The Michigan Legislature passed a large number of legislative bills in lame-duck session at the end of 2018, many of which were signed into law by outgoing Governor Rick Snyder. One of the bills enacted MCL 500.3136 which, in limited circumstances, permits the recovery of tort damages beyond the $1 million of property protection insurance benefits available under MCL 500.3121 for damage to tangible property, where liability insurance is required by federal statute or regulation. As enacted, this new statute becomes effective March 29, 2019, and states as follows:
Sec. 3136.
(1) In addition to the exceptions expressed in section 3135, the abolition of tort liability under that section does not apply to damage to tangible property arising from 1 accident in excess of the limit in section 3121 for which liability insurance required by federal statute or regulation is in effect.
(2) The exception provided by subsection (1) is limited to the amount of the applicable limit under the insurance policy in effect less the limit under section 3121 or $4,000,000.00 in excess of the limit under section 3121, whichever is less.
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Prior to the enacting of this statute, tort liability for damage to property was abolished altogether (provided the offending vehicle was properly insured under Michigan law), which left the aggrieved property owner relying solely upon the $1 million available under no-fault property protection insurance. This was true even in situations where commercial trucks, such as those hauling hazardous materials, were required to have liability insurance in excess of $1 million. In a previous edition of Garan Lucow Miller’s Law Fax[1] it was reported that the Michigan Supreme Court in Michigan Dept. of Transportation v Initial Transport, Inc., 481 Mich 862 (2008), had held that the adoption of Federal motor carrier safety regulations by the Michigan Motor Carrier Safety Act, “did not create an exception to the $1 million cap on property damage established by the Michigan No-Fault Act in MCL 500.3121(5)”.
In that case, the Michigan Department of Transportation had attempted to argue that, because Federal regulations mandated that transporters of hazardous materials maintain insurance limits of financial responsibility as high as $5 million, property damages should be recoverable up to the amount of those insurance limits, despite the Michigan No-Fault Act’s $1 million limit on property protection insurance benefits. That argument was rejected by the Supreme Court.
This new statute was enacted for the purpose and effect of overturning the Supreme Court’s decision in MDOT v Initial Transport, Inc. In fact, assistance in drafting the legislation was provided by members of the Michigan Attorney General’s office on behalf of the Michigan Department of Transportation.
Under the newly enacted MCL 500.3136, the abolishment of tort liability under MCL 500.3135 does not apply to damage to tangible property in situations where liability insurance required by Federal statute or regulation is in effect. The first $1 million in property damage remains recoverable without regard to fault pursuant to MCL 500.3121 as Property Protection Insurance benefits. Thereafter, where an involved party possesses liability insurance which is required by federal statute or regulation, the abolishment of tort liability has been rescinded.
However, while the first $1 million which may be recoverable as Property Protection Insurance benefits under MCL 500.3121 is recoverable without regard to fault, damages in excess of that amount will only be recoverable where the claimant can establish fault on the part of the insured. The additional amount which is potentially recoverable will be limited to (1) the amount of the applicable liability insurance limits available less the $1 million amount available under section 3121, or (2) $4 million in excess of the $1 million amount available under section 3121, whichever is less.
This significant additional potential exposure will involve insureds which are required to have liability insurance in excess of $1 million by Federal law or regulation, such as commercial motor carriers hauling hazardous materials. However, for property damages in excess of the first $1 million, applicable liability defenses remain available, and investigation of facts supporting such defenses should be made in cases involving catastrophic loss.
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Sarah Nadeau, Editor of the Law Fax Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com