AMENDED MCL 500.3009 DOES NOT AUTOMATICALLY INCREASE PRE-EXISTING POLICY'S LIABILITY COVERAGE

Chelsea Saferian

Included in the 2019 amendments to the No-Fault Act was an increase in the statutory minimum for automobile or motor vehicle liability policies, governed by MCL 500.3009. As amended, MCL 500.3009 increases the minimum liability coverage to $250,000 per one person and $500,000 per one accident, for policies issued after July 1, 2020.

In a recently published opinion from the Michigan Court of Appeals, Progressive Marathon Ins Co v. John Michael Pena, et al., the Court addressed how this statute applies to automobile accidents where the auto policy was issued prior to July 1, 2020, but remained in effect beyond that date.

Defendants Pena and Sewell were seriously injured when, on August 5, 2020, their motorcycle was struck by a Toyota which had been struck by a vehicle owned and operated by Defendant Giddings. Giddings maintained a six-month automobile policy issued by plaintiff Progressive, with effective dates of March 11, 2020, through September 11, 2020. Giddings’ auto policy provided bodily injury coverage of up to $20,000 for any one person and up to $40,000 for any one accident.

At the trial court level, Progressive filed a declaratory action, requesting a declaration that Progressive was not obligated to provide liability coverage for the injured Defendants beyond the policy limits of $20,000 per person/$40,000 per accident, as the subject auto policy had been issued prior to July 1, 2020. Defendants Pena and Sewell responded by requesting a judgment as a matter of law that the increased statutory policy limits of $250,000 per person/$500,000 per accident applied to accidents occurring after July 1, 2020, regardless of whether the applicable policy was issued prior to that date. The trial court ruled in favor of the Defendants, finding that the policy must be reformed to confirm to the statutory amendments. Progressive appealed.

The Court of Appeals considered the intent of the Legislature and appropriately looked no further than the language of the statute itself. Progressive argued that MCL 500.3009(1)(a) and (b) apply only to policies that were “delivered or issued for delivery” after July 1, 2020. But what does that mean exactly? The Court reviewed the Merriam-Webster Collegiate Dictionary definition of “deliver,” which is “to take and hand over to or leave for another,” and “issue” which is “to put forth or distribute.” As such, the Court concluded MCL 500.3009(1) applies to a policy “delivered and left in an insured’s possession and a policy that was sent out or distributed to an insured for delivery.”

The Court noted the Legislature made a point to distinguish the liability limitations by the date the policy is “delivered or issued for delivery” in subsections (1)(a) and (1)(b) – such that policies issued before July 2, 2020 shall have minimum limits of $20,000 per person/$40,000 per accident and those issued after July 1, 2020 shall have minimum limits of $250,000 per person/$500,000 per accident. This distinction makes it clear the coverage limits were meant to be allocated differently based on the controlling delivery date. MCL 500.3009 subsections (5) to (8) provide further support that the higher limits do not automatically apply to existing policies, as these subsections provide certain conditional options for lower liability coverages for policies issued after July 1, 2020.

The Court further noted that the 2019 No Fault amendments included several statutory reforms that provided changed benefits and coverages effective July 1, 2020, including: MCL 500.3107c, 500.3107d, 500.3109a and 500.3135. MCL 500.3107c, 3107d, and 3109a. As indicated by the Court, these statutes should be considered in harmony with 500.3009, which also applies to policies “delivered or issued for delivery” after July 1, 2020.

For these reasons, the Court concluded that MCL 500.3009 does not automatically increase the limit of liability coverage in policies issued before July 2, 2020, whose policy terms extend beyond that date.