Insurer Reimbursement Action Limited by One-Year Back Rule Despite Mistake of Fact

It has long been held by Michigan courts that where a priority question arises between two PIP insurers, the preferred method of resolution is for one of the insurers to pay the claim and sue the other in an action of subrogation. 

However, insurers must carefully heed the rigors of the Michigan No-Fault Act where the insurer steps directly into the shoes of the claimant in an action for reimbursement based on common law subrogation.

The Michigan Court of Appeals addressed this issue very recently in the unpublished opinion, Special Tree Rehab System v Progressive Mich Ins Co, 2014 WL 4375729 (Sept 4, 2014) where the Court of Appeals reversed the ruling of the trial court by holding that the one-year back rule pursuant to 3145(1)[1]1 limited an insurers claim for reimbursement via subrogation.

In Special Tree the plaintiff, Daniel Button, was injured when he was hit while riding his bicycle by a motor vehicle operated by Ruben Arreola on June 2, 2007.  Because household insurers are first in priority for pedestrians injured in motor vehicle accidents pursuant to MCL 500.3115(1), insurance was first sought from QBE insurance company, the insurer of the live-in girlfriend of plaintiff’s father, after she falsely told QBE that plaintiff was her step-son. 

QBE voluntarily paid over $200,000 in PIP benefits through 2010. After the plaintiff eventually filed suit against QBE for wrongfully denied benefits it was revealed through discovery that he was actually not the step-son of his father’s live-in girlfriend. Accordingly, QBE filed a claim against Progressive, the insurer of the at-fault driver Arreola, seeking “reimbursement.”

The appellate court found that although the trial court correctly characterized QBE’s claim as one of subrogation, it incorrectly found that 3145(1) did not apply under a mistake of fact. The appellate court reasoned that no common law authority exists whereby a party that made payments under a mistake of facts can then recoup monies from a party that did not actually receive those payments mistakenly made. 

Regardless, the court further held that even if QBE’s claim could have been characterized as a common law claim for “reimbursement,” the claim would still be subject to MCL 500.3145(1).  Notably, 3145(1) states in pertinent part that it is a limitations period for “an action for recovery of personal protection insurance benefits payable under this chapter.”  The court cited this exact language for the broad proposition that any claim brought by QBE directly against Progressive would be a claim for recovery of PIP benefits subject to 3145(1).

The court did not elaborate on the distinction between common law remedies and statutory recoupment actions for insurers in equal priority pursuant to MCL 3114(6) and 3115(2) which have been long been held been to be subject to the six-year statute of limitations. 

Insurers should carefully note the distinctions between reimbursement actions for PIP benefits mistakenly paid and actions for recoupment from equal priority insurers due to the strict implications of the one-year back rule.


1MCL 500.3145(1) states in pertinent part: An action for recovery of personal protection insurance benefits payable under this chapter . . . may not be commenced later than 1 year after the date of the accident causing the injury unless written notice of injury as provided herein has been given to the insurer within 1 year after the accident or unless the insurer has previously made a payment . . . for the injury. . . .The claimant may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced.

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