Two of the many changes in the no-fault act emerging from the amendments of June 11, 2019 (2019 PA 21 and 2019 PA 22) concerned priority of PIP coverage applicable to injuries sustained by non-contracting parties under MCL 500.3114(4) and MCL 500.3115 and a new cap on coverage applicable to claims handled through Assigned Claims Plan. Whether either or both of these changes were to have immediate effect as of June 11, 2019, became the center of a lengthy and complicated dispute between the Department of Insurance and Financial Services (“DIFS”) and the Michigan Automobile Insurance Placement Facility (“MAIPF”), which maintains the Michigan Assigned Claims Plan (“MACP”). And caught in the middle of the dispute for nearly two years were Michigan’s policy-issuing no-fault insurers, whose claims were thrown into confusion by the uncertainty of whether they should be handled by the insurers themselves or the MACP. By an agreement just finalized by DIFS and MAIPF, the disputes now have been resolved and order restored.
The first of the disputes concerned sections 3114(4) and 3115. Under the pre-amended version of these priority of coverage provisions, accident victims who neither had no-fault policies of their own nor had coverage under a policy issued to a spouse or resident relative would claim benefits from the insurer of the involved vehicle’s owner or operator. Only if there was no such policy-based coverage would the claimant then turn to the MACP for benefits. As amended effective June 11, 2019, however, these statutory provisions effectively deleted the involved vehicle’s insurer from the equation. If no policy applied directly to the accident victim either as a named insured or via an insured spouse or resident relative, that person would go straight to the assigned claims plan for their benefits.
As of June 11, 2019, then, according to the newly amended versions of sections 3114(4) and 3115, these particular “order-of-priority claims” would go to the MACP. At the same time, however, under a section added to the assigned claims provisions of the no-fault act on June 11, 2019, MCL 500.3172(7)(a), benefits payable to accident victims through the MACP (subject to narrow exceptions) are capped at the level specified under MCL 500.3107c(1)(b) – i.e., $250,000. Yet all the policy-issuing insurers under sections 3114(4) and 3115 would continue to provide unlimited PIP coverage until July 2, 2020, when choice of PIP coverage limits would first go into effect. As a consequence, if the MACP cap were to become immediately effective on June 11, 2019, which was the MAIPF’s interpretation, this class of “order-of-priority” claimants would suddenly be limited to a maximum of $250,000 in benefits if the MACP were to be responsible for their claims, but would still have unlimited PIP coverage if the policy-issuing insurers of the involved vehicles were still in priority.
Thus, under DIFS Order No. 19-048-M, issued September 20, 2019, the Director addressed the fact that most of the policies in effect at that time still contained terms of coverage that, in accordance with the law as it existed prior to June 11, 2019, would extend PIP coverage to injured passengers and pedestrians – i.e., those who would claim benefits under the pre-amended versions of sections 3114(4) and 3115(1). Under DIFS Order No. 19-048-M, insurers were to remain responsible for these claims, notwithstanding the amendments to sections 3114(4) and 3115, until their revised policy forms and proposed rates were approved by DIFS. Many insurers were understandably conflicted between proceeding in accordance with the clear terms of the amended statute or the clear mandate of the DIFS order. Some, by adhering not only to the dictates of the statute but the direct invitation of the MAIPF to transfer these order-of-priority claims to the MAPF for handling, would face formal administrative action for violating Order No. 19-048-M.
The second of the two disputes, closely related to the first, was whether the new $250,000 cap on MACP benefits was immediately effective as of June 11, 2019, as the MAIPF maintained, or not until July 2, 2020, which was the position ordained by DIFS Order 19-049-M, issued September 24, 2019. This disagreement led to a declaratory judgment action by the MAIPF against DIFS in the Michigan Court of Claims, No. 19-000162-MM. The court ultimately ruled in favor of the DIFS interpretation – the MACP was to continue providing unlimited PIP coverage through July 1, 2020; but the MAIPF appealed (Court of Appeals No. 335331).
Resolution achieved and order restored. On July 16, 2021, both of the disputes were resolved by a settlement agreement between DIFS and MAIPF. In exchange for MAIPF dismissing its appeal and agreeing not to apply the $250,000 cap referenced in MCL 500.3172(7)(a) for claims arising between June 11, 2019, and July 2, 2020, DIFS rescinded its Order No. 19-048-M. MAIPF dismissed its appeal on July 19, 2021, and DIFS formally rescinded its Order No. 19-048-M on July 20, 2021. Immediately thereafter, DIFS informed insurers that its Notices of Potential Violations were likewise formally withdrawn.
With these complex disputes now resolved, insurers may now rely on, and apply, the clear terms of the priority-of-coverage provisions of sections 3114(4) and 3115, as amended. For accidents occurring after June 11, 2019, accident victims not covered by a no-fault policy issued either in their own names or to a spouse or resident relative (and not otherwise covered under sections 3114(2), (3) or (5)) will receive their benefits not from the insurer of the involved motor vehicle’s owner or operator but through the MACP – and those claims, arising between June 11, 2019, and July 2, 2020, will have unlimited PIP coverage, as the $250,000 cap on MACP coverage will apply only on claims arising on or after July 2, 2020. From chaos comes order.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com