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No-Fault Insurance
Wayne State University Law School
Miller, Wayne J.

Michigan No-Fault Auto Insurance Law – FINAL EXAM OUTLINE – Professor Miller
I. Introduction
What is No-Fault?
Basic Concept: To guarantee payment of certain economic losses to all victims of motor vehicle accidents regardless of who is at fault. 
To finance such a system no-fault laws imposes restrictions on the ability of accident victims to bring tort claims for non-economic losses against negligent drivers
The Quid Pro Quo – Basic No-Fault Bargain
Trade off between economic and noneconomic losses – wherein compensation for certain economic losses is guaranteed regardless of fault and is paid by the accident victim’s own insurance company, while compensation for noneconomic loss is prohibited unless the victim has sustained an injury of sufficient severity to qualify for such compensation.
Injury severity standard for noneconomic loss claims is referred to as the tort threshold.
ECONOMIC DAMAGES = expenses that can be counted in dollar form (medical bills, loss of income, etc).
NON-ECONOMIC DAMAGES = relate to diminished quality of life (intangible concepts such as pain and suffering, disability, loss of function, deprivation of social pleasure, and enjoyment, mental anguish and distress, etc.
Pure no-fault—all tort liability for non-economic damages is eliminated
Add-on no-fault-a tort system with optional no-fault insurance coverage for economic loss
No-Fault in Michigan
“Modified No-Fault” (Not pure or add on) = Guarantees a certain level of economic loss benefits to all victims while imposing a threshold injury requirement on all victims who pursue tort claims for noneconomic loss against the negligent driver. Uses verbal threshold, not dollar threshold
II. An Overview of the Michigan No-Fault System
Compulsory Insurance System.
Every accident that occurs in the State of Michigan and results in personal injury or death, creates two separate and distinct claims: the first is the claim for no-fault personal protection insurance (PIP) benefits; the second is the third party tort liability claim against the party at fault, which, for purposes of recovering noneconomic loss, is limited to “threshold injuries.”
                                                              i.      PIP benefits can also be referred to as: no-fault benefits; first party benefits and economic loss benefits.
                                                            ii.      In Michigan, there are four types of no-fault PIP benefits: (1) allowable medical expense benefits; (2) wage loss benefits: (3) replacement service expenses; and (4) survivor’s loss benefits.
                                                          iii.      Tort liability can also be referred to as: third-party claim; the tort claim; the noneconomic loss claim; and residual bodily injury claim.
                                                          iv.      There are three categories of threshold injury claims in Michigan: (1) death; (2) serious disfigurement; and (3) serious impairment of body functions.
PIP Claims – Benefits Recoverable
Benefit #1 – Allowable Expenses
                                                              i.      §3107(1)(a) – allows an individual to recover “allowable expenses” statutorily described as, “all reasonable charges incurred for reasonably necessary products, services and accommodations for an injured person’s care, recover or rehabilitation.” These are payable for life without dollar limitation.
                                                            ii.      These include: medical expenses; in-home nursing or attendant care; residential accommodations; physical and vocational rehabilitation; special motor vehicle transportation; medical transportation mileage; guardian expenses, etc.
Benefit #2 – Work Loss Benefits
                                                              i.      §3107(1)(b) – provides that where an injured victim cannot work as a result of an accident work loss benefits are payable for 3 years from the date of accident. The statute states that this provides compensation for, “loss of income from work an injured person would have performed during the first three years after the accident if he or she hadn’t been injured.”
                                                            ii.      Allows for 85% of gross pay plus overtime. – current monthly maximum – $4,700.00
Benefit #3 – Replacement Service Expenses
                                                              i.      §3107(1)(c) – provides reimbursement for certain domestic services incurred by the injured person to replace those he or she could have performed, but for the injury. The statute provides reimbursement of expenses that are, “ reasonably incurred in obtaining ordinary and necessary services in lieu of those that, if he or she hadn’t been injured, an injured person would have performed during the first three years after the date of the accident, not for income but for the benefit of himself or herself or of his or her dependent.”
                                                            ii.      Cannot exceed $20/day – only available for three years. Include housekeeping, yard work, home maintanence, babysitting.
Benefit #4 – Survivor’s Loss Benefits
                                                              i.      If the accident results in death, PIP benefits are payable to the dependents of the decedent.
                                                            ii.      §3108 – The statute defines these benefits as, “[the] loss … of contributions of tangible things of economic value … that dependents of the deceased … would have received for support during their dependency… if the deceased had not suffered the accidental bodily injury causing death and expenses, not exceeding $20/day, reasonably incurred by these dependents during their dependency … in obtaining ordinary and necessary services in lieu of those that the deceased would have performed for their benefit if the deceased had not suffered the injury causing death.”
                                                          iii.      Payable for three years, subject to same maximums as Work-Loss ($4,700.00/month)
                                                          iv.      Also qualify for payment of funeral and burial expenses under §3107(1)(a).
 The PPI (Property Protection) Claim – Damage to Tangible Property
NOT ON EXAM – but provides the payment of benefits for certain kinds of “accidental damage to tangible property arising out of the ownership, operation, maintenance or use of a motor vehicle.” Referenced in §§3121-3127.
The Tort Liability Claim – Damages Recoverable
Tort liability is controlled by §3135.
Recoverable here are, (1) noneconomic losses; and (2) excess economic loss.
NON-Economic Losses for Threshold Injuries – only recoverable is the injured person has sustained a threshold injury. (death, permanent disfigurement, serious impairment of body function)
EXCESS-Economic Losses Not Covered by PIP – can consist of work-loss in excess of the monthly and 3-year limitations applicable to replacement service expenses.
                                                              i.      If defendant doesn’t have no-fault insurance, all economic losses can be covered.
                                                            ii.      NOTE: Threshold injury is not required here.
The Constitutionality of the Michigan No-Fault Law –Shavers v. Attorney General
Holding #1: The concept of compulsory auto insurance is a Constitutional exercise of power.
Holding #2: The concept of compulsory auto insurance activates due process protections regarding rate making and insurance availability.
                                                              i.      Basically, compulsory insurance must be made fairly priced and widely accessible to comport with DP requirements.
Holding #3: As written, the Michigan No-Fault Act violates due process protections of the Michigan and U.S. Constitutions, which must be corrected within 18 months.
                                                              i.      Unconstitutional because there were no rate-making protections in place for those required to have insurance to challenge the rates that they were given. 
                                                            ii.      Michigan legislature remedied the problem, and the statute has been considered constitutional ever since.
Holding #4: Constitutional challenges to No-Fault are evaluated under the ‘reasonable relation’ test.
                                                              i.      Court held that there is a presumption of constitutionality regarding this type of law and the state police power, which requires the Court to give great deference to the Legislature.
Holding #5: The partial abolition of tort remedies for personal injury is Constitutional.
                                                              i.      Court felt that the remedies provided by the tort system were inadequate, and that the no-fault system remedied those issues.
Holding #6: The partial abolition of tort remedies for property damage is Constitutional.
Holding #7: The exclusion of motorcycles from the no-fault system is Constitutional.
                                                              i.      Court found that this wasn’t unconstitutional, because it would be too expensive to include motorcycles in a compulsory insurance system, and motorcycles are rarely at fault in auto accidents.
Holding #8: Declaratory relief is a viable procedural tool under no-fault.
Recognized Principles Regarding the Judicial Interpretation of the Michigan No-Fault Law
Prompt Reimbursement for Economic Loss
                                                              i.      Shavers – “…no-fault act designed to afford prompt and adequate reparation for economic loss…incurred by individuals injured in MVA.” Johnson v. Michigan Mutual.
                                                            ii.      Supreme Court, “The Act is designed to minimize administrative delays and actual disputes that would interfere with achievement of the goal of expeditious compensation of injuries suffered in MVAs.”
Cost Containment
                                                              i.      Cuts losses in tort system, and sets up a reparation scheme that ensures equal, adequate and prompt recovery under the law for those injured in MVA.
Remedial Legislation & Liberal Construction
                                                              i.      Act is remedial in nature and is meant to be liberally-construed in favor of persons intended to benefit from it. See Turner v. ACIA, Putkamer v. Transamerica
III. The Mandatory Insurance Requirement
Who and What Must be Insured?
§3101. (1) The owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance, property protection insurance, and residual liability insurance. Security shall only be required to be in effect during the period the motor vehicle is driven or moved upon a highway. Notwithstanding any other provision in this act, an insurer that has issued an automobile insurance policy on a motor vehicle that is not driven or moved upon a highway may allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion of the policy in effect.
§3101 makes a couple of things clear:
                                                              i.      Only motor vehicles “required to be registered” in MI must be insured with no-fault.
                                                            ii.      Only “owners or registrants” are required to maintain mandatory no-fault.
                                                          iii.      Only mandatory coverages are: PIP benefits, PPI benefits and residual liability coverage.
                                                          iv.      Only required to have no-fault coverage in effect when the motor vehicle is driven or moved upon a highway, but may still have comprehensive coverage while the vehicle is being sto

alochowski v. Cross Concrete (1987) – “Motor vehicles are designed and used for many purposes. The truck involved in this case is a cement truck capable of pouring cement at elevated levels. Certainly one of the intended uses of this motor vehicle (a motor vehicle under the no-fault act) is to pump cement. The accident occurred while this vehicle was being used for its intended purpose.”
3.      NOTE: If a vehicle is a “dual purpose vehicle” it doesn’t necessarily lose it status as a motor vehicle when an injury occurs off the public highway, while the vehicle is engaged in its non-motor vehicle function – but benefits may not always be payable in this situation.
Things That are NOT Motor Vehicles – CASE LAW
                                                              i.      Snowmobiles
1.      Schuster v. Allstate (1985) – Court noted that snowmobiles can never be considered motor vehicles, as they do not have more than two wheels – regardless of whether it is operated on a public highway of not. “We believe that the legislature intended “wheels” to mean wheels used to propel the vehicle and not extraneous wheels or those with belt-type treads.
                                                            ii.      Forklifts
1.      Ebernickel v. State Farm (1985) – Appellate court rued that a hi-lo didn’t fall within the statutory definition of motor vehicle where the injury giving rise to the claim occurred on private property when plaintiff was walking from one part of the job site to another. The hi-lo had four-wheels, lights and an exhaust system, but it was not intended to be operated primarily on public roadways. The court noted that, “if the hi-lo was an item designed primarily for highway use, it would have been covered.” The court further held that since the injury did not occur on a public highway, the injury was not compensable.
2.      Ebernickel was followed by Jones v. Employers Insurance of Wausau (1987).
3.      In considering the forklife cases, it is clear that the courts have focused on whether the forklift was being operated on a public highway at the time of the crash. When they were, they were considered motor vehicles pursuant to §3101(2). However note that where the vehicle is required to be registered, it will be disqualified from receiving no-fault PIP benefits if the vehicle isn’t insured.
                                                          iii.      Street Stock Cares
1.      Apperson v. Citizens (1983) – Appellate court held that such vehicles didn’t fall within the statutory definition of motor vehicle where the incident causing the injury occurred at a speedway race track when the vehicle flew off the race track and struck a spectator. Since the accident didn’t occur on a public highway, the question was whether the vehicle used was designed for operation on a public highway. The Court concluded that it wasn’t, as important vehicular equipment had been removed. In addition, the vehicle only had one seat and a roll cage. Even though originally designed for use upon a public highway, the modifications forced the vehicle to lose its status as a MV within the meaning of §3101(2).
Who is a Vehicle Owner?
Motor Vehicle Code Definitions
                                                              i.      MCL 257.37 – “Owner means any of the following: (a) any person . . . renting a motor vehicle or having the exclusive use thereof, under a lease or otherwise, for a period that is greater than 30 days.”
                                                            ii.      Exclusive use of the motor vehicle can make someone without title to the vehicle the statutory owner of the vehicle.
No-Fault Statutory Definition
                                                              i.      §3101(2)(h) –“Owner” means any of the following:

1.      (i) A person renting a motor vehicle or having the use thereof, under a lease or otherwise, for a period that is greater than 30 days.

2.      (ii) A person who holds the legal title to a vehicle, other than a person engaged in the business of leasing motor vehicles who is the lessor of a motor vehicle pursuant to a lease providing for the use of the motor vehicle by the lessee for a period that is greater than 30 days.

3.      (iii) A person who has the immediate right of possession of a motor vehicle under an installment sale contract.
                                                            ii.      This language means that any person who is leasing or using a vehicle for more than 30 days, or holds legal title to a vehicle, or is buying a vehicle under a sales contract where the person has the immediate right to possession, is considered to be the owner of the vehicle, and therefore has a statutory obligation to insure that vehicle under the no-fault law.
                                                          iii.      Leasing companies are exempted from this definition of owner.