Lawyers’ Corner: Statute of Limitations in Jesperson v Auto Club Insurance Association

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When a potential client’s history raises statute of limitations concerns, your first instinct might be to turn them away, but a recent Michigan Supreme Court decision has given hope to motorists whose work with their insurance company made them miss their one year deadline.

The Michigan Supreme Court decision, Jesperson v Auto Club Insurance Association, which was published March 21, 2016, interprets the Michigan No-Fault Act’s statute of limitations. It protects motorists who, in working with their no-fault providers, miss the one-year time limit to file their First Party lawsuit.

Alan Jesperson was in an auto accident on May 12, 2009. He was riding his motorcycle when he was struck from behind by a vehicle owned by Mary Basha and driven by Jet’s Pizza delivery driver Matthew Badelalla. Jesperson notified Auto Club Insurance Association (ACIA) of his injuries on June 2, 2010, after it was determined ACIA was the insurer of highest priority. ACIA made payments to Jesperson from July 23, 2010 until after Jesperson started his third-party claim against Jet’s, Basha, and Badelalla.

When ACIA terminated Jesperson’s benefits, he moved to amend the complaint to add a First Party claim against ACIA. The new defendant filed a motion for summary disposition, asking for the claim to be dismissed because more than 1 year had passed since the accident. The insurance company claimed that Jesperson’s claim was barred by the Michigan No-Fault Act’s statute of limitations.

The trial court agreed with the defendant and dismissed the case. The Court of Appeals, in a published split decision, agreed, and ruled that the one-year limitations period can only be extended if the insurer made a payment within that first year. The Michigan Supreme Court disagreed.

Exceptions to the Michigan No-fault Statute of Limitations

The Michigan No-Fault Act’s statute of limitations is MCL 500.3145. It includes two exceptions to the general rule that 1 year limitation:

“The first exception—the ‘notice’ exception—allows the filing of an action for no-fault benefits more than one year after the date of the accident if ‘written notice of injury . . . has been given to the insurer within 1 year after the accident[.]’

MCL 500.3145(1). The second exception—the ‘payment’ exception—allows the filing of an action for no-fault benefits more than one year after the date of the accident if ‘the insurer has previously made a payment of personal protection insurance benefits for the injury.’” Id.

The Michigan Supreme Court very clearly separated these two exceptions. Relying on the word “or” that appears between them in the statute, the court ruled that the notice exception and payment exception must be interpreted independently.

The Payment Exception

Since Jesperson did not give notice to ACIA until over 1 year after the accident, the question was whether his case fell within the payment exception to the statute of limitations. That boiled down to the meaning of the word “previously” in the statute. Jesperson argued that it included any payment made prior to the start of the lawsuit. ACIA argued that the payment had to be made within the 1 year statute of limitations.

The court agreed with the plaintiff’s attorney. The Legislature chose to use separate limiting words for the notice exception – “within 1 year after the accident” and the payment exception – “previously”. If the  Legislature had meant to interpret the payment exception the way the ACIA suggested, it would not have needed different language. Instead, the court ruled that “previous” meant “coming or occurring before something else; prior.”

In addition, the second sentence of MCL 500.3145(1) also supports a separate interpretation:

“If the notice has been given or a payment has been made, the action may be commenced at any time within 1 year after the most recent allowable expense, work loss or survivor’s loss has been incurred.”

The Court said that the Legislature referred to a specific notice (“the notice”) but any payment previously made (“a payment”). The court said that ruling otherwise, requiring a payment to happen within 1 year of the accident, would make the payment exception redundant – a surplusage – in the Michigan No-Fault Act.

The court found that this does not produce an “absurd result.” After all, the defendant had to act – by making a payment – before the exception to the statute of limitation was triggered.  Even then, the plaintiff’s recovery is still limited by the one-year-back rule.

Implications for No-fault Attorneys

Jesperson v ACIA means insurance companies can no longer completely remove a motorist’s claim just by stringing him or her along with short-term benefits. While potential clients’ recovery may be limited based on when the claim is filed, their recovery will still be protected as long as the insurance company has made some payment.

The statute of limitations doesn’t have to be a stop sign for auto accident attorneys. If your client provided notice within that first year, or if the insurance provider has made any payments, you may still be able to collect no-fault benefits for them and get them the compensation they need.

David Christensen is an auto accident attorney at Christensen Law in Southfield, Michigan. He has been dealing with auto insurance companies for over 20 years. If your client is facing a difficult no-fault claim, contact Christensen Law for a referral today.