Topics covered: Who is insured Benefits Exclusions Relationship to other coverages Other items Tort liability Property protection insurance Property protection vs. other coverages

Who Is Insured

Persons eligible for no-fault benefits under a policy endorsed to provide personal protection insurance are the named insured and any family member (a resident of the named insured's household related to the named insured by blood, marriage, or adoption, including wards and foster children) injured in an auto accident. Also considered an insured is anyone else injured in an auto accident while occupying the named insured's covered auto, or if the accident involves any other auto that is operated by the named insured or a family member and which is insured for bodily injury liability under the policy. Finally, anyone else injured in an auto accident while not occupying any auto (for example, a pedestrian) is an insured if the accident involves the named insured's covered auto. A covered auto is defined as an auto for which the named insured is required under the Michigan insurance code to maintain security and to which the bodily injury liability coverage of the named insured's personal auto policy applies.

Benefits

Michigan no-fault benefits under endorsement PP 05 90 are payable to or for an insured who sustains bodily injury caused by an auto accident and that results from the ownership, operation, maintenance, or use of an auto as an auto. The benefits are subject to the provisions of the Michigan insurance code and to the limits shown in the schedule of the endorsement.

Medical and related expenses (such as care and rehabilitation expenses), the cost of replacement services, funeral and burial expenses, work loss benefits, and survivor's loss benefits are paid under the no-fault endorsement. Medical and rehabilitation expenses are covered without any specific dollar amount listed; rather, these expenses are to be reasonable and, note that the cost of hospital accommodations are not to exceed the customary charge for a semiprivate room unless special or intensive care is required. Funeral expense benefits are limited to reasonable, incurred expenses up to $1,750 per person.

Covered under the category of work loss benefits is an insured's actual loss of income from work. Benefits for loss of income are limited to 85 percent of the actual amount lost, in view of the fact that the benefits do not constitute taxable income. The work loss benefits are adjusted annually by the insurance commissioner to reflect changes in the cost of living and are paid on a thirty day period basis. All work loss recovery is further subject to a benefit period of three years after the date of the accident. Work loss benefits are not payable after the insured's death.

Survivor's loss benefits parallel those of the work loss category, but are applicable when an insured has died as a result of the injury. Total survivor's loss benefits payable in any one thirty-day period are limited to whatever amount is established by law based on an annual cost-of-living adjustment. Like work loss benefits, recovery in this category is limited to a benefit period of three years following the date of the accident. Survivor's loss benefits are payable to a deceased insured's spouse if that spouse was either residing with or dependent on the insured at the time of death. A surviving spouse's "dependent survivor" status ends upon remarriage or death. Any other person who was dependent upon the deceased insured at the time of death qualifies for survivor's loss benefits as long as the dependent is under eighteen years old, or unable to earn income because of a physical or mental condition, or is a full time student.

Replacement services are reasonable expenses for obtaining services to replace those an insured would have done without pay and for the benefit of that insured or dependents. This benefit is payable for loss sustained during the three years after the accident and does not apply after an insured dies. The limit of liability shown on the endorsement's schedule is $20 per day maximum.

Exclusions

The personal injury protection endorsement contains several exclusions. The first two deal with injuries that involve questions of public policy or moral hazard. Coverage is not provided for bodily injury to any person who intentionally caused the injury. Also excluded is coverage for bodily injury to any person while using an auto that has been taken unlawfully unless the injured person reasonably believes that he was entitled to take and use the auto.

Some of the endorsement's exclusions affect coverage with respect to the use of an auto. For example, no coverage is provided for injury to any persons occupying an auto located for use as a residence or premises. Injury to persons occupying a public auto for which the security required under state law is in effect is also excluded, with certain exceptions; these exceptions include bodily injury to the named insured or a family member while a passenger in a school bus; a certified common carrier; a bus operated as part of a government sponsored transportation program or by or for a nonprofit organization; a bus operated by a watercraft, bicycle, or horse livery used only to transport passengers to or from a destination point; or, a taxicab. Furthermore, there is no coverage for injury in connection with a parked auto, again, however, with certain exceptions. The injury is covered if the way in which the vehicle was parked created an unreasonable risk; if the injury itself resulted from physical contact with permanently mounted equipment while the equipment was being used, or from physical contact with property being lifted onto or lowered from the vehicle; or if the injured person was occupying the auto at the time of injury.

Personal injury protection does not apply to medical expenses and accommodation expenses for the named insured or any family member to the extent that similar benefits are paid or are payable under any other insurance, benefit, or reimbursement plan (excluding Medicare benefits provided by the federal government). The same exclusion applies for work loss benefits.

If the accident takes place outside Michigan, the coverage does not apply to any person while not occupying an auto, except for the named insured or any family member. Bodily injury to the named insured while occupying, or struck by while not occupying, any auto owned by the named insured but on which no-fault coverage is not maintained is excluded.

The owner who does not have auto insurance on an auto involved in an accident and who suffers bodily injury does not have coverage. This exclusion prevents, among other things, no-fault recovery by the owner of an uninsured vehicle under the named insured's policy if the owner is injured as a passenger in his own vehicle being operated by the named insured or a family member.

Bodily injury sustained while occupying an auto, other than the named insured's covered auto, for which the owner is not required to provide security under the law is also not covered; however, there is a requirement in this case that the auto be operated outside Michigan by the named insured or a family member. This exclusion does not apply to the named insured or a family member.

If the named insured or a family member is injured while occupying an auto owned or registered by the employer of the named insured or of the family member, and that auto is covered by no-fault insurance, the named insured's no-fault coverage will not apply.

Personal injury protection coverage does not apply for bodily injury sustained by anyone entitled to Michigan no-fault benefits as a named insured or as a family member under another policy except while an operator or passenger of a motorcycle involved in the accident. This exclusion does not apply to the named insured or any family member.

Bodily injury is not covered if sustained by anyone while occupying, or struck by while not occupying, an auto (other than the named insured's covered auto) if the auto is operated by the named insured or any family member and the owner of the auto has the security required under the insurance code. This exclusion does not apply to the named insured or any family member.

PP 05 90 does not apply to bodily injury sustained in an auto accident by the named insured or any family member while an operator or passenger of a motorcycle if the owner of the auto involved in the accident has provided security as required under the insurance code.

PP 05 90 does not provide personal injury protection coverage for work loss for an insured age sixty or older if rejection of work loss is indicated on the endorsement's schedule and if that insured has signed a form rejecting the work loss benefit.

Relationship to Other Coverages

No one is entitled under PP 05 90 to duplicate payments for the same elements of loss regardless of the number of vehicles covered or insurers providing security.

If an insured is injured in an accident while an operator or passenger of a motorcycle, insurance benefits can be claimed in the following order of priority: first, the insurer of the owner or registrant of the auto involved in the accident; second, the insurer of the operator of the auto; third, the auto insurer of the operator of the motorcycle involved in the accident; and fourth, the auto insurer of the owner or registrant of the motorcycle involved in the accident.

Any amounts payable under endorsement PP 05 90 shall be reduced by any amounts paid or payable or required to be provided by state or federal law, except those amounts provided by Medicare, provided that the benefits serve the same purpose as personal injury protection benefits and are provided as a result of the same accident for which the personal injury benefits are payable.

Other Items

The named insured can choose a deductible by checking the appropriate box on the schedule of the endorsement. This deductible applies only to the named insured and any family member.

The term "auto" is defined on the endorsement as a motor vehicle or trailer that is operated or designed for use on public roads. However, the term does not include a motorcycle or moped, a farm tractor or other implement of husbandry not subject to the registration requirements of the state vehicle code, a vehicle operated by muscular power or with fewer than three wheels.

Tort Liability

Under the Michigan no-fault law, tort liability for injury arising out of the ownership, maintenance, or use in Michigan of an auto with respect to which personal protection coverage is in effect is abolished within the limits of coverage as required by the law. The right to recovery in tort is retained, however, with respect to intentionally caused injury and for noneconomic loss (e.g., pain and suffering or inconvenience) in connection with an injury resulting in death, serious impairment of a body function, or permanent and serious disfigurement.

Property Protection Insurance

The Michigan no-fault law abolishes tort liability with respect to damage to motor vehicles or their contents arising out of the ownership, maintenance, or use of a motor vehicle. Michigan drivers are therefore obliged to carry collision insurance in order to recover for such losses, even if the operator of the other vehicle involved in the accident is at fault. However, the no-fault program does not respond in every case, since drivers are liable and can be sued for damage of less than $1000 to another person's vehicle.

The property protection coverage endorsement, PP 05 91, is used to provide the insurance required for the no-fault property protection coverage. The endorsement applies to property damage caused by an accident and resulting from the ownership, operation, maintenance, or use of an auto as an auto.

Coverage under the endorsement is defined for the most part by the exclusions. Property protection insurance does not apply to property damage intentionally caused by any claimant. The insurance does not apply to any property of the named insured or a family member damaged in connection with an accident involving a vehicle owned, registered, or operated by the named insured or the family member. There is no coverage for damage to property of a person using the insured motor vehicle without the named insured's implied or expressed consent. Nor is there coverage with respect to an insured motor vehicle while located for use as a residence or premises. Damage resulting from an accident involving a motor vehicle not owned by but operated by the named insured or a family member is not covered to the extent that the owner of the auto has the security required under the no-fault law. PP 05 91 excludes coverage for property damage to the named insured's covered auto or its contents, and to any vehicle that is not the named insured's covered auto or its contents; however, this last part of the exclusion does not apply if the vehicle was damaged by the named insured's covered auto and was parked is such a way as not to cause unreasonable risk of the property damage. Finally, there is no coverage for property damage occurring within the course of the business of repairing, servicing, or otherwise maintaining motor vehicles.

Unlike the personal injury protection component of Michigan no-fault insurance, property protection insurance applies only to accidents that occur in the state of Michigan.

The maximum limit of liability for property protection insurance is $1,000,000 for all property damage arising out of any one accident, regardless of the number of insureds, claims made, vehicles involved, or insurers providing coverage. The insurer will pay the lesser of reasonable repair costs or replacement costs minus depreciation; and, where applicable, the insurer will also pay the value of loss of use of the vehicle.

Property Protection vs. Other Coverages

In imposing a kind of strict liability for damage to nonexcluded property, the property protection provisions of Michigan's no-fault coverage on occasion came into conflict with the other forms of statutorily imposed liability in the state, most notably, the Michigan garagekeepers liability law. This law created a presumption of negligence on the part of garage business operators in connection with damage to customers' vehicles and made necessary the maintenance of direct, bailee-type coverage (like that provided as an option under the standard garagekeepers program) to insure the exposure.

The classic example of a loss bringing these two forms of liability into conflict with each other is a fire that is caused by repair work on an insured vehicle and that spreads to cause damage to other customers' cars in the garage as well. (Being "properly parked," that is, parked in such a way as not to cause unreasonable risk of property damage, the other customers' cars would be exempt from the otherwise applicable property protection exclusion on PP 05 91.) Michigan appellate courts have given divergent answers to the question of which statutory liability—property protection or garagekeepers—governs in such a loss and, consequently, which insurance coverage—no-fault automobile (on the car being repaired) or garagekeepers—must respond.

One decision—Liberty Mutual Insurance Co. v. Allied Truck Equipment Co., 302 N.W.2d 588 (Mich. App. 1981)—held the garagekeepers liability act (and hence garagekeepers insurance) applicable to such a loss, reasoning that "whenever a bailment-for-hire situation is presented, it is the bailment of the vehicle and not the maintenance of the vehicle that governs." But a subsequent case—Buckeye Union Insurance Co. v. Johnson, 310 N.W.2d 268 (Mich. App. 1981)—reached the opposite conclusion, with the court holding the liability imposed by the state's no-fault act to be the more pertinent coverage. Moreover, the Liberty decision seemed to be rejected by the Michigan Supreme Court in Great American Insurance Company v. Old Republic Insurance Company, 448 N.W.2d 493 (1989). Another decision concurs with the Buckeye Union ruling, with the court stating that "the presumption of fault established by the garagekeepers liability act [becomes] meaningless in circumstances when the damage [is] covered by the no-fault automobile insurance act." Where a causal connection between the maintenance of a vehicle insured for property protection coverage and damage to nonexcluded property can be established, the court concluded that the no-fault insurance against "accidental damage to tangible property arising out of the… maintenance… of a motor vehicle as a motor vehicle" would respond. The case is Liberty Mutual Insurance Co. v. Insurance Co. of North America, 323 N.W.2d 650 (Mich. App. 1982).