Author(s): Thomas G. Herman, James L. Borin

Uninsured Motor Vehicle – Occupancy of Parked Car – Exclusion Applies

In Adams v Citizens, COA# 290037, Brian Adams was seated in a parked uninsured motor vehicle when struck by another vehicle. Mr. Adams sought no-fault benefits alleging that he was not the owner of the parked vehicle and, moreover, that it was not “involved in the accident” because it was legally parked.

The trial court entered summary disposition for Citizens, the assigned insurer, finding that Mr. Adams was a de facto owner due to his use of the vehicle for more than 30 days. The trial court also ruled that the parked vehicle was “involved in the accident” because it met one of the exceptions to the parked car exclusion, [i.e., 3106(1)(c)]. Thus, Adams was excluded from PIP pursuant to section 3113(b), as the owner of an uninsured motor vehicle involved in the accident.

The Court of Appeals affirmed on both grounds, finding that there was no factual dispute as to plaintiff’s “ownership” of the parked car. Further, the Court of Appeals held that occupancy of a parked care is sufficient to satisfy the “involved in the accident” criteria.

{Editor’s Note – It is extremely important that detailed facts be developed during the investigation of a putative de facto owner. These are some of the questions which should be asked:

1. Did the putative de facto owner (DFO) have a personal set of keys to the vehicle?

2. Did the DFO have a copy of the registration and proof of insurance in his personal possession?

3. Did the DFO have discretionary use of the vehicle or did he have to seek permission of the owner each time he wanted to drive it? Did the DFO pay the owner for the use of the vehicle? Was there a written agreement between the DFO and the owner?

4. Did the DFO contribute financially to the maintenance, repair, registration and the purchase of gas?

5. Did the DFO actually drive the vehicle for more than 30 days? If not, was he authorized and intending to do so?

6. Did the DFO have another vehicle available for his personal use? Did the titled owner have another vehicle available for his use?

7. Did the DFO engage in activities which reflected proprietary control over the vehicle, (i.e., customizing or installing adaptations)?

8. Did the DFO need the vehicle to get to and from work? To take his/her children to and from school?

9. Did the DFO have any personal affects in the vehicle such as CDs, GPS device or clothing?

10. Did the titled owner of the vehicle ever have insurance on the vehicle in the past? If so, was the DFO a listed driver?

The mere fact that a person uses a motor vehicle for more than 30 days does not automatically result in de facto ownership. There must be a proprietary, possessory component to the usage, although it need not be exclusive or adversarial to the title holder. Recent cases from the Court of Appeals, most of which are unpublished, are setting a higher bar to establish de facto ownership under the No-Fault Act.}



The Michigan Insurance Code allows an automobile liability policy to specifically exclude coverage for a named driver. (MCLA 500.3009). That statute, however, includes mandatory disclaimer language which must be included on the certificate of insurance and on the policy. The Michigan Court of Appeals recently ruled that the mandatory disclaimer cannot be altered by even one word, even if it makes the disclaimer language more easily understandable.

Progressive Insurance v Smith & Harris (published decision issued March 16, 2010) involved a specifically excluded unlicensed driver. Mr. Smith lost his license due to too many points. When it came time to renew his license plates, Smith added a female friend on the title to his truck. The friend then obtained insurance coverage which listed Smith as a named excluded driver.

The statute requires the following specific disclaimer: Warning – when a named excluded person operates a vehicle all liability coverage is void – no one is insured. Owners of the vehicle and others legally responsible for the acts of the named excluded person remain fully personally liable.

For whatever reason, the insurance company changed the last word “liable” to “responsible” on the certificate of insurance. The correct statutory language was used on the declarations page of the policy. In a 2 to 1 decision, the Court of Appeals ruled that the exclusion was not valid and required that the insurance company provide liability coverage when Smith was involved in an accident.

The dissenting opinion raised many common sense arguments. There was no claim that the actual exclusion language was ambiguous. Smith and his friend both clearly understood he was not covered when driving the truck. The premium was several times lower than it would have been if Smith had not been excluded. The word “responsible” is more understandable to a lay person than the word “liable.”

Despite the acknowledged common sense arguments, the two judge majority held that when the legislature requires specific language, that language must be followed exactly. A hard and fast rule is easier to apply, even if it results in an unjust result, such as this case. The judges did not want to open the door to having to decide in future cases when a change in language “substantially complies” with the intent of the legislature. If the legislature requires specific language, or specific size type, or even a specific color paper, an insurer would be well advised to comply with those requirements.