Michigan Supreme Court Clarifies PIP Exclusion for “Unlawfully Taken” Vehicles

Michigan’s broad no-fault scheme extends PIP coverage to most people injured in auto accidents with a few frequently litigated exclusions. One of these exclusions bars coverage for a person injured while using or operating a vehicle that was “taken unlawfully” at the time of the accident. This exclusion appears in MCL 500.3113(a).

Recently, in Swoope v. Citizens Insurance Company of the Midwest, the Michigan Supreme Court considered whether this exclusion may bar coverage based solely on a claimant’s unlawful operation of a vehicle.

In the past, interpreting a prior version of the statute, the Court has held that the exclusion applies to anyone taking a vehicle without the authority of the owner, regardless of their intent, or lack thereof, to necessarily steal the vehicle. This includes anyone who takes a vehicle contrary to the owner’s express prohibition and may include others depending on the circumstances under which the vehicle was taken.

In later cases, the Court of Appeals interpreted this to mean that a vehicle is “taken unlawfully” when, examining the matter from the driver’s perspective, it can be said that the driver took the vehicle without the owner’s authority.

In Swoope, the insurer denied coverage because when the accident occurred, the claimant was operating another person’s vehicle without consent and without a valid driver’s license. The Court of Appeals upheld the denial. Relying on dicta from prior cases, the Court of Appeals noted that any violation of a criminal law leading to the taking of a motor vehicle is “unlawful” – therefore, the claimant’s use of the vehicle without a valid license was necessarily unlawful. Further, the claimant must have known the taking was unlawful because she knew she did not have a valid license at the time.

The Supreme Court rejected this interpretation because, it held, it improperly focused on the unlawful nature of the operation of the vehicle, as distinct from the unlawful nature of the taking of the vehicle. In other words, simply because the claimant could not lawfully operate the vehicle without a license, it did not necessarily follow that her act of taking the vehicle in the first place was also unlawful. 

Takeaways

This opinion clarifies that “taken unlawfully” focuses on how possession was obtained, not how the vehicle was later operated, which yields a narrower application of the exclusion than previous case law permitted. While prior appellate opinions can be read to suggest that any criminal violation connected to vehicle operation automatically triggers the exclusion, the Supreme Court has now expressly rejected this interpretation.

In Swoope, the Supreme Court remanded the case for a proper determination of whether the taking itself was unlawful, leaving the parties still without a firm resolution.

For future cases, this opinion serves as a reminder that while Michigan’s no-fault exclusions can be powerful tools, they must be applied using the correct legal framework. This starts with asking the right questions early and then applying the facts in the appropriate legal context and sequence. This helps ensure that when the time comes for motion practice, the court is asked not to expand the statute beyond its text to decide a “close call,” but rather, to follow a methodical formula to the only permissible outcome.