COURT ADDRESSES EFFECTIVENESS OF CHOICE-OF-COVERAGE FORMS IN A BODILY INJURY LIABILITY COVERAGE DISPUTE

Andrew J. Beck

In a recent published decision, State Farm Mutual Automobile Insurance Company v Estate of Sonya Maria Fortin, ___ Mich App ___ (1/25/24), the Court of Appeals considered the effectiveness of a change-of-coverage election in the realm of bodily injury liability coverage, post no-fault reform. The Court concluded that, unlike with PIP benefits, an effective choice of reduced bodily injury liability coverage under the newly amended provision of MCL 500.3009 must be made before or when a policy is issued. If an insured does not make an effective choice of coverage until after an insurer issues a policy, the statutory default coverage of $250,000 will apply and any policy provision providing reduced coverage is void and not susceptible to being reformed by a belated choice.

The underlying case involved a wrongful-death action arising out of a motor vehicle accident in which Sonya Fortin and State Farm’s insured, Andrew Kadish, were both killed. Importantly, State Farm issued two policies to Kadish: the first, policy 22, was issued on June 22, 2020; the second, policy 22A, was issued on July 21, 2020. Both policies included a bodily injury liability limit of $50,000, although policy 22A was issued after the no-fault amendments took effect. Kadish then executed a choice-of-coverage form on August 13, 2020, presumably electing coverage lower than the new statutory minimum $250,000. Kadish and Fortin were killed in a December 2, 2020, motor vehicle accident.

State Farm tendered to Defendant $50,000 consistent with the policies’ declarations page(s) relying upon the choice-of-coverage form signed by Kadish. Defendant argued there were deficiencies in the choice-of-coverage form that Kadish signed, namely that the form referenced policy 22 but identified the effective date of that policy as July 21, 2020. The Circuit Court determined that policy 22 was valid at the time, but policy 22A was effectively a “new replacement policy”. The Court declined to read MCL 500.3009 to require the choice-of-policy form to be signed on the same date the policy was issued and reasoned that, because Kadish signed and sent in the form, he had validly elected reduced limits of $50,000 / $100,000. The Court granted State Farm’s motion for summary disposition, and denied Defendant’s.

The Court of Appeals reversed the Circuit Court’s decision. First, the Court determined that the evidence established that policy 22A was a distinct and separate policy from policy 22, and importantly, policy 22A was issued after the amended no-fault provisions took effect. The Court then noted that, pursuant to MCL 500.3009(8), if an insured “has not made an effective choice” or reduced coverage, the default limits of $250,000 / $500,000 apply. The Court stated, “[T]he lynchpin of this case is whether Kadish’s execution of the choice-of-coverage form constituted an “effective choice” of reduced liability coverage. If so, Policy 22A would provide the minimum amount of bodily injury liability coverage that could be chosen as provided under MCL 500.3009(5). If not, then the bodily injury liability limits under the policy are the minimum set by the no-fault act of $250,000 per person and $500,000 per accident as provided under MCL 500.3009(8).”

The Court concluded, after a lengthy analysis of each of Defendant’s arguments, that revised section 3009 clearly requires that an insured have already made an effective choice by the time the policy is issued, or when the policy is actually issued. Because Kadish did not make an effective choice under section 3009(5) until after policy 22A was issued, the operation of the plain language of section 3009(8) was triggered which required application of the default limits of $250,000 per person and $500,00 per accident.

The Court specifically noted that this case differed from the recent Bronson Health Care Group v Esurance Prop and Cas Ins Co, ___ Mich App ___ (2023) decision (which is currently pending on application before the Michigan Supreme Court). While the cases both addressed similar statutory language, Bronson Health addressed PIP benefits and State Farm addresses bodily injury limits. Moreover, the two at-issue statutory provisions – MCL 500.3107c(1) and MCL 500.3009 – provided different consequences for an insured’s failure to make an effective choice-of-coverage. An insurance policy may provide reduced PIP benefit coverages even in the absence of an effective selection of reduced coverage, whereas an insurance policy may not provide reduced bodily injury liability coverage in the absence of an effective choice of reduced coverage.