PIP BENEFITS AND DISQUALIFICATION INVOLVING NON-MICHIGAN RESIDENTS IN MICHIGAN WRECKS UNDER 3102, 3113(b), and MAJ No-Fault Institute V

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1 PIP BENEFITS AND DISQUALIFICATION INVOLVING NON-MICHIGAN RESIDENTS IN MICHIGAN WRECKS UNDER 3102, 3113(b), and MAJ No-Fault Institute V Barry R. Conybeare Conybeare Law Office P.C. St. Joseph, Michigan September 2, 2010

2 PIP BENEFITS AND DISQUALIFICATION INVOLVING NON-MICHIGAN RESIDENTS IN MICHIGAN WRECKS UNDER 3102, 3113(b), and 3163 GENERAL RULE An out-of-state resident who, while in Michigan, suffers accidental bodily injury involving a motor vehicle has a great likelihood of receiving Michigan PIP benefits. ISSUE The issue is to determine the proper PIP carrier (priority) and the limitations (if any) for the PIP benefits available to the out-of-state resident. I. THE DISQUALIFICATION RULE - - MCL (c) MCL (c) is the starting point for analyzing PIP coverage when an out-of-state resident is involved in a motor vehicle accident in Michigan. Section 3113(c) states, in relevant part, as follows: Sec A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident any of the following circumstances existed: *** (c) The person was not a resident of this state, was an occupant of a motor vehicle or motorcycle not registered in this state, and was not insured by an insurer which has filed a certification in compliance with section This section requires three elements for the non-resident to be disqualified from Michigan PIP when involved in a Michigan motor vehicle accident. Those three elements are: 1. The claimant must be an out-of-state resident; 2. The claimant must be occupying a motor vehicle not registered in Michigan; and 3. The claimant must not have a foreign vehicle in his home that was insured by a 3163 insurer. Again, all three of these elements must be present to disqualify the non-resident from PIP coverage. 1

3 This disqualification rule requires the non-resident to be an occupant of a motor vehicle or motorcycle not registered in this state. Thus, non-residents involved in Michigan motor vehicle accidents while they are non-occupants are likely entitled to Michigan PIP, i.e. pedestrians, bicyclists, etc. Conclusion: If not disqualified under 3113(c), then the out-of-state resident in a Michigan motor vehicle accident should receive Michigan PIP benefits. II. SECTION 3163 REQUIREMENTS AND INSURERS A. The General Rule In part, 3163 states as follows: MCL (1) An insurer authorized to transact automobile liability insurance and personal and property protection insurance in this state shall file and maintain a written certification that any accidental bodily injury or property damage occurring in this state arising from the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle by an out-of-state resident who is insured under its automobile liability insurance policies, is subject to the personal and property protection insurance system under this act. By its terms, 3163 applies when an out-of-state resident uses a motor vehicle as a motor vehicle in Michigan. Thus, 3163 is applicable whenever a non-resident: 1. Operates a motor vehicle in Michigan; 2. Is a passenger in a motor vehicle; and 3. Is maintaining, loading, unloading, entering, exiting, etc., a motor vehicle in Michigan. Under 3163, if the insurer of an out-of-state resident has filed a certification in Michigan, the out-of-state resident is entitled to PIP benefits. Notably, the non-resident s out-ofstate vehicle insured by a 3163 carrier need not be involved in the Michigan accident to provide PIP coverage to the non-resident claimant. Rather, as clearly stated in 3163(1), the carrier is liable for the non-resident s injury that occurs in Michigan if it arises from the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle by an out-of-state resident. Thus, the out-of-state resident must simply be using a motor vehicle; not the motor vehicle the out-of-state resident owns and which has coverage through a 3163 certified insurer. The out-of-state resident s 3163 carrier is on the hook for PIP benefits whenever the outof-state resident is an operator, passenger or user of a motor vehicle in Michigan and the out-ofstate resident suffers accidental bodily injury involving a motor vehicle. 2

4 Example: An Indiana resident who owns an Indiana car with a 3163 certified insurance carrier, but who is driving or a passenger in someone else s Indiana vehicle, and who is then in an accident in Michigan, receives Michigan PIP benefits from his 3163 insurer. Initial inquiry: Any time an out-of-state resident is involved in a Michigan motor vehicle accident, an initial question is whether the out-of-state resident s vehicle (whether involved in the wreck or not) was insured by a carrier certified under A complete and current list of insurers who are 3163 certified may be found at If 3163 applies, the insurer of an out-of-state resident is required to pay the same type of no-fault benefits that are available to a Michigan resident. Section 3163(3) provides the insurer and its insureds have the same rights and immunities under the no-fault statute (i.e. threshold defense under 3135) and that claimants have the same rights and benefits to PIP and PPI insurance. Section 3163(3) states in full as follows: (3) Except as otherwise provided in subsection (4), if a certification filed under subsection (1) or (2) applies to accidental bodily injury or property damage, the insurer and its insureds with respect to that injury or damage have the rights and immunities under this act for personal and property protection insureds, and claimants have the rights and benefits of personal and property protection insurance claimants, including the right to receive benefits from the electing insurer as if it were an insurer of personal and property protection insurance applicable to the accidental bodily injury or property damage. B. The $500,000 Limit Under Section 3163(4) MCL (4) states as follows: (4) If an insurer of an out-of-state resident is required to provide benefits under subsections (1) to (3) to that out-of-state resident for accidental bodily injury for an accident in which the out-of-state resident was not an occupant of a motor vehicle registered in this state, the insurer is only liable for the amount of ultimate loss sustained up to $500, Benefits under this subsection are not recoverable to the extent that benefits covering the same loss are available from other sources, regardless of the nature or number of benefit sources available and regardless of the nature or form of the benefits. 3

5 When does the $500,000 limit apply and who pays? Section 3163 was amended in December, The Legislation amended 3163 by adding 3163(4). This section now provides that, under certain circumstances, non-residents who are injured in automobile accidents occurring in Michigan and who are drawing PIP benefits under 3163 may only recover a maximum of $500,000 in PIP benefits. As 3163(4) states, benefits are not recoverable to the extent that benefits covering the same loss are available from other sources, regardless of the nature or number of benefit sources available and regardless of the nature or form of the benefits. Thus, non-residents who are eligible to receive 3163 PIP benefits must coordinate those PIP benefits with their health and/or disability insurance policies. The Appellate Courts have established that non-residents seeking PIP benefits pursuant to 3163 follow the order of priority as established in 3114 and Safeco Ins. Co. v Economy Fire and Casualty Co., 182 Mich App 552 (1990); Smith v Continental Western Ins. Co., 169 F. Supp. 2d. 687 (2001). If 3163 does not apply, and the out-of-state resident is not excluded from PIP benefits under 3113(c), then the out-of-state resident receives full Michigan PIP benefits. Out-of-state residents suffering accidental bodily injury involving a Michigan motor vehicle will fall into one of four categories: 1. Excluded from Michigan PIP benefits under 3113(c); 2. Entitled to limited Michigan PIP benefits under 3163(1) and (4); 3. Entitled to full Michigan PIP benefits from the out-of-state resident s personal 3163 insurer, or the Michigan insurer for a vehicle involved in the accident; or 4. Entitled to full Michigan PIP according to 3114 priority for employer provided vehicles or vehicles for hire. Sample factual scenarios: Out-of-state resident occupying a vehicle. The Indiana resident operating, using or maintaining a motor vehicle in Michigan, qualifies for 3163 coverage. The subsection (4) limits will apply most of the time because the non-resident injured in a Michigan accident is most likely to be an occupant of a non-michigan owned or registered motor vehicle. On the other hand, if the out-of-state resident is an occupant of a Michigan motor vehicle, then the claimant gets full PIP from his 3163 insurer. An Indiana resident in his Indiana registered car suffering accidental bodily injury in Michigan would get PIP benefits from his 3163 insurer capped pursuant to 3163(4). If the Indiana resident driving his own foreign car has no 3163 insurer, then he is entitled to no PIP at all (see 3113(c) and Goldstein v Progressive, 218 Mich App 105). 4

6 If an Indiana resident is an occupant of a Michigan registered motor vehicle, he gets full PIP from his own 3163 certified insurer (because subsection 3163(4) does not apply since the foreign resident is an occupant of a Michigan vehicle). Or, if the Indiana resident has no 3163 insurer in his home, then he gets full PIP benefits from the Michigan carrier for the car in which he is an occupant (see priorities under 3115). Non-occupants who are loading/unloading, entering/alighting, or maintaining a motor vehicle in Michigan. An out-of-state resident who is loading/unloading, entering/alighting, or maintaining a motor vehicle at the time he suffers an accidental bodily injury, is entitled to Michigan PIP benefits pursuant to subsection 3163(1). In this scenario, the out-of-state resident is entitled to those PIP benefits from his 3163 certified insurer and they are capped under 3163(4). If the non-resident has no 3163 insurance in his home, then he claims benefits pursuant to 3115 and recovers full Michigan PIP. Motorcyclists. The insurer of an out-of-state motorcycle that has complied with 3163 is not required to pay no-fault benefits to a motorcyclist injured in an accident involving a Michigan motor vehicle because a motorcycle is not a motor vehicle within the meaning of the no-fault act. Rather, the responsibility for PIP coverage would lie with the insurer of the Michigan vehicle involved in the wreck. Mills v Auto-Owners Ins. Co., 413 Mich 567 (1982); Guibord v Farmers Insurance Exchange, 110 Mich App 218 (1981). The Mills case reasoned that the certificate of compliance of 3163 requires the out-of-state insured to provide nofault coverage only when the injured out-of-state resident is involved in the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle at the time of the injury. Because the out-of-state claimant in Mills was operating a motorcycle, which is not a motor vehicle, the 3163 certificate does not require the out-of-state insurer to provide coverage. Thus, the injured non-resident claimant is treated like an injured pedestrian who has no PIP insurance in his or her household. Under that circumstance, the claimant receives no-fault benefits from the insurer of the striking vehicle. MCL ; Bach v State Farm, 137 Mich App 128 (1984). See also Edquist v Cadillac Mutual Ins. Co., 119 Mich App 801 (1982). Because 3163 does not apply, the motorcyclist receives full PIP from the insurer for the motor vehicle involved in the accident. Notably, the non-resident motorcyclist involved in a Michigan wreck with a motor vehicle will only recover Michigan PIP if the non-resident is insured by a 3163 insurer (even though that insurer does not owe PIP). The 3113(c) exclusion applies to a non-resident occupant of a motor vehicle or motorcycle not registered in Michigan and where the non-resident does not have a 3163 insurer. 5

7 Non-occupants - pedestrians and bicyclists. The non-resident pedestrian or bicyclist is not using a motor vehicle as a motor vehicle (similar to a motorcyclist above) and thus does not claim benefits from a 3163 certified insurer. The nonresident pedestrian or bicyclist suffering accidental bodily injury in Michigan involving a motor vehicle claims benefits pursuant to Thus, under 3115(1), a non-resident pedestrian or bicyclist will receive PIP benefits from the insurer for the owner, registrant or operator of the motor vehicle involved in the accident. Notably, the non-resident pedestrian or bicyclist receives full PIP benefits because 3163 does not apply. III. THE OUT-OF-STATE RESIDENT WHO OPERATES HIS MOTOR VEHICLE IN MICHIGAN MORE THAN 30 DAYS IN A YEAR A. The Rule Under limited circumstances, non-resident owners of motor vehicles not registered in Michigan may nonetheless have the responsibility to insure the vehicle with Michigan PIP. The obligation of the non-resident owner of an out-of-state vehicle is addressed in MCL (1). This section states as follows: (1) A nonresident owner or registrant of a motor vehicle or motorcycle not registered in this state shall not operate or permit the motor vehicle or motorcycle to be operated in this state for an aggregate of more than 30 days in any calendar year unless he or she continuously maintains security for the payment of benefits pursuant to this chapter. This section means that if a non-resident is the owner of the vehicle not registered in Michigan, but the non-resident uses the vehicle in Michigan more than 30 days in any calendar year, that individual must purchase mandatory PIP insurance coverage. This is not a consecutive 30 day period, but rather an aggregate 30 day period. The following case law addressed, in some way, the mandatory requirement of 3102(1) for non-residents who operate an out-of-state vehicle in Michigan for more than 30 days. Parks v DAIIE, 426 Mich 191, (1986). This case dealt with whether an out-ofstate truck trailer was subject to the mandatory security requirements of the No-Fault Act. The Court held that 3101(1) was not applicable and, stated as follows concerning 3102(1): Second, 3102(1) applies only to vehicles owned by nonresidents and not registered in this state. Security must be maintained for vehicles operated in this state for more than thirty days in a single calendar year. Roadway falls within 3102(1) because it is a nonresident corporation and because trailer No was not 6

8 registered in Michigan. However, Roadway s director of systems and procedures attested that trailer No had been operated in Michigan for only three days in 1981, up to and including March 13, 1981, the date of Parks injury. Thus, the trailer was not subject to the mandatory security requirements of 3102(1) at the time of the injury. Gersten v Blackwell, 111 Mich App 418, (1981), which stated as follows: [A]ll owners or registrants of motor vehicles not registered in Michigan must maintain the requisite insurance if the vehicle is operated in Michigan for more than 30 days in any year. MCL (1); MSA (1). The act provides penalties for those who do not comply as required. Such persons are guilty of a misdemeanor and can be fined $100- $500 and imprisoned for not more than a year. MCL (2); MSA (2). Perhaps in recognition of Michigan s tourist industry, the Legislature carved out an exception to the requirement that those who travel our highways must purchase no-fault insurance. Nonresidents are not required to purchase no-fault insurance if they operate their vehicles in this state for less than 30 days. In this manner the legislation protects tourists and other transient nonresidents from the criminal sanctions imposed by the act. Berrien County Road Commission v Jones, 119 Mich App 315, 318 (1982), stating that 3102 requires defendants compliance with the security requirements of no-fault after a 30-day period. The 30-day period is to protect tourists and other transient nonresidents from the criminal sanctions imposed by the act. (Citation omitted). McGhee v Helsel, 262 Mich App 221, 225 (2004), stating that under MCL (1) a non-resident owner or registrant of a motor vehicle not registered in Michigan must maintain security if the vehicle is operated in Michigan for an aggregate of more than 30 days in any calendar year. Plaintiff did not exceed this 30 day period. Thus, MCL (2)(c) does not apply in this case and does not preclude plaintiff from recovering non-economic damages. J.B. Hunt Transport, Inc. v Adams, 537 F. Supp.2d 880, 884 (E.D.Mich. 2007). In this case, the issue centered upon whether J.B. Hunt s tractor-trailer was subject to the mandatory security requirements of the No Fault Act at the time of the collision. After quoting 3102(1), the Court stated as follows: Therefore, [s]ecurity must be maintained for vehicles operated in this state for more than thirty days in a single calendar year. The 7

9 30-day requirement is designed to protect tourists and other transient nonresidents from criminal sanctions imposed by the No Fault Act. The plain text of 3102(1), and the above case law, make it clear that an out-of-state vehicle that is operated in Michigan for more than 30 days in a calendar year must have full mandatory 1 Michigan PIP coverage. There are many circumstances where 3102(1) may apply, including the following: Individuals who regularly operator their vehicle in Michigan for work; Individuals who live on the boarder with Michigan and commonly visit the state to see friends or shop or for recreational activities; Individuals who own a second home in Michigan; or Individuals who go to school/college in Michigan. All of these people who operate a foreign vehicle in Michigan more than 30 days in a year are required under the law to have full Michigan PIP. Unfortunately, a non-resident who owns a non-michigan titled or registered vehicle, and who does not primarily house or garage the vehicle in Michigan, cannot get a Michigan PIP policy. The Michigan insurance companies simply do not sell a policy that meets this circumstance. Nonetheless, there are potential penalties associated with the failure to have 3102(1) PIP coverage where the foreign vehicle is operated in Michigan for more than 30 days. B. Criminal Liability Section 3102(2) imposes criminal liability on owners or registrants who fail to provide no-fault insurance as required by the act. Importantly, this section applies to Michigan residents and non-residents who fail to have the mandatory PIP coverages under the Act. Section 3102(2) provides: (2) An owner or registrant of a motor vehicle or motorcycle with respect to which security is required, who operates the motor vehicle or motorcycle or permits it to be operated upon a public highway in this state, without having in full force and effect security complying with this section or section 3101 or 3103 is guilty of a misdemeanor. A person who operates a motor vehicle or motorcycle upon a public highway in this state with the knowledge 1 There has been some dispute over the time period for which the vehicle must be operated more than 30 days in Michigan. Section 3102(1) states more than thirty days in any calendar year. The general consensus is that this phrase means the calendar year in which the crash occurred. See, e.g. Mathews v Republic Western Ins. Co., docket no (March 2, 2006). 8

10 that the owner or registrant does not have security in full force and effect is guilty of a misdemeanor. A person convicted of a misdemeanor under this section shall be fined not less than $ nor more than $500.00, imprisoned for not more than 1 year, or both. Thus, a non-resident owner who operates his vehicle in Michigan for more than 30 days, but does not have insurance as required by 3102(1), is subject to criminal liability for a misdemeanor. C. Does the Failure to have 3102(1) Insurance Bar a PIP Claim? MCL (b) generally bars PIP coverage for an owner or registrant of a motor vehicle or motorcycle involved in an accident where there is not the required insurance coverage. 3113(b) provides as follows: A person is not entitled to be paid personal protection insurance benefits for accidental bodily injury if at the time of the accident any of the following circumstances existed: * * * (b) The person was the owner or registrant of a motor vehicle or motorcycle involved in the accident with respect to which the security required by section 3101 or 3103 was not in effect. If 3113(b) applies, the disqualification is absolute and the injured person completely and permanently loses the right to recover no-fault PIP benefits. This disqualification from receipt of PIP benefits DOES NOT apply to the non-resident owner required to have insurance under 3102(1) for operating a foreign vehicle in Michigan for more than 30 days. It does not apply because the express language of 3113(b) states that it only applies to insurance required by 3101 or 3103, not This analysis was recently confirmed in an unpublished decision. Titan Ins. Co. v Brotherhood Mut. Ins. Co., and State Farm Mut. Automobile Ins. Co., docket no (February 23, 2010). IV. THE INSURER S RESIDENCY DEFENSE An insurer that in good faith issues an insurance policy in another state to an insured who provides the insurer with an address in the other state but is really a Michigan resident is not responsible for paying Michigan no-fault PIP benefits under the policy. When the insured is a Michigan resident, MCL (covering non-residents) does not apply and does not impose liability on the insurer. Farm Bureau ins. Co. v Allstate Ins. Co., 233 Mich App 38 (1998). 9