Determining Coverage Under the Michigan No-Fault System

The Michigan No-Fault system provides two mechanisms of recovery when a person is injured in a motor vehicle accident. First party benefits provide the claimant with medical expenses, wage loss, replacement services and, in the case of death, survivors’ loss benefits. Meanwhile, third party benefits provide the claimant with compensation for pain and suffering. The focus of this article is on first party benefits only.

With regard to first party benefits, at its most fundamental level, the Michigan No-fault system provides that each driver’s personal insurance company is responsible for the damage and injuries that driver sustains in a car accident, regardless of fault. This principle can been seen at work in the classic scenario where two insured drivers collide, file claims with their individual no-fault insurers, and receive benefits pursuant to the terms of their individual no-fault insurance policies.

But, consider a different scenario: Imagine that a pedestrian with the right-of-way is struck in a crosswalk by a driver who has run a red light. Whose insurance company is responsible for the pedestrian’s injuries? The answer is not as clear as it may first appear.

Though it may seem as though the driver should be responsible for the pedestrian’s injuries, in reality, there is very little chance that this will be the case. This is because the Michigan No-fault system is governed by a series of priorities, which assign responsibility for damage and/or injuries that arise out of the operation of a motor vehicle.

The list of standard priorities is relatively straightforward, even if — as the scenario described above demonstrates — the facts of a motor vehicle are not.

The first order of priority is the injured party’s own no-fault insurance policy. Returning to the example, our pedestrian would file a claim for injuries arising out of the accident with his own no-fault insurance carrier — even though his vehicle was not involved in the accident in any capacity. This is because in Michigan, no-fault insurance actually attaches to the individual, rather than the vehicle.

But, what happens if our pedestrian does not have a vehicle covered by a no-fault policy of insurance? In that circumstance, we must turn to the second level of priority, which would be a no-fault policy of insurance maintained by our pedestrian’s resident relative, i.e., a spouse or over familial relative residing in the same home as our pedestrian.

Assuming our pedestrian has no resident relative with an applicable no-fault insurance policy, the next level of priority available is the no-fault insurance policy of the owner of the vehicle, regardless of whether of the owner was driving the vehicle at the time of the accident. We look to the owner instead of the driver because, as noted previously, No-fault insurance in Michigan flows through the individual, rather than the vehicle.

Only if the owner of the vehicle fails to carry an active policy for No-fault insurance — or, if the owner and driver are one-and-the-same — would our pedestrian be entitled to file at claim for injury with the driver’s insurance. That is, in our pedestrian versus motor vehicle scenario, the vehicle driver’s insurance is actually the fourth order of priority, even if the driver is 100 percent at fault for the accident.

Recognizing that situations may arise where even after sifting through four levels of priority, no insurance would be available to cover a claimant’s injuries, the Michigan Legislature provided a fifth and final priority to serve as a “catch all” for any remaining, valid claims for first party no-fault insurance benefits. The Assigned Claims Plan, managed by the Michigan Automobile Insurance Placement Facility, is a mechanism by which the State of Michigan will assign a claim to a no-fault insurer to provide benefits, even though that no-fault insurer otherwise has no relationship to the accident. The purpose of the Assigned Claims Plan is to insurance that persons such as our pedestrian are not left holding the bag for injuries arising out of the operation of a motor vehicle.

Importantly, the order of priority, as applied to our pedestrian, is equally applicable to an individual injured while riding as a passenger in a motor vehicle. Meaning, the first level of priority would be the passenger’s own insurance, followed by the insurance of a resident relative, the insurance of the vehicle owner, the insurance of the driver and, finally, the Assigned Claims Plan.

A final, critical caveat to our analysis is this: Michigan law requires the owner of a vehicle to maintain a valid policy of no-fault insurance. If a driver fails to do so, he will not be entitled to any no-fault benefits — including pain and suffering — nor will he be entitled to make a claim with the Assigned Claims Plan, even if the other driver is totally at fault. Thus, it is essential that all vehicle owners in Michigan maintain proper no-fault coverage.

As this exercise clearly demonstrates, determining the precise no-fault carrier responsible for providing coverage for damage and injuries arising out of the operation of a motor vehicle can be a complex endeavor. Accordingly, it is advisable to consult with an attorney whenever you are involved in an injury accident — regardless of your personal fault — to ensure that your rights are protected.

A Roadmap to Priority: Follow these Five Steps

  1. Turn to the claimant’s own insurance. If no such policy exists …
  2. Turn to the insurance of the claimant’s resident relative. If no such policy exists …
  3. Turn to the insurance of the vehicle owner. If no such policy exists …
  4. Turn to the insurance of the driver. If no such policy exists …
  5. Turn to the Assigned Claims Plan.

Robert L. Blamer is a partner in our Livonia office and head of the Firm’s plaintiff’s practice group. He focuses his practice on helping injured people in many types of negligence actions, workers’ compensation claims, and Social Security disability claims. He may be reached at (734) 261-2400 or rblamer@cmda-law.com.