Lawyers’ Corner: Revising No-Fault Policies in Auto Owners Ins Co v Morse

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Representing auto accident victims often comes down to contract interpretation. Sometimes, you can ask the judge about revising no-fault policies themselves – but only when the contract is illegal under Michigan law.

No-fault auto insurance policies protect Michigan motorists from car accident injuries. But those policies are not without exclusions. In Auto Owners Insurance Company v Morse, the court decided whether to revise a business’s insurance policy to cover listed drivers’ out-of-state injuries.

William and Cally Morse were injured in a rental van accident in Hawaii. The Morses were 2 of the 5 listed drivers for Mor-Dall Enterprises, Inc., which insured a fleet of 7 vehicles.

Mor-Dall’s insurance policy with Auto Owners contained an exclusion:

We will not pay personal protection insurance benefits for: * * * d. bodily injury sustained outside of Michigan unless: (1) the injured person was occupying the insured motor vehicle, the motor vehicle accident occurred within the United States. . . (2) the injured person (a) is a named insured under this insurance policy; or (b) is the spouse or relative of such named insured.

In other words, Auto Owners didn’t have to pay PIP benefits for out-of-state accidents unless they involved one of the insured vehicles. Because the Morses were in a rental van, they were included from the policy.

Revising No-Fault Policies

The contract exclusion didn’t stop the Morses, though. Their attorney asked the trial court to revise Mor-Dall’s insurance policy, saying the contract as written didn’t include any “insurable interest” and improperly shifted the liability for those accidents to the Michigan Assigned Claims Facility. The Michigan Court of Appeals disagreed.

Insurable Interest

A policy can be revised if the way it was written made the company pay for a contract without receiving a benefit. Mor-Dall’s benefit under the contract included meeting its statutory requirement for no-fault insurance coverage of its vehicles, as well as property damage, residual liability, and PIP coverage for in-state accidents. The court said all of this was an insurable interest that prevented the judge from revising the policy.

Shifting Liability

Nor did the court agree that the policy improperly shifted liability to the Michigan Assigned Claims Facility. That entity only covers accidents that occur within the state. Since the policy covered PIP benefits in state and only excluded out-of-state accidents, the judge was not permitted to revise the policy to cover the company’s employees.

Asking the court to revise a no-fault auto policy is an aggressive strategy with a high bar to meet. But it can provide coverage in otherwise desperate cases when a policy would illegally cut a person off from PIP benefits. It is worth asking the court for relief to keep your clients from bearing the burden of their medical expenses on their own.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. He has over 20 years’ experience representing auto accident victims against insurance providers. If your clients are facing a difficult auto accident claim, contact Christensen Law for a referral today.