Subrogation recovery under the the Michigan No-Fault Act is possible, especially with a thorough understanding of this complex Act and the EXCEPTIONS it allows. These exceptions provide a treasure trove of subrogation opportunities.

How Does Subrogation Fit Into The No-Fault Scheme?

The Michigan No-Fault Act essentially grants tort immunity to anyone who has No-Fault insurance. Most people believe this means there is no subrogation potential in this area. NOT TRUE!

In general, no-fault coverage is payable to anyone who suffers an injury (not just physical/bodily) “arising out of the ownership, operation, maintenance or use of a motor vehicle”. However, since each party must obtain their own No-Fault insurance policy, they must turn to their own insurance company for any damages suffered. This means that neither the injured individual or their insurance company can pursue the at-fault party….UNLESS AN EXCEPTION APPLIES!

EXCEPTIONS TO THE MICHIGAN NO-FAULT SCHEME:

 Uninsured Motorist Exception see MCL 500.3135(3)

•  MCL 500.3101 requires that every resident maintain basic coverage.

•  Anyone who fails to maintain this basic coverage is liable in tort.

•  All costs including Attorney fees and expenses are recoverable;
see AO v Biddis 123 Mich App 232 (1983)

• Remedies for non-payment of judgment obtained under this exception include revocation or suspension of registration and driver’s license. see MCL 500.3177

Parked Car Exception see MCL 500.3123(1)
The Michigan No-Fault Act, effectively abolished tort liability between drivers who maintained the requisite insurance mandated under MCL 500.3101, subject to certain exceptions. MCL 500.3135(3). The “parked vehicle” exception is one such exception. See MCL 500.3121, 500.3123. Under §§ 3121 and 3123(1)(a) of the No-Fault Act, the owner/insurer of a moving vehicle who collides with a parked vehicle is obligated to pay, without regard to fault, property protection insurance benefits to the owner of the parked vehicle for damage to the vehicle and its contents. United S. Assur. Co. v. Aetna Life & Cas. Ins. Co., 189 Mich. App. 485, 488-89, 474 N.W.2d 131, 134 (1991) citing Heard v. State Farm Mutual Automobile Ins. Co., 414 Mich. 139, 150, 324 N.W.2d 1 (1982). The Michigan Supreme Court in Heard v. State Farm Mutual Automobile Ins. Co., supra provided the following rationale:

“Injuries involving parked vehicles do not normally involve the [parked] vehicle as a motor vehicle. Injuries involving parked vehicles typically involve the vehicle in much the same way as any other stationary object (such as a tree, sign post or boulder) would be involved. There is nothing about a parked vehicle as a motor vehicle that would bear on the accident.” Heard v. State Farm Mut. Auto. Ins. Co., 414 Mich. 139, 148-49, 324 N.W.2d 1, 4 (1982).

These provisions of the no-fault act mean that the no-fault insurer of a moving vehicle which collides with a parked vehicle is obliged to pay, without regard to fault, property protection insurance benefits to the owner of the parked vehicle for damage to the vehicle and its contents. Heard v. State Farm Mut. Auto. Ins. Co., 414 Mich. 139, 150, 324 N.W.2d 1, 5 (1982). If the owner of the parked vehicle has purchased collision or other insurance, the no-fault insurer of the moving vehicle is obligated to reimburse the owner’s insurer(s). Id. at fn 11. As stated in Shavers v. Attorney General, 402 Mich. 554, 631, 267 N.W.2d 72, 102-103 (1978):

“Under the property protection scheme, owners of tangible property and properly parked motor vehicles collect from the insurer of the motor vehicle which inflicted the damage.
“The different treatment of moving vehicles…and properly parked vehicles is related to the second conceptual difficulty relating to the use of fault in a no-fault act. Common sense would indicate, and actuarial studies have shown, that in accidents involving motor vehicles and tangible property, the motor vehicle is usually at fault. Consequently, The [No-Fault] Act makes the motorist [of the moving vehicle] strictly liable for the damage he does to tangible property and requires him to purchase insurance for such damage.” (Emphasis supplied and footnote omitted.)

Out of State Accidents Exception
This exception is a bit tricky. What happens when a Michigan resident is involved in an out of state accident? Although some court have issued split opinions, this author concludes that the at-fault party loses the No-Fault immunity. Further, an out of state motorist insured by an insurance company that has not filed a certificate of compliance with the State of Michigan also loses the No-Fault protections. MCL 500.3135(3) specifically states: “Notwithstanding any other provision of law, tort liability arising from the ownership, maintenance, or use within this state of a motor vehicle with respect to which the security required by section [500.]3101 was in effect is abolished.” The Michigan Court of Appeals has held that “by its plain terms the statute [MCL 500.3135(3)] does not operate to abolish tort liability for economic loss arising from an out-of-state accident.” McLean v. Wolverine Moving and Storage Co., 187 Mich.App. 393, 396, 468 N.W.2d 230, 232 (1991).

Motorcycles
Motorcycle involvement is a completely different animal under the No-Fault Act. Contrary to the general scheme of seeking benefits from your own insurer, motorcyclists who are injured must seek any damages/benefits from the insurer or owner of any motor vehicles “involved” in the accident (if applicable). This little understood area of recovery has benefited many of our clients that have paid out such benefits. For example, in these types of cases, there are often multiple motor vehicles “involved” in the accident. Each insurer of each motor vehicle is responsible to an equal pro-rata share of the benefits paid out. Recently, this firm handled a claim where our insured struck a motorcyclist. The injuries sustained required medical treatment that exceed six figures – which our client promptly paid. However, after examining the file, it was discovered that another motor vehicle was involved in the accident. We were able to successfully recover a 50% pro-rata share for our client.

Under the no-fault act, MCL 500.3101 et seq., a motorcycle is not a “motor vehicle.” MCL 500.3101(2)(e). For an injured motorcyclist to recover PIP benefits, the accident must involve a motor vehicle. MCL 500.3105; Auto Club Ins. Ass’n v. State Auto. Mut. Ins. Co., 258 Mich.App 328, 331 n 1; 671 NW2d 132 (2003). If a motor vehicle is involved, MCL 500.3114(5) establishes the order of priority with respect to which insurer must pay the benefits:
A person suffering accidental bodily injury arising from a motor vehicle accident which shows evidence of the involvement of a motor vehicle while an operator or passenger of a motorcycle shall claim personal protection insurance benefits from insurers in the following order of priority:

(a) The insurer of the owner or registrant of the motor vehicle
involved in the accident.
(b) The insurer of the operator of the motor vehicle involved in the accident.
(c) The motor vehicle insurer of the operator of the motorcycle involved in the accident.
(d) The motor vehicle insurer of the owner or registrant of the motorcycle involved in the accident.

The terms “involved in the accident” and “involvement of a motor vehicle” are not defined in the no-fault act. See MCL 500.3101 et seq. Generally, when there is physical contact between the injured party and a motor vehicle, that motor vehicle is involved under MCL 500.3114(5). See Auto Club Ins. Ass’n, 258 Mich.App at 339–341. Even if there was no physical contact, a motor vehicle may still be involved in an accident under certain circumstances.

Intentional Acts Exception
Acts that “intentionally caused harm to persons or property” are expressly excluded from the protections and tort immunity under the Michigan No-Fault Act. See MCL 500.3135(3)

Property Damage Exception
Under the Michigan No-Fault Act, a person who suffers personal injuries because of a motor vehicle generally looks first to his own no-fault insurer for recovery. See MCL 500.3114(1) and 3115(1). However, there is a distinct difference for a person who suffers property damage. In contrast, “Property Protection benefits are distinguishable from Personal Protection benefits (PIPs) because, among other things, Property Protection benefits provide third-party protection, whereas PIPs provide first-party protection. Turner v. Auto Club Ins. Ass’n, 448 Mich. 22, 30, 528 N.W.2d 681, 685 (1995), citing MCL 500.3125. “In other words, when a person’s property has been damaged because of a motor vehicle, he does not look first to his own no-fault insurer for recovery, but, rather, to the insurers of … vehicles involved in the accident.” Id. (emphasis added). MCL 500.3125 states:

“ A person suffering accidental property damage shall claim property protection insurance benefits from insurers in the following order of priority: insurers of owners or registrants of vehicles involved in the accident; and insurers of operators of vehicles involved in the accident. ”

In Turner v. Auto Club Ins. Ass’n, 448 Mich. 22; 528 N.W.2d 681 (1995), the Michigan Supreme Court addressed this very issue. In Turner, a thief stole a motor vehicle and caused property damage. The insurer of the property sought reimbursement from, among others, the insurer of the motor vehicle stolen. The insurer of the vehicle argued that it was not liable since a thief drove the car at the time of the accident – not its insured – and therefore coverage under its policy was not triggered. The Court disagreed and held that the duty to provide coverage was imposed on the insurer of the vehicle involved…not the individual involved:

“ While we recognize the validity of the principle we stated in [Lee v. DAIIE, 412 Mich. 505, 509, 315 N.W.2d 413 (1982)], we are also cognizant that at various places throughout the no-fault act, the Legislature chose to make the liability of the insurer turn on whether the insured’s vehicle is “involved in the accident,” rather than on the involvement of the insured in the accident. The primary insurer liability scheme for property protection benefits under §§ 3121(1) and 3125 is such an example.” Turner v. Auto Club Ins. Ass’n, 448 Mich. 22, 43-44, 528 N.W.2d 681, 691 (1995)

Recognizing the contrast between liability for PIP benefits and Property Damage benefits, the Turner Court held that the Legislature did not choose to preclude coverage for property protection benefits on the basis that someone other than the insured was driving the vehicle when the accident occurred. “Rather, the Legislature contemplated the car- thief scenario when it drafted the no-fault act is made manifest by the existence of MCL 500.3113(a). MCL 3113(a) expressly provides that insurers do not have to pay PIP benefits to a car thief who incurs injuries in a motor vehicle accident.” Turner v. Auto Club Ins. Ass’n, 448 Mich. 22, 36, 528 N.W.2d 681, 687-88 (1995). Because the Legislature did not incorporate any type of exception for the car-thief situation with respect to property protection benefits, such an exception would not be recognized. Turner v. Auto Club Ins. Ass’n, 448 Mich. 22, 36, 528 N.W.2d 681, 687-88 (1995).

The Turner Court further held that MCL 500.3121(1) and MCL 500.3125, “read in conjunction, provide evidence that the primary insurer’s duty to pay property protection benefits may be triggered whether or not its insured personally participated in the accident.” This conclusion is also supported by Michigan Mutual Ins. Co. v. Carson City Texaco, Inc., 421 Mich. 144, 365 N.W.2d 89 (1984), in which the insurer was held to be liable even though the insured did not personally participate in the property damage. Turner v. Auto Club Ins. Ass’n, 448 Mich. 22, 44-45, 528 N.W.2d 681, 691 (1995).

Non-Automotive Defendant Exception
This exception often arises when a insurance carrier has paid out a claim under an insured’s No-Fault policy. If the at-fault party’s actions did not arise out of the ownership, maintenance, operation or use of a motor vehicle, tort liability (and subrogation) is available.

Examples include: Product liability/breach warranty, Dramshop, malpractice and highway defect cases

Recently, our firm successfully recovered payment against a tree service company that was negligently cutting tree branches near our insured’s motor vehicle. One of the tree branches fell and struck our insured’s vehicle causing substantial damage. Our carrier paid for the repairs under the insured’s No-Fault policy. However, since the tree service’s actions did not arise out of the ownership, maintenance, operation or use of a motor vehicle, the No-Fault Act did not bar subrogation recovery.

Not sure if you have a potential avenue of subrogation recovery? Give us a call.