Michigan Supreme Court Issues Important 6-1 Decision on Priority of Payments for PIP Benefits and Rules Against Double Recovery

In Harris v. Auto Club.07.29.2013, the Michigan Supreme Court has ruled a plaintiff injured in a motor vehicle accident was not entitled to double recovery of medical benefits under the automobile liability policy issued to the owner of the motor vehicle involved in the accident.  The plaintiff was injured when his motorcycle was struck by a motor vehicle.  The motor vehicle was covered by a no-fault automobile liability policy issued by Auto Club Insurance Association (ACIA).  Under the no-fault act the insurer of the motor vehicle is responsible to pay personal insurance protection (PIP) benefits for injuries incurred by the plaintiff.  Plaintiff sought insurance coverage for his medical bills from his personal health insurance provider, Blue Cross Blue Shield of Michigan (BCBSM) and from ACIA.  He expected BCBSM to directly pay his medical providers and he expected ACIA to send him a check in the same amount.

The trial court ruled that ACIA’s policy was “uncoordinated” with other benefits, meaning it was responsible to pay PIP benefits regardless of any other insurance the claimant might have.  The trial court also noted plaintiff’s contract with BCBSM provided the latter was not responsible for services for which the plaintiff was not legally responsible, or for which he would not be charged if he did not have coverage with BCBSM.

The Court of Appeals in a 2-1 unpublished opinion (O’Connell, P.J., Donofrio, J., and Murray, J. (dissenting)) reversed, holding, in essence, the plaintiff was entitled to receive a double recovery for those benefits initially paid by BCBSM.  The dissenting judge reasoned that the language of the BCBSM policy controlled the outcome because plaintiff was not legally chargeable with the responsibility to pay for the services rendered due to the injuries he suffered in the collision with the insured motor vehicle.

The Supreme Court, addressing the question whether the plaintiff was entitled to a double recovery, reversed.  The Court noted its prior acknowledgement that an insurer with an uncoordinated policy may be required to pay a claimant even if that claimant received services for injuries paid for by a no-fault insurer.  The Court reasoned that the plaintiff here was not “covered” by a no-fault policy, but rather, he was entitled to receive payment for medical services rendered by statute.  MCL 500.3114 (priority statute allowing recovery of PIP benefits by a motorcyclist from the insurer of a motor vehicle when the former suffers injury in an accident with a motor vehicle – the insurer of the owner or registrant of the motor vehicle involved in the accident is the priority insurer in such situations).

The Court reasoned the Court of Appeals erred by concluding that the no-fault insurance policy issued by the driver of the motor vehicle involved in the accident with plaintiff covered the plaintiff; rather, the statute provided an entitlement to PIP benefits to be paid for by that insurer.  “[Plaintiff] is entitled to PIP coverage because MCL 500.3114(5)(a) designates ACIA as the responsible insurer.”

If the plaintiff had paid a premium to BCBSM for an uncoordinated policy, a premium that would have reflected the absence of the coordination provision, then he might expect a double recovery.  Under MCL 500.3114(5)(a) however, the plaintiff was not obligated to pay his medical expenses, ACIA was as a matter of law.

The Court also relied on policy concerns of avoiding double recovery in the insurance industry by allowing matching cash grants as a result of the apparent (but not legitimate) ambiguities created by two existing insurance policies.  Premiums are to reflect, as near as possible, the risks associated with the policy’s terms of coverage.  If the BCBSM policy’s “non-coordination” provision would have been read out of that policy, it would have required BCBSM to cover a risk which it did not anticipate by the provision of a higher premium for such non-coordination.

This opinion obviously reflects a reasonable outcome and is based more on common-sense than any real concern of policy.  The other take away from the opinion is that the health insurance provider must take care the policy reflects the coordination with other potentially legally required priority payments to which the insured may be entitled.

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