August 26, 2015
In Titan Insurance Company v State Farm Mutual Automobile Insurance Company, unpublished per curiam opinion of the Court of Appeals decided August 11, 2015 (Docket No. 321112), a panel of the Court of Appeals held that the no-fault act’s ‘one-year back’ and ‘one-year notice’ rules are to be applied strictly to claims by insurance companies seeking reimbursement for no-fault benefits that should have been paid by another carrier. Just as individual claimants who violate these rules risk losing the right to challenge an insurer’s denial of benefits, the panel ruled that insurance companies ‘standing in the shoes’ of a claimant face similar risks.
Matthew Sterling was injured while attempting to start an uninsured 1968 Camaro owned by Frank Ward. Sterling denied having no-fault coverage and made a claim for personal injury protection [“PIP”] benefits under Michigan’s Assigned Claims Plan. Sterling’s claim was assigned to Titan. Titan paid a total of $45,664.27 in PIP benefits on Sterling’s behalf.
During the pendency of the claim, Titan undertook a priority investigation and discovered that State Farm insured another vehicle owned by Frank Ward which placed State Farm at the highest priority. On August 23, 2012 Titan sued State Farm seeking reimbursement pursuant to MCL 500.3175(2). Titan’s suit was filed precisely two years after having been assigned Sterling’s claim. Meanwhile, State Farm had undertaken its own coverage investigation. In March 2011 State Farm directed two letters to Affirmative Insurance Company asking for verification whether a vehicle owned by Sterling at the time of the loss was insured by Affirmative. The letters did not provide Sterling’s address nor did they provide any indication regarding the place or nature of Sterling’s injury. In August 2011, Affirmative paid an Oakwood Hospital emergency room charge related to Sterling.
On March 27, 2013 State Farm filed a third-party complaint against Affirmative alleging that at the time of the accident Sterling was covered by a no-fault policy issued by Affirmative. As a consequence, State Farm alleged that Affirmative was at a higher level of priority than State Farm with regard to Titan’s claim for reimbursement.
Titan, State Farm and Affirmative each moved for summary disposition at the trial court. Affirmative argued that State Farm’s claim was time-barred under MCL 500.3145(1) which sets forth a one-year statute of limitations for subrogation claims between no-fault carriers and a “one-year back” rule generally limiting recovery for such claims to benefits paid within the year previous to the commencement of the action. State Farm responded with three arguments. First, it argued that its March 2011 letters to Affirmative seeking verification of coverage constituted notice of its reimbursement claim within one year of Sterling’s accident. Second, it argued that Affirmative’s August 2011 payment of the Oakwood bill tolled the statute of limitations. Third, it argued it had not incurred any expense and would not do so until it was required to reimburse Titan by way of the court granting Titan’s motion for summary disposition.
The circuit court granted Titan’s motion and entered judgment for $45,664.27 against State Farm. The court granted State Farm’s motion and in turn denied Affirmative’s motion and entered judgment in the amount of $45,664.27 against Affirmative. The court reasoned that 500.3145(1) did not bar State Farm’s claim against Affirmative because State Farm did not “incur” an expense until Titan obtained judgment against State Farm. Affirmative appealed the trial’s court ruling.
The crux of the appeal was whether State Farm’s claim was barred by the “one-year back” and “one-year notice” provisions of MCL 500.3145(1). Citing the decisions in Joseph v Auto Club Ins Ass’n, 491 Mich 200; 815 NW2d 412 (2012) and Titan Ins v North Pointe Ins Co, 270 Mich App 339; 715 NW2d 324 (2006), the panel noted that these provisions are to be construed strictly, even as to a carrier’s equitable subrogation claim seeking to recover PIP benefits from another carrier. Belated discovery of the existence of a higher priority carrier does not toll the limitations period.
The panel then rejected each of State Farm’s arguments and reversed the circuit court’s decision that entered judgment against Affirmative. First, the panel disagreed with State Farm’s one-year notice argument noting that the letters failed to contain the requisite language required by MCL 500.3145(1), i.e., the name and address of the claimant and an indication in ordinary language of the name of the person injured and the time, place and nature of the injury. The panel also noted that the letters also did not substantially comply with the statutory notice requirement because the letters failed to provide any basic information regarding the nature of Sterling’s injuries.
The panel also rejected State Farm’s second argument that Affirmative’s August 2011 payment of Sterling’s Oakwood Hospital bill triggered the second statutory exception to the one-year back rule which provides that a lawsuit may be commenced more than one year after the accident when “the insurer has previously made a payment of personal protection benefits for the injury.” MCL 500.3145(1). Citing Jesperson v Auto Club Ins Ass’n, 306 Mich App 632; 858 NW2d 105 (2014), the panel noted that only a payment made within the first year after a claimant’s accident triggers the second exception. In this case, Affirmative’s payment was made fourteen months after the accident and thus the second exception did not apply.
In a footnote, the panel also rejected State Farm’s tolling argument which was the essence of the trial court’s decision granting State Farm summary disposition against Affirmative noting that the statute’s time limits are to be “comprehensive and exclusive” and that the statute did not contain a tolling provision. The panel cautioned that trial courts cannot ’employ an extra-statutory discovery rule to toll accrual in avoidance’ of the statute’s plain language.
It remains to be seen whether State Farm decides to appeal the panel’s decision. Given the trend of recent higher court decisions upholding strict statutory construction of the no-fault act, a different outcome would seem unlikely absent further evolution of the concept of “substantial compliance” when applied to State Farm’s letter to Affirmative.
For insurance carriers seeking reimbursement of no-fault benefits, the salient lesson of the Titan decision is that Michigan courts will continue to strictly interpret and to apply the no-fault act’s notice and one-year back provisions. It is incumbent upon carriers contemplating or defending reimbursement claims to conduct their priority investigation in the most complete and timely manner that circumstances allow. In the event that a potentially higher priority carrier is identified, carriers are advised to comply with MCL 500.3145(1) to the letter, which includes the form of the notice and the timing of any legal action seeking reimbursement. By the same token, carriers defending these actions should evaluate these claims critically to ensure that the insurance claimant has complied with its obligations under the act.
TROY BREAKFAST SEMINAR
The Troy Breakfast Seminar will take place on Thursday, September 3, 2015, at the Troy Marriott. Please note, this is a complimentary seminar for our clients. Contact Eileen Carty to register: firstname.lastname@example.org or (800) 875-7600.
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BASICS OF MICHIGAN AUTOMOBILE NO-FAULT INSURANCE LAW COURSE
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