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Court of Appeals Determines a PIP Settlement Does Not Bar a Subsequent Lawsuit for UM Benefits between the Same Parties

By Allison D. Lazette-Magnan

The Court of Appeals had issued unpublished decisions with opposite holdings regarding whether a plaintiff who settled a personal-injury protection claim with his or her no-fault insurer can later sue the same insurer for not paying uninsured-motorist benefits.  On August 11, 2015, in a published decision, the Michigan Court of Appeals has ruled that a plaintiff who settled a PIP claim CAN still bring a subsequent cause of action for UM benefits.

Cynthia Adam was injured in an auto accident and sued the insurance carrier, State Farm, for PIP benefits. She settled that claim for benefits. Thereafter, Adam filed a third-party action, asserting that State Farm breached its contractual duty to pay uninsured-motorist benefits.

Oakland Circuit Judge Rae Lee Chabot dismissed the uninsured-motorist claim, finding it was barred by res judicata because Adam could have raised it in her first lawsuit.

The Court of Appeals reversed in Adam v. Bell, et al, COA No. 319778 (released August 11, 2015), holding that applying res judicata to require a mandatory joinder of a mere potential UM claim with a PIP claim would be inconsistent with the very divergent statutory treatment of these two very different types of no-fault claims. 

In reaching this conclusion, the Court of Appeals, applied the doctrine of res judicata and Michigan’s transactional test.  The Court found that under the transaction test, the facts must be viewed pragmatically, relying on Adair v. State, 470 Mich 105 (2004) and looking to the unpublished decision of Miles v. State Farm Mut Auto Ins Co,  Docket No. 311699.  Using this pragmatic approach, the Court concluded that although plaintiff’s PIP claim and plaintiff’s tort/UM contract claim both arise from the same automobile accident, the claims also have significant differences in the motivation and in the timing of asserting the claims, andthey often do not form a convenient trial unit. Further, applying res judicata to the facts of thiscase would not promote fairness and would be inconsistent with the Legislature’s intentexpressed through the no-fault act. The no-fault act provides for the swift payment of no-faultPIP benefits. On the other hand, it severely restricts the right to bring third-party tort claims thatwould form the basis for a UM contract claim.

The Court noted that in contrast to a claim for PIP benefits, in order to establish his or her right to uninsured motorist benefits, an injured person must—as provided in the insurance agreement—be able to prove fault: he or she must be able to establish that the uninsured motorist caused his or her injuries and would be liable in tort for the resulting damages.  Significantly, this means that the injured person must plead and be able to prove that he or she suffered a threshold injury.  Thus, while an injured person willlikely have all the facts necessary to make a meaningful decision to pursue a PIPclaim within a relatively short time after an accident, the same cannot be said forthe injured person’s ability to pursue a claim for uninsured motorist benefits.This case was remanded for further proceedings.

Practice Tip: Going forward, we will no longer be able to argue that a subsequent claim for UM benefits is barred by res judicata following a PIP settlement.  Thus, we expect to see an increase in this litigation being filed separately and after the conclusion of a PIP lawsuit.