Michigan Supreme Court Orders Argument in No-Fault Cases Concerning Covenant’s Retroactivity, Out of State Vehicles

By: Steven M. Couch

On May 25, 2018, the Michigan Supreme Court ordered oral argument on applications for leave to appeal in two no-fault insurance cases. In one instance, the order was not surprising because the case concerns the line of cases that has developed since the Covenant Medical Center v. State Farm Mutual Automobile Insurance Company decision last year, which barred direct no-fault lawsuits by medical providers. The other case, however, comes out of an unpublished Court of Appeals decision regarding whether the no-fault act requires the owner of a vehicle registered outside of Michigan who is involved in an accident to register it in Michigan and maintain security for the payment of personal protection insurance (PIP) benefits in order to be eligible to receive those benefits. These two cases are now set to join at least one other no-fault case on the Michigan Supreme Court’s calendar starting this fall.

In the first case, W.A. Foote Memorial Hospital v. Michigan Assigned Claims Plan, the Court of Appeals ruled that Covenant applies retroactively. (Click here for our previous piece on this case.) In its order granting oral argument on the hospital’s application for leave to appeal, the Supreme Court requested further briefing on three questions. The first is whether Covenant should be applied to this case. Next, the Court asked whether the Court of Appeals correctly concluded that the Supreme Court’s decision in Pohutski v. City of Allen Park, 465 Mich 675, 696 (2002), has been “effectively repudiated” by later cases in the context of judicial decisions of statutory interpretation, such as Spectrum Health Hospitals v. Farm Bureau Mutual Insurance Company of Michigan, 492 Mich 503 (2012). Lastly, the Court inquired whether, if Pohutski had not been effectively repudiated, should that case have been applied to the later Spectrum case.

The Court’s questions bear directly on the litigation of no-fault provider suits in the wake of Covenant, as well as the Court’s broader approach to the interpretation of statutes. In Pohutski, the Supreme Court had set out a three-part test for determining whether a judicial interpretation of a statute should be retroactive or prospective. This test weighed (1) the purpose to be served by the new rule, (2) the extent of the reliance on the old rule, and (3) the effect of retroactivity on the administration of justice. The Court of Appeals ruled that the Supreme Court’s later decision in Spectrum effectively repudiated the Pohutski decision when it held that “[t]he general principle is that a decision of a court of supreme jurisdiction overruling a former decision is retrospective in its operation, and the effect is not that the former decision is bad law, but that it was never the law.” Spectrum, 492 Mich at 536. The Court’s concerns about the interplay between the Pohutski and Spectrum tests will impact not only the immediate issues that have arisen after Covenant, but also in the interpretation of statutes more broadly.

The second case, Home-Owners Insurance Company v. Jankowski, is one in which the insureds, married Michigan residents who live in Florida for part of the year, purchased, registered, and insured a vehicle in Florida. The Jankowskis were injured in an accident in that vehicle while they were in Florida. They claimed no-fault and underinsured motorist benefits under a policy issued on their two other vehicles, which were registered and insured in Michigan. The trial court determined that Richard Jankowski could not collect PIP benefits because he was an owner of the Florida vehicle, which was not covered by a no-fault policy. However, the court ruled that Janet Jankowski was not barred from recovering PIP benefits under the Michigan policy because she was not an owner or “owner by use” of the Florida vehicle.

The Court of Appeals affirmed in part and reversed in part, holding that Janet Jankowski, like her husband, was barred from claiming no-fault benefits because she was an owner of the vehicle for the purposes of MCL 500.3113 and therefore could not collect no-fault benefits for an accident in which the vehicle she owned lacked the security required by statute. The Court of Appeals rejected the Jankowskis’ argument that, because the Florida vehicle was never driven in Michigan, there was no obligation to register it in Michigan and, therefore, no obligation to carry no-fault coverage on it in order to collect the benefits.

The Michigan Supreme Court ordered further briefing on the question whether the Jankowskis were required to register the vehicle in Michigan and to obtain no-fault insurance on it in accordance with MCL 500.3101 in order to obtain no-fault benefits in connection with the out of state vehicle’s use. This question will be of particular significance to all no-fault carriers in the state of Michigan as it is common for Michiganders to spend some or all of the winter months in warmer climates outside of the state.

Regardless of how the Court decides these cases, the forthcoming rulings will have substantially effects on the administration of no-fault insurance claims for all insurers in the state of Michigan. With 30 cases set for argument starting in the fall –only about half of the Court’s total for the 2017-2018 term – the Michigan Supreme Court’s next term is already shaping up to be a big one for no-fault insurance.

For more information or questions on how this pertains to cases you are handling please e-mail the author here.