As part of its 2019 overhaul of the no-fault act and other provisions of Michigan’s Insurance Code the Legislature amended MCL 500.3009[1] to mandate that every automobile insurance policy issued or renewed after July 1, 2020 provide minimum liability coverage limits of at least $250,000 per person and $500,000 per accident.[2] However, in order to allow persons renewing or purchasing automobile insurance policies the option of obtaining lower policy premiums, the Legislature provided an exception that allows insurers to issue policies providing liability coverage limits as low as $50,000 per person and $100,000 per accident if the “named insured in” an existing policy or “an applicant for” a new policy completes, signs, and provides to the insurer a form issued by the Director of Michigan’s Department of Insurance and Financial Services (“DIFS”) opting to have such lower liability coverage limits.
In Newton v Progressive Marathon Ins Co, __ Mich App __; __ NW2d __ (2024)(accessed Jan 19, 2024), Nykie Moyer applied for and received a policy of automobile insurance after July 1, 2020. During the application process Moyer signed the required DIFS form electing that the policy provide liability coverage limits of $50,000 per person and $100,000 per accident rather than the default minimum liability coverage limits of $250,000 per person and $500,000 per accident.
Moyer’s 17 year-old son, Eric, owned his own motor vehicle when Moyer applied for and received the policy. Because he was a minor, under Michigan law Eric was not legally able to contract for his own policy of insurance. So, while Moyer was listed in the policy as the “named insured,” Moyer requested that her policy identify Eric as an additional covered person and that Eric’s vehicle be listed as a covered vehicle. Although he knew that Moyer had listed himself and his vehicle on her policy, Eric was not involved in Moyer’s application for the policy. Thus, Eric did not personally sign the DIFS form, and also did not specifically authorize Moyer to elect the lower liability coverage limits with respect to himself and his vehicle.
Two months after Moyer purchased the policy, and while Eric was still a minor unable to purchase his own policy, Eric was operating his vehicle when he collided with a motorcycle operated by Samantha Newton. The collision caused Newton several injuries, and resulted in Newton undergoing multiple surgeries.
When she learned that Eric’s only automobile liability coverage was under Moyer’s policy, and that Moyer had elected the lower liability coverage limits, Newton filed a lawsuit seeking a declaratory judgment that Moyer’s election of the lower liability coverage limits was invalid as to Eric because Eric had neither signed the DIFS form nor specifically authorized Moyer to elect the lower liability coverage limits on his behalf. Newton thus asserted that Moyer’s policy should have to provide Eric with automobile liability coverage up to the default coverage limits of $250,000 per person and $500,000 per accident.
But, the Court of Appeals rejected Newton’s assertion and held that Moyer’s election of the lower liability coverage limits was valid as to Eric. The Court explained that the plain language of MCL 500.3009 “provides that only ‘an applicant for or a named insured in the automobile liability or motor vehicle liability policy . . . may choose to purchase lower limits” than the $250,000 per person and $500,000 per accident default automobile liability coverage limits.[3] And, although Eric was listed in the policy as a covered person, Moyer was the only “applicant for” the policy and the only “named insured in” the policy. Because of this, the Court concluded that Moyer “had statutory authority to elect lower liability coverage limits for Eric’s vehicle,” regardless of whether Eric had personally signed the DIFS form or had specifically authorized Moyer to do so on his behalf.[4]
It remains to be seen whether Newton will seek leave to appeal to the Michigan Supreme Court. If she does, it will be interesting to see whether the Supreme Court considers something that, oddly, the Court of Appeals did not address and, in fact, did not even mention.
That is, when it overhauled the Insurance Code in 2019 the Legislature not only provided in MCL 500.3009 that an “applicant for or named insured in” a policy of automobile insurance has the option of purchasing lower liability coverage limits, but also provided in MCL 500.3107c that an “applicant or named insured” has the option of purchasing less than unlimited coverage for allowable expense personal protection insurance benefits.[5] Notably, though, the Legislature specifically stated in MCL 500.3107c(5) that if the “applicant or named insured” selects less than unlimited coverage for allowable expense benefits, then the lower level of allowable expense benefit coverage “applies [not only] to the named insured, [but also to] the named insured’s spouse, and a relative of either domiciled in the same household, and any other person with a right to claim personal protection insurance benefits under the policy.” But, the Legislature made no similar statement in MCL 500.3009 with respect to lower liability coverage limits selected by the “applicant for or named insured in” a policy of automobile liability insurance.
Whether the Legislature’s inclusion of such a statement in MCL 500.3107c and simultaneous omission of a similar statement from MCL 500.3009 was because the Legislature did not intend for lower liability coverage limits selected by “an applicant . . . or named insured” to also apply with respect to persons other than the “applicant . . . or named insured” is thus something that remains to be considered by Michigan’s appellate courts.
Footnotes:
[1] MCL 500.3009 is not part of Chapter 31 of the Insurance Code of 1956, which though not officially titled as such by the Legislature is colloquially referred to as the “no-fault act.” The no-fault act governs only policies providing “personal protection insurance” and “property protection insurance.” MCL 500.3009 is instead contained within Chapter 30 of the Insurance Code of 1956, which governs policies that provide “casualty insurance.” Automobile liability insurance is one type of casualty insurance. MCL 500.624(1)(b).
[2] Policies of automobile liability insurance issued before July 2, 2020 only had to provide liability coverage limits of at least $20,000 per person and $40,000 per accident.
[3] Id. at __; slip op at 8 (emphasis in Newton).
[4] Id. at __; slip op at 8-9. The Court of Appeals engaged in a lengthy discourse about the fact that Eric was not legally able to contract for his own policy of insurance, id. at __; slip opn at 6-7, and seemingly indicated that its decision may have been different if Eric had not been a minor, stating “[b]ecause this case involves a parent buying car insurance for their minor child, and opting for lower coverage, we can resolve it on these narrow grounds,” id. at __; slip op at 10. However, it seems unlikely that Eric’s status as a minor makes any difference. MCL 500.3101(1) provides that “the owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance and property protection insurance as required under this chapter, and residual liability insurance.” (Emphasis added). In Dye by Siporin & Assocs, Inc v Esurance Prop & Cas Ins Co, 504 Mich 167; 934 NW2d 674 (2019), the Michigan Supreme Court held “that an owner or registrant of a motor vehicle is not required to personally purchase [the required] insurance for his or her vehicle . . . . Rather, MCL 500.3101(1) only requires that the owner or registrant ‘maintain’ [the required] insurance, and the term ‘maintain,’ as commonly understood, means to keep in an existing state.” Id. at 173. The Court further held that “MCL 500.3101(1) does not prescribe any particular manner by which a registrant or owner must keep [the required] insurance in an existing state.” Id. at 186-187. Thus, the Court held that the owner or registrant of a vehicle is statutorily authorized by MCL 500.3101(1) to fulfill their obligation of “maintaining” the required insurance by having the owner or registrant’s parent list them and their vehicle on a policy that the parent “applies” for and on which the parent is the only listed “named insured” – even though the child in Dye was not a minor. Id. at 174-175. That being so, if an adult child chooses to “maintain” liability insurance by letting their parent list the adult child and the adult child’s vehicle on the parent’s policy, then there seems to be no logical reason why the parent would not “ha[ve] statutory authority [pursuant to MCL 500.3009] to elect lower liability limits for [the child’s] vehicle,” just as the Court of Appeals held in Newton that parents have such statutory authority with respect to minor children. Newton, supra, __ Mich App at __; slip op at 9.
[5] Before the 2019 amendments, all policies of no-fault insurance had to provide unlimited coverage for a certain category of personal protection insurance benefits known as “allowable expense” benefits. “Allowable expense” benefits are benefits for such things as medical treatment, as opposed to “work loss” or so-called “replacement service” benefits. See MCL 500.3107. Similar to what it did in MCL 500.3009 with respect to automobile liability coverage, as part of its overhaul of the Insurance Code the Legislature gave insureds the ability to obtain lower policy premiums for no-fault coverage by providing that the “applicant or named insured” on a policy issued or renewed after July 1, 2020 may, by executing a form approved by DIFS, choose one of five different “per individual per loss occurrence” levels of “allowable expense” personal protection insurance benefits: (1) unlimited, (2) $500,000, (3) $250,000, (4) $50,000, and (5) no “allowable expense” personal protection insurance coverage. MCL 500.3107c; MCL 500.3107d.
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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