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FUN 'N SUN R.V., INC., and John Chamberlain Corporation, Plaintiffs-Appellants, v. STATE of Michigan and Accident Fund Director, Defendants-Appellees.
In 1993, plaintiffs initiated this lawsuit in the Court of Claims, claiming, inter alia, that as pre-1990 policyholders in the state's Accident Fund, they and other similarly situated policyholders had a right to receive the surplus moneys the fund had allegedly accumulated. In In re Certified Question, 447 Mich. 765, 527 N.W.2d 468 (1994), our Supreme Court rejected plaintiffs' claim that the Accident Fund surplus was held in trust for plaintiffs and other similarly situated Accident Fund policyholders and upheld the constitutionality of 1993 P.A. 198, which declares the consideration for the Accident Fund's sale to be state property. Following the Supreme Court's opinion in In re Certified Question, the Court of Claims granted summary disposition for defendants with respect to plaintiffs' claim that M.C.L. § 418.712; M.S.A. § 17.237(712), which was repealed by 1993 P.A. 198, § 2, gave plaintiffs and similarly situated policyholders a “vested” interest in the statutory escrow account derived from the June 30, 1990, “excess surplus” of the Accident Fund. Plaintiffs appeal as of right. We affirm.
In 1912, the Legislature created the Accident Fund to provide for worker's compensation and employer's liability insurance. M.C.L. § 418.701 et seq.; M.S.A. § 17.237(701) et seq. Originally, the Accident Fund could be “neither more nor less than self-supporting” in its operation. M.C.L. § 418.711; M.S.A. § 17.237(711), now repealed. However, in 1990, the Legislature enacted 1990 P.A. 157, in which it repealed the “break-even” provision in § 711 and replaced it with § 711a, M.C.L. § 418.711a; M.S.A. § 17.237(711a), which mandated that premiums remain as low as possible. In 1990 P.A. 157, the Legislature also added § 712, which provided for a one-time determination and distribution of “excess surplus” Accident Fund assets to holders of policies during the period between 1986 and 1989. By its terms, § 712(1) required that the insurance commissioner determine the amount of surplus required of the Accident Fund and that any surplus exceeding 1 the required amount be placed into a temporary escrow account for later distribution.
Thereafter, in 1993 P.A. 198, § 1, the Legislature added § 701a, which, in subsection 1, authorized the outright sale of the Accident Fund to private interests, M.C.L. § 418.701a(1); M.S.A. § 17.237(701a)(1), and, in subsection 2, provided that the state would retain the proceeds of such sale, M.C.L. § 418.701a(2); M.S.A. § 17.237(701a)(2). 1993 P.A. 198, § 2, provided that most of the other provisions of law related to the Accident Fund, including § 712, would be repealed as of the close of that sale. The actual sale of the Accident Fund was consummated in December 1994, and § 712 was thereby repealed as of that date. 1993 P.A. 198, § 2. Plaintiffs never received a dividend from the escrow account.
Plaintiffs claim a “vested” right in the “excess surplus,” if any, placed in escrow pursuant to § 712, arguing that the “neither more nor less than self-supporting” provision of § 711 evidenced the state's “promise” to pay policyholders any surplus.2 However, plaintiffs did not raise this specific argument in the trial court and, instead, based their statutory promise claim solely on the operation of § 712.3 Accordingly, to the extent plaintiffs now contend that they acquired a vested right in the escrow funds by operation of § 711, their argument is unpreserved. Royce v. Citizens Ins. Co., 219 Mich.App. 537, 545, 557 N.W.2d 144 (1996). In any case, we hold that, in enacting § 711, the Legislature did not intend to contractually bind the state to pay the Accident Fund's surplus to the fund's policyholders.
Although the Supreme Court did not specifically rule with respect to this issue in In re Certified Question, supra, its rationale applies to and supports the lower court's conclusion that plaintiffs had no vested right in any Accident Fund surplus existing in 1990. In In re Certified Question, supra at 777-778, 527 N.W.2d 468, our Supreme Court gave the following summarization of the law regarding when a statute binds the state contractually:
“Courts usually have concluded that a state contractual obligation arises from legislation only if the legislature has unambiguously expressed an intention to create the obligation.” In order to prove that a statutory provision has formed the basis of a contract, the language employed in the statute must be “plain and susceptible of no other reasonable construction” than that the Legislature intended to be bound to a contract. As a general rule, vested rights are not created by a statute that is later revoked or modified by the Legislature if “the Legislature did not covenant not to amend the legislation.” Yet, a statute can create a contract if the language and circumstances demonstrate a clear expression of legislative intent to create private rights of a contractual nature enforceable against the state. [Citations omitted; emphasis added.]
Applying these principles to the present case, we hold that the state is not contractually bound to pay the funds that had been placed in the excess surplus escrow account to Accident Fund policyholders. In re Certified Question, supra. There is no express contract regarding this point between plaintiffs and the state. Nor do we find that § 711 unambiguously expresses an intention or promise to distribute Accident Fund excess surpluses to its policyholders. Instead, the break-even language in § 711 is reasonably construed as the attempt to decrease premiums by preventing the Accident Fund from profiting or taking more than it needs. The statute does not address what happens in case of an excess surplus, let alone give its policyholders dividend rights in any such excess surplus. Therefore, we view § 711 as expressing a legislative policy of mitigating premiums, not an intent to contractually bind the state to disperse excess surpluses by paying dividends to Accident Fund policyholders. Accordingly, § 711 does not support plaintiffs' interpretation that the Legislature intended to contractually bind the state to give policyholders a share in any excess surplus held by the Accident Fund. Furthermore, the Legislature never covenanted not to amend § 711. Thus, even if § 711 could be interpreted as giving policyholders a right to any excess surplus, nothing precluded the Legislature from extinguishing that right by repealing the statute. In re Certified Question, supra.4
Because plaintiffs had no vested right in the escrowed funds, whatever expectation of payment they had pursuant to § 712 was eliminated by the 1994 repeal of that provision. See 1993 P.A. 198, § 2. Accordingly, the lower court properly granted summary disposition for defendants. Taylor v. Lenawee Co. Bd. of Rd. Comm'rs, 216 Mich.App. 435, 437, 549 N.W.2d 80 (1996).
Given our resolution of this issue, plaintiffs' remaining issues on appeal, which are premised on the assumption that this Court would find that plaintiffs had a vested right, are without merit.
1. The proper determination of the amount of such “excess surplus” was disputed below. However, the correct figure is irrelevant to this appeal.
2. Plaintiffs also appeal the order granting summary disposition of counts I and III of their complaint. However, these issues were directly addressed in the Supreme Court's majority opinion in In re Certified Question, supra. We are bound by the Supreme Court's holding, MCR 7.305(A)(4), and therefore affirm the Court of Claims' opinion granting summary disposition of counts I and III of plaintiff's complaint.
3. To the extent plaintiffs raise this argument on appeal, we reject the claim for the reasons stated in the Court of Claims' opinion.
4. We also note that plaintiffs cite out of context a section of the Supreme Court's opinion in In re Certified Question, supra at 782, 527 N.W.2d 468, by which plaintiffs claim that the Court actually and explicitly recognized their claim of a vested right in the funds escrowed pursuant to § 712. In fact, the context of the statement in question clearly indicates that the Court intended no such thing. Rather, the Court only intended to emphasize the one-time effect of § 712 so as to refute plaintiffs' claim of a vested right in the proceeds from the sale of the Accident Fund; the statement was clearly not a recognition of plaintiffs' claim of a vested right in the § 712 excess surplus escrow account.
GRIFFIN, Presiding Judge.
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Docket No: Docket No. 188909.
Decided: May 16, 1997
Court: Court of Appeals of Michigan.
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