PIP Exclusion Still Requires Benefits for Injured Motorcyclist

The complex statutory scheme affording Michigan vehicle owners new PIP coverage options after no-fault reform has led to a wave of uncertainty and litigation in the years following its enactment, and the Court of Appeals recently opined on another of these issues. In Love v Rudolph, the Court created a new directive on applying this scheme in claims involving motorcyclists.  

The Love case concerned an auto insurance policy Lashawn Rudolph purchased from Auto Club Group Insurance Company (Auto Club), in which Rudolph selected a PIP medical (or “allowable expenses”) coverage limit of $250,000. In exchange for a reduced premium, she then excluded herself from this coverage, which the no-fault act permits for people with certain “qualified health coverage” (QHC).  

In May 2021, Rudolph’s insured vehicle was involved in an accident that resulted in injuries to the plaintiff, Walter Love, who was operating a motorcycle at the time. Love sought PIP benefits related to his injuries, and as the insurer of Rudolph’s vehicle involved in the accident, Auto Club was ostensibly in the statutory order of priority to provide them.  

However, the priority statute excludes from the order of priority “a policy…as to which an exclusion under section 3109[a](2) applies…” MCL 500.3114(6). The referenced “exclusion” is the QHC allowable expenses exclusion Rudolph elected for her policy. Therefore, Auto Club argued that it was excluded from the order of priority for Love’s claimed benefits.  

The Court of Appeals disagreed. While the “coverage level” an insured initially selects under MCL 500.3107c applies to any “person with a right to claim [PIP] benefits under the policy,” i.e., the $250,000 limit selected by Rudolph, an “exclusion” subsequently selected under MCL 500.3109a, “must apply only to benefits payable to the person named in the policy, the spouse of the insured, and any relative of either domiciled in the same household.” 

The Court reasoned that because Love was a person with a right to claim benefits under Rudolph’s policy but was not the named insured, the named insured’s spouse, or a resident relative of either, Rudolph’s $250,000 selection could apply to him, but her exclusion of allowable expenses coverage could not. Since the exclusion did not apply to Love, Auto Club remained in the order of priority to provide benefits.  

The practical effect of Love is that, although the statutory order of priority for motorcyclists appears to bypass any policy containing a QHC-related allowable expenses exclusion like Rudolph’s, that result occurs only if the motorcyclist is the policyholder, the policyholder’s spouse, or a resident relative of either. In other words, the injured motorcyclist and the involved-vehicle owner would have to know each other. Because accidents almost always involve strangers, this supposed priority exception has little real-world application.  

Shortly after Love, another Court of Appeals panel faced the same issue and bound by Love, reached the same conclusion. But the concurring opinion highlighted these practical consequences and called for the Michigan Supreme Court to overturn the Love opinion.  

Both cases are now pending on applications to appeal in the Supreme Court. In the meantime, the Love rule stands, and insurers should be prepared to continue to face extended, likely unanticipated exposure when claims involving motorcyclists arise under QHC exclusion policies such as the one at issue in this case.