November 15, 2021
It is well understood that when a plaintiff is injured alighting from their motor vehicle during the course of their employment, they must first turn to any worker’s disability compensation insurer before turning to the no-fault insurer for benefits. However, what happens when the worker’s disability compensation insurer becomes insolvent and the claim is taken over by the Michigan Property & Casualty Guaranty Association (“MPCGA”) under the Guaranty Act? In the case of Matthis v. Home-Owners and MPCGA, the trial court found that the MPCGA is the insurer of last resort and that no-fault insurers must pay ahead of the MPCGA even when there were prior payments made by a workers compensation disability insurer before it became insolvent.
On appeal, the Court looked to the Guaranty Act, MCL 500.7901 et seq., and found it created the MPCGA to satisfy the obligations of insolvent insurers. Per the statutory language, the MPCGA is not obligated to pay benefits for all “covered claims,” and the MPCGA shall receive a credit against a “covered claim” if damages or benefits are recoverable by a claimant under an insurance policy other than the policy of the insolvent insurer. MCL 500.7931(3). The Court next looked to the no-fault exclusion for alighting from a work vehicle under MCL 500.3106(2)(a), and found that the legislative purpose for excluding no-fault benefits where worker’s compensation benefits are available is to prevent impermissible double recovery. The Court found that once the worker’s comp carrier became insolvent, benefits under its policy were no longer available and the no-fault exclusion no longer applied to bar coverage under the No-Fault Act. As such, there was no longer a possibility of double recovery and the no-fault insurer became higher in priority than the MPCGA.
The Court concluded that MPCGA got a credit to the extent the no-fault insurer could pay benefits to Plaintiff, highlighting the fact that the MPCGA is the insurer of last resort. The Court also found that because the question presented to the trial court in this case was one of priority between two insurers, rather than a question of whether worker’s compensation benefits were due or whether Plaintiff was an employee in the course of his employment, the trial court had jurisdiction over the case rather than the Board of Magistrates.
This ruling creates an opening for claims otherwise covered by the worker’s compensation realm to spill over into no-fault where the worker’s compensation carrier becomes insolvent and the Guaranty Act applies.