Insurance – Michigan No Fault Law – Uninsured Motorist Provision

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Where the appellant insurer, who provided liability and UM coverage to the respondents, argues that the respondents cannot maintain an action against it under the UM provisions of their policy since they are precluded from initiating a lawsuit against a Michigan resident, who was involved in the collision with the respondent’s daughter in Michigan, because they failed to acquire no-fault insurance as required by Michigan law, the Circuit Court improperly found that the respondents could maintain an action against the appellant under the UM provisions of their policy in view of the undisputed finding that the respondents are legally entitled to collect no more than the $500 they received from their tortfeasor under Michigan law; the policy’s UM provision limiting its coverage to damages for which “a covered person is legally entitled to recover” precludes the respondents from seeking additional compensation under the policy.

Affirmed in part and reversed in part.

Background

On Feb. 5, 1999, the appellant issued a liability insurance policy to the respondent Ms. Smith, which provided liability and UM coverage for a 1990 Acura. When the policy was issued, Smith’s daughter, Ashley, resided with her but attended college in Michigan. On Jan. 17, 1999, Ashley, with her mother’s permission, took the car to Michigan. It remained there until March 5, 1999, when it was involved in an automobile collision with an automobile operated by Mr. Nail. Ashley was driving the car.

Nail was injured by Amerisure, an insurance company doing business in Michigan. For purposes of this declaratory judgment action only, the appellant concedes that the collision was caused by Nail’s negligence. At the time of the collision, Michigan had a no-fault law in effect. Under the no-fault law, Nail’s insurer denied that Nail or it were liable or indebted to the respondents, except Amerisure admitted it is liable to Ms. Smith for $500 of her property damage.

The respondents filed a claim with the appellant, seeking benefits under the policy’s UM provision. The appellant then filed the present action seeking an order from the Circuit Court declaring that the respondents were not entitled to recover under the policy’s UM provision. The complaint alleges that the respondents were “precluded from initiating a lawsuit against Mr. Nail for their damages and injuries” because the respondents failed to acquire no-fault insurance as required by Michigan law. The complaint further alleges that the respondents did not have a valid claim against it under the policy’s UM provision because the respondents were not legally entitled to collect for their damages from the tortfeasor, Nail.

The Circuit Court judge denied the appellant’s motion to dismiss, ruling that the respondents could maintain an action against the appellant to collect under the policy’s UM provision. This appeal followed.

Discussion

Here, the parties have stated that Nail is the tortfeasor liable to the respondents in this accident, and that Michigan’s no-fault insurance law limits his liability to $500 for property damages. Additionally, there is no dispute about the fact that the respondents received this $500 payment from Nail’s insurer. In view of the undisputed finding that the respondents are legally entitled to collect no more than the $500 they received from their tortfeasor under Michigan law, we find the policy’s UM provision limiting its coverage to damages for which “a covered person is legally entitled to recover” precludes the respondents from seeking additional compensation under the policy, as the Circuit Court permitted. Thus, we find the Circuit Court erred in allowing the respondents to pursue an action against the appellant under the policy and reverse this portion of the Circuit Court’s order.

S.C. Farm Bureau Mutual Ins. Co. v. Stowe (Lawyers Weekly No. 011-362-03) (7 pages) (Per Curiam) (SCCOA) Appealed from the Chester County Circuit Court, Kenneth G. Goode, J.; Forrest C. Wilkerson for appellant; Harold C. Staley Jr. and David V. Benson for respondents (No. 2003-UP-676) (Nov. 18, 2003).