Volume XXII, No. 29 November 10, 2010

LAW FAX MICHIGAN LAW – BLUE | INDIANA LAW – RED www.garanlucow.com

Garan Lucow Miller, P.C. 1111 West Long Lake Road, Suite 300 Troy, Michigan 48098 248.641.7600 From the Co-Editors James L. Borin & Simeon R. Orlowski

NO-FAULT – MINI-TORT CONTRIBUTOR – JAMES L. BORIN

Many years ago I published an article on mini-tort which, I hoped, would answer all of your questions. I still receive innumerable inquiries regarding this particular subject. Accordingly, I herewith republish that article, slightly revised to reflect the recent amendment to Section 3135: I should advise you that this memo was submitted to the Insurance Commissioner’s office for its consideration. While the memo was not adopted by the Commissioner, I did receive a tacit “approval” of the contents and recommendations made therein. By the same token, there being

few appellate decisions interpreting this area of the law, it remains solely my own opinion as to how these questions should be answered.

MCL 500.3135(3)(e) of the Michigan No Fault Act, commonly referred to as the “mini-tort” provision, is relatively straight forward:

(3) 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 3101 was in effect is abolished except as to:

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(e) Damages up to $500 to motor vehicles, to the extent that the damages are not covered by insurance. An action for damages pursuant to this subdivision shall be conducted in compliance with sub-section (4).

Sub-section (4) reads as follows:

(4) In an action for damages pursuant to sub-section (3)(e):

(a) Damages shall be assessed on the basis of comparative fault, except the damages shall not be assessed in favor of a party who is more than 50% at fault.

(b) Liability shall not be a component of residual liability, as prescribed in Section 3131, for which maintenance of security is required by this act.

The two questions that I am most frequently asked involve the manner in which damages are computed and the eligibility for a mini-tort claim. In my view, the assessment of damages for purposes of a mini-tort claim must be computed based upon the uninsured portion of the claimant’s loss, and not upon the entire amount of such property damage. Further, it is my belief that the legislature did not contemplate that uninsured claimants should be excluded from pursuing a mini-tort claim.

It must be remembered that the mini-tort provision was not an original part of the No Fault Act. Thus, at the inception of no fault, October 1, 1973, there was absolutely no remedy available for any vehicular property damage caused by a properly insured motor vehicle. That situation remained unaltered until July 1, 1980, when the No Fault Statute was amended, adding MCL 500.3135(2)(d) and (3)(4) and (5). Those sections were subsequently renumbered when the tort reform provisions were added in March 1996, but the only significant change was the increase of the dollar amount from $400 to $500. Thus, the basic provisions of the mini-tort claim have been in effect since 1980.

2 See Travelers Ins Co v U-Haul, 235 Mich 273 (2000). GARAN LUCOW MILLER, P.C.

It is interesting, given the three decade time span, that there have only been three reported opinions which directly interpret these particular sections of the No Fault Statute. The reason for same is obvious: the amount involved is nominal and would not justify the attorney fees attendant to the trial and subsequent appeal of an adverse ruling. In order to create binding precedent on this issue, a published opinion would be needed from the Michigan Court of Appeals. Due to the amount in controversy, such a case would be initially litigated in a district court. If a party were to pursue an appeal, the appeal as of right would be to the circuit court. A party would then have to seek application for leave to appeal to the Michigan Court of Appeals – an application that may or may not be accepted – and then the Court of Appeals would have to elect to publish the decision. Thus, while the aggregate amount is probably quite significant to the large insurers of this state, there are no published opinions (or unpublished, for that matter) which directly consider the two issues presented for my analysis.

We are obviously dealing with an issue of statutory construction. Thus, we need to consider the legislative intent and, unfortunately, we have very little guidance in that regard. However, given the amount which was originally carved out from tort immunity ($400), it’s pretty clear that the legislature was attempting to provide a mechanism by which a relatively innocent owner (i.e. less than 50% at fault) could recover her or his deductible. While the legislature did not use that particular terminology, such an intent is the only logical conclusion. In determining the method by which damages should be calculated, it is necessary to observe the following three propositions:

1. The No Fault Statute affords complete immunity in tort for property damage under MCL 500.3135(3). Thus, had there been no exception created for the mini-tort, there would be no liability whatsoever.2

2. That the mini-tort exception should be viewed in a similar fashion to other economic loss which is often incurred in a motor vehicle accident, but is otherwise subject to tort immunity (e.g., medical and hospital bills and wage loss for the first three years).

3. That the Michigan Supreme Court favors strict statutory construction and, in considering this situation, we should do likewise. In my view, the language of the statute is clear and unequivocal. It states that the damages which are available in a mini-tort claim are limited in three ways:

1. Monetary damages (same not to exceed $500);

2. To repair or replace a motor vehicle; and

3. Which is not covered by insurance.

Accordingly, in order for a plaintiff to prevail in a mini-tort claim, he must establish five points:

1. That he is the owner of a motor vehicle;

2. Which was damaged by the negligence of the defendant;

3. That such damage was repaired and/or that such damage caused the vehicle to be totaled;

4. That all or a portion of the damage was uninsured; and

5. That the plaintiff was not more than 50% at fault.

The trial judge, sitting without a jury (i.e. there are no juries in the small claims division of the district court), would then consider the plaintiff’s proofs and, to the extent that plaintiff has established same by a preponderance of the evidence, would enter a verdict for the plaintiff which would be reduced by the plaintiff’s comparative negligence, if any. The ultimate judgment, however, could not exceed $500, to the extent that such damages were not covered by insurance. Again, viewing this matter in the context of tort immunity under Section 3135(3), it is my belief that the trial judge should not consider the insured portion of the property damage. Using the parallel of medical expense in a serious impairment claim, it is clear that a properly insured motor vehicle defendant cannot be held responsible for economic loss (i.e. medical or hospital bills) in a no fault tort claim. Indeed, while the extent of medical and hospital expense is admissible for the limited purpose of demonstrating “serious impairment,” it obviously is not admissible for purposes of establishing actual monetary damages. Indeed, the standard jury instructions and the standard verdict forms for motor vehicle tort litigation does not even contemplate damages for hospital or medical expense.

To further demonstrate my interpretation, let’s take two separate accidents involving similarly situated claimants with identical deductibles of $500. Let’s first assume that both “x” and “y” are sitting at a light and are struck from the rear by “z.” In the absence of comparative negligence, and assuming that both sustained at least $500 of property damage (which was repaired), each would be entitled to a mini-tort judgment of $500 against the defendant. Now let’s assume that the accident is a contested intersectional accident with each being 50% at fault and, again, identical $500 deductibles. Let’s assume that “x” sustains damage of $1,000 and “y” sustains damage of $750. If “x” is allowed to introduce the entire amount of his property damage, he gets a $500 judgment in mini-tort. “Y,” on the other hand, who only had $750 in damage, gets an award of $375. Clearly, both “x” and “y” are in the identical position, being 50% at fault and having incurred a $500 deductible. Their recovery, however, is not the same solely because the total amount of damage to their respective vehicles differs.

In my view, neither “x” or “y” should get more than $250. The “damages” in the mini-tort claim should be limited to the amount of the uninsured loss. Thus, applying 50% fault to each claim, the judgment should be the same, $250.

To further illustrate the above, let’s assume that both “x” and “y” had $1,000 deductibles. In that situation, each would be entitled to put in the full amount of his property damage and, applying 50% comparative, “x” would obtain a judgment of $500 and “y” a judgment of $375. In conclusion, based on the above analysis, it is my opinion that the only “damages” admissible in a mini-tort claim is the uninsured portion of the cost of repair, or actual uninsured cash value (if the vehicle is totaled), which is then reduced by the comparative negligence of the claimant. Any portion of the property repair or value which is covered by insurance is not an element of “damage” in a mini-tort claim.

The second question is whether the owner of an uninsured motor vehicle should be permitted to pursue a mini-tort claim. There are two separate situations where that might occur: one where the motor vehicle is totally uninsured and the second where it is insured for mandatory coverages (i.e. PIP, PPI, and residual bodily injury), but not for collision coverage. In my view, the result is identical, that no prohibition exists under the statute. That interpretation is premised upon the following three key observations:

1. Collision coverage is not statutorily mandated under the No Fault Act;

2. The terminology chosen by the legislature for the mini-tort claim (i.e. “damages . . . not covered by insurance”) is clear and unequivocal; and

3. The legislature was fully capable of drafting an exclusion, but apparently chose not to do so.

The last point is probably the most significant. It should be remembered that the mini-tort claim was added to the No Fault Act in 1980. Thus, in looking at the statute that was originally enacted, it is uncontroverted that the legislature contemplated certain situations wherein a claimant, as the owner of a motor vehicle, would be punished for having allowed that vehicle to be operated without insurance. Indeed, three separate sections of the statute were enacted which imposed sanctions upon the owner and/or registrant of an uninsured motor vehicle: MCL 500.3102(2); MCL 500.3113(b); and MCL 500.3177(1). Thus, at the time the mini-tort amendment was being considered, the legislature surely would have reviewed its own statute and recognized that there were other exclusions and sanctions against owners of uninsured motor vehicles.

Additionally, in recent amendments to the statute, the legislature added yet another exclusion, MCL 500.3135(3)(c) which verifies the proposition that it (i.e., the legislature) is fully capable of stating an exclusion, if it feels compelled to do so. With that assumption, it must be further presumed that the legislature did not intend to create a similar sanction or exclusion within minitort. In this regard, there is a further aspect which should be considered. First of all, coverage for a mini-tort claim is optional, not mandatory. Second, mini-tort claims are relegated to the small claims division of the district court where attorneys are not permitted. Thus, the legislature would not have added any provision in this claim requiring legal sophistication. To have an exclusion, it is necessary that the defendant be aware of same and capable of articulating the applicability of such provision. Clearly, under circumstances where the legislature did not wish to even have

Mr. Saylor is a Partner in the Firm’s Detroit Office and can be reached at (313)446-1530 or dsaylor@garanlucow.com

attorneys involved, it is hard to imagine that it would have incorporated any exclusion, much less one that requires a sophisticated legal argument.

It is also noteworthy that the language of the statute, “damages not covered by insurance” does not suggest that the plaintiff’s vehicle is, or must be, insured. Had the legislature used the term “deductible,” which has a very specific and unambiguous meaning in the law and insurance, then such an argument would have more weight. As I see it, there is neither an expressed, nor implied exclusion for owned uninsured motor vehicles precluding same from seeking the mini-tort claim.

Finally, it seems illogical that the legislature would have incorporated an exclusion relating to non-mandatory coverage. Therefore, to argue the implied exclusion, one must further suggest that it applies only to totally uninsured motor vehicles (i.e. no PIP, PPI, or residual bodily injury). It would make little sense to punish the owner of a motor vehicle which has the mandatory coverages, but for which the insured has elected not to purchase collision coverage. Certainly, there would be no public policy consideration which would support such a result.

Accordingly, since collision coverage is not mandatory, since the legislature did not choose to incorporate an expressed exclusion for uninsured motor vehicles and, finally, since there is no public policy basis upon which to apply such an implied exclusion, it is my firm belief that no such provision was intended by the legislature. Thus, uninsured motor vehicles, whether totally or partially (i.e. no collision coverage), may still pursue the mini-tort remedy.

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WILCOX DECISION CONTRIBUTOR – DANIEL S. SAYLOR3 FYI — the Supreme Court issued an order yesterday (just received) VACATING its earlier order granting leave to appeal. We just argued this case, on the merits, on Thursday, November 4. A mere 5 days later, the Court has decided not to decide the case: “On order of the Court, leave to appeal having been granted and the briefs and oral arguments of the parties having been considered, the order of April 16, 2010 which granted leave to appeal is VACATED and leave to appeal is DENIED because we are no longer persuaded the questions presented should be reviewed by this Court.”

This is the case that was taken by the “new” Supreme Court to overrule Griffith v State Farm. Plaintiff was making a all-out push for a ruling that, once a claimant has shown that his ordinary expenses of living — i.e., housing — are impacted by his MVA injuries, the no-fault insurer must pay ALL such expenses and not merely the amount of the increase. With the new change in the Court’s make-up, it certainly appears that Griffith (and Hoover) is alive and well!

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The Firm’s Estates, Probate and Elder Law practice group has published a weblog called the Michigan Probate and Estate Journal, found at http://www.michiganestatejournal.com. Articles are posted on a regular basis by members of the practice group. We encourage you to visit, read, and comment on the postings.