COA deals double whammy to no-fault insurers

The Michigan Court of Appeals, in a pair of split decisions, has complicated matters for two of the state’s no-fault insurers.

In both, the majorities employed strict statutory construction. The resulting rulings are undoubtably causing insurance defense lawyers to reach for the antacid tablets.

In Ward v. Titan Insurance Co., a bar employed a bouncer “off the books.” When the bouncer was hurt in a traffic accident, he filed for no-fault work-loss benefits.

Apparently there was a lot of hemming and hawing when it came time for the bar to produce, as required by MCL 500.3158(1), a sworn statement of the bouncer’s earnings.

The trial court ruled that if the bar could not, or would not, furnish the statement, the bouncer could not press his claim.

“Wrong,” said COA Judge Richard Bandstra, joined by Judge Deborah Servitto.

Nowhere do the statutes suggest that MCL 500.3158(1) is the only manner in which a wage loss claim may be proved or that MCL 500.3107(1)(b)’s right to a wage loss claim hinges on compliance with MCL 500.3158(1).

Bandstra acknowledged dissenting Judge Jane Markey’s suggestion that the arrangement between the bar and the bouncer was likely a scheme to avoid paying federal and state taxes.

As the dissent contends, under the facts and circumstances of this case, penalizing an employee for an employer’s failure to produce a sworn statement might be appropriate. However, imposing such a penalty would be a public policy decision for the Legislature, not the court. …

We are not free to read something into the statute that doesn’t exist, no matter how egregious the facts may be.

Markey retorted:

I find the majority’s crafting a loophole for an employer and his complicit employee who cannot or will not provide the requisite documentation because they are flouting federal and state tax laws contrary to the plain language, intent, and spirit of the no-fault act.

It is legislating from the bench and creating public policy where that function resides with the Legislature.

Moreover, under the facts of this case, I can find no injustice to plaintiff. Indeed, both the law and the equities of this fact scenario to me lie with Titan Insurance, the personal protection insurer.

Here’s a full summary of Ward.

Over at the offices of Progressive Michigan Insurance, everyone is probably running around like their hair is on fire after reading the COA’s decision in Progressive Michigan Ins. Co. v. Smith.

Smith didn’t have a driver’s license because there were too many points on his record. He bought a truck and added his friend, Harris, to the title. Harris obtained insurance from Progressive and listed Smith as an excluded driver. Smith paid for the policy.

Smith drove the truck, crossed the centerline and hit another car. The injured parties sued Smith, who defaulted. At that point, they sued Progressive, which defended on the basis that Smith was an excluded driver.

MCL 500.3009(2) specifies the exact language that must be used in an excluded driver notice:

If authorized by the insured, automobile liability or motor vehicle liability coverage may be excluded when a vehicle is operated by a named person. Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance:
Warning — when a named excluded person operates a vehicle all liability coverage is void — no one is insured. Owners of the vehicle and others legally responsible for the acts of the named excluded person remain fully personally liable.

Let’s focus on that last word, “liable.”

Progressive’s notice substituted the word “responsible” for “liable.”

That’s good enough, the trial court said, and granted Progressive summary disposition.

“Wrong,” said Bandstra, this time joined by Judge Christopher Murray.

The Legislature did not merely set forth the substance of the required warning. Instead, the statute mandates use of “the following notice,” which notice is provided verbatim for insurers to use. Further, the Legislature did not merely state that this notice is required, without specifying the effect of noncompliance. If the required warning notice is not provided, the named person exclusion “shall not be valid.”

The statute could not be clearer. In this case, the warning notice does not appear, as required, on the certificate of insurance. Accordingly, the mandate of the statute is clear: the named driver exclusion “shall not be valid.”

Markey, in her dissent, suggested there are times when the law should bend a little.

It is not our job to modify, amend, or read into a statute something that is not there; such legislating from the bench is simply improper. Legislating belongs to the Legislature.

Nonetheless, on rare occasion there may arise a situation where following this philosophy with myopic rigidity effects not only a complete thwarting of the Legislature’s intent but also a profoundly unfair and inequitable result. …

The choice of “liable” versus “responsible” does not in any way frustrate the Legislature’s intent to ensure that strong warning be provided as to the import of an excluded driver provision.

Murray, in his concurring opinion, said he didn’t like the result but the statute is unambiguous.

Both the majority opinion and Judge Markey’s dissent, though coming to opposite conclusions, are thoughtful and well-written. …

[I]n my view our judicial duty is to enforce that indisputably unambiguous statute as written, and we cannot under Michigan law make exceptions to that rule. …

The essence of the dissent is that although our judicial duty is to almost always apply the statute’s unambiguous words to the facts presented, “on rare occasion[s]” like this case, “where following this philosophy with myopic rigidity effects not only a complete thwarting of the Legislature’s intent but also a profoundly unfair and inequitable result,” we should disregard that judicial duty.

With all due respect … I do not believe we can apply this rationale, which is essentially the “absurd result” doctrine of statutory construction, to this case.

Here’s a full summary of Smith.

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