Auto insurers may control the interpretation of the provisions of their own policies regarding the payment of benefits not required by the no-fault statute. However, this is not true when it comes to the payment of benefits required by the no-fault statute.
Personal protection insurance (PIP) coverage is mandated by Michigan’s no-fault statute under MCL 500.3101(1), and a no-fault insurer is liable to pay PIP benefits under MCL 500.3105(1). As such, courts have ruled that the statute is the “rule book” that auto insurers must follow when dealing with issues pertaining to the award of PIP benefits. If the policy language of an automobile insurance policy conflicts with the no-fault statute regarding the payment of PIP benefits, the statute wins.
Furthermore, MCL 500.3114(1) of the no-fault statute instructs us that following persons are entitled to PIP benefits in a no-fault policy: the person named in the policy, the person’s spouse, and a resident-relative who lives with either spouse or the person named in the policy. So, when it comes to determining whether a claimant is entitled to PIP benefits, automobile insurers must follow a fundamental rule in the no-fault rule book: “persons, not motor vehicles, are insured against loss.” This rule also applies to commercial policies.
Background of MemberSelect v. Hartford
Recently, the Court of Appeals decided the issue of whether a no-fault commercial policy can limit a named insured’s PIP coverage to accidents involving only vehicles listed in the policy. In MemberSelect Insurance Company v. Hartford Accident & Indemnity Company, Michael McGilligan purchased a commercial auto insurance policy from Hartford Accident & Insurance Company. The named insured in the policy is identified as “Michael McGilligan DBA McGilligan Plumbing and Heating.”
While he was servicing a vehicle insured by MemberSelect Insurance Company, it fell on top of him, causing severe injuries. McGilligan filed a claim for PIP benefits from Hartford, but it denied the claim because the vehicle was not specifically listed as a “covered auto” in the policy’s PIP endorsement section. McGilligan then filed a claim for PIP benefits from MemberSelect who paid his PIP benefits. MemberSelect thereafter sought reimbursement from Hartford, but it again denied coverage. MemberSelect then filed the subject lawsuit.
In the Circuit Court, both parties filed cross-motions for summary disposition, and the court granted summary disposition to Hartford. The court agreed with Hartford’s position that commercial policies may limit PIP coverage to accident-causing events involving only “covered autos” if McGilligan and Hartford agreed to the terms of the policy. MemberSelect appealed the ruling, and the issue was presented to the Court of Appeals.
Court of Appeals’ Analysis and Ruling
The Court of Appeals held that Hartford could not avoid its responsibility to pay PIP benefits under the no-fault statute by labeling its no-fault policy as “commercial.” The court explained that two important principles of the no-fault statute are to “broadly provide coverage” to persons injured in motor vehicle accidents regardless of fault, and that “persons, not motor vehicles, are insured against loss” when it comes to the payment of PIP benefits.
Hartford relied on Sisk-Rathburn v Farm Bureau Gen Ins Co of Michigan to argue that Plaintiff is not covered under its commercial policy. Sisk-Rathburn involved a Plaintiff who was injured while driving a rental vehicle without her own no-fault policy. She sought PIP benefits from her husband’s “business auto” policy where she was listed as a designated driver, but the policy only extended PIP coverage to vehicles listed in the policy. The Sisk-Rathburn court held that Plaintiff was not covered under her husband’s policy. The court reasoned that her husband agreed to the terms of the business policy that limited PIP coverage to only vehicles listed in the policy, and that Plaintiff, like her husband, would be entitled to PIP coverage as an employee under MCL 500.3114(3).
The court distinguished this case from Sisk-Rathburn because MCL 500.3114(3) did not apply here since McGilligan was not an occupant of his employer’s vehicle at the time of the accident, and because it did not analyze the PIP mandate provisions of the no-fault statute. The court found that Hartford’s policy language does not comport with key principles of the no-fault statute when it analyzed pertinent provisions of the statute.
First, the court reasoned that since a named insured is synonymous with “the person named in the policy” under MCL 500.3114(1), then Hartford must pay PIP benefits to McGilligan. The court also noted that the legislature had not created a “commercial policy” exception to MCL 500.3114(1). These factors were crucial to the court’s finding that policy language does not overcome Hartford’s statutory obligation to pay PIP benefits to “the person named in the policy.”
Second, the court explained that since PIP benefits are mandated by Michigan’s no-fault statute under MCL 500.3101(1), the policy language of an automobile insurance policy cannot conflict with the statute regarding the payment of PIP benefits. The court further reasoned that Hartford’s policy language that indicated that PIP coverage extended to only “specifically described autos” in the policy is a violation of the fundamental rule in the no-fault statute regarding the payment of PIP benefits.
Although MemberSelect addresses the issue of whether the language of a commercial automobile policy can limit a named insured’s PIP coverage, its reach extends beyond that. One of the key holdings in MemberSelect is that a named insured is synonymous with “the person named in the policy” under MCL 500.3114(1). It follows that it also extends to “the person’s spouse,” and a resident-relative of either. As a result, commercial policies cannot limit PIP coverage for persons entitled to PIP benefits under the no-fault statute. Otherwise they’d be in violation of a central tenet in the no-fault “rule book.”