MCL 500.3135 - Higher Damage Exposure Shifts Back To Tort Liability For The First Time In Nearly Fifty Years

Samantha Orvis

For decades, attorneys and claims handlers alike have relied on MCL 500.3135, which governs tort liability in auto accident cases, in analyzing the potential exposure and value of a tort claim. Among other things, this statute immunizes motorists from tort liability for injuries caused by motor vehicle accidents. There are only a few, narrow exceptions to this immunity. Principle among these are claims for excess-economic and non-economic damages. Before the recent amendments, the statute only permitted excess-economic damage claims “for allowable expenses, work loss, and survivor’s loss . . . in excess of the daily, monthly, and 3-year limitations contained” within sections MCL 500.3107 and MCL 500.3110. Moreover, the statute only allows non-economic damage claims where the claimant can prove a “threshold” injury, the most notable of which is a “serious impairment of body function.” Before the recent amendments, the meaning of this standard was hotly contested by the appellate courts and changed several times during the nearly 50 years since the no-fault act’s inception. On one end of the spectrum were the robust threshold standards set forth by the Michigan Supreme Court in Cassidy v McGovern[1] and Kreiner v Fischer[2], while on the other end of the spectrum were the innocuous threshold standards set forth in DiFranco v Pickard [3]and the recent case of McCormick v Carrier[4].

The recent no-fault amendments have changed the playing field quite a bit.

Now, injured parties can recover excess-economic damages to include all future allowable expenses, work loss, and survivor’s loss. And, since PIP benefits for allowable expenses for medical care will no longer be unlimited in all cases, there will now be the potential for some significant excess-economic damages claims for medical expenses. Moreover, for an injured party who has opted out of certain health care coverages or is otherwise subject to an exclusion of health care coverage, the ability to recover excess economic damages is “without limit for allowable expenses.”

And, with respect to claims for non-economic damages, the recent amendments have put an end to the judicial debate over the meaning of the threshold of “serious impairment of body function.” They have done this by codifying – and thus effectively rendering judicially immutable – the rather impotent criteria set forth by the Michigan Supreme Court in McCormick. Thus, MCL 500.3135(5) now provides:

(5) As used in this section, “serious impairment of body function” means an impairment that satisfies all of the following requirements:

(a) It is objectively manifested, meaning it is observable or perceivable from actual symptoms or conditions by someone other than the injured person.

(b) It is an impairment of an important body function, which is a body function of great value, significance, or consequence to the injured person.

(c) It affects the injured person’s general ability to lead his or her normal life, meaning it has had an influence on some of the person’s capacity to live in his or her normal manner of living. Although temporal considerations may be relevant, there is no temporal requirement for how long an impairment must last. This examination is inherently fact and circumstance specific to each injured person, must be conducted on a case-by-case basis, and requires comparison of the injured person’s life before and after the incident.

Another significant change is that the amendments substantially alter the damages that a non-resident can recover. Before the amendments, a non-resident who was injured in a motor vehicle accident occurring in Michigan was generally able to recover PIP benefits. But, such recovery was limited by MCL 500.3163. And, MCL 500.3135(3)(d) enabled a non-resident to sue an at-fault driver for excess-economic damages over and above what MCL 500.3163 permitted the non-resident to recover in PIP benefits. Under the recent amendments, MCL 500.3113(c) and MCL 500.3163 generally bar a non-resident from recovering PIP benefits for accidents occurring in Michigan. Accordingly, MCL 500.3135(3)(d) has been revised to provide that a non-resident injured in an accident occurring in Michigan may sue the at-fault driver for all economic losses. However, the non-resident’s right to do so is limited to situations where the non-resident can establish that they have suffered a “threshold” injury.

These changes to the law governing tort claims in motor vehicle accident cases, like many other of the statutory changes, took immediate effect on June 11, 2019. What this means is that the new losses being reported as of that date are subject to these new rules. Thus, an insured owner/operator of a motor vehicle who is found to be at fault will have very little protection from liability for non-economic damages. Moreover, with respect to excess-economic damages, their potential liability may now include present and future medical expenses in some cases, and in some cases their liability therefore will be limitless.
These changes to MCL 500.3135 – coupled with the mandated increase in the policy limits for residual bodily injury liability coverage – will most likely result in a steep rise in tort litigation and substantially more tort cases going to trial. More than ever, the status of the current PIP claim for any injured party will be of utmost importance in day-to-day claims handling when the notice of a potential third-party case comes under the radar of claims handlers and BI adjusters. It is entirely plausible that the first time a third-party claim will be made is once the PIP medical coverage is exhausted, exposing the tortfeasor (and its insurer) to skyrocketing excess-economic damages claims, the potential for higher settlements, and its logical conclusion – higher verdicts at trial in the event of a judgment for injured parties.

Once in litigation, discovery conducted in third-party cases will presumably become more involved given the anticipated increase in excess-economic damages claims and the fact that McCormick‘s feeble threshold standard has now been codified. Claims handlers and legal practitioners alike need to be more concerned about the potential for excess verdicts against insured’s and govern themselves accordingly.

[1]  415 Mich 483 (1982).

[2]  471 Mich 109 (2004).

[4]  487 Mich 180 (2010).