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Lawyers’ Corner: Out-of-State Residents in Mary Free Bed Clinic v Farmers Insurance

When visitors to Michigan get in accidents here in the state, the question may arise whether the Michigan no-fault act even applies. As a recent Michigan Court of Appeals case explains, the answer depends on the insurance company.

Every Michigan resident is required to maintain a no-fault auto insurance policy to cover his or her vehicles. When Michigan residents get into car accidents, their no-fault policies will cover all his or her medical expenses. Michigan no-fault law is written to protect all drivers from unpaid medical expenses by requiring insurance companies to pay benefits in every accident. That includes accidents involving non-residents.

In Mary Free Bed Rehabilitation Hospital v Farmers Insurance Group of Companies, a Michigan Court of Appeals panel considered whether the Michigan no-fault law applied to a Chicago resident who was injured as a passenger in a rental vehicle on her way to Ontario, Canada.

On March 19, 2012, Yu Ju Chen was riding with her boyfriend Jason Liao in a Hertz rental car from their home in Chicago through Michigan on their way to Ontario, Canada. Both Chen and Jason were Illinois residents. Their trip was cut short when they got into a serious auto accident near Battle Creek, Michigan. Chen was paralyzed in the crash and was eventually taken to Mary Free Bed Rehabilitation Hospital for treatment.

As an Illinois resident, Chen was not required to maintain no-fault insurance the way a Michigan resident would have. She sued Jason’s insurance company, Farmers Insurance, for no-fault PIP benefits since he was the driver of the rental vehicle.

Farmers filed a motion for summary disposition, claiming it was not required to pay for Chen’s injuries since she was not insured by a company licensed to sell insurance in the state under MCL 500.3163. The court said that for a person to be excluded from Michigan’s no-fault protections, three things had to be true at the time of the accident:

  1. “The person was not a resident of Michigan;
  2. The person as an occupant of a vehicle that was not registered in Michigan; and
  3. The person was not insured by an insurer that has filed a 3163 certification.”

Farmers Insurance has filed a 3163 certification. But it argued that the rental car was not a vehicle insured under its policy, and it did not insure Chen.

Coverage of Out-of-State Residents

The court said Michigan law interprets no-fault insurance policies to refer to persons, rather than vehicles. By filing a 3163 certification, Farmers subjected itself to “the entire Michigan personal and property insurance system when any accidental bodily injure arising from an out-of-state insured’s ownership or use of a motor vehicle occurs.” Id at *4 (quoting Tevis v Amex Assurance Co).

The court considered the conflict between MCL 500.3113(c), which limits payment of PIP benefits to people “insured by an insurer” and MCL 500.3163, which entitles insured parties and “insurance claimants” to the same benefits. Farmers asked the court to deny Chen’s claims because she was not “insured by an insurer.” But that position is inconsistent with other court decisions which have interpret 3163 more broadly. The court determined that the legislature intended two types of people to be covered by 3163: insured people and insurance claimants.

As an occupant of a motor vehicle who doesn’t have access to another no-fault policy, Chen was entitled to file a claim against the insurer of the owner or operator of the vehicle occupied. Because the Hertz rental car company did not appear to have opted in to the Michigan no-fault system under 3163, that claim was properly filed with Jason’s insurance company.

Coverage of Rental Vehicles

But Farmers argued that Jason’s insurance didn’t cover the rental car. The policy stated it only covered rental vehicles if they were rented by a named insured. Jason did not have a policy in his own name. Instead, he was covered by his parents’ insurance policy.

But a driver doesn’t have to be named on a policy to be considered an “insured”. The statute requires the “insurer of the operator of the vehicle occupied” to pay benefits in cases like Chen’s. The statute does not limit that liability to named insureds. That means Farmers could not exclude coverage of an out-of-state accident just because it was a rental car.

$500,000 Cap on Out-of-State Benefits

While Farmers was required to pay benefits to Chen for her injuries, she was not entitled to the same unlimited benefits as a Michigan resident would be. MCL 500.3163(4) says:

If an insurer of an out-of-state resident is required to provide benefits under subsections (1) to (3) to that out-of-state resident for accidental bodily injury for an accident in which the out-of-state resident was not an occupant of a motor vehicle registered in this state, the insurer is only liable for the amount of ultimate loss sustained up to $500,000.00.

Because Chen was an out-of-state resident and the rental car was not registered in this state, the court determined her benefits were capped at $500,000.00.

Advice for Trial Attorneys

When representing an out-of-state resident, auto accident trial attorneys need to be particularly attentive to the insurance companies involved. Before taking a case to court, make sure you know whether your defendant insurance company has filed a 3163 certification. If not, you could be facing a quick dismissal and an unhappy client.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. He has be representing the victims of motor vehicle accidents for over 20 years. If your client is facing a difficult auto accident claim, contact Christensen Law for a referral today.