When a person is injured in a motor vehicle accident while working on the job, that individual usually carriers Worker’s Compensation insurance through his employer in addition to No-Fault PIP insurance on the vehicle. What happens when the Worker’s Compensation carrier goes bankrupt in this situation?
In Mathis v Auto-Owners et al, unpublished per curiam opinion of the Court of Appeals, issued [December 9, 2021] (Docket No. 354824), the Michigan Court of Appeals clarified that the No-Fault Insurer is higher in priority than the Michigan Property & Casualty Guaranty Association (MPCGA) when a Worker’s Compensation Carrier becomes insolvent and No-Fault Insurance is available to a claimant.
Background on Mathis
Gary Mathis was injured while exiting his semi-truck. The truck carried a No-Fault PIP Insurance policy with Home-Owners. Since Mathis was also working at the time, he also had a Worker’s Compensation policy available to him as part of his job. Michigan’s No-Fault Act clearly makes the Worker’s Compensation carrier priority for payment of benefits in this situation.
In Mathis, the Worker’s Compensation carrier became insolvent before it made any payments for benefits to Mathis. The MPCGA was created to pay injured claimants for benefits in such situations involving an insolvent insurer. However, the MPCGA argued that Home-Owners is priority in this case because the No-Fault Insurance is still available to Mathis. Home-Owners disagreed and argued that the MPCGA is priority based on the language of the No-Fault Act.
Both the MPCGA and Home-Owners moved for summary disposition. The trial court ruled in favor of the MPCGA and held that Home-Owners’ policy was priority. Home-Owners appealed.
The Court of Appeals’ Ruling
The Court of Appeals agreed with the trial court and affirmed its ruling. The Court of Appeals first explained that the MPCGA was created for paying and discharging obligations of insolvent insurers and that the Guaranty Act allows the MPCGA to receive a credit against a covered claim if damages or benefits are recoverable by a claimant under an insurance policy other than the policy of the insolvent insurer.
The Court emphasized that the purpose of the Guaranty Act is to protect claimants or policyholders from the insolvency of insurers. It also emphasized that the MPCGA was meant to be a last resort for a claimant.
After looking at the language of the Guaranty Act and the No-Fault Act, the Court agreed with the lower court and ruled that Home-Owners was highest in priority.
What does this mean going forward?
If a person is injured in a motor vehicle accident while working, the No-Fault benefits insurer is on the hook in the event that the Worker’s Compensation carrier becomes insolvent.
Although the Court of Appeals opinion was unpublished and therefore nonbinding, the Court’s ruling appears to be how the Court of Appeals would rule on this issue. Unless a binding opinion is released in the future that states otherwise or the Michigan Supreme Court takes this issue on appeal, you should assume that the No-Fault insurer is on the hook for paying No-Fault benefits in these situation.
If you have questions about situations involving Worker’s Compensation carriers becoming insolvent in a case involving potential No-Fault benefits, please feel free to contact the author, Ali H. Harajli. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.