In Westfield Inc. Co. v. Ritcher, No. 20-CV-12692, 2021 U.S. Dist. Lexis 94926, the United States District Court for the Eastern District of Michigan considered whether a residential tenant was an implied co-insured on the landlord’s insurance policy, and thus shielded from a subrogation claim brought by the landlord’s carrier for fire damage caused by the tenant’s negligence. The court found that the tenant was an implied co-insured on the landlord’s insurance policy, but only with regards to the apartment that the tenant leased. The tenant was not shielded from claims for damage to the rest of the building, the contents of other residents and the landlord’s rental loss income. Continue reading
In Michigan, an employee’s entitlement to compensation for injuries sustained in a motor vehicle accident is governed by both the Workers’ Disability Compensation Act of 1969, MICH. COMP. LAWS ANN. § 418.801 et seq., and Chapter 31 of The Insurance Code of 1956, MICH. COMP. LAWS ANN. § 500.3101 et seq., commonly referred to as the “no-fault act.” Polkosnik v. United Canada Ins. Co., 421 N.W.2d 241, 242 (Mich. App. 1988).
PIP1 benefits payable arising from a motor vehicle accident in Michigan include, principally, (1) medical benefits unlimited in amount and duration, and (2) 85% of lost wages for up to three years. See DEPARTMENT OF INSURANCE AND FINANCIAL SERVICES, Brief Explanation of Michigan No-Fault Insurance. As of October 2013, lost wages are capped at $5,282 per month. Id. Such benefits constitute an injured worker’s “economic loss.” See generally Wood v. Auto-Owners Ins. Co., 668 N.W.2d 353, 355 (Mich. 2003).
Michigan’s no-fault legislation is no different than other no-fault legislation in regard to its purpose: The automobile insurer pays without any right of reimbursement out of any third party tort recovery. Sibley v. Detroit Auto. Inter-Ins. Exch., 427 N.W.2d 528, 530 (Mich. 1988). Moreover, just like in New York, for example, “where benefits are provided from other sources pursuant to state or federal law, the amount paid by the other source reduces the automobile insurer’s responsibility.” Id. at 530.
Under the Michigan no-fault act, an employee’s entitlement to workers’ compensation benefits is set off against her PIP benefits, thereby reducing the PIP insurer’s liability for payment. Polkosnik, 421 N.W.2d at 242. Thus, if a motorist is injured in a motor vehicle accident while operating the vehicle in the course and scope of her employment, the compensation insurer covering the motorist substitutes as the primary payor of the benefits to which the injured motorist is entitled under the no-fault act. See generally Mathis v. Interstate Motor Freight Sys., 289 N.W.2d 708 (Mich. 1980). See also Great Lakes Am. Life Ins. Co. v. Citizens Ins. Co., 479 N.W.2d 20, 24 (Mich. App. 1991) (“Although a workers’ compensation carrier is not a no-fault insurance carrier, it nevertheless “stands in the shoes” of a no-fault carrier. . . .”).
PIP insurers are entitled to reimbursement out of a motorist’s third party recovery “only if, and to the extent that, the tort recovery includes damages for losses for which [PIP] benefits were paid.” Workman v. DAIIE, 274 N.W.2d 373 (Mich. 1979). In other words, subrogation is only possible for economic damages, since PIP does not provide coverage for noneconomic damages like pain and suffering, for example.
But such subrogation is limited to several circumstances set forth in MICH. COMP. LAWS ANN. § 500.3116. Dunn v. Detroit Auto. Inter-Ins. Exch., 657 N.W.2d 153, 158 (2002). “It is now clear that an insurance carrier responsible for no-fault benefits may realize reimbursement from an insured’s third-party tort claim only in the following situations: (1) accidents occurring outside the state, (2) actions against uninsured owners or operators, or (3) intentional torts.” Citizens Ins. Co., 479 N.W.2d at 23 (citation omitted).
Since workers’ compensation benefits substitute for no-fault benefits otherwise payable in the event of a motor vehicle accident, a workers’ compensation carrier’s subrogation rights “are coextensive with those of the no-fault insurer whose liability it replaces and are thus limited to cases where there is tort recovery for basic economic loss.” Great Am. Ins. Co. v. Queen, 300 N.W.2d 895, 897 (Mich. 1980). Thus, a compensation insurer’s subrogation rights are limited to the same three exceptions enumerated in MICH. COMP. LAWS ANN. § 500.3116. And, like PIP insurers, workers’ compensation insurers are generally not subrogated for noneconomic damages—i.e., pain and suffering. Citizens Ins. Co., 479 N.W.2d at 23-24.
Unlike PIP insurers, however, workers’ compensation insurers are entitled to subrogation under an exception not available to PIP insurers: “When the carrier pays benefits which do not substitute for no-fault benefits, because they exceed no-fault benefits in amount or duration, it should be treated like all other workers’ compensation carriers and be entitled to reimbursement out of any third-party recovery.” Queen, 300 N.W.2d at 897 (emphasis added). The determination of whether a workers’ compensation carrier’s payments “exceed” PIP benefits otherwise payable “involves a factual question.” Bialochowski v. Cross Concrete Pumping Co., 407 N.W.2d 355, 360 (Mich. 1987) (subsequent case history omitted).
One Michigan appellate court has stated that “[a]ny weekly workers’ compensation benefits paid beyond that three-year period cannot properly be regarded as a substitute for benefits under the no-fault act.” Hearns v. Ujkaj, 446 N.W.2d 657, 659 (Mich. App. 1989). Thus, such benefits are recoverable in subrogation under the Queen exception. Allowing subrogation for such benefits “would work no discrimination” against motor vehicle accident victims who happen to be injured in the course or scope of employment because reimbursement is permitted only for benefits which other motor vehicle accident victims do not receive. Queen, 300 N.W.2d at 897.
Other Michigan courts have continued to apply the Queen exception to scenarios in which the compensation insurer sustains a loss that exceeds the PIP threshold in either, or both, the time and quantity set forth in the no-fault act. Identifying when theQueen exception might apply to a given state of facts is critical for ensuring that a compensation insurer can exploit the exception. It is critical that counsel be sought whenever a set of facts appears to introduce an intersection between two or more statutory schemes—such as Michigan’s Workers’ Disability Compensation Act and no-fault act—so that every opportunity for a recovery can be properly vetted and pursued.
Robert M. Caplan is Counsel with White and Williams LLP and Workers’ Compensation Subrogation Team Leader. In addition to litigating and trying cases, Rob is a frequent lecturer at national and regional conferences held by the National Association of Subrogation Professionals (NASP) where he has been a Track Leader for the Workers’ Compensation Subrogation Track. Rob can be reached at firstname.lastname@example.org and 215.864.7012.