No-Fault Insurance, Miller, Winter 2012
1. Introduction to No-Fault Insurance
i. Before 1973, Michigan had a pure fault system so that the claimant could only collect upon proof of negligence. Pure fault still exists in some states.
ii. Pure fault applies to all losses- economic and non-economic loss. Economic loss includes lost wages and medical compensation. Non-economic loss includes pain and suffering.
iii. Problems with pure fault: Only those who are not at fault will have their expenses paid, but there will still be medical bills. There are also delays in compensation from proving fault in the judicial system. Also, in some cases, nobody is at fault or another person who is responsible may not be financially responsible to compensate the victim. Insurance companies did not like pure fault because the system was jammed with frivolous lawsuits for minor injuries.
b. The No-Fault System
i. Compulsory insurance system: Michigan No-Fault Act creates class of motorists who must purchase mandatory no-fault coverages or face fines or imprisonment.
ii. Michigan still has a residual fault system because two separate claims are created by every motor vehicle accident that results in personal injury or death:
1. No-Fault Personal Protection Insurance Benefits (PIP)
a. i.e. PIP benefits, no-fault benefits, first party benefits, or economic loss benefits
b. 4 types of PIP benefits payable under Michigan system:
i. Allowable medical expense benefits: No time or dollar limit (MOST important)
ii. Wage loss benefits: Up to $5000 per month for up to 3 years
iii. Replacement service expenses: Up to $20 per day for up to 3 years (least important)
iv. Survivor’s loss benefits
2. Third party tort liability claim
a. i.e. third party claim, tort claim, noneconomic loss claim, or residual bodily injury (RBI) claim
b. The victim MUST have sustained a threshold injury to make this claim. 3 categories that meet the threshold:
ii. Permanent serious disfigurement
iii. Serious impairment of body function
iii. The construction of the No-Fault law is contractual and statutory- MCL 500.3101 et seq. The law is a function of contract and tort.
c. Buying Auto Insurance
i. There are mandatory and optional coverages in purchasing car insurance.
ii. Mandatory Coverages:
1. Personal Injury Protection (No-Fault benefits/PIP)
2. Property Protection Insurance (PPI)
3. Residual Liability Insurance
iii. Optional Coverages:
1. Collision/comprehensive: This is usually the biggest expense. Comprehensive includes any accident which is not a collision.
2. Uninsured/underinsured motorist: 20% of Michigan drivers don’t have insurance.
d. Policy Concerns
i. Re-Insurance: The No-Fault law created problems for insurance companies since it is unlimited so an amendment creating the Michigan Catastrophic Claims Association (MCCA) was added. Insurance companies are liable for the first $500,000 and every dollar after that is reimbursed by the MCAA.
ii. Collision/comprehensive services seems to still be a problem for high premiums.
iii. Several bills have been put out to limit PIP coverage, but they have not successfully passed. Insurance companies want to get rid of the unlimited coverage.
iv. Other interests regarding the No-Fault statute include decreasing litigation, receiving a prompt assured reimbursement, and the cost of insurance associated with mandatory coverage (constitutional concern that this must be affordable for all).
2. Mandatory Insurance Requirement
a. What Insurance Must Be Purchased?
i. 3101(1). Security for Payment of Benefits; Definitions: The owner or registrant of a motor vehicle required to be registered in this state shall maintain: personal protection insurance (no-fault), property protection insurance, and residual liability insurance.
b. What Motor Vehicles Must Be Registered?
i. MCL 257 (Motor Vehicle Code) states that basically every motor vehicle has to be registered. This does NOT include U.S. government vehicles (e.g. postal vehicles). Federal vehicles are exempt from the application of state law.
c. What Are Motor Vehicles?
i. 3101(2)(e). Definitions: A vehicle, including a trailer, operated or designed for operation upon a public highway by power other than muscular power which has more than 2 wheels.
1. A motor vehicle (MV) is NOT a motorcycle, moped, farm tractor, or an ORV. A snow mobile is also not a motor vehicle because it does not have wheels.
2. Drivers of vehicles which are not MVs may still be entitled to no-fault benefits if they are involved in an accident with a MV.
3. Even when a trailer is disconnected, it may still be a MV under the statute.
ii. Looking to what is a MV requires a debates among textualism, public policy, and legislative intent.
iii. Lee v. Daiie (Mich. 1982): A postman was injured while unloading his truck. The insurance company argued that he was not entitled to no-fault benefits because his vehicle (postman’s truck) was not registered. This argument was rejected because he was hurt in relation to a MV and that the MV was not required to be registered.
iv. In determining no-fault coverages, there are three “hoops” to be jumped through before no-fault benefits are awarded: entitlement, disqualifications, and priorities.
d. Who Are Owners?
i. 3101(2)(h). Definitions: An owner is: (i) person renting a MV or having the use thereof, under a lease or otherwise, for a period greater than 30 days. (ii) A person who holds the legal title to a vehicle, other than a person engaged in the business of leasing MVs who is the lessor of a MV pursuant to a lease providing for the use of the MV by the lessee for a period that is greater than 30 days. (iii) A person who has immed
intent is that the individual must not only intend the act, but also intend the result.
b. Wheeler v. Tucker Freight (Mich. App. 1983): Bodily injury does not include stress injuries. The injury must be something sustained in a single accident. E.g. repetitive stress injuries not covered include carpal tunnel, degenerative back conditions. BUT heart attack may be caused by a single stressful event.
c. The injury may include psychiatric injury whether or not the person was actually hit (in a close accident).
3. 3105(2): PIP benefits are due without regard to fault.
ii. Arising Out Of (Causal Nexus for NF benefits)
1. Not every injury happening in or near a car will be covered. The “arising out of” test is the NF equivalent to the tort proximate cause test.
2. Criminal Assaults
a. Early appellate decisions held that NF benefits were sometimes allowed in assault cases and the later Supreme Court decision found NF benefits were NOT allowed in assault cases.
b. Target of Assault Test (Now OVERRULED):
i. Mann v. DAIIE (Mich. App. 1981): A stone hit a car on the freeway after being thrown from an overpass. This type of assault was directed at the automobile itself, not the driver so there was a direct causal relationship between driving the vehicle and the assault. OVERRULED.
ii. Saunders v. DAIIE (Mich. App. 1983): A projectile of an unknown source hit the vehicle. The court found NF benefits here because the MV was moving as an MV. This was an assault on the MV as an MV, not at the person who happened to be in a MV. OVERRULED.
c. Instrumentality Test and Ordinary Risk of Operating a MV Test (Both of these tests have SURVIVED):
i. Gajewski v. Auto Owners (Mich. 1982): A wife planted a car bomb which was triggered by the ignition. Though the criminal assault that could have taken place anywhere, the court found there was NF here because the car was the instrumentality of the injury.
d. Vehicular Use Test:
i. Thornton v. Allstate (Mich. 1986): A cab driver was shot and assaulted by a passenger. The court found there was no sufficient causal connection because the shooting could have taken place anywhere. The court rejected the argument that the cab is a vehicle that serves the purpose of attracting people and moving with them in it. The court found the shooting did NOT have anything to do with the fact that the car was moving so there was no causal relationship between the injury and the use of a vehicle as a vehicle.
1. Justice Levin concurred saying that this vehicular use and direct relationship standard would solve future situations.