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No-Fault 101 For Law Students: Your Michigan Bar Exam Question

No-fault auto insurance is one of the most consistently tested areas on the Michigan Bar Exam. Our personal injury attorneys would like to warn you that Bar examiners are using no-fault as a substitute for torts questions on most exams. In fact, no-fault has been tested in each of the last four Michigan Bar Exams, more than topics like secured transactions, conflicts of law, sales, personal property, partnerships and trusts and corporations.

I know what you’re thinking, “…but I never took no-fault in law school! How am I supposed to get a decent score on test day?” Take a deep breath and relax. While no-fault law may deal with some very complex issues, the topics tested by the Bar examiners are basic and easy to study.

Michigan Auto Law is the largest law firm in the state totally specializing in this area of law, and we’ve put together this handy no-fault study aid to help you earn a higher score on test day. You can also refer to our breakdown of the Michigan No-Fault Act.

A Tale of Two Claims; the First and Third Party Case

There are only two types of no-fault auto insurance questions that you will see on the Michigan Bar Exam. Thus, there are really only two sets of rules you need to memorize to get a passing score on the no-fault question.


The first-party case: Fact pattern

The first fact pattern will look something like this:

Paul, a factory worker, was driving home on Woodward Ave. from work. The conditions were extremely hazardous that evening, with over six inches of snow falling within the last two hours. The snow plows had yet to clear off the roadways, and the falling temperatures began to make the road surfaces ice over.

Paul was in a hurry to get home from work. His favorite television show was about to begin. The roads did not have any other motorists, so Paul decided to drive a bit faster than normal. He figured his large SUV with four-wheel drive could handle the elements.

Unfortunately, Paul’s driving decisions caused him to slip on a patch of black ice. His SUV spun out of control, colliding with a large oak tree sitting on the side of the road. His SUV was insured by Hosmer Insurance Company.

Paul was rushed to a nearby hospital by an ambulance. While at the hospital, Paul received several X-rays which revealed a punctured left lung, two broken legs and a fractured left wrist that required surgery. Paul was also going to need months of physical therapy. He was eventually discharged from the hospital in a wheelchair.

Paul’s doctor restricted him from returning to work for three months and told him to refrain from doing any chores around the house. Paul lives alone, and is fearful about not working. He also has no health insurance, and does not know how he is going to afford his medical bills- which have accumulated to more than $50,000. Paul comes to your office for advice.

Please discuss.


The first-party case: What you must know

What you will need to know for this type of fact pattern is found below. This first type of fact pattern will focus on what is commonly referred to as “the first party case.”

Here’s where it all begins. In an effort to restrict lawsuits for medical benefits and lost wages (we call them “economic damages”), the Michigan Legislature established a compulsory insurance system where EVERY registered motor vehicle in the state of Michigan is required to carry no-fault auto insurance.

Take a look at your auto insurance policy and you’ll find a section labeled “personal injury protection (PIP)” benefits. With no-fault insurance, an injured motorist can recover “economic” benefits from his own insurance company. These include payments for medical expenses, wage loss, replacement services, mileage, survivor’s loss, funeral expenses, and attendant care. If your insurance company refuses to provide these benefits, an injured motorist can sue. This is what is referred to as the first-party case for PIP benefits.

Here’s a detailed list of each benefit:

  1. Medical expenses Your auto insurance company is required to pay for all reasonably necessary medical treatment stemming from your auto accident. This is a lifetime benefit, with no monetary caps. This benefit also includes a mileage reimbursement for your trips to and from your treating physicians and facilities.
  1. Wage lossYour auto insurance company will pay for 85 percent of your lost gross wages as a result of the auto accident.
  1. Replacement services Your insurer will pay up to $20 a day for you to hire someone to handle your household chores and services. Unlike medical expenses, this benefit stops three years after the accident, up to a statutory monthly maximum that is adjusted annually.
  1. Survivor’s loss and funeral expenses If an insured person is killed in an auto accident, her family is entitled to survivor’s loss benefits as well as reasonable costs for the burial.
  1. Attendant care If you are seriously injured in an auto accident, and need in-home assistance with your activities of daily living (i.e. bathing/grooming, using the restroom, preparing meals, taking medications, changing bandages, getting around your home, etc.), you are entitled to reimbursement for hiring an in-home caregiver. This is also a lifetime benefit, with no monetary cap.

With that, the insured person (in this hypothetical case, Paul) must file a no-fault application for benefits with his own auto insurance carrier within 12 months from the date of the accident — or he will forever lose any entitlement to benefits.

Also, for any items of reimbursable expense that go unpaid by the insurance carrier, the insured person must file a lawsuit for that expense within 12 months from the date that it was incurred. If such a lawsuit is not filed within that 12-month period, the insured will once again lose his right to receive reimbursement of that expense item. This is what is commonly referred to as the “one- year back” rule.

Sounds like a good deal right? In theory, Michigan has one of the most generous no-fault insurance systems in the country. But there’s a catch. While an insured person has easy access to recovering economic damages, the ability to recover non-economic damages (pain and suffering, excess economic damages, loss of consortium, etc.) against the at-fault driver is more restrictive. This brings us to the second type of fact pattern: the third party case.


The third-party case: Fact pattern

This is what you should expect to see in a third-party type question:

Debbie drove a group of her friends to a bar on a Friday night. The group was at the bar for several hours, and Debbie had seven cocktails. Debbie only weighs about 120 pounds, but was a very experienced drinker. She was able to order each drink from the bartender without slurring her speech or knocking into other patrons.

After spending the night dancing at the bar, Debbie separated from her friends and decided to drive home. On the way, Debbie crossed the center line and collided head-first into Paula’s vehicle. Paula was a decorated high school volleyball player who was to begin college in the fall on a volleyball scholarship. Debbie was arrested for Operating While Intoxicated (OWI), with a blood alcohol level of .20, over twice the legal limit.

Paula had serious injuries as a result of the accident including multiple spinal injuries, a fractured pelvis and a traumatic brain injury. Her spinal injuries required low back surgery, which had to be done again two years after the crash. Her traumatic brain injury required a year of cognitive therapy and psychiatric counseling.

Paula’s treating doctors said she may never be able to play volleyball again. Paula missed her entire first year of college, but was able to attend full-time the following year. Paula was an honor roll student in high school, but now can only earn C’s and D’s in college.

Two years after the accident, Paula comes to your office, looking to file a lawsuit against Debbie for her injuries. She also wishes to sue the bar for over-serving Debbie.

Discuss Paula’s chances for success in both suits.


The third-party case: What you must know

Now instead of bringing a claim against her own insurance company, the insured is bringing the classic negligence suit against the at-fault party. This is called a third-party case. The No-Fault Act allows this type of lawsuit against the at-fault driver for non-economic damages, but only if the injured party has suffered any of the three types of injuries:

  1. Death
  2. Permanent serious disfigurement
  3. Serious impairment of body function

“Death” is pretty self-explanatory. A “permanent serious disfigurement” is the loss of a body part, scarring, burning, or any other type of injury that affects one’s outward appearance. A “serious impairment of body function” is an injury that generally affects the plaintiff’s ability to lead her normal life.

Chances are the Bar examiners aren’t going to let you off the hook by giving you a dead or permanently disfigured plaintiff. Instead, they’re going to want to see your analysis as to what a serious impairment of body function is, and whether or not the plaintiff has suffered such an injury.

First, you’ll want to state that in order to bring a valid lawsuit for non-economic damages, the injured party must bring her lawsuit within three years of the date of the accident.

Next, you’ll want to state the definition of “serious impairment of body function” described above, and discuss the Michigan Supreme Court’s current interpretation of that definition in Kreiner v. Fischer. Kreiner requires (at a minimum) that the plaintiff’s injuries are objectively manifested (meaning that they can be seen on a diagnostic test like an MRI, X-ray, EEG, etc.), affect an important body function, and affect the plaintiff’s general ability to lead his or her normal life.

Now, using the skills you learned in law school, apply the fact pattern to the law, make your arguments, and conclude.


There’s more: Dram shop

I know what you’re thinking, “But what about the bar? Can it be joined in the lawsuit?” This is what is commonly referred to as a “dram shop” problem. To hold a bar liable for a plaintiff’s injuries, the plaintiff must prove that the driver was “visibly intoxicated” at the time she was being served through some independent eyewitness evidence. A breathalyzer reading or toxicology report is not enough to prove a dram shop claim. This issue might not be tested often, but it’s an easy way to earn extra points on your problem.


Michigan Auto Law Wishes You Good Luck

With the knowledge in this guide, you should have no problems getting a passing score on any no-fault problem on the Michigan Bar Exam. We at Michigan Auto Law wish you the best of luck on your upcoming test.

If you are seeking even more information, we have an entire section devoted to helping Michigan lawyers handle auto accident cases.

Please call Michigan Auto Law at (800) 968-1001 if you’re interested in our opportunities for law students, or if you or a loved one has been injured in an auto accident.