When insurance providers fight over who should pay first-party no-fault benefits, the issue is a matter of priority. While priority is usually relatively straightforward, there are cases where it is clear an injured person is entitled to benefits, but not which insurance company should pay.
When an insurance company voluntarily pays no-fault benefits and then stops, it is often because their adjusters determine they are not the highest priority payer. Whether they are right or wrong, these priority challenges can often leave injured motorists in limbo, fighting to receive benefits they clearly deserve.
That was the case in a recent unpublished Michigan Court of Appeals case, Banks v AAA Insurance Co. In that case, 15-year-old Sean Banks II was pinned between two vehicles as he helped his mother, Sharon Clark, unload groceries from the trunk of a friend’s Honda Civic. The Honda was parallel-parked on the side of the road when a GMC Envoy made a wide left turn onto the street and rear-ended the Honda with Sean trapped in between.
Insurance Denials and the Assigned Claims Plan
The Honda where Sharon Clark was a passenger was owned by Darcia Davis and insured by AAA Insurance Company. Ms. Clark initially filed for no-fault benefits through AAA under Davis’s policy. But after voluntarily paying some initial benefits, AAA denied the claim. The insurance company took the position that the Honda was parked and wasn’t being used as a motor vehicle at the time of the accident. Because the GMC Envoy was not insured, Sean’s claim was sent to the Assigned Claims Plan and assigned to Citizens Insurance Company.
Priority of Auto Insurers
When a person is injured in an auto accident, who pays depends on the priority of the auto insurance companies. A person’s own auto insurance policy is always the first priority, whether that person is a driver, passenger, or pedestrian. Because Sean was 15 years old, he had no policy in his own name.
Where a person is not insured directly, policies apply in the following priority order:
- A relative residing in the same household (resident relative)
- The owner of the vehicle the injured person occupied
- The driver of the vehicle the injured person occupied
- The owner or driver of another vehicle involved in the accident
If none of those policies exist, a person’s no-fault benefits can be assigned to an insurance provider with a timely application to the Assigned Claims Plan.
Parked Cars Involved in the Accident
If a car is in motion, at the time of a crash, it is almost automatically involved in the accident. But the same is not true if the vehicle is parked. Remember that no-fault benefits are payable “for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle.” The question before the Michigan Court of Appeals was whether the parked Honda was being used as a motor vehicle at the time of the accident.
The court noted:
“In general, parked vehicles are not considered to be involved in an accident unless certain circumstances are present.”
Those circumstances are set out in MCL 500.3106(1):
(a) The vehicle was parked in such a way as to cause unreasonable risk of the bodily injury which occurred.
(b) Except as provided in subsection (2), the injury was a direct result of physical contact with equipment permanently mounted on the vehicle, while the equipment was being operated or used, or property being lifted onto or lowered from the vehicle in the loading or unloading process.
(c) Except as provided in subsection (2), the injury was sustained by a person while occupying, entering into, or alighting from the vehicle.
Citizens, the assigned insurance company, argued that because Sean was unloading groceries from the vehicle’s trunk, (1)(b) applies. But the court disagreed.
For a parked vehicle to be “involved in an accident” while being loaded or unloaded, Michigan law “requires that there be ‘physical contact’ with the property being loaded and that the physical contact ‘directly result’ in injury.” Adanalic v Harco Nat’l Ins Co. Having physical contact with the groceries in the trunk of the vehicle wasn’t enough, because the contact didn’t actually cause the injury.
The physical contact with a parked vehicle has to be something more than “other stationary roadside objects” like benches. Because Sean was doing nothing more than he would have had the Honda been a bench, the Honda was not being used as a motor vehicle and was not “involved in the accident.”
Effect of a Priority Decision in a No-Fault Case
When priority issues arise, it is important for auto accident attorneys to make sure their clients are protected. The Michigan No-Fault Act prescribes a process for priority challenges that ensure that injured motorists get paid their benefits in a timely way.
However, insurance providers often try to use priority issues as a basis for summary disposition, rather than contribution by another insurance provider. Auto accident attorneys should be on their guard against insurance providers and protect their clients from unnecessary delays that could result in statute of limitation problems later on.
David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. He represents auto accident victims against insurance providers and at-fault drivers. If your client is facing a complicated no-fault claim, contact Christensen Law today for a referral.