Doctrine of Equitable Subrogation to Recover Wrongfully Paid PIP Recognized by Michigan Supreme Court
A driver who was seriously injured in a single vehicle automobile accident received approximately $571,000 in first-party no-fault personal protection insurance (PIP) benefits from plaintiff appellant insurance company. It was later determined that the driver did not have no-fault insurance at the time of the accident. The vehicle was registered in Michigan and titled to another party, who also did not have no-fault insurance. The vehicle was insured by plaintiff insurance company under a Colorado policy issued to the titled driver’s mother. At the time the policy was written, the insured mother falsely represented that she owned the vehicle, was a Colorado resident, and that the vehicle would be garaged in Colorado.
The injured driver sought PIP benefits from the plaintiff insurance company, which initiated payments. The driver also timely applied for benefits from the Michigan Assigned Claims Plan (MACP), as administered by the Michigan Automobile Insurance Placement Facility (MAIPF). The MAIPF did not assign a servicing insurer to the claim under MCL 500.3175 because the insurance company was already paying PIP benefits.
After discovering the fraudulent representation, the insurance company obtained a default judgment against the parties and rescinded the policy, declaring it void ab initio. The plaintiff-appellant insurance company then filed suit against the Michigan Assigned Claims Plan (MACP) and the Michigan Automobile Insurance Placement Facility (MAIPF), seeking reimbursement for the PIP benefits paid in the matter. The primary theory for recovery was the doctrine of equitable subrogation. Defendants moved for summary disposition under MCR 2.116(C)(8), arguing that there was no legal basis for the claim because the no-fault act, MCL 500.3101 et seq., did not contemplate the given circumstances. The plaintiff appellant insurance company argued that it could stand in the injured driver’s place because he had timely claimed benefits from the MACP and was not covered by a no-fault policy. The Trial Court dismissed this argument and granted summary disposition for defendants. The Michigan Court of Appeals affirmed the Trial Court’s dismissal but on different grounds.
The plaintiff insurance company then appealed to the Michigan Supreme Court, which ruled that “when a paying insurer has at least an arguable duty to pay benefits under the no-fault act, the insurer is simply protecting its own interests and not acting as a volunteer, and it may invoke the doctrine of equitable subrogation to recover any benefits paid erroneously.” Courts must perform an order-of-priority analysis under MCL 500.3114(1) and (4)(a) through (b) to determine if there is an “applicable” policy, according to the Michigan Supreme Court.
The case is Esurance Prop & Casualty Ins Co v MI Assigned Claims Plan, MSC Docket No. 160592, argued on application for leave to appeal April 8, 2021. Decided July 26, 2021. COA Case Number 344715.
Click on the link to read the full Michigan Supreme Court Opinion.