Having a ‘Cowboy Attitude' About No-Fault Insurance Limits Could Cost You

Country Music Hall of Famer Willie Nelson’s 90th birthday party was recently on TV. And I found myself singing one of his tunes today. You know, the one about moms and liability insurance – “Mamas don’t let your babies choose their own insurance.”

Well, I think that’s how it goes. Regardless of the “correct” lyrics, that is the version the Michigan Court of Appeals was singing in its recently published decision of Newton v Progressive Marathon Insurance Company, et al.

The Newton case stemmed from an accident whereby Eric, a minor at the time, crashed his Honda Accord into Newton’s motorcycle and injuries resulted. Eric was the sole owner of the Accord, which Progressive insured through a No-Fault policy purchased by Eric’s mother, Nykie.

With respect to the Accord, Nykie elected bodily injury liability limits of $50,000 per person and $100,000 per occurrence rather than the statutory default of $250,000 per person and $500,000 per occurrence. Nykie did not consult Eric when electing lower liability coverage. In fact, Eric was not involved in obtaining the policy from Progressive.

Newton filed a lawsuit seeking a declaratory judgment, arguing that Nykie's election of lower liability limits for Eric's vehicle exposed him to greater liability. As part of the relief, Newton requested the trial court to reform the Progressive policy to include the higher default liability limits established by law.

The court granted summary disposition in favor of Progressive, stating that Nykie had the legal authority to elect lower insurance policies for Eric's vehicle. Newton appealed.

The Michigan Court of Appeals affirmed the trial court’s decision. Essentially, Newton had three arguments, all of which failed: (1) that Nykie did not have the authority to elect lower liability limits for Eric's vehicle without his authorization; (2) that the owner of the vehicle should make the election or the term "applicant" should be expansively construed to require authorization from the vehicle owner; and (3) that that Nykie, as Eric's parent, lacked agency authority, citing Woodman v Kera LLC.

Regarding the first argument, the appellate court stated that the plain language of MCL 500.3009(5) permits the “applicant for or named insured” to choose lesser limits. Because Nykie was both the “applicant” and “named insured,” she was permitted to elect lower limits for Eric.

Regarding the second argument, the appellate court found that the language of MCL 500.3009(5) was clear and unambiguous – it did not contain the word “owner” or have any implications on the owner.

Lastly, regarding the third argument, the appellate court distinguished this matter from Woodman. The Michigan Supreme Court, in Woodman, held that parents have no authority to waive, release or compromise a claim belonging to their child. The ruling arose out of a situation where a father signed a liability waiver for his son at an indoor play area.

The appellate court found that Nykie did not seek to waive, release or compromise a claim or defense belonging to Eric. By choosing the lower liability limits, Nykie did not limit the defenses available to Eric. Although this had the potential to expose Eric to more liability in the event of a collision, that was a risk that was allowed by the plain language of MCL 500.3009

By publishing this decision, the appellate court makes the Newton case the current state of the law in Michigan. Simply put, parents can elect lesser-than-statutory liability limits for their children – even if this exposes the children to greater risks. But is that the most prudent thing to do?

The Red Headed Stranger warned mamas that their babies shouldn’t grow up to be cowboys. Maybe in a different universe he would warn them about too little liability limits in their No-Fault policy.

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