Introduction

In Mary Free Bed Rehab Hosp v Esurance Prop & Cas Ins Co and United Servs Auto Assn, No. 370846 (Mich Ct App Mar 2, 2026), the Michigan Court of Appeals addressed a post-reform priority problem that is showing up more often in catastrophic losses: when the highest priority insurer on a motorcyclist claim has a capped PIP medical limit, can the injured motorcyclist or a provider pursue additional PIP benefits from a lower priority policy with a higher limit, including unlimited coverage. The Court held the answer is yes.

Background on Mary Free Bed Rehabilitation Hospital

On November 12, 2020, Aaron Slade was catastrophically injured when his motorcycle collided head-on with a vehicle owned and driven by Haley Tanner in Muskegon. Slade received inpatient rehabilitation at Mary Free Bed.

Tanner’s vehicle was insured by Esurance with a $250,000 PIP medical limit. Slade was also covered under his parents’ USAA motor vehicle policy, which carried unlimited PIP medical coverage, and USAA did not dispute Slade’s status as a covered household relative. Under the motorcyclist priority statute, Esurance was highest in priority as the insurer of the owner and operator of the motor vehicle involved in the crash, while USAA was lower in priority as the motor vehicle insurer covering the motorcycle operator.

Mary Free Bed billed $1,183,565.59. Esurance made payments, including $113,307.30 to Mary Free Bed, and then took the position that the $250,000 PIP medical limit was exhausted. Mary Free Bed demanded payment from USAA for the remaining allowable expenses, and USAA denied coverage on the ground Esurance was higher in priority and had already afforded coverage.

The trial court granted summary disposition to USAA, holding the provider could not proceed down the priority chain after Esurance’s limit was exhausted, and it also ruled Esurance’s policy was capped at $250,000.

The Court of Appeals’ ruling on Mary Free Bed Rehabilitation Hospital

First, the Court held Esurance’s policy was properly capped at $250,000, so the priority dispute turned on whether the provider could pursue USAA after exhaustion.

Turning to the motorcyclist priority statute, MCL 500.3114(5), the Court held the phrase “in the following order of priority” establishes the sequence in which insurers must be approached, but it does not impose a hard stop after the first policy. The Court explained that the old practice of stopping after identifying the first-in-priority insurer reflected the pre-reform era of unlimited PIP medical benefits, not limiting statutory language.

The Court also held MCL 500.3114(6) does not bar moving down the priority list because subsection (6) addresses opt outs and exclusions, not exhaustion of an available but capped limit. Finally, the Court relied on the post-reform aggregate limit concept to confirm that allowable expenses may, in appropriate cases, implicate more than one policy, subject to an aggregate limit equal to the highest available limit under any one applicable policy.

The Court affirmed the trial court’s ruling as to Esurance, reversed as to USAA, and remanded for further proceedings.

Driving Forward

Mary Free Bed has immediate claim-handling implications for Michigan carriers, including carriers that write commercial auto policies, because MCL 500.3114(5)(c) and (d) can pull in the motorcyclist’s own motor vehicle policy, which may be personal or commercial, depending on how the risk is placed.

• Priority investigation can no longer stop with the first insurer in the 3114(5) list. If the first-in-priority policy is capped and exhaustion is plausible, claims teams should identify lower priority policies early, confirm their PIP medical limits, and evaluate whether tender and coordination are needed.
• This is not unlimited stacking. Total allowable-expense exposure is capped at the highest limit available under any one applicable policy. The added exposure arises when the lower priority policy carries a higher limit, including unlimited coverage.
• Coverage documentation matters more than ever for capped-limit disputes. In limit disputes, carriers can often rely on declarations and premium records to show the insured paid for a specific PIP medical limit, even if the selection paperwork is challenged.
• Provider litigation risk increases. Providers now have a published roadmap supporting pursuit of a lower priority higher-limit policy once a capped higher priority policy is exhausted. Expect more demands and lawsuits naming both the higher priority capped insurer and the lower priority higher-limit insurer.
• Scope of the ruling. Although Mary Free Bed arises under the motorcyclist priority, some litigants may still cite its reasoning in other priority disputes. The statutory framework should limit that effort: MCL 500.3114(5) is an express priority ladder, while most auto occupant claims are governed by different provisions that direct the claimant to a specific payer rather than allowing movement down a priority list after a cap is exhausted.