Michigan Court of Appeals Reaffirms the Standards Governing Reimbursement of Mistakenly Paid PIP Benefits

Michigan Court of Appeals Reaffirms the Standards Governing Reimbursement of Mistakenly Paid PIP Benefits


In Ravenell v Auto Club Ins Assoc, unpublished per curiam opinion of the Court of Appeals, issued October 15, 2020 (Docket No. 348436), the Court of Appeals considered NGM Insurance Company’s claim for reimbursement of mistakenly paid personal protection insurance (PIP) benefits from Auto Club Insurance Association (ACIA). The Court followed Amerisure Cos v State Farm Mut Auto Ins Co, 222 Mich App 97; 567 NW2d 65 (1997), and Titan Ins Co v North Pointe Ins Co, 270 Mich App 339; 715 NW2d 324 (2006), holding that NGM was not entitled to reimbursement because its action against ACIA sounded in subrogation, and NGM paid benefits as a “mere volunteer.”

Background on Ravenell

On November 6, 2014, a vehicle operated by Thaddeus Stec struck Oliver Ravenell. After the accident, Ravenell claimed first-party no-fault benefits from NGM, “the commercial-automobile insurer of three vehicles listed on a policy issued . . . to Omega Appraisals, LLC, a company for which Ravenell’s wife was the resident agent.” Ravenell, unpub op at 1. NGM ultimately paid more than $331,000 in no-fault benefits to or on behalf of Ravenell.

Sometime after it made the payments, NGM concluded that Ravenell was not covered by the commercial automobile policy. So, NGM sued for reimbursement under the theory that ACIA, Stec’s insurer, was responsible for paying PIP benefits to Ravenell. The trial court granted summary disposition in favor of NGM, and ACIA appealed.

The Court of Appeals’ Ruling

On appeal, the insurers disputed the nature of NGM’s reimbursement claim and the authority that should govern the Court’s analysis. ACIA argued that NGM’s claim was an action to recover no-fault benefits through equitable subrogation, as explained in Titan, 270 Mich App 339, Amerisure, 222 Mich App 97, and Michigan Mut Ins Co v Home Mut Ins Co, 108 Mich App 274; 310 NW2d 362 (1981). NGM argued that its claim against ACIA was governed by Madden v Employers Ins of Wausau, 168 Mich App 33; 424 NW2d 21 (1988). Madden held that an action between insurers for reimbursement of mistakenly paid PIP benefits was a claim for recoupment of money paid by mistake, not an action to recover no-fault benefits.

The Court of Appeals held that it was required to follow Amerisure and Titan Ins Co as binding precedent. In Amerisure, an insurer mistakenly paid PIP benefits under a commercial insurance contract to a person who was not an employee of the insured, and who had his own no-fault insurance policy. The commercial insurer sued the claimant’s no-fault insurer for reimbursement. On appeal, the Court held that the one-year statute of limitations under MCL 500.3145(1) governs actions between insurers to recover no-fault benefits mistakenly paid by the lower-priority insurer. It reasoned that this type of action sounds in subrogation, meaning that the plaintiff insurer acquires no greater rights than the injured claimant had against the defendant insurer. Titan also held that actions between no-fault insurers for the recovery of mistakenly paid benefits are subrogation claims subject to the one-year limitations period under MCL 500.3145(1). Based on this authority, the Court of Appeals concluded that NGM’s action sounded in equitable subrogation.

Next, the Court applied the rules of equitable subrogation to NGM’s claim. The Court explained that a “mere volunteer” cannot prevail in an equitable subrogation action because relief is available only to those who are compelled to pay a debt primarily owed by another. So, “[t]o avoid being a mere volunteer, a subrogee must be acting to fulfill a legal or equitable duty.” Ravenell, unpub op at 7, citing Esurance Prop & Cas Ins Co v Michigan Assigned Claims Facility, ___Mich App ___, ___; ___ NW2d ___(2019) (Docket No. 344715) ; slip op at 5-6 (quotation marks omitted). NGM’s position was that Ravenell was not a named insured under the commercial automobile policy, and that NGM didn’t otherwise owe him a duty to pay PIP benefits. Accepting this position, the Court held that NGM was a “mere volunteer” because it mistakenly paid benefits that it had no obligation to pay. Thus, its claim for reimbursement failed. The Court noted, though, that the “mere volunteer” rule would not have barred NGM’s claim if it “had paid PIP benefits to one of its insureds.” Id. at 7.

Lastly, the Court rejected NGM’s unjust-enrichment claim. It reiterated that NGM’s action for mistakenly paid PIP benefits was for subrogation, not unjust enrichment.

What does Ravenell mean for insurers?

An insurer should consider this decision when determining whether to pay PIP benefits to a claimant. Under Ravenell, an insurer who pays benefits as a “mere volunteer” is solely liable for the benefits paid with no ability to seek equitable subrogation. To avoid the risk of becoming a “mere volunteer,” an insurer should investigate (1) the validity of its insurance policy and (2) the claimant’s coverage under the policy and applicable statutes before paying no-fault benefits. Such an investigation can mitigate the risk of paying benefits to a claimant when the insurer does not have a legal or equitable duty to pay.

It bears noting within this context that the “mere volunteer” bar does not apply to insurers who pay no-fault benefits to an insured despite the existence of a higher-priority insurer. In that scenario, the lower-priority insurer may seek reimbursement though a timely filed subrogation action against the higher-priority insurer. See, e.g., Titan, 270 Mich App 339.

If you have questions about actions to recover mistakenly paid no-fault benefits, please feel free to contact the author, Joseph P. Zannetti. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.


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