Michigan No-Fault Act Requires Diligent and Timely Action by all Parties

The Michigan No-Fault Act requires due diligence. On the one hand, the claimant must make a good-faith effort to demonstrate entitlement to No-Fault Personal Protection Insurance (PIP) benefits from a particular insurer. On the other hand, the insurer who receives a claim must act reasonably when investigating, responding to and resolving a claim.

The provisions of the No-Fault act provide a strong financial incentive to do so. A claimant who does not exercise a good-faith effort to identify the responsible insurer may lose out on collecting any benefits. An insurer that does not act reasonably may be subject to penalty interest and attorney-fees.

This was the holding in Griffin v. Trumbull Ins. Co., 509 Mich. 484, 983 N.W.2d 760 (2022). In Griffin, the Michigan Supreme Court explained that MCL 500.3114, which establishes priority among insurers, places the burden on a claimant to claim PIP benefits from a list of potential insurers based on the priority scheme. In other words, a claimant must be diligent in the pursuit of benefits. “Due diligence requires a good-faith effort to fulfill a legal obligation or requirement that could ordinarily be expected of a person under the factual circumstances.”  While it “must be more than a mere gesture, it does not mean that one must exhaust everything that is theoretically or abstractly possible.”

Regarding the insurers, the Supreme Court also held that an insurer is not excused from paying benefits on the sole basis that the parties know a higher-priority insurer exists that they cannot identify because a third-party refuses to cooperate with the investigation, but the lower-priority insurer is not required to pay benefits if another legitimate reason exists.  The Supreme Court added that the No-Fault act has a strong preference that an insurer promptly pay claims and then seek reimbursement from another insurer that is found to be higher in the order of priority to pay the claim.

In a footnote to its ruling in Griffin, the Supreme Court explained that it did not mean to suggest that a lower-priority insurer is statutorily obligated to pay PIP benefits merely because it received a timely claim for such benefits. Rather, such insurers have an obligation to act diligently in deciding how to resolve the claim and to inform the claimant of that decision in a timely manner. Assuming the claimant has been diligent, an insurer within the order of priority who has received a timely PIP benefit claim, but neither pays nor denies the claim prior to expiration of the limitations period, risks being held liable due to its lack of timely action. Conversely, any claimant who waits until the twilight of the limitations period to put an insurer on notice of a possible PIP benefits claim for the first time by filing a lawsuit is unlikely to have been diligent. The Supreme court further indicated that diligent and timely action by all parties is required; gamesmanship should not be rewarded.

As for the specific facts regarding the claimant’s diligence in Griffin, the Supreme Court concluded that he acted diligently. The claimant swerved his motorcycle to avoid a collision with a truck. His motorcycle went down, and he was badly injured. At the time of the accident, the claimant was required to seek PIP benefits from insurers in the following order of priority:

  1. The insurer of the owner or registrant of the motor vehicle involved in the accident
  2. The insurer of the operator of the motor vehicle, if that operator is someone other than the owner or registrant
  3. The No-Fault insurer of the injured motorcyclist, if that individual is insured under a No-Fault policy on another vehicle
  4. The No-Fault insurer of the owner or registrant of the motorcycle, if such policy exists

The claimant hired an attorney, who promptly sent the truck driver a letter, but the truck driver did not respond or forward it to his insurer. So, the claimant submitted a claim to his own insurer.

The claimant’s insurer made several unsuccessful attempts to contact the truck driver. When the claimant’s attorney later contacted the claimant’s insurer, the claimant’s insurer did not respond, and in fact, had closed its investigation. 

The Supreme Court held that the claimant properly filed a claim against all insurers identifiable before the expiration of the limitations period and that the claimant’s insurer’s delay in deciding whether to pay or deny the claimant’s claim until after the limitations period expired did not excuse it from liability. The Supreme Court admonished the claimant’s insurer for leaving the claimant in limbo for a year under the guise of “investigation” while refusing to pay or deny the pending PIP benefit claim. 

More recently, the Michigan Court of Appeals applied the Griffin court’s reasoning in Stanley v. City of Detroit, --- N.W.2d ---, 2023 WL 3664545 (May 25, 2023). The facts are a bit convoluted as there were several potential insurers involved.

Nevertheless, in Stanley, the claimant was injured on May 24, 2019 while a passenger in a vehicle her sister had rented from a rental company. The claimant did not have insurance of her own and did not live with anybody that had insurance. Soon thereafter, she hired an attorney who left voicemails for the rental company trying to open a claim on Nov. 27, 2019—six months after the accident.  Eight days later, on Dec. 3, 2019, the claimant’s attorney reached out the rental company’s claims department. That same day, the rental company’s claims department responded and said its insurance usually does not cover passengers or drivers. 

On Jan. 28, 2020, the claimant filed suit for PIP benefits against the rental company, USAA (which was the claimant’s sister’s insurer), and the Michigan Automobile Insurance Placement Facility (which would later be swapped for Farmers Insurance Exchange after assignment by the MAIPF).

During the lawsuit, it was discovered that the rental vehicle was insured through National Interstate Insurance Company of Hawaii, which would have been the primary insurer. Additionally, it was determined that USAA was the secondary insurer. Because the top two insurers in the order of priority were identified or identifiable, the appellate court concluded that the claimant’s actions did not meet the due diligence standard articulated under Griffin.

As demonstrated by the Griffin and Stanley cases, whether a claimant or an insurer acted with due diligence is a fact-specific determination made on a case-by-case basis.

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