Michigan Court of Appeals; Docket Nos. 114112 and 115469; Published
Judges Cavanagh, Sawyer, and T.G. Kavanagh (with Judge Cavanagh, Concurring in the Result)
Official Michigan Reporter Citation: 183 Mich App 752; Link to Opinion
Exception for Motorcycle Injuries [§3114(5)]
One-Year Notice Rule Limitation [§3145(1)]
One-Year Back Rule Limitation [§3145(1)]
Required Content of Notice / Sufficiency of Notice [§3145(1)]
Tolling of Limitations Upon Submission of Claim [§3145]
In this Opinion by Judge Sawyer (Judge Cavanagh concurring in the result only), the Court of Appeals decided an important issue concerning the requirements of the notice of claims section of the no-fault statute, §3145(1), and tolling of the one year back rule.
Plaintiff’s husband was killed in an automobile accident while driving his motorcycle on September 2, 1984. He was insured under a motorcycle policy issued by State Farm, as well as an automobile policy by State Farm. Both policies had been written by the same agent with whom plaintiff had been dealing for more than 20 years. Plaintiff informed the agent of the accident within 24 hours, and within three months of the accident, the insurance company was aware that both the driver of the other vehicle involved in the accident and the vehicle itself were uninsured. Therefore, under the priority provisions of §3114(5), the policy issued by State Farm on plaintiffs automobile was the applicable policy under which plaintiff was required to claim no-fault benefits.
Although plaintiff requested coverage under the motorcycle policy, she did not specifically demand the payments under the automobile policy until January 1987, well beyond the time established by §3145 for notice of claim.
Defendant denied first party benefits on the basis that plaintiff had not satisfied the notice requirements of §3145(1). The trial court held that plaintiff’s notice of injury with respect to her claim for uninsured motorist benefits under the motorcycle policy constituted sufficient notice of a claim for personal protection insurance benefits under the automobile policy, in light of the fact that both policies were written by State Farm through the same agent.
In affirming the trial court decision, the Court of Appeals held that this case is on all fours with the court's decision in State Farm v Insurance Company of North America, 166 Mich App 133 (1988) (Item No. 1110), which held that the §3145 requirement for notice of injury was met by the filing of a notice for workers' compensation benefits where the same insurance company provided both workers compensation and no-fault insurance benefits to the claimant's employer.
The court held that the §3145 notice statute does not direct that the notice must be sent to any particular department within the insurance company, nor, does the statute provide that the notice of injury must specifically identify which insurance policy the claimant is claiming benefits under. The court held that plaintiff was required only to give one notice of injury to defendant and that the notice of injury was operable to provide defendant with notice with respect to all policies issued by defendant to plaintiff for her decedent. The court acknowledged that there is some contrary precedent which has held that notice to an insurer of a workers' compensation claim does not serve as a notice of injury for a no-fault claim, but these cases were disapproved in State Farm v INA, and the court here agrees with that court's analysis.
Having concluded that plaintiff had satisfied the notice requirements of §3145, the court also then addressed the issue raised by the "one year back rule" contained in §3145(1). Citing the Supreme Court decision in Lewis v DAIIE, 426 Mich 93 (1986) (Item No. 936), the Court of Appeals held that the one year back rule is tolled from the time a claimant makes a specific claim for benefits until the insurer formally denies that claim. The parties agreed in this case that no specific claim for benefits in a dollar amount was submitted by plaintiff prior to commencement of the action. Plaintiff contends that she did make a sufficiently specific claim for damages to toll the one year back rule, and the Court of Appeals agreed. The Supreme Court in Lewis, supra, did not define what constitutes a "specific claim for benefits." Here, plaintiff did inform defendant of the decedent's fatal accident within 24 hours of the accident and did notify the defendant that decedent had died as a result of that accident. Further, State Farm was aware, within three months, that the other driver and vehicle involved in the accident were both insured, thus making defendant the highest priority for payment of PIP benefits. At this point defendant had all of the information it needed to pay survivors' loss benefits, other than perhaps the amount of decedent's wages.
The court held that it defies common sense to expect that most lay persons possess a sufficient level of sophistication with insurance matters and the no-fault statute to be able to specifically inform their insurance companies of which benefits they believe they are entitled to receive under their insurance policies. An insured should be expected to inform the agent of the occurrence of an insured loss and to specifically inform the insurer of the nature of the losses suffered, and an insured ought then be able to reasonably rely on the agent to advise the insured of the benefits to which the insured might be entitled and to provide the insured with the appropriate claim forms to be filed.
The court rejected defendant's argument that it could not be aware of the existence of an insurance policy which it itself had issued until such time as plaintiff had brought the existence of the policy to its attention. The court held that the defendant knew, or should have known, what policies had been issued by itself to plaintiff and the decedent. In so ruling, the court stated:
"To rule in defendant's favor would serve as an endorsement for an insurance company to willfully withhold information from its insured, namely, what first party benefits the insured might be entitled to, in hopes that the insured will not discover on his own what specifics under a policy he is entitled to receive. To allow insurance companies to engage in such maneuvering would be inconsistent with the purposes underlying the No-Fault Act. Simply put, it is an insurer's obligation under the No-Fault Act to insure that its insureds receive the prompt and fair payment of benefits to which the insureds are entitled without undue delay or the necessity of litigation, or even the need to retain counsel. To this end, we hold that the one-year back rule is tolled from the time that an insured notifies his insurer of a specific loss which the insurer knows, or has reason to know, is compensable under a policy issued by the insurer to the insured until such time as the insurer either (1) formally denies coverage under the policy, or (2) specifically advises its insured that he may be entitled to benefits under a policy issued by the company and specifically advises the insured to file a claim, providing the insured with any forms necessary to file such a claim."
The Court of Appeals also affirmed mediation sanctions awarded to the plaintiff. Defendant contended that the provisions of MCR 2.403(O)(2)(c) precluded mediation sanctions where judgment was rendered by motion prior to commencement of trial. The court held that the 1987 amendment to the mediation sanctions rule should be construed to allow for an award of mediation sanctions, even where judgment is entered pursuant to a motion prior to commencement of trial.