No-fault insurance policies cover people, not vehicles.


Michigan’s no-fault insurance law is grounded in the 1972 no-fault act. But the Michigan legislature couldn’t anticipate every potential issue when it drafted and revised that legislation, so there are many judicial decisions interpreting the act.

Although these cases can be confusing to attorneys and laypeople alike, there are a few bright-line rules. Michigan courts generally enforce insurance contracts as written. You’re presumed to have read and understood your insurance policy. You can’t reasonably have an expectation about your insurance (at least not one that courts will enforce) that is at odds with the plain language of your insurance contract.

Applying these rules can be controversial at times. Occasionally, though, they lead to a fairly clear-cut resolution.

Stone v Auto-Owners Insurance Companyarose out of a tragic automobile crash that killed Stephanie Stone while she was driving her Ford Taurus. Stephanie’s parents, John and Linda Stone, had added the Taurus to their insurance policy. But the policy listed John and Linda as the owners, not Stephanie.

Stephanie’s widower, William Stone, sued John and Linda’s insurer for no-fault insurance benefits. The insurer sought to dismiss the case, arguing that it couldn’t be liable because the policy insured John and Linda, not Stephanie. William argued that the policy should cover Stephanie because John and Linda’s insurance agent led them to believe that it would. Still, the policy didn’t list Stephanie by name.

The trial court denied the insurer’s motion to dismiss the case and the Court of Appeals denied the insurer’s application for leave to appeal. The Michigan Supreme Court thought the issue warranted review, however, and sent the case back to the Court of Appeals for its consideration.

In a published (and therefore precedential) decision, the Court of Appeals held that William isn’t entitled to no-fault benefits from John and Linda’s insurer.

The court’s decision focused on two sections of the no-fault act. Subsection (1) states that, with certain exceptions, a no-fault policy covers “the person named in the policy, the person’s spouse, and a relative of either domiciled in the same household …” Subsection (4) states that injured parties must claim insurance benefits from the vehicle’s owner’s insurer before seeking benefits from the vehicle’s operator’s insurer.

William argued that Subsection (4) applied because Stephanie was the owner of the Taurus and, in his view, John and Linda’s insurer was also Stephanie’s insurer. But the Court of Appeals held that a party is covered under a policy only if the language of that policy includes him or her under the definition of an “insured person.” It rejected William’s argument that the policy had to expressly exclude Stephanie, and held that the critical issue was whether Stephanie was included in the definition of an “insured person.”

Unfortunately for the plaintiff, she wasn’t. The policy listed only John and Linda Stone as the insureds.

William argued that John and Linda’s expectations should expand coverage to Stephanie. He said that “(1) Linda requested a new policy in Stephanie’s name, (2) Linda thought she was receiving such a policy based on her conversation with her insurance agent, and (3) Linda paid defendants premiums for such a policy, which defendant excepted while knowing that Stephanie did not live with John or Linda.”

This argument foundered on the rocks of the Michigan Supreme Court’s opinion in Wilkie v. Auto-Owners, Ins. Co: “[A] policyholder cannot be said to have reasonably expected something different from the clear language of the contract ….”

In addition, the Court of Appeals explained that the insurer wasn’t bound by the insurance agent’s representations. The insurance agency was an independent insurance agent, meaning that it sold policies for more than one insurer. Under Michigan law, independent insurance agents are agents of the insured, not the insurer.

William has the option of appealing this decision to the Michigan Supreme Court. If the Court finds something amiss in the Court of Appeals’ analysis, it may take the case. But if the Court agrees with the Court of Appeals or finds other reasons militating against taking the case, the Court of Appeals’ opinion could be the end of William’s claim against John and Linda’s insurer.

The legal lesson here is that no-fault insurance policies cover people, not automobiles. By law, your no-fault insurance policy will cover your spouse and relatives who live with you. But it will only cover other people if they are listed as “insured persons” in your insurance contract.

Have questions or looking for further information? Contact one of our attorneys.