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How can divorcing parents avoid No Fault problems with ‘joint physical custody’ of their children?

March 1, 2017 by Steven M. Gursten

No one thinks about a car accident when they are getting divorced. But they should.

No Fault benefits for children of divorced parents after a car accident
To avoid problems with No Fault benefits after a car accident, divorcing parents should identify a child’s ‘domicile’ in agreements for joint physical custody.

When divorce lawyers think about family law, they don’t think about Michigan’s auto No Fault insurance law or how a car accident will impact a child’s domicile.

But they should.

In divorce agreements, where there are minor children involved, the focus is almost exclusively on the obvious issues of child support and visitation.

However, another issue – sad and tragic as it may seem – deserves attention, too: What happens to children of divorcing parents who are injured in a car accident – either as drivers, passengers, bicyclists, pedestrians?

The reality is that a divorce agreement that adequately and clearly addresses the issue of joint physical custody can be a key instrument in ensuring that the children receive the auto No Fault medical benefits they’ll need for their care, recovery or rehabilitation after an auto accident.

Where exactly do a child’s No Fault benefits come from after an auto accident in Michigan?

The short answer here is that if a child is injured in any Michigan motor vehicle accident, then he or she receives No Fault benefits through his or her parents’ car insurance policy.

To learn about why these benefits are so important, please check out our “No Fault insurance benefits” page, where you can learn about medical and attendant care benefits, among other protections guaranteed by law.

Here’s how No Fault works when a child is injured in an auto accident.

The Michigan No-Fault Act protects people injured in auto accidents. This person, regardless of Fault, will receive Michigan No-Fault (PIP) benefits, which includes among other benefits, all necessary medical treatment.  That means a badly injured child can receive critical necessary medical care for life.

However, before any of this can happen, it must first be determined which auto insurance company is responsible for providing those PIP benefits from.

This is what auto accident lawyers in my own world call the “Order of Priorities” and, although there are exceptions (vehicles for hire, employer’s vehicles, motorcycles, etc.), the most common formula for determining the correct insurer can be found in MCL 500.3114(1), which states that the injured person receives their benefits from the following sources in order:

  1. Their own car insurer;
  2. Car insurer of a resident-relative;
  3. Car insurer of the owner of the vehicle occupied;
  4. Car insurer of the driver of the vehicle occupied;
  5. Michigan Assigned Claims Plan.

Since most minors do not own or insure their own vehicles, they will generally receive their benefits from a resident-relative (someone they reside with who they are related to by blood or marriage) who has car insurance. In the vast majority of cases, that will be their parent or parents.

How does divorce & joint physical custody affect No Fault benefits?

If both of a child’s divorced parents have joint legal custody, but only one parent has primary physical custody, the insurer of the parent with primary physical custody will be the proper insurer, by operation of law.  Grange Insurance v. Lawrence, 494 Mich 475; 835 NW2d 363, 366 (2013) (citing Auto Club Ins Ass’n v State Farm Mut Auto Ins Co, NW2d; 2011 Mich. App. LEXIS 1102 (Ct App, June 21, 2011)).

However, things become less straight-forward when a child’s divorced parents have joint physical custody.

That’s because, even though the child may have more than one residence (i.e., one residence with each parent) under a joint physical custody arrangement, he or she will only have one “domicile” and that’s the determinative factor for which parent’s auto insurance policy will be liable to pay for the injured child’s No Fault benefits.

Without this determination being easily made – or agreed upon by the divorcing parents and their lawyers – the effect will often be needless and time-consuming litigation between insurance companies over who is the proper insurer, unless by sheer luck, both parents have the same insurer.

Because most insurers will not step up like they are supposed to and pay benefits, even if the presence of a priority dispute, the minor child will go without their medical bills and other benefits being paid, waiting for the lengthy litigation to conclude.

How to resolve the No Fault problem with ‘joint physical custody’?

The solution to No Fault problem with “joint physical custody” is not complicated.

Family law attorneys should incorporate the following paragraph into their boilerplate divorce agreements and use it in situations involving joint physical custody:

“The minor child/children’s domicile for the purposes of Michigan No-Fault (PIP) benefits is the [choose one] mother’s/father’s address.”

The inclusion of the word “domicile” is critical here and, although it might make sense to choose the residence which most relates to the school or the residence of the parent who has the higher policy limits, it doesn’t really matter as long as it is expressly spelled out in the divorce order/agreement.  If the situation does not apply, the paragraph can simply be deleted.

Although car accidents and the resulting injuries for children are not pleasant issues to anticipate or discuss, they nonetheless are going to occur.  Steps should be taken in advance of a final divorce to avoid gridlock in the auto No Fault insurance claims process when a car accident does occur so you, whether as a parent or a divorce lawyer, can ensure that the minor child’s medical needs are addressed properly in the tragic event of an automobile accident.

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