, they argue that once the jury rendered its verdict, a protectable property right arose. A jury verdict, however, does not become enforceable until the court enters a judgment on that verdict. Plaintiffs' argument fails to comprehend the distinction between a judgment, which finally disposes of the claim between parties, and the jury's verdict, which is merely the basis for the judgment. See 3 Martin, Dean Webster, Michigan Court Rules Practice, p. 364. Thus, because plaintiffs do not enjoy complete dominion and control over the jury verdict, they have failed to prove that a cognizable property right was affected.

Next, plaintiffs argue that when they negotiated the redemption and waiver of lien from their worker's compensation provider, they, in effect, purchased the lien. Thus, according to plaintiffs, they had a protectable property right in the lien.

This argument is also unpersuasive. Plaintiffs, as the parties claiming the existence of this property right, had the burden of producing evidence relevant to the issue. See Brown v. Beckwith Evans Co., 192 Mich. App. 158, 167; 480 N.W.2d 311 (1991). Plaintiffs, however, failed to produce any evidence to substantiate their claim, such as the redemption agreement indicating that plaintiffs purchased the lien. Thus, plaintiffs have also failed to demonstrate that they had a protectable property right in the lien. Their claim that the statute effects an unconstitutional taking of property without compensation therefore must fail.


Plaintiffs next argue that by arbitrarily reducing the amount of the jury verdict, the statute denied them their state right to a trial by jury with respect to the issue of damages. Const. 1963, art. 1, § 14. Plaintiffs support their argument by quoting the following passage from Leary v. Fisher, 248 Mich. 574, 578; 227 N.W. 767 (1929):

Plaintiff is entitled to a right of trial by jury, and one of the necessary incidents of the trial of cases of this character by jury is that the jury shall fix the amount of damages. Their verdict should not be interfered with unless plainly excessive. If the verdict was excessive, the trial court had a right to grant a new trial. This court has recognized that the trial court has a wide discretion in granting or refusing new trials.

The error in plaintiffs' argument is the application of Leary to the facts of this case. In Leary, the jury awarded the plaintiff $15,000 in damages, but the trial court reduced the amount of the award to $5,000. In other words, the trial court altered the jury's assessment of the damages.

Here, however, the statute does not alter the jury's assessment of the damages. The jury award specified that Mr. Heinz suffered $128,000 in lost wages and $20,000 in medical expenses. The reduction of the award recognizing the collateral-source benefits did not alter this determination; rather, it merely recognized that plaintiffs were already compensated, in part, for these damages. In other words, plaintiffs received the full amount of the damages that the jury determined proper, the source of payment of that amount merely was split between defendant and the worker's compensation provider.

Accordingly, we conclude that plaintiffs' allegation that they were denied their right to a jury trial is without merit.


Next, plaintiffs claim that the statute deprives them of their property without due process of law. However, because we have already determined that plaintiffs have failed to prove that they have a protectable property right, see Detroit v. Walker, 445 Mich. 682, 699; 520 N.W.2d 135 (1994), this argument is without merit.


Plaintiffs' final constitutional argument is that in creating a distinction between personal injury plaintiffs and all other tort claimants, the statute creates an unjustifiable class distinction in violation of the federal and state Equal Protection Clauses. U.S. Const., Am. XIV; Const. 1963, art. 1, § 2.

Because MCL 600.6303; MSA 27A.6303 is a statute relating to economic matters, the constitutional standard of review is the rational basis test. See Bissell v. Kommareddi, 202 Mich. App. 578; 509 N.W.2d 542 (1993).

Plaintiffs argue that the statute fails even under a rational basis test because the justification for enacting tort reform, an alleged crisis in the insurance industry, is a mere fantasy concocted by the insurance industry to ensure greater profits. Thus, according to plaintiffs, any classification to further the presumed legislative intent of assisting the insurance industry in order to make insurance more affordable must fail. Plaintiffs acknowledge, however, that no statutory history detailing the exact intent of the Legislature in enacting 1986 PA 178 exists. Plaintiffs cite authority from legal scholars and case law from other states in support of their argument that Michigan enacted its tort reform legislation to combat an insurance industry crisis.

We find plaintiffs' argument overly narrow. We conclude that it is just as reasonable to presume from the enactment of MCL 600.6303; MSA 27A.6303 that the Legislature's intent was to promote fairness, i.e., to prevent personal injury plaintiffs from being compensated twice for the same injury. See, e.g., Imlay v. Lake Crystal, 453 N.W.2d 326 (Minn, 1990). We conclude that this is a legitimate governmental objective.

Next, we conclude that the class distinction created by the statute rationally relates to this proper governmental purpose. Although the classification does not include all tort victims, that is not the constitutional requirement. Under the rational basis test, the Legislature is not required to enact laws affecting all equally, but may "`direct its legislation against what it deems an existing evil without covering the whole field of possible abuses.'" Michigan AFL-CIO v. Michigan Employment Relations Comm, 212 Mich. App. 472, 483; 538 N.W.2d 433 (1995), quoting from Metropolitan Funeral System Ass'n v. Comm'r of Ins., 331 Mich. 185, 194; 49 N.W.2d 131 (1951). This is what the Legislature has done with the statute abrogating the common-law collateral-source rule, and we will not upset this legislative judgment.

Accordingly, we find plaintiffs' equal protection argument lacking in persuasion as well.


Next, plaintiffs argue that because defendant did not insist on using the jury verdict form set forth in MCL 600.6305; MSA 27A.6305, it is estopped from relying on MCL 600.6303; MSA 27A.6303, because the two statutes are in pari materia. We disagree.

Plaintiffs have cited no authority, and we know of none, that compels the result they request. Rather, examining the jury verdict form used in this case, we are convinced that it sufficiently itemized plaintiffs' damages to enable the court to reduce the jury's award by those amounts for which plaintiffs had already been compensated. Accordingly, although it would have been beneficial to use the proper jury verdict form, we find no error in the jury verdict form used.


Finally, plaintiffs argue that the trial court erred in failing to credit plaintiffs the amount of the worker's compensation premiums paid by Mr. Heinz' employer. We disagree.

MCL 600.6303(2); MSA 27A.6303(2) provides that the amount of a collateral-source setoff will be reduced by insurance premiums, "[e]xcept for premiums on insurance which is required by law." Plaintiffs argue that because an employer may self-insure against worker's compensation claims under MCL 418.611(1)(a); MSA 17.237(611)(1)(a), worker's compensation is not insurance "required by law."

Plaintiffs' argument, however, fails to cite the initial language of MCL 418.611(1); MSA 17.237(611)(1), which provides that "[e]ach employer under this act . . . shall secure the payment of compensation under this act by 1 of the following methods." Thus, whether an employer pays a premium or reserves funds, the same concept is involved: protection against risk that is required by law. This Court has previously refused to distinguish between self-insurance and purchasing insurance from a worker's compensation insurer, and we refrain from doing so now. See Wallace v. Consolidated Freightways, 199 Mich. App. 141, 145; 500 N.W.2d 752 (1993).

Further, this Court in Allstate Ins. Co. v. Elassal, 203 Mich. App. 548, 554; 512 N.W.2d 856 (1994), determined that because the no-fault and financial responsibility acts do not distinguish between a self-insurer and commercial insurance, self-insurance was essentially the same as a commercial insurance policy for the purposes of those acts. Because the Worker's Disability Compensation Act also does not distinguish between the two types of insurers, we reach the same conclusion as did the Court in Allstate, i.e. self-insurance in the worker's compensation arena is the functional equivalent of purchasing a commercial insurance policy. Therefore, because an employer must by law obtain insurance, plaintiffs' argument must fail.

In Docket No. 169059 the trial court's judgment and orders are affirmed.


Defendant's main argument in Docket No. 169075 is that the trial court erred in failing to deduct from the jury verdict the amount plaintiffs received as a redemption of their future worker's compensation claims. We agree.

The trial court determined that it could not offset the $80,227.25 redemption amount because the redemption agreement between plaintiffs and their worker's compensation benefits provider did not itemize the reasons for the payment. Thus, according to the trial court, it would have to engage in utter speculation in order to offset that amount against the amounts awarded by the jury. We disagree with this analysis.

The primary goal of judicial interpretation of statutes is to ascertain and give effect to the intent of the Legislature, People v. Stanaway, 446 Mich. 643, 658; 521 N.W.2d 557 (1994).

MCL 600.6303(1); MSA 27A.6303(1) provides in part:

[I]f the court determines that all or part of the plaintiff's expense or loss has been paid or is payable by a collateral source, the court shall reduce that portion of the judgment which represents damages paid or payable by a collateral source by an amount equal to the sum determined pursuant to subsection (2). This reduction shall not exceed the amount of the judgment for economic loss or that portion of the verdict which represents damages paid or payable by a collateral source. [Emphasis added.]

Subsection 4 of § 6303, in pertinent part, defines collateral source as follows:

As used in this section, "collateral source" means benefits received or receivable from an insurance policy; benefits payable pursuant to a contract with a health care corporation, dental care corporation, or health maintenance organization; employee benefits; social security benefits; worker's compensation benefits; or medicare benefits.

Regardless of the amount of the collateral source benefits "paid or payable," the statute in § 6303(1) places two outer limits on the reduction of the jury verdict: first, the reduction may not exceed the economic-loss portion of the judgment; second, the reduction may not exceed the portions of the verdict corresponding to the type of damages the collateral source has compensated or will compensate.

In the present case, the jury awarded damages in the areas of lost wages ($128,000), medical expenses ($20,000), "general damages" ($40,000), and loss of consortium ($10,000). The second limitation on verdict reduction requires that the reduction not exceed the portion of the damages awarded to compensate for the same "type" of damage as the worker's compensation benefits covered. Worker's compensation benefits address medical expenses and wage loss, but not "general damages" or loss of consortium suffered when the injured party is still alive. See, e.g., MCL 418.301, 418.401; MSA 17.237(301), 17.237(401). Therefore, the statutorily mandated reduction may not exceed the total award of medical and lost-wage damages ($20,000 + $128,000 = $148,000).

The trial court was concerned with partitioning the reduction between reduction of the medical damages and reduction of lost-wage damages. However, because both types of damages are "paid or payable" by worker's compensation, there does not appear to be any statutory requirement for this more detailed breakdown of the reduction. It is adequate to indicate that worker's compensation benefits, unless specifically targeted for medical expenses or lost wages (in which case the designation should be respected), will be offset against the verdict, but not in an amount greater than the total award of medical and lost-wage damages ($148,000 in the present case).

Here, because the worker's compensation redemption was not earmarked specifically, it should simply be offset against the total verdict for lost wages and medical costs remaining after the reduction by the earlier, targeted worker's compensation payments ($19,824.25 for past medical expenses and $38,106.21 for past wage loss). After the reduction of the jury verdict by those sums, the combined medical and wage-loss damages were $90,069.54 ($175.75 + $89,893.79). The redemption amount was $80,227.25. Upon reduction by the amount of the redemption, plaintiffs are left with $9,842.29 of recovery representing medical expenses and lost wages not covered by worker's compensation payments.

This result is consistent with the statutory language and better serves the statutory purpose of preventing "double recovery" than does the trial court's refusal to reduce any portion of the verdict by the $80,227.25 worker's compensation redemption. As a result of the error by the trial court, the plaintiffs have been paid twice for one set of injuries.

Holding that § 6303 will not apply to lump-sum redemptions, which are a standard practice in the settlement of worker's compensation claims, would lead to frustration of the statute's purpose in a large number of cases. Neither the worker's compensation carrier nor a plaintiff has any reason to apportion the redemption, and a potential defendant has no control over the redemption process. Thus, because lump-sum redemptions would continue to be common practice, frustration of the Legislature's intent in enacting § 6303 will continue if the trial court's reasoning is allowed to stand.


Defendant's remaining issue is that the trial court erred in failing to grant costs and sanctions pursuant to MCR 2.403(O) and 2.405(D)(1). Defendant acknowledges, however, that this issue was considered and decided adversely to its position in Warden v. Fenton Lanes, Inc., 197 Mich. App. 618; 495 N.W.2d 849 (1992). We affirm that aspect of the trial court's judgment.

In Docket No. 169075, the trial court's judgment is reversed in part, and we remand for entry of judgment for plaintiffs in the amount of $29,921.15, representing the total of the $9,842.29 in medical expenses and lost wages not covered by worker's compensation payments, the $40,000 in general damages, and the $10,000 in loss of consortium as reduced by the degree of comparative negligence. We do not retain jurisdiction.

In Docket No. 169059, we affirm.

NEFF, J. (concurring in part and dissenting in part).

I respectfully dissent from the holding of part IIIA of the majority opinion. I concur in all other respects.

MCL 600.6303(1); MSA 27A.6303(1) provides that the trial court is to reduce a plaintiff's recovery by an amount determined pursuant to subsection 2. MCL 600.6303(2); MSA 27A.6303(2) provides:

The court shall determine the amount of the plaintiff's expense or loss which has been paid or is payable by a collateral source.

Thus, in order for a court to perform its task under subsection 2, it must know the type of expenses and losses for which a payment from a collateral source was made to a plaintiff. In other words, the court could not reduce a plaintiff's jury award by $5,000 received from a worker's compensation provider for past medical expenses, if the jury award did not provide a recovery for past medical expenses.

Here, Mr. Heinz' redemption agreement did not account for any allocation of the payment. Defendant argues that because the money came from a wage-loss reserve, it is clear that the redemption amount is lost wages. Defendant, however, cites no authority, and I know of none, that holds this Court bound by the accounting practices of a worker's compensation provider. To the contrary, it is probable that the redemption included at least medical expenses, and most likely other expenses and losses, in addition to wage loss. However, on the record presented below there is no way to determine what the redemption payment covered or in what proportion.

I recognize that by refusing to allow the $80,227.25 redemption amount to be offset from plaintiffs' recovery, the possibility exists that plaintiffs will be twice paid for some of the same expenses or injuries. I also recognize defendant's seemingly valid public policy arguments in favor of creating a rule disallowing double recovery under these circumstance. However, we clearly do not have the authority to create such a rule, a constraint the majority overlooks. We are not permitted to pass on the wisdom or fairness of a legislative enactment or, in essence, to enact correcting legislation to rectify a perceived inequity; our task is simply to apply the law as written. See Allstate Ins. Co. v. Dep't of Ins., 195 Mich. App. 538, 547; 491 N.W.2d 616 (1992).

Except, of course, in those instances where we determine that the Legislature has acted in violation of the state or federal constitution.

I would affirm.