No-Fault Statute Misinterpreted: MSC Reverses Denial Of PIP Insurance Benefits

In this no-fault insurance case, the Michigan Supreme Court reversed the Court of Appeals’ denial of personal injury protection (PIP) benefits to the injured plaintiff, finding the appeals court misinterpreted the applicable no-fault statute and wrongly extended dicta from case precedent.

The plaintiff in Swoope v Citizens Ins Co of the Midwest (Docket No. 166790) was injured while driving a friend’s vehicle, which she had taken without permission. The plaintiff did not have a valid driver’s license or auto insurance. The plaintiff applied for no-fault PIP benefits through the Michigan Assigned Claims Plan, which assigned her claim to the defendant, Citizens Insurance Company of the Midwest. The defendant denied benefits.

The plaintiff sued the defendant for coverage in Wayne County Circuit Court. The defendant filed a motion to dismiss the claim, arguing the plaintiff was not entitled to benefits under MCL 500.3113(a) of the No-Fault Act because she had unlawfully taken the vehicle and did not have a reasonable belief that she had permission to use it. The trial court denied the defendant’s motion to dismiss, as well as its motion for reconsideration. The defendant appealed.

The Court of Appeals (Docket No. 364924) reversed the trial court’s decision. In a published opinion, the Court of Appeals said the plaintiff was not entitled to PIP benefits because she did not have a valid driver’s license and, therefore, was unlawfully operating the vehicle at the time of the accident. The plaintiff appealed.

The Michigan Supreme Court, after hearing oral arguments and in lieu of granting leave to appeal, reversed the Court of Appeals in a unanimous opinion.

“The Court of Appeals misinterpreted MCL 500.3113(a) when it held that plaintiff was barred from recovering PIP benefits on the ground that there was no genuine question of fact that she was unlawfully operating the motor vehicle,” Justice Kyra H. Bolden wrote for the high court. “It reached this conclusion, in part, by erroneously extending dicta from Ahmed v Tokio Marine America Ins Co, 337 Mich App 1 … (2021).”

‍According to the Michigan Supreme Court, the relevant question under MCL 500.3113(a) was whether the vehicle had been taken unlawfully – “a distinct inquiry from whether the vehicle had been operated unlawfully.” Because the Court of Appeals erred in its analysis of MCL 500.3113(a), “we reverse,” the justices held.

‘Operating’ Versus ‘Taking’

The Michigan Supreme Court began its analysis by examining MCL 500.3113(a), which bars the recovery of PIP benefits under certain conditions. Relevant to this case, the statute says:

“A person is not entitled to be paid [PIP] benefits for accidental bodily injury if at the time of the accident … :

• (a) The person was willingly operating or willingly using a motor vehicle or motorcycle that was taken unlawfully, and the person knew or should have known that the motor vehicle or motorcycle was taken unlawfully. …”

Here, the parties did not dispute whether the plaintiff was “willingly operating or willingly using the vehicle,” the high court noted. “Therefore, this case turns on whether [the] vehicle was ‘taken unlawfully’ at the time of the accident and whether plaintiff knew or should have known that it was ‘taken unlawfully.’”

The Michigan Supreme Court also examined two cases that interpreted “prior versions” of MCL 500.3113: 1) Spectrum Health Hospitals v Farm Bureau Mut Ins Co of Michigan, 492 Mich 503 (2012), and 2) Rambin v Allstate Ins Co, 495 Mich 316 (2014). In both cases, the justices interpreted the phrase “taken unlawfully” to prohibit recovery if, at the time of the accident, the person “was using a motor vehicle or motorcycle which he or she had taken unlawfully, unless the person reasonably believed that he or she was entitled to take and use the vehicle.”

According to the high court, Spectrum Health and Rambin, when viewed together, require the applicable circumstances be fully considered when determining whether the taking of the vehicle was unlawful. The justices noted that, if a person operated a vehicle that was unlawfully taken – but was not taken over the owner’s “express” prohibition – there must be an additional inquiry into the driver’s intentions at the time.

The Michigan Supreme Court further noted that, after Spectrum Health and Rambin were decided, the Legislature amended MCL 500.3113(a) by enacting 2014 PA 489. “Although this is our first time interpreting the amended language of MCL 500.3113(a) and how it relates to PIP benefit eligibility, the Court of Appeals has discussed the amended language on a few occasions,” the high court said, citing Ahmed and Monaco v Home-Owners Ins Co, 317 Mich App 738 (2016).

In Ahmed, the Court of Appeals held that disqualification from PIP benefits in the amended version of MCL 500.3113(a) “’applies to any person (1) willingly operating or willingly using a motor vehicle or motorcycle that (2) was unlawfully taken by someone, and (3) the person seeking benefits knew or should have known that the motor vehicle was taken unlawfully,’ with the focus of the analysis on whether the vehicle was taken unlawfully,” the Michigan Supreme Court explained. Meanwhile, the Court of Appeals in Monaco noted that MCL 500.3113(a)’s amended language “still generally bars the recovery of PIP benefits by a person who operated a vehicle that he or she had ‘taken unlawfully.’ … The opinion established that the ‘first level of inquiry when applying MCL 500.3113(a) always concerns whether the taking of a vehicle was unlawful,’” the justices said.

“We agree with Monaco and Ahmed that when the Legislature amended MCL 500.3113(a), the focus of the analysis was unchanged because a court must still determine whether the vehicle was ‘taken unlawfully,’” the Michigan Supreme Court observed. “Under the present version, the statute bars relief if ‘[t]he person was willingly operating or willingly using a motor vehicle or motorcycle that was taken unlawfully, and the person knew or should have known that the motor vehicle or motorcycle was taken unlawfully.’ … When the Legislature modified MCL 500.3113(a), it continued to make benefit eligibility contingent on whether the vehicle had been ‘taken unlawfully.’”

In Monaco, the Court of Appeals applied the previous version of MCL 500.3113(a) “to reject the argument that unlawful operation – as opposed to the unlawful taking – of a vehicle bars relief under the statute, stating that ‘the unlawful operation or use of a motor vehicle is simply not a concern in the context of analyzing whether the vehicle was taken unlawfully,’” the high court explained. “Now, recovery of PIP benefits is barred if a person was (1) ‘willingly operating or willingly using’ a vehicle that was (2) ‘taken unlawfully,’ (3) if the person ‘knew or should have known’ it was taken unlawfully.”

‘Agree With Ahmed’

The Michigan Supreme Court continued, “We agree with Ahmed that the amended language replaced a safe harbor for ensuring that benefits remained for a person who had a reasonable belief that their taking of a vehicle was lawful with a disqualification from benefits for a person who knew or should have known the taking of the vehicle was unlawful.”

Moreover, continuing to apply Spectrum Health and Rambin, “we also agree that ‘unlawfully taken’ is associated with how possession of the vehicle that was involved in the accident was gained,” the high court stated. “Whether the vehicle was taken unlawfully is a distinct inquiry from whether it was used or operated unlawfully.”

Further, if the Legislature had wanted to bar recovery under MCL 500.3113(a) for a person who had “unlawfully taken, operated or used” a vehicle, “it would have done so,” the justices emphasized. “Because the Legislature did not do so and the language of the statute is plain, we decline to read such language into the statute.”

In addition, “we find it compelling that in the first clause of MCL 500.3113(a), the Legislature specified that PIP benefit recovery is barred only for a person who was willingly operating or using the vehicle that was taken unlawfully,” the Michigan Supreme Court stated. “This requires a separate inquiry into the willing use or operation of the vehicle.”

Applying this analysis to the present case, the Michigan Supreme Court noted the Court of Appeals held that, because “there was no genuine question of fact that plaintiff was unlawfully operating the car,” she was “not entitled to PIP benefits ….” However, the Court of Appeals “erroneously applied Ahmed’s dictum and misread MCL 500.3113(a),” the justices said. “The correct inquiry requires a court to focus on whether the taking of the vehicle was unlawful, not whether the operation of the vehicle was unlawful. Plaintiff’s status as an unlicensed driver provides no insight as to whether she had unlawfully gained possession of the vehicle. …  How the driver operated that vehicle has no bearing on whether MCL 500.3113(a) bars recovery of PIP benefits.”

Therefore, the Court of Appeals wrongly held that the plaintiff’s unlawful operation of the vehicle prohibited her recovery of PIP benefits, the Michigan Supreme Court concluded. “We reverse.”

In addition, the Court of Appeals “failed to address the alternative ground for summary disposition raised by [the] defendant regarding how [the] plaintiff’s taking of the vehicle was unlawful,” the justices said. “Accordingly, we remand this case to the Court of Appeals for further proceedings consistent with this opinion.”