Miles ruling thwarts State Farm ploy to avoid paying uninsured motorist bodily injury benefits to accident victim
I write often about State Farm. And recently, State Farm tried to pull another fast one.
But the Michigan Court of Appeals brought the auto insurer’s shenanigans to a screeching halt.
Specifically, State Farm settled Miles’s No Fault lawsuit for Michigan PIP benefits (personal injury protection, also known as No Fault insurance benefits) and, then, claimed the settlement of the PIP lawsuit barred Miles’s subsequent lawsuit for unpaid “uninsured motorist” benefits for personal injuries suffered in the same car accident. State Farm argued that the injury claim should be barred because it would have been disposed of with the first lawsuit.
I realize this last sentence might read a bit wonky, especially to non-lawyers. But this is an incredibly important ruling for Michigan auto accident victims (especially as the number of uninsured drivers on the state’s roadways continues to climb – now estimated at over 50% of all drivers in cities like Detroit and Pontiac).
I’ve spoken out on this issue many times before. I’m pleased to see it’s finally being addressed and State Farm is being held responsible to pay the benefits it promised to its policyholders after it tried to pull a fast one.
The Court in Miles made the same common-sense argument I’ve been making for years. In Miles v. State Farm Mutual Automobile Insurance Company, the Court of Appeals ruled that settling the No Fault claim does not bar Miles’s “uninsured motorist” bodily injury claim on res judicata grounds (i.e., “multiple suits litigating the same cause of action”) – contrary to State Farm’s argument and the ruling of the trial court.
Significantly, and correctly, the appellate judges noted:
“Because Miles’ claim for uninsured motorist benefits was not one that could have been litigated during the time of his original lawsuit [for overdue, unpaid No Fault benefits], his failure to bring his claim for uninsured motorist benefits did not implicate the doctrine of res judicata” and, thus, did not warrant dismissal.
Unfortunately, the shameful strategy employed by State Farm in Miles is not unique to State Farm. It’s prevalent among many of Michigan auto’s insurance companies. In my nearly 20 years of legal practice, I’ve seen this strategy trotted out by insurance defense attorneys far too many times and, far too many times, I’ve seen it prove successful – just as it did initially in Miles with the trial court.
But in Michigan, PIP and third-party/uninsured motorist tort claims are fundamentally different
Thankfully, Miles sets the record straight by explaining that No Fault and uninsured motorist claims are vastly different and settlement of one cannot – and will not – affect the other.
The “significant differences between the two types of claims” were highlighted by the Court of Appeals.
No Fault claims have the following characteristics:
- Victims are “immediately entitled to PIP benefits without the need to prove fault” under Michigan’s No Fault law.
- “The PIP benefits are designed to ensure that the injured person receives timely payment of benefits so that he or she may be properly cared for during recovery.
- “[T]he injured person has a limited period within which to sue an insurer for
wrongfully refusing to pay PIP benefits.
- For the foregoing reasons, “the injured person has a strong incentive to bring PIP
claims immediately after an insurer denies the injured person’s claim for PIP benefits.
- Whereas “uninsured motorist” claims are completely different:
- “[A]n injured person must … be able to prove fault: he or she must be able to establish that the uninsured motorist caused his or her injuries and would be liable in tort for the resulting damages.”
- “[A]n injured person will therefore be required to show that his or her injuries” resulted in a “serious impairment of body function” that “affects the injured person’s general ability to lead his or her normal life,” which “will often require proof of the nature and extent of the injured person’s injuries, the injured person’s prognosis over time, and proof that the injuries have had an adverse effect on the injured person’s ability to lead his or her normal life.”
- “[A]n injured person’s claim for uninsured motorist benefits involves compensation for past and future pain and suffering and other economic and noneconomic losses rather than compensation for immediate expenses related to the injured person’s care and recovery.”
After comparing the characteristics of the two types of claims, the Court of Appeals concluded:
“[A] claim for PIP benefits differs fundamentally from a claim for uninsured motorist
benefits both in the nature of the proofs and the motivation for the claim.”