One of the more common misconceptions one hears in the realm of health and accident subrogation is that, when it comes to motor vehicle accidents, “there is no subrogation in Michigan.” No one can deny that the Michigan No-Fault Act presents an abundance of obstacles for a carrier looking to recover medical and wage loss benefits stemming from a car crash. M.C.L. § 500.3101, et seq. In spite of those difficulties, health carriers ought to be careful not to categorically write off Michigan auto accident recoveries. Not every rule applies in every case, so staying attentive to facts, coverage, and timing can often lead to diamonds in the no-fault rough.
The Michigan anti-subrogation myth likely stems from a widespread overemphasis of M.C.L. § 500.3135, which largely abolishes tort liability arising out of the use or operation of motor vehicles, mainly subsection (1). This allows tort liability for noneconomic damages only if the claimant has suffered a “threshold injury,” meaning death, serious impairment of body function, or permanent serious disfigurement. These are the claims found in the well-known anti-subrogation narrative. Subrogation claims are made up of economic damages, such as medical expenses and wage loss. If the insured can only recover for noneconomic damages, then there can be no double recovery of the carrier’s loss and, hence, no right to subrogation. However, there are also circumstances under which a third party can be liable for economic damages, namely where the accident occurred out of state, the tortfeasor is uninsured, or if the work loss damages exceed the statutory limits on PIP benefits. M.C.L. § 500.3135(3). In that case, double recovery is possible, and so is subrogation. How common, for instance, are out of state accidents involving Michigan residents?
Of course, conventional thinking may be just as culpable. Much of the time, yes, M.C.L. § 500.3135 will likely preclude a third-party subrogation claim. Yet the third-party aspect is just one battle, not the war; there are other fronts on which to fight. We sometimes have to shift away from the standard personal injury subrogation paradigm in order to get results. Where Michigan motor vehicle injuries are concerned, the better option for health and accident carriers may be to seek recovery directly from the PIP carrier. One can essentially sidestep tort liability issues, contributory negligence, Made Whole Doctrine and Common Fund Doctrine. Statutory interest and attorney fees may even be available in some cases. That is the upside.
The downside is that establishing the right to reimbursement from PIP carriers can be very, very complicated. In theory, a health carrier’s claim for PIP reimbursement is an interesting form of subrogation wherein the carrier is subrogated to the insured’s contractual rights under the no-fault policy. The extent of those rights, insofar as the health carrier’s claim is concerned, depends almost entirely on Coordination of Benefits clauses. The No-Fault Act specifically authorizes automobile carriers to offset their benefits (i.e., “coordinate”) for other health and accident coverage available to the insured. M.C.L. § 500.3109a. If the no-fault policy is coordinated, then health and accident coverage will be primary, regardless of whether they contain coordination clauses of their own. See Federal Kemper Ins. Co. v. Isaacson, 145 Mich. App. 179 (1985). However, not all PIP coverage is coordinated, and that is the most crucial detail. Where health and accident coverage is coordinated and the PIP coverage is not, then the PIP carrier is primary. See Smith v. Physicians Health Plan, Inc., 444 Mich. 743 (1994). If both the PIP coverage and the health coverage are uncoordinated, then the insured may be entitled to double recover. See Shanafelt v. Allstate Ins. Co., 217 Mich. App. 625 (1996). One should always attempt to identify PIP coverage and determine whether it is coordinated. You may like what you find.
The No-Fault Act and the law surrounding it is far too vast a topic to fully address here, but the limited aspects of the law discussed herein should, at the very least, shed enough light on the Michigan anti-subrogation myth to expose its imperfections. Bars to subrogation are not always the absolute truths they seem to be, and subrogation professionals would do well to continually explore new recovery options. Those options may be difficult, they may be hard. The No-Fault Act is a fine example of a daunting, but vulnerable problem, for the subrogation industry. Without a doubt, Michigan no-fault can be a nightmare. But, in order to win, one has to know the rules of the game, no matter how bad they are; and there is no reason to forfeit when you or your clients’ money is already on the table.
To learn more about the nuances of the Michigan No-Fault Act and the law surrounding it, please plan on attending Tim Mentkowski’s complimentary webinar Road To Recovery: Michigan No-Fault and Health, Accident and ERISA Subrogation scheduled for January 9, 2014. For more information on this webinar or to register for it, click HERE. If you have any questions regarding this article, please contact Tim Mentkowski at [email protected].