The Michigan Court of Appeals addressed for the first time the “knew or should have known” language under MCL 500.3113 - “Persons Not Entitled to Personal Protection Insurance Benefits.” Plaintiff in this No-Fault action was the driver of a leased automobile involved in an accident. Defendant was insurer Tokio Marine.
The automobile was leased by the Plaintiff’s wife. The lease agreement provided that only “Authorized Drivers” were eligible to drive the vehicle. The Plaintiff was driving despite not having a valid driver’s license because it was revoked in 2015. This disqualified him as an “Authorized Driver” under the vehicle lease. The appellate opinion discussed MCL 750.414, titled “Motor Vehicle; Use Without Authority but Without Intent to Steal.” MCL 500.3113(a), as recently amended, bars eligibility for PIP benefits if the motor vehicle is “taken unlawfully” and the person “knew or should have known” of the unlawful nature of the taking.
The Trial Court ruled adversely on Tokio Marine’s dispositive motion holding that there was a dispute of material fact regarding whether Plaintiff was barred from received PIP benefits by application of MCL 500.3113(a). An appeal followed. The Appellate Court disagreed and remanded the case back to the Trial Court with instructions to enter an Order granting summary disposition. The Appellate Court reasoned that “actual knowledge” that a vehicle was being taken unlawfully was no longer necessary so long as a Plaintiff “should have known” that he was taking the motor vehicle contrary to the Owner’s directives. The “should have known” language imposes a more restrictive standard.
Plaintiff knew that the car was rented; he knew that there was a written rental agreement; and of course the law required him to know his driving status, i.e., that he was not a licensed driver. Under the “should have known” standard, Plaintiff was obligated to determine the scope of the authorization that the Owner (Lessor of the vehicle) had set under the rental agreement for a non-party such as himself, to take and drive the car. Stated another way, Plaintiff knew that his wife executed the vehicle lease agreement with Lessor, that she was not the owner of the car, and that any authority to use the car was based on the terms set by the Lessor/Owner. Plaintiff was also imputed with the knowledge that he did not have a driver’s license.
The case is Mohamed Ahmed v Tokio Marine Insurance Company, No. 352418, Macomb Circuit Court LC No. 2018-004076-NI.