NO-FAULT ACT’S PRIORITY PROVISIONS DO NOT APPLY TO A RENTAL VEHICLE FROM OUT OF STATE OPERATED IN MICHIGAN FOR LESS THAN 30 DAYS

Paul Gipson

In Heichel v. Geico Indem. Co., 2016 Mich. App. LEXIS 399 (Mich. Ct. App. Mar. 1, 2016), the Michigan Court of Appeals affirmed the trial court’s ruling that a non-Michigan self-insured owner of a rental car was not required to have Michigan insurance coverage when the rental car was operated in Michigan for less than 30 days.  Accordingly, the COA held that the owner was not subject to the no-fault coverage requirements and responsibility fell to the next insurer in priority.

In Heichel, the underlying claimant was operating a motorcycle in Orion Township when he was struck by a Ford Fusion (hereinafter the “motor vehicle”) that was rented and operated by Krzysztof Pietruczynik (hereinafter the “Operator”).  The motor vehicle was owned by Enterprise, registered in North Carolina, and rented in Pennsylvania.  Moreover, the motor vehicle had not been operated in Michigan for more than 30 days.

MCL 500.3114(5) addresses the order of priority when a motorcyclist suffers accidental bodily injury where there is involvement of a motor vehicle.  The order of priority is as follows: (A) Insurer of the owner or registrant of the motor vehicle involved in the accident; (B) Insurer of the operator of the motor vehicle in the accident; (C) The motor vehicle insurer of the operator of the motorcycle involved in the accident; and (D) The motor vehicle insurer of the owner or registrant of the motorcycle in the accident.

The Court of Appeals held that Enterprise had filed a certificate to provide security equivalent to that afforded by a policy of insurance under MCL 500.3101(4).  In essence, Enterprise was a self-insurer that could be considered as first in priority under MCL 500.3114(5)(a), pending an analysis of MCL 500.3101(1) which “is the key to liability under the no-fault act.”

MCL 500.3101(1) requires owners of motor vehicles registered in Michigan to maintain security for payment of PIP benefits.  This requirement also extends to owners of vehicles registered in other states that are operated in Michigan for more than 30 days in a calendar year.  MCL 500.3102(1).

The Court of Appeals held that the plain language of MCL 500.3101(1) subjects only those vehicles required to be registered in Michigan to the mandatory security requirement.  As the motor vehicle had not been operated in Michigan for more than 30 days prior to the accident, the motor vehicle did not need to be registered in Michigan and therefore did not need to maintain security for payment.

This was a similar result to the Supreme Court holding in Parks v. Detroit Auto. Inter-Insurance Exchange, 426 Mich. 191, 393 N.W.2d 833, (Mich. 1986).  Parks involved a workplace injury in an employment context and dealt with a different subsection of MCL 500.3114.  The motor vehicle in Parks did have a self-insured nonresident owner and was registered in another state.  However, the motor vehicle was not required to be registered in Michigan under MCL 500.3101(1) as it was not operated in Michigan for 30 days or more.

Enterprise, as a self-insurer, was not required to register the motor vehicle in Michigan and maintain security for PIP benefits under MCL 500.3101(1) and 500.3102(1).  As such, Enterprise was exempt from consideration in determining priority under MCL 500.3114(5). The Operator owned a vehicle that was insured with Geico and was a named insured of a vehicle insured by State Farm.  As the insurers of the Operator were next in priority under MCL 500.3114(5), the Court found that Geico and State Farm were required to provide no-fault benefits to the underlying claimant.

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