Motorcycles, Company Cars, and the No-Fault “Choice” Fallacy
Proponents of the auto no-fault insurance overhaul known as Publics Acts 21 & 22 heralded the era of “choice.” The pitch went like this: since everyone loves choices, everyone will benefit when consumers can choose various monetary limits on allowable expense no-fault PIP benefits. While it makes for good marketing, both its premise and implementation are flawed.
Risk of Loss from Car Accident is Unknown
First, ask yourself this – can a consumer accurately make an informed choice about auto insurance that provides coverage for medical care following a car accident, to begin with? For some insurance (e.g. homeowners or life insurance) where the risk of loss is known, a consumer can choose coverage accordingly. But the same cannot be said for car accidents. None of us know whether we will be in an accident and, if we are, whether we will be injured, how so, and what medical care we will need. Hence, Michigan’s auto no-fault insurance actually functions more closely to health insurance than auto insurance.
And if our auto no-fault system works more along the lines of health insurance – ask yourself if you’ve ever heard of a $250,000 health insurance policy limit.
The No-Fault Choice Mess for Motorcyclists and Drivers of Company Cars
Thus, in the context of auto no-fault, “choice” is really a guess at best, and a gamble at worst. But let’s just assume that “choice” was a desired virtue for our no-fault system. The law’s drafters still failed in implementing this concept in Public Acts 21 & 22. To understand this firsthand for yourself, you don’t need to look any further than motorcyclists and drivers of company cars – none of whom have any “choice” under the new law about the level of coverage that applies should tragedy strike.
The problems for motorcyclists and company cars arise from the so-called “priority” rules at MCL 500,3114. Section 3114(1) provides the general rule that injured motorists draw their no-fault PIP benefits from their own auto insurer or the insurer of family members with whom the motorcyclist lives. Yet sections 3114(3) and 3114(5) create exceptions to this general rule for those occupying employer-furnished vehicles and motorcycles involved in motor vehicle accidents. Occupants of employer-furnished vehicles are required to draw PIP benefits from the insurer of the employer-furnished vehicle. Motorcyclists are required to look first for PIP benefits from the insurer of the owner, registrant, or operator of the motor vehicle in the accident involved.
Yet the drafters of Public Acts 21 & 22 never addressed how these priority issues would collide with the idea of “choice.” And we now have a situation where many people will never be able to access their personal choices.
How This Plays Out for Company Car Drivers
Suppose, for example, an employee chooses unlimited PIP for her personal auto policy, but the employer chose a $250,000 policy. If the employee is injured while occupying an employer-furnished vehicle, she is likely stuck with the $250,000 cap.
How This Plays Out for Motorcyclists
If a motorcyclist selects unlimited PIP for his own auto insurance but is struck by a motorist with a $250,000 policy, the motorcyclist may also be stuck with the $250,000 cap.
These problems could have been fixed by a more thoughtful and deliberative approach. And, sadly, this is now the reality of many Michiganders.