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Auto accident lawyers beware: Insurance giants’ ‘fraudulent’ No-Fault policy

November 11, 2010 by Steven M. Gursten

Allstate and Auto Club tell Michigan Supreme Court that Daimler Chrysler Insurance Company’s No- Fault PIP coverage is ‘wholly illusory’ under ‘shell game’ policy

Michigan auto accident lawyers and personal injury lawyers in other No-Fault states should be on the lookout for an auto insurance company’s national policy that Allstate Insurance Company and the Auto Club Insurance Association (ACIA) have decried as a “fraud,” a “shell game” and a “scheme” whose purported No-Fault coverage is “wholly illusory.”

In a friend of the court brief filed in the Michigan Supreme Court, auto insurance giants Allstate and Auto Club Insurance Association (ACIA) pulled no punches in pummeling Daimler Chrysler Insurance Company (DCIC) for the auto insurance policy it literally forces upon its own employees and retirees as part of the Daimler Chrysler Corporation’s employee/retiree lease program.

They contended that Daimler Chrysler Insurance Company’s policy was designed to deny its “insureds” the No-Fault insurance benefits (also called personal injury protection or PIP benefits) they paid for.

Under Michigan law, No-Fault benefits include lifetime medical and mileage expenses, lost wages and attendant care (also referred to as nursing services).

Allstate and Auto Club Insurance Association make the case against Daimler Chrysler Insurance Company

“[E]very person [who purchased Daimler Chrysler Insurance Company auto insurance] was the victim of fraud by … pay[ing] for no-fault insurance from which the person, his or her family, and all occupants of the … vehicle could reap no benefits due to the no-fault insurance shell game perpetrated by DCIC,” Allstate and ACIA argued in their brief. “[P]remiums are paid but … coverage is not provided.”

In their Michigan Supreme Court brief, Allstate and Auto Club make the case that Daimler Chrysler Insurance Company accomplishes its No-Fault PIP benefits scam through simple manipulation of the “named insured” portion of its policy.

But what does Michigan No-Fault law mandate?

Under Michigan No-Fault Insurance law, the identity of the “named insured” (“the person named in the policy”) is critical to whether an insurer is liable for No-Fault insurance benefits.

In particular, Michigan No-Fault law mandates that an insurer, such as Daimler Chrysler Insurance Company, is obligated to pay an auto accident victim’s No-Fault benefits if the victim is either a “named insured” on the insurer’s policy, or if the victim is related to a “named insured” or was a passenger in a vehicle driven by a “named insured.”

How Daimler Chrysler Insurance Company avoided liability for No-Fault insurance claims

Accordingly, in order to insulate itself from No-Fault liability, Daimler Chrysler Insurance Company had to choose a “named insured” who could never be an accident victim, or a victim’s family member, or the driver of a vehicle involved in an auto accident.

Of course, that necessarily ruled out the otherwise obvious, commonsense choice of the so-called “insureds” who were actually paying the premiums on Daimler Chrysler Insurance Company’s policies.

Instead, Daimler Chrysler Insurance Company chose “Daimler Chrysler Corporation” as its “named insured.”

In Michigan alone, there are approximately 8,000 vehicles covered by Daimler Chrysler Corporation’s employee/retiree lease program. As a condition of the program, participants must purchase all of their auto insurance, including No-Fault coverage, from and only from Daimler Chrysler Insurance Company.

Where the fraud scheme started: Abay v. Daimler Chrysler Insurance Company

The No-Fault insurance scheme condemned by Allstate and Auto Club Insurance Association in their Michigan Supreme Court brief arose in the context of a lawsuit brought by the estate of a woman who was killed by a drunk driver. (Abay v. Daimler Chrysler Insurance Company, et al., which is pending in Michigan Supreme Court.)

No-Fault benefits were not an issue in the case, but because Daimler Chrysler Insurance Company was using the same tactic of manipulating the “named insured” portion of its policies to avoid liability for pain and suffering compensation in that case, objection to the scheme was broadened to include its use in avoiding No Fault liability.

In their Michigan Supreme Court brief, Allstate and Auto Club laid out the pertinent portions of the Daimler Chrysler Insurance Company policy they were attacking. They noted that, even though the policy’s “Michigan Personal Injury Protection” provision said “We will pay personal injury protection benefits to or for an ‘insured,'” the policy’s definition of “insured” rendered the promise of coverage an empty one. The policy said the “insured” was “the named insured shown in the declarations,” yet the “named insured” was “Daimler Chrysler Corporation.”

The plaintiff in Abay made clear in her Michigan Supreme Court brief that Allstate’s and ACIA’s condemnation of Daimler Chrysler Insurance Company’s scheme to bilk its “insureds” – of their hard-earned premium dollars while offering “wholly illusory” No-Fault insurance coverage – was not unwarranted or based on a fundamental misunderstanding of Daimler Chrysler Insurance Company’s policy.

The Abay plaintiff cited two pending Oakland County Circuit Court cases, Daimler Chrysler Insurance Company v. Allstate Insurance and Corwin, et al., v. Daimler Chrysler Insurance Company, where Daimler Chrysler Insurance Company has relied on its “named insured” manipulation to escape having to pay PIP benefits.

In both cases, according to the Abay plaintiff’s brief, Daimler Chrysler Insurance Company rebuffed its premium-paying insureds’ claims for No-Fault benefits because those insureds were not the “named insureds” in the Daimler Chrysler Insurance Company policies they had paid for.

This blog was written by Steve Gursten and Todd Berg.

Steve Gursten is recognized as one of the nation’s top auto accident lawyers handling serious car and truck accident cases and insurance No-Fault litigation. Steve speaks and writes extensively on Michigan’s No-Fault law and insurance company abuse, and is available for comment.

– Todd Berg is an Illinois attorney. At Michigan Auto Law, he provides analytical, research and writing support to the firm’s auto accident attorneys. Todd was formerly a trial and appellate attorney in Illinois. He was also a legal news reporter and editor with Michigan Lawyers Weekly.

– Photo courtesy of Creative Commons, by Mike Licht

Related information:

How to read your auto insurance policy

Car insurance claims adjuster delays in Michigan

Michigan’s top 10 worst auto insurance companies

Michigan Auto Law is the leading and largest law firm exclusively handling car accident, truck accident and motorcycle accident cases throughout the entire state for more than 50 years. We have offices in Farmington Hills, Ann Arbor, Detroit, Grand Rapids and Sterling Heights to better serve you. Call (800) 777-0028 for a free case evaluation with one of our auto accident lawyers.

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