April 12, 2010
OWNER/OPERATOR OF SEMI TRACTOR EXCLUDED FROM NO FAULT COVERAGE UNDER MCLA 500.3101 AND 3113 OF THE MICHIGAN AUTOMOBILE NO FAULT INSURANCE ACT
Oftentimes within the commercial trucking industry, an arrangement is reached for the transportation of goods by what is termed an “owner/operator” agreement. In these instances, an owner of a semi tractor will contract to transport a trailer and often is the individual who actually is the driver of the semi tractor, but the trailer itself is owned by a separate entity.
In an unpublished decision, Titan Insurance v Republic Western Insurance, COA #276145 (February 14, 2008), the driver, Mr. Al-Shimmary, was the owner/operator of a semi tractor, acting as an independent contractor for Horizon Freight System, when he was involved in an accident in the State of Michigan. He was in fact a Michigan resident, had a Michigan driver’s license, and was driving the semi which he had purchased in Michigan, but had chosen to register in the state of Oklahoma. Republic Western insured the semi-tractor under a policy providing for “non- trucking” liability coverage, available when the tractor was not hauling a trailer, otherwise known as “bobtail” coverage. The non-trucking policy, as was typical for such, excluded liability coverage
(including no fault personal protection insurance) if the semi tractor was “under carrier direction, control, or dispatch”, or “used to carry property to any business or en route for such purposes”.
At the time of Mr. Al-Shimmary’s accident, he was, in fact, pulling a trailer which Horizon Freight System had separately insured under a Michigan no fault policy. However, Mr. Al-Shimmary himself did not have a liability/no fault policy on the tractor-trailer, other than the bob-tail coverage.
Following the motor vehicle accident, Mr. Al-Shimmary made a claim for Michigan no fault benefits to the Assigned Claims Facility. Titan, as the assigned carrier, paid no fault benefits to or on behalf of Mr. Al-Shimmary. Titan subsequently filed suit against Republic Western, which insured Mr. Al-Shimmary’s tractor for non-trucking liability coverage; Auto Club Insurance, which insured Mr. Al-Shimmary’s wife’s automobile; and Pacific Employers, which insured the trailer Mr. Al-Shimmary was hauling at the time of the accident. The trial court found ACIA to be responsible for plaintiff’s no fault benefits.
The Court of Appeals held that Titan Insurance was not entitled to reimbursement from any of the carriers because Mr. Al-Shimmary was excluded from recovering any no fault benefits at all under MCLA 500.3101 and MCLA 500.3113(b). Even though Mr. Al-Shimmary had a non-trucking policy that complied with the Michigan Automobile No Fault Insurance Act, at the time of the accident, he was pulling a trailer, and that policy specifically excluded coverage for such instances. The fact that Horizon Freight System had insured its trailer under a Michigan no fault policy did not alter the fact that the tractor Mr. Al-Shimmary owned by him did not have an applicable no fault policy in force at the time of the accident. The Court stated that under the No Fault Act, the owner of a motor vehicle that is required to be registered in Michigan must carry personal protection insurance on that motor vehicle and when he does not, he is excluded under MCLA 500.3113(b) from receiving no fault benefits.
Often, personal line insurers are called upon in these instances to pay for the no fault benefits of a truck driver. Many questions come into play such as, in the instant case, whether the truck driver is an owner/operator of the motor vehicle involved, if he is an employee of the owner of that motor vehicle, and if the motor vehicle/tractor-trailer is under dispatch. If you are presented with such a claim, you are also encouraged to review the obligations under the owner operator agreement between the owner of the truck and the entity shipping the goods or product.
{EDITOR’S NOTE – This is not a situation where the involved vehicle was properly insured. In fact, the owner registered the tractor in a foreign state to avoid the cost of insuring it under Michigan law. Thus, even if the tractor had been insured under Oklahoma law by a Michigan certifying insurer, the result would have been the same (i.e., the owner/registrant would be excluded from receiving Michigan PIP benefits).} – JLB
MEDICARE, MEDICAID, AND SCHIP EXTENSION
ACT OF 2007 SIGNED BY PRESIDENT BUSH ON DECEMBER 29, 2007 AND ITS IMPACT UPON NO FAULT INSURERS
On December 29, 2007, President George W. Bush signed into law the “Medicare, Medicaid, and SCHIP Extension Act of 2007″. This law, in part, is an extension act which simply extends the Medicare Secondary Payor Act and certain other provisions. It does, however, make some changes that indeed affect no fault insurers. It was thought initially that the Act would require the creation of set aside trusts for settlements relating to personal protection insurance benefits whether through present date or for future medical payments. In fact, a close examination of this Act indicates that no such requirement has been placed upon PIP insurers. There is a suggestion, within the Act, that it would apply to third party settlements that include excess economic payments or that include a lien interest for Medicare. This places a higher burden on the claimant/Plaintiff’s attorney than it does on a third party no fault insurer issuing such payment.
The Medicare Secondary Payor Statute, found at 42 USCA 1395y, and its implementation guidelines set forth within the Code of Federal Regulations make it abundantly clear that Medicare is entitled to seek payment from a no fault insurer and third parties which would, by necessity, include a claimant’s attorney. They are, likewise, able to collect payments made in error from medical providers, private insurers or any other party receiving a payment from the case. Clearly, the Medicare Secondary Payor Statute provides a private cause of action for a claimant to seek remedy on behalf of Medicare for payments made in error against a no fault insurer which should have made payments on a primary basis, and also allows Medicare the same right of recovery against insurers, claimants or third parties, inclusive of allowing double damages, actual costs and actual attorneys fees. Prior to the enactment of the new law signed by President Bush, it was long believed that Medicare had the affirmative duty to place individuals on notice of their lien interest before any affirmative duty existed to protect the right of recovery of Medicare from a settlement. The new Act makes it abundantly clear that the obligation is no longer placed on Medicare, but those parties who knew or otherwise should have known that Medicare made a conditional payment in error and those parties now have an affirmative duty relative to not only notification, but protection of potential interests.
In terms of third party settlements and set aside trusts, the Code of Federal Regulations has not yet been amended to adopt procedural guidelines for utilization of set aside trusts and liability settlements. It is anticipated that within the next year, those changes will, in fact, be made and requirements will affirmatively exist to protect those interests. It is important to note that the law
passed on December 29, 2007, provides a grace period before the requirements are to commence and that grace period indicates that said requirements shall take effect on July 1, 2009. It is clear that set aside trusts are required presently in terms of compensation settlements. It does appear as if they will now be required in liability settlements and potentially in PIP cases for which a settlement may include future benefits. However, no fault PIP cases are not specifically referenced in the Act and it is unknown whether the government will attempt to create this requirement via the Code of Federal Regulations.
In review of the statute, a clear mandate exists for notification to Medicare by a no fault carrier. We can no longer wait for Medicare to assert a lien. It will now be the responsibility of a no fault carrier to identify those claimants who are entitled to Medicare benefits and report the findings with sufficient detail to prevent Medicare from issuing payments on a primary basis. These requirements apply equally to Medicaid. If the carrier does not report as required, they run the risk of incurring a fine of $1,000 per day. As indicated, these mandates will be required as of July 2009. It is recommended that each carrier establish procedures now to respond to the reporting requirement.