• Introduction to No-Fault PIP Benefits
• Legal Entitlement to No-Fault PIP Benefits

The No-Fault Automobile Insurance Act (MCL 500.3101, et seq.) was adopted by the Michigan Legislature in 1972 and went into effect in October of 1973. Michigan is only one of a handful of states in the country to adopt a no-fault system. Although the original intent was to simplify motor-vehicle claims, in many respects, the opposite has occurred. There have been approximately 3000 appellate court decisions written over the last 35 years interpreting various aspects of the Michigan No-Fault Act. In addition, there are numerous issues which remain confusing and unresolved. Clearly, however, one fact has emerged from the past four decades of the Michigan no-fault experiment: it is critically important for consumers and accident victims to understand their rights. In many situations, it is a person’s ignorance of these rights that results in a loss of benefits and a denial of compensation.

The basic concept of no-fault is to guarantee payment of certain insurance benefits to all victims of motor-vehicle accidents regardless of who was at fault. In order to fund such a system, however, the no-fault law imposes certain limitations on the rights of accident victims to bring tort liability claims against the negligent parties who inflicted the injury.

Under the Michigan No-Fault Act, it is helpful to always remember that every motor-vehicle accident that occurs in this state has two separate and distinct claims. The first is for no-fault personal protection insurance (PIP) benefits. The second is the tort liability claim against the party at fault for recovery of noneconomic damages and excess economic damages. These claims are summarized below.

A. The No-Fault Benefits Claim

Under the statute, an auto-accident victim has the right to recover certain “no-fault benefits” (usually from the victim’s own insurance company) regardless of who caused the accident and regardless of whether the injured person was driving a motor vehicle, was a passenger in a motor vehicle, or was a pedestrian or a bicyclist. These no-fault benefits are often referred to by a variety of terms, all of which mean the same thing. The legally correct name for no-fault benefits is “personal protection insurance benefits.” They are also called “PIP benefits,” “no-fault benefits,” or “first-party benefits.” Basically, there are four types of no-fault benefits payable under the Michigan system: (1) allowable medical and rehabilitation expenses for life; (2) wage loss benefits for a three-year period; (3) replacement service expenses for a three-year period; and (4) survivor’s loss benefits for a three-year period when an accident results in death.

B. The Tort Liability Claim Against the Party at Fault

Under the Michigan No-Fault Act, an accident victim also has the right to pursue a tort liability claim against the driver at fault to recover those damages that are not compensable with no-fault benefits. The compensation recoverable in these liability claims includes damages for “noneconomic loss” and “excess economic loss.” Claims for noneconomic loss require proof that the injury suffered by the victim constitutes either “serious impairment of body function” or “permanent serious disfigurement.” Where the at-fault driver causes an accident resulting in death, the decedent’s estate can pursue a tort liability claim for damages under the Michigan Wrongful Death Act.

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An analysis of the no-fault PIP claim begins with understanding when no-fault PIP benefits are payable. This issue is commonly referred to as “entitlement to benefits.” The pivotal statutory section regarding entitlement to no-fault benefits is Section 3105, which is considered the “gateway” to the no-fault first-party system. Within that section, subsection 3105(1) is the key provision. In one sentence, this subsection sets forth the following entitlement test: “Under personal protection insurance an insurer is liable to pay benefits for accidental bodily injury arising out of the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle, subject to the provisions of this chapter.” Subsection 3105(2) states that no-fault PIP benefits “are due under this chapter without regard to fault.” It is this later subsection that gives “no-fault” its name.

As is apparent, the entitlement language of Subsection 3105(1) is very broad and goes beyond bodily injuries sustained in traditional motor-vehicle collisions. On the contrary, this section has been interpreted to extend entitlement to benefits to non-collision situations, such as cases involving vehicular maintenance, vehicular loading and unloading, and vehicular occupancy.

The Five-Part Test Regarding Legal Entitlement

Case law decided under Subsection 3105(1) has, over many years, produced a five-part test that determines whether an injury victim is entitled to recover no-fault PIP benefits. The five elements of this test are as follows:

1. There must be a “motor vehicle” involved in the accident, as that term is defined in the statute [see Section 3101(2)(e)];

2. The claim must involve some form of bodily injury, rather than some latent medical condition or disease [see Wheeler v Tucker Freight Lines, 125 Mich App 123 (1983)];

3. The bodily injury giving rise to the claim must be accidental in the sense that it was not caused intentionally by the claimant [see Mattson v Farmers Insurance Exchange, 181 Mich App 419 (1989) and Miller v Farm Bureau, 218 Mich App 221 (1996)];

4. There must be a sufficient causal nexus between the injury and the use of a vehicle such that the use of the vehicle is one of the causes of the injury, even though there may be other causes, provided that the connection between the injury and vehicle use is more than incidental or fortuitous [see Shinabarger v Citizens Insurance Co, 90 Mich App 307 (1979); Thornton v Allstate, 425 Mich 643 (1986); Marzonie v ACIA, 441 Mich 522 (1992); Bourne v Farmers, 449 Mich 193 (1995); and Morosini v Citizens, 461 Mich 303 (1999)]; and

5. The injury must be closely related to the transportational function of a motor vehicle [see McKenzie v ACIA, 458 Mich 214 (1998)].

The Parked-Vehicle Exclusion

Although Subsection 3105(1) sets forth a broad legal entitlement to benefits, this test narrows considerably if a “parked vehicle” is involved in the injury-producing scenario. Parked vehicle situations are addressed in Subsection 3106(1) of the Act, which states that an accidental bodily injury arising out of a parked vehicle is not compensable with no-fault benefits unless the injury falls into one of the three (3) exceptions set forth in Subsection 3106(1). These exceptions deal with vehicles parked in a way that cause unreasonable risk of injury; injuries occurring as a result of contact with vehicle equipment or with property being loaded or unloaded; and injuries occurring while the victim is occupying, entering into, or alighting from a vehicle. The case law has also recognized a fourth common-law exception to the parked-vehicle bar involving injuries sustained in the course of vehicular maintenance. [See Miller v Auto-Owners, 411 Mich 633 (1981)]. Unfortunately, the statute does not define a “parked vehicle,” and therefore, that is sometimes an issue. It is also important to note that Subsection 3106(2) contains a very strict exclusion dealing with work-related injuries which provides that PIP benefits are not payable if the injury gives rise to the payment of workers’ compensation benefits and the employee sustained the injury while loading, unloading, or doing mechanical work on a vehicle or while entering into or alighting from the vehicle, unless the injury arose from the use or operation of some other motor vehicle. This work-related exception does not apply, however, when an employee sustains injury while actually operating a vehicle.

Statutory Disqualifications

In addition to satisfying the entitlement requirements of Section 3105 and Section 3106, it is also important to establish that the victim is not otherwise statutorily disqualified under the provisions of Section 3113. This section disqualifies injury victims in three situations: (1) the victim was using a vehicle he or she had taken unlawfully; (2) the victim was the owner or registrant of a vehicle involved in the accident that was not insured as required by the No-Fault Act; and (3) the victim was a foreign resident occupying a vehicle not registered in Michigan and not insured by a Michigan- authorized insurer. The most important of these disqualifications is the second one which disqualifies uninsured owners and registrants. This disqualification underscores the fact that the Michigan no-fault system is a compulsory insurance system that obligates the owner or registrant of any vehicle required to be registered in Michigan to buy the statutorily mandated auto no-fault insurance.

Out-of-State Accidents

No-fault PIP benefits are also payable in certain situations involving out-of-state accidents. This issue is addressed in Section 3111 of the Michigan No-Fault Act, which states that no-fault PIP benefits “are payable for accidental bodily injury suffered in an accident occurring out of this state, if the accident occurs within the United States, its territories and possessions or in Canada” and if the injured person falls into one of two classifications: (1) the injured person is a named insured under a Michigan no-fault policy or the spouse or a resident relative of a person who is a named insured under a Michigan no-fault policy; or (2) the injured person is an occupant of a vehicle whose owner or registrant insured that particular vehicle under a Michigan no-fault policy.

Out-of-State Residents Injured in Michigan

There are a number of circumstances where citizens of other states who are injured in motor-vehicle accidents occurring in Michigan are entitled to recover Michigan no-fault PIP benefits. For example, benefits are payable to nonresidents who are: (a) injured while occupying a motor vehicle insured with a Michigan no-fault PIP policy, or, (b) injured while a non-occupant (pedestrian, bicyclist, motorcyclist) as a result of the operation of a motor vehicle that is insured with a Michigan no-fault PIP policy. In addition, Section 3163 of the Act provides that out-of-state residents who are insured by auto insurance companies authorized to do business in the State of Michigan can recover Michigan no-fault PIP benefits when they travel into Michigan in out-of-state vehicles and sustain injury in a motor-vehicle accident occurring in Michigan. However, Section 3163 provides that in certain circumstances, out-of-state residents may be subject to a $500,000.00 cap on PIP benefits. This is a complicated issue that needs to be analyzed carefully if an out-of-state claimant is drawing benefits under the provisions of Section 3163 of the Act.

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