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Who Pays an Injured Person’s No-Fault Insurance Benefits?

Lawyer Commentary on No-Fault Statute: MCL 500.3114

Who pays for an injured person’s No-Fault PIP benefits? What is the order of priority for auto insurance companies when the injured person was a vehicle occupant?

Under most circumstances, there will be a source of No-Fault insurance available to provide benefits to a driver or passenger who has suffered a personal injury in an auto accident in Michigan.

The “order of priority” rules set forth in this statute determine what auto insurance company will pay the injured driver’s or passenger’s No-Fault benefits.

The general rule for vehicle drivers and passengers – referred to as “occupants” by the statute – is as follows:

  • A person injured while he or she is an occupant of a motor vehicle should first make a claim for Michigan No-Fault benefits with the auto insurance company on whose policy he or she is listed as a “named insured.” (MCL 500.3114(1))
  • If the person injured in an auto accident is not a “named insured” on a motor vehicle insurance policy, then he or she may claim No-Fault benefits from the insurance company of a spouse or a relative who lives in the same household. (MCL 500.3114(1))
  • If the injured person does not have a No-Fault insurance policy of his or her own and no No-Fault coverage is available through a spouse or resident relative, then he or she would apply for benefits through the Michigan Assigned Claims Plan. (MCL 500.3114(4)) The Assigned Claims Plan, which is administered by the Michigan Automobile Insurance Placement Facility, will assign the person to a participating Michigan No-Fault insurance company. (See MCL 500.3171-3176 for more information about the Michigan Assigned Claims Plan)

Summary of No-Fault Insurance Order of Priority for Drivers and Passengers

  • First priority – No-Fault insurer of the injured occupant
  • Second priority – No-Fault insurer of the injured occupant’s spouse
  • Third priority – No-Fault insurer of the injured occupant’s resident relative
  • Fourth-priority – Michigan Assigned Claims Plan

The summary of the “order of priority” rules above reflects the general rule under Michigan law, but there are important exceptions under the Michigan No-Fault Act.

Exception: Vehicles in the Business of Transporting Passengers

Generally, a driver or a passenger “of a motor vehicle operated in the business of transporting passengers” who is injured in a Michigan car accident involving that motor vehicle will apply for and receive No-Fault benefits “from the insurer of the motor vehicle.” (MCL 500.3114(2))

However, this general rule does not apply to a “passenger” under the following circumstances unless the passenger does not have No-Fault coverage available through his or her own auto insurance policy or through the policy of his or her spouse or a resident relative:

  • Buses
  • School buses
  • Buses operated by a “common carrier of passengers certified by the department of transportation”
  • Buses operated under a government sponsored transportation program
  • Buses servicing non-profit organizations
  • Taxicabs that follow specific insurance requirements under the No-Fault Act
  • Buses operated by certain liveries, used only to carry passengers to and from a destination
  • A transportation network company vehicle, such as one operated by ride-sharing application-based services like Uber or Lyft
  • A car or truck whose owner has opted out of No-Fault PIP medical benefits coverage under MCL 500.3107d once that coverage becomes available in policies issued or renewed after July 1, 2020
  • A car or truck for which an exclusion under MCL 500.3109a(2) applies once the new No-Fault PIP medical benefits coverage levels become available in policies issued or renewed after July 1, 2020

Exception: Employer Provided Vehicles

Vehicles provided by an employer present another exception that changes the general rules regarding the order of priority for Michigan No-Fault benefits for drivers and passengers.

The exception provides that:

An employee – as well as his or her spouse and/or a resident relative – who is injured in a car accident “while an occupant of a motor vehicle owned or registered by the employer” will receive No-Fault benefits to which he or she “is entitled from the insurer of the furnished vehicle,” i.e., the auto insurance company covering the employer-provided vehicle. (MCL 500.3114(3))

This exception applies even if a car accident occurs when an employee is not driving the employer-provided vehicle in the course of his or her job. For example, if an auto accident occurs while an employee is using an employer-provided vehicle to run personal errands over the weekend, the employee, the employee’s spouse and/or the employer’s resident relatives (if they were occupants of the vehicle at the time of the crash) would file a claim for No-Fault benefits with the insurance company that covers the employer-provided vehicle.

Exception: Motorcycles

When a motorcycle and motor vehicle are involved in an accident in Michigan, the rules of priority:

  • First Priority – “The insurer of the owner or registrant of the motor vehicle involved in the accident.”
  • Second Priority – “The insurer of the operator of the motor vehicle involved in the accident.”
  • Third Priority – “The motor vehicle insurer of the operator of the motorcycle involved in the collision.”
  • Fourth Priority – “The motor vehicle insurer of the owner or registrant of the motorcycle involved in the accident.” (MCL 500.3114(5))
  • Fifth Priority – If no motorcycle insurance coverage is available through any of the above sources, then an injured motorcyclist will have to file a claim for No-Fault benefits with the Michigan Assigned Claims Plan. (MCL 500.3114(6))

No-Fault Lawyers of Michigan Auto Law

The lawyers of Michigan Auto Law have been specializing in automobile No-Fault litigation for more than 50 years. If you have been injured in a car accident, truck accident or motorcycle accident and need help with your No-Fault insurance, please call one of our experienced attorneys for a free case evaluation at (800) 777-0028 or fill out our consultation form. There is no fee or obligation.

We are here to help you.