Michigan Court Clarifies PIP Medical Opt-Out Rules

The Michigan Court of Appeals recently issued a published decision in Northland Radiology, Inc. v Allstate Fire and Casualty Insurance Company, addressing an important question under Michigan’s no-fault insurance reforms: what happens when a named insured submits a form to their insurer to opt out of personal protection insurance medical benefits, but a resident relative does not have the required qualifying coverage?

The Court held that for an opt-out to be valid, the named insured has to do more than just execute the appropriate form; instead, the insured also has to comply with all the other conditions of the statute, including ensuring that any other members of their household have the appropriate other available insurance coverage and providing proof of that coverage to the auto insurer with their election form. In other words, an opt-out under MCL 500.3107d is effective only if all statutory requirements are satisfied.

Because, here, the evidence suggested that the named insured’s resident relative did not have qualified health coverage or PIP medical coverage under another auto policy, the insured’s election to opt out was ineffective, regardless of whether the opt-out form itself was properly completed and appeared facially valid to the insurer. As a result, absent any other valid defenses, the policy was considered to provide unlimited PIP medical coverage.

What Happened?

The case arose after Dwight Turner was injured in an automobile collision while riding with his mother, Jacqueline Springer. Turner later received treatment from Northland Radiology and assigned his rights to the provider. Springer had an Allstate no-fault policy and had selected the Medicare-based option to opt out of PIP medical coverage in exchange for a reduced premium under MCL 500.3107d.

On the opt-out form, Springer certified that she had Medicare Parts A and B and that all resident relatives had either qualified health coverage or coverage under another auto policy with PIP medical benefits. But Turner, who was alleged to be a resident relative, apparently did not have qualifying coverage. His Medicaid coverage did not qualify under the statute.

The trial court ruled for Allstate, reasoning that Allstate was entitled to rely on Springer’s statements in the opt-out form. The Court of Appeals reversed.

The Court’s Holding

The Court emphasized its view of the plain language of MCL 500.3107d. To be eligible to opt out of PIP medical coverage under the statute, the named insured must be a qualified person, and the named insured’s spouse and resident relatives must have either qualified health coverage or PIP medical coverage under another auto policy.

Because those conditions were not met, the Court held that Springer did not make an effective election to opt out. Under MCL 500.3107d(4), when an effective election has not been made, the policy is considered to provide unlimited PIP medical benefits.

Why This Matters

This decision is significant because it confirms that an insurer may face unlimited PIP medical exposure where an opt-out form was signed but the statutory prerequisites were not actually satisfied. For insurers, the decision raises practical questions about how much they must do to verify who resides in the insured’s household and the coverage status of resident relatives before treating an opt-out as effective. This presents a unique challenge in cases where, as this one, the insured fails to disclose to the insurer all the members of their household. Under this holding, the insurer cannot necessarily rely on the compliance certifications in the insured’s opt-out form – if the other statutory requirements are not satisfied, then the opt-out is invalid, regardless of what the insurer reasonably could have known about the status or existence of other household members.

The Concurring Opinion: “Incentives Matter”

Judge Swartzle concurred in the result but wrote separately to highlight what he described as “odd incentives” created by the statute. He pointed out that the statutory framework may allow an insured to receive a reduced premium while, after an accident, a resident relative and medical provider may still obtain the benefit of full PIP medical coverage if the opt-out was ineffective by way of the named insured’s failure to disclose all resident relatives and their coverage status.

The concurrence suggested that the Legislature could address this issue by amending the no-fault act, including by adding language similar to the rebuttable-presumption provision that applies to certain PIP coverage-level selections under MCL 500.3107c.

Key Takeaway

A Michigan no-fault PIP medical opt-out is not effective merely because the form was signed. All statutory requirements must actually be met regardless of what is disclosed, or not disclosed, to the insurer when the election is made. If they are not, the policy may be deemed to provide unlimited PIP medical coverage unless the circumstances of the coverage election provide other grounds for relief such as rescission. Thus, insurers bear the risk of an insured’s mistakes in executing an opt-out form, and should be prepared to affirmatively investigate and seek out other opportunities for relief where needed when circumstances such as this arise.