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Summary:
- Michigan Court of Appeals rules on motorcyclist insurance priority
- Esurance policy limit set at $250,000 exhausted before USAA coverage
- Rehab hospital involved in $1.18 million medical claim
A motorcyclist injured in a motor vehicle accident or their treatment provider may move down the priority list and claim additional benefits from a lower-priority insurer that provides unlimited coverage once their expenses exhaust and exceed a $250,000 coverage limit in the policy of a higher-priority insurer, a panel of the Michigan Court of Appeals has ruled on a matter of first impression.
“Turning to the current version of MCL 500.3114(5), we read ‘in the following order of priority’ to similarly mean that benefits must be claimed in the order of preference listed in the statute from MCL 500.3114(5)(a) through (d),” Judge Daniel S. Korobkin wrote. “But as this case shows, because the 2019 amendments allow policyholders to decline or limit [personal protection insurance] coverage, there may be circumstances in which the benefits sought exceed the first-in-priority insurer’s policy limits. Under such circumstances, and when a lower-priority insurer has a higher limit (or, as is the case here, no limit at all), we hold that the plain language of MCL 500.3114(5) allows an injured motorcyclist or their treating medical provider to recover from such lower-priority insurers once coverage by a higher-priority insurer is exhausted.”
The 17-page opinion is Mary Free Bed Rehab. Hosp. v. Esurance Prop. & Cas. Ins. Co.; MiLW No. 07-110396. Korobkin was joined by Judges Thomas C. Cameron and Mariam Saad Bazzi.
Stephen J. van Stempvoort of Miller Johnson in Grand Rapids, who represented the treating medical provider, did not respond to a request for comment.
Neither did attorneys for the insurers: Kaitlyn A. Cramer of McDonald Baas and Livingston in Troy, who represented the higher priority insurer, nor Lori M. McAllister of Dykema Gossett in Lansing, who represented the lower priority insurer.
Motorcyclist catastrophically injured
On Nov. 12, 2020, Aaron Slade rode a motorcycle belonging to his cousin the wrong way down Seaway Drive in Muskegon. He was catastrophically injured when he collided head-on with a vehicle that was owned and driven by Haley Tanner.
Slade was treated at several medical facilities for multiple serious injuries before being transferred to Mary Free Bed Rehabilitation Home, where charges for his medical treatment amounted to $1,183,565.59.
Tanner had insured her vehicle through Esurance Property and Casualty Insurance Company. Her policy purportedly carried a coverage limit of $250,000. Slade’s father maintained an insurance policy through United Services Automobile Association (USAA) which included unlimited personal protection insurance (PIP) medical benefits coverage.
Once Esurance paid $113,307.30 to Mary Free Bed, it declined to make further payments on the basis that the policy’s PIP medical benefits limit had been exhausted. When Mary Free Bed reached out to USAA, the insurer denied the demand on the ground that Esurance was higher in priority and had already provided coverage.
Mary Free Bed then filed suit against Esurance and USAA, claiming that they failed to pay certain PIP insurance benefits in violation of the no-fault act.
The trial court granted summary disposition in favor of the defendants, and Mary Free Bed appealed.
Statute allows moving down priority list
It was undisputed that Slade was injured in a motor vehicle accident while operating a motorcycle and that he was covered under both Tanner’s Esurance policy and his parents’ USAA motor vehicle policy.
Pursuant to the statute, Esurance’s policy was the highest in priority under MCL 500.3114(5)(a) and (b) because Tanner was the owner and operator of the motor vehicle in the accident, while USAA’s policy fell to MCL 500.3114(5)(c) because that subsection applies to any motor vehicle policy that covers a motorcycle operator.
The court first addressed Mary Free Bed’s argument that Esurance’s policy was not exhausted and that it was on the hook for the outstanding charges for Slade’s medical care.
While Tanner’s selection of limited coverage was not effective under MCL 500.3107c(1), the elements for the rebuttable presumption were satisfied, the court found, and there was a coverage limit to Esurance’s policy. Esurance provided the policy declarations page for Tanner’s policy, which reflected a full-term total premium of $568, with $21 of the premium allocated to PIP coverage and a note referring to a supplemental policy declarations page that stated Tanner’s coverage contained a $250,000 limit for PIP medical.
“In short, Esurance established that its policy limit was $250,000,” the court wrote. “And [Mary Free Bed] does not dispute that Esurance paid benefits to the policy limit.”
Turning to USAA, the court determined that the no-fault act did not prohibit Mary Free Bed from claiming medical benefits after Esurance’s policy coverage was exhausted.
“The relevant statute directs injured persons to claim benefits ‘from insurers in the following order of priority,’” the court said. “‘Priority’ is not defined in the no-fault act, but when analyzing disputes that implicated priority rules under the former version of MCL 500.3114(5), Michigan courts construed ‘order of priority’ to mean the order of preference or precedence for payment of benefits.”
As nothing in the language of Section 3114(5) – which sets out a sequential list of insurers – prohibits continuing down the priority ladder to obtain benefits if a higher-priority insurer’s policy is inadequate, the court found the current version of the statute should be read similarly.
This reading accorded with the act’s purpose of providing those injured in car accidents “assured, adequate, and prompt” coverage to which they have a claim, the court said. Surrounding statutory provisions provided additional context and support for this interpretation, as did the Michigan Supreme Court’s history of indicating that whether an insurer is higher in priority is distinct from whether an injured person is covered by that insurer’s policy. The 2019 legislative reforms also removed the antistacking provision.
“The Legislature could have chosen to retain an antistacking provision to prevent motorcyclists from stacking policies to recover benefits from multiple insurers in different orders of priority, but it did not,” the court pointed out.
USAA contended that the logic of preventing higher priority insurers from recovering from lower-priority insurers should be extended to claimants, “[b]ut we fail to see how this follows, as recoupment by insurers and recovery of benefits by claimants are distinct concepts in the no-fault act,” the court said.
Nor was the court persuaded by a frequently-asked-questions page of the Michigan Department of Insurance and Financial Services, which USAA argued took the position that motorcyclists can’t recover from another insurer in the order of priority, as “we must reject such a policy because it conflicts with our interpretation of the statute’s plain meaning.”
Because Esurance was entitled to the presumption of an effective selection under MCL 500.3107c(3) and its $250,000 policy was exhausted, the trial court correctly granted summary disposition to Esurance.
“But because we hold that the no-fault act allows [Mary Free Bed] to recover payments from USAA, a lower-priority insurer under MCL 500.3114(5), the trial court erred in granting summary disposition to USAA,” the court held.
