The Michigan Catastrophic Claims Association (MCCA) is a non-profit, unincorporated association created by the state legislature in a 1978 amendment to the Michigan No-Fault Act. It is funded through law that requires all insurance companies operating in Michigan to become members. The MCCA charges each member insurance company an annual assessment that is ultimately passed down in premiums paid by Michigan drivers. Currently, the MCCA charges each insured vehicle a $160 fee that is shown as a line item on most insurance policies.
The MCCA uses the funding it receives from these annual assessments to pay for no-fault Personal Injury Protection (PIP) benefits for medical and rehabilitation expenses after a catastrophic accident victim exceeds $545,000 in medical expenses. Once an accident victim exceeds that amount in their claims, the MCCA reimburses the insurer for ongoing expenses and continues to do so as long as the patient is alive.
The Need for Transparency
Several years ago, the Michigan auto insurance industry, supported by the MCCA, asked the Michigan Legislature to pass drastic reforms to the state no-fault insurance system that would have imposed draconian cuts to medical and rehabilitation coverage for accident victims. The insurance industry and MCCA alleged that the cuts were needed because the MCCA was no longer “financially sustainable.” Despite these claims, the 2016 MCCA Annual Statement reveals that the organization holds more than $18.5 BILLION is assets.
CPAN sought to determine the truth behind the MCCA’s claims of financial distress, so it submitted a Freedom of Information Act request asking for the rate-making data that the MCCA used to determine its financial health and set its annual assessment. Even though MCCA is considered a “public body” created by the legislature, the MCCA declined CPAN’s request. In denying CPAN’s inquiry, the MCCA argued that it was not subject to FOIA because of a little known amendment passed by the Legislature in 1988 even though the state FOIA law was never changed.
Shortly after the FOIA request was denied by the MCCA, CPAN filed a lawsuit seeking compliance. The Brain Injury Association of Michigan (BIAMI) filed a separate and independent suit shortly after based on the principles of Michigan common law that allow citizens who have a “demonstrable interest” to access certain records that are public in nature. The lawsuits, which were first filed in 2012, have followed a long path all the way to Michigan’s Supreme Court. Here are the highlights
- The Michigan Circuit Court
- Agreed with CPAN’s argument that, “because the MCA was created entirely by statute, it comes within the definition of a ‘public body’ under FOIA.”
- Agreed with CPAN’s argument that Michigan citizens have a right to know how their rates are calculated to ensure that no-fault insurance is provided on a fair and equitable basis.
- Agreed with BIAMI’s argument that because the MCCA rate charged to insurers is passed down to customers, it is reasonable to conclude that citizens essentially fund the MCCA and have a financial interest in the rate calculation process.
- The Michigan Court of Appeals
- Reversed the Circuit Court decision because the MCCA was exempted from FOIA laws through the obscure statute buried in a provision of our insurance law. This decision was made even though no amendment was made directly to the FOIA law itself to create this exemption.
- The Michigan Supreme Court
- Vacated the Appeals Court decision and remanded the case back to the Court of Appeals.
- The Court of Appeals was directed to specifically address whether the MCCA is a “public body” as defined by state law and, if so, whether the MCCA’s exemption from Michigan’s FOIA law was constitutionally enacted.
- The Michigan Court of Appeals
- Agreed that the MCCA is a public body as defined by Michigan law.
- Determined that the MCCA’s exemption from FOIA was constitutional.
- Michigan Supreme Court
- CPAN has appealed the latest Court of Appeals ruling back to the Michigan Supreme Court
- The Michigan Association of Broadcasters and Michigan Press Association filed amicus briefs in support of CPAN’s case. The two associations argued that if the Appeals Court decision is allowed to stand, it will make it easier for the legislature to hide FOIA exemptions in other areas of the statute. This argument was clearly pointed out in the Appeal Court’s dissenting opinion.
It is critical that the financial records and rate setting metrics of the MCCA be available to Michigan policy makers. They must have this information in order to determine the sustainability of the fund and how rates are set before creating legislation that reforms our current auto no fault laws. Recently, legislation was introduced that would bring much needed transparency to Michigan no-fault auto insurance system.
- Senate Bills 240 and 241: These bills would require MCCA to abide by Michigan’s Open Meetings and FOIA laws.
- House Bill 4354: In addition to subjecting the MCCA to the Open Meetings Act and FOIA, this bill would require the State Insurance Commissioner to appoint a member of the public to sit on the MCCA board of directors and empower the Commissioner to disapprove of any MCCA charge he or she deems to be excessive.