Columns

A troubling gap in Michigan’s 2019 no-fault reform act has become increasingly apparent as auto insurance companies exploit provisions allowing family members to be excluded from coverage without their knowledge or consent.

By A. Vince Colella
Moss & Colella P.C.

A troubling gap in Michigan’s 2019 no-fault reform act has become increasingly apparent as auto insurance companies exploit provisions allowing family members to be excluded from coverage without their knowledge or consent.

In a recent Jackson County Circuit Court case, this oversight led to devastating consequences for a motorcyclist who suffered serious injuries in a freeway accident, including severe damage to his pelvis and wrist. The victim required extensive medical care, including surgery, inpatient hospitalization, and a comprehensive physical therapy and rehabilitation program, ultimately incurring medical expenses exceeding $100,000.

Unknown to the injured motorcyclist, his spouse had previously elected to exclude him from their Personal Injury Protection (PIP) medical coverage, exercising a provision within the no-fault statute that permits opting out when covered under a qualified health plan. The motorcyclist’s situation became dire when it was discovered that his qualified health plan contained an exclusion for medical expenses related to motor vehicle accidents—a critical detail his spouse likely overlooked when making the election.

Michigan’s transition to a cafeteria-style approach for auto insurance coverage has left drivers facing complex premium decisions and potentially devastating consequences when insurance carriers fail to explain nuances that could substantially impact post-accident coverage adequately.

The provision central to the Jackson County case, MCL 500.3107c, allows an applicant or named insured to select PIP coverage limits of $250,000 per individual per loss. Yet the coverage decisions extend beyond mere limit selection — under MCL 3017d, the applicant or named insured can exclude their spouse and any household relatives by simply indicating they have qualified health care plan coverage. While the Act requires insurers to provide a standardized form for excluding family members and mandates that these forms explain coverage limits and associated risks, it does not require applicants to prove their excluded family members have qualified healthcare coverage. This oversight creates a dangerous scenario where spouses and household members risk complete loss of PIP coverage for medical expenses following a severe accident.

Most concerning is the apparent absence of any statutory duty requiring auto insurance companies to notify family members when they’ve been excluded from the policy by the named insured.

The Department of Insurance and Financial Services (DIFS) anticipated these coverage gaps when it amended its model form for PIP medical opt-outs. DIFS Bulletin 2023-11-INS, which contains the agency recommendations for all Michigan automobile insurance companies, explicitly requires “specific proof for Qualified Health Coverage purposes.” The amended form contains language mandating that an applicant or named insured “provide current updated documentation every year for … qualified health coverage.” The language appears to be more than a mere recommendation; rather, it imposes an implicit obligation on insurers to verify that any spouse or family member being excluded from PIP medical coverage maintains qualified healthcare coverage. The model form thus attempts to create a safeguard that the legislature failed to include in the statutory framework. However, without explicit statutory authority requiring insurers to follow DIFS’ guidance, the model form’s protective measures may prove toothless in practice.

The no-fault Act’s silence regarding protection against unauthorized coverage opt-outs creates a significant vulnerability for Michigan motorists. When challenged on these issues, auto insurance companies will likely seek refuge in principles of statutory construction that prevent courts from reading additional requirements into unambiguous statutes, as recently demonstrated in Bronson Health Care Group v Esurance, ___ Mich App ___ (2023) (Docket No. 363486). However, courts confronting these cases should balance strict constructionist approaches against compelling public policy considerations that have historically shaped Michigan’s no-fault system. Since its inception in 1972 until the 2019 reforms, Michigan’s no-fault system prioritized protecting motorists against catastrophic medical and financial losses following auto accidents. While recent reforms may signal a shift away from guaranteed unlimited medical coverage, the legislature’s inclusion of a qualified health coverage requirement for PIP opt-outs clearly indicates it did not intend to leave motorists completely exposed to devastating medical bills. This suggests courts should interpret the Act’s provisions to prevent family members from being stripped of coverage without their knowledge, consent, or proof of alternative coverage.

The evolving landscape of Michigan’s no-fault insurance system has created unforeseen gaps in coverage that can devastate families following serious accidents. While the legislature’s intent may have been to provide flexibility and cost savings through various coverage options, the lack of statutory safeguards has allowed insurance companies to exclude family members from coverage without their knowledge or consent.

Until the legislature addresses these oversights, courts should interpret the Act’s provisions in a manner that promotes its historical purpose of protecting Michigan motorists from catastrophic losses. At a minimum, insurance carriers should be required to verify qualified health coverage for excluded individuals and provide notice to all affected household members. Without these basic protections, more Michigan residents may face overwhelming medical bills despite believing they have adequate insurance coverage.

Policymakers and academics have long been concerned about the danger posed by “shadow banks”—financial institutions that function like banks but are not subject to banking regulations, such as money market mutual funds or stablecoin issuers.

By Bob Needham
Michigan Law

Policymakers and academics have long been concerned about the danger posed by “shadow banks”—financial institutions that function like banks but are not subject to banking regulations, such as money market mutual funds or stablecoin issuers.

That lack of safeguards leaves shadow banks susceptible to instability that can quickly spread throughout the financial system. Typical approaches to addressing this risk have focused on changing banking laws.
Yet a conversation between Professors Gabriel Rauterberg and Jeffery Zhang during a stroll around the Law Quad led to a new idea: using securities law instead.

Rauterberg and Zhang took the idea from that initial conversation and developed it into a new paper, forthcoming in the Stanford Law Review.

They argue that securities regulators—who already exercise some authority over shadow banks—can and should do more, even if it might not be the first-best solution. They recently answered five questions about the issue:

1. How does the shadow banking sector contribute to problems of insecurity in the broader economy?

Rauterberg: Businesses need both long-term and short-term funding. They get a lot of their short-term funding from the shadow banking sector. So when there are mass withdrawals of financing from the shadow banking sector, it destabilizes the shadow banks themselves. Then it also dries up funding for businesses just when we’re in a moment of financial instability or panic. The broader economy depends on financial institutions for funding, and it turns out they’re kind of fragile.

Zhang: If the shadow banking market was tiny, it probably wouldn’t matter. But shadow banking in the last few decades of US financial history has grown into a multi-trillion-dollar industry. When you have an industry that large, that is so interconnected with the rest of the US economy—and that is also subject to the dynamics of bank runs, but without the safeguards that banks have—you get problems in the real economy.

2. Efforts to address this vulnerability have largely focused on banking law, but your paper suggests approaching the issue through securities law. How did you develop this idea?

Zhang: It started in 2022, when a banking law scholar (Zhang) was walking with a securities law scholar (Rauterberg) around the Law Quad. We’d both noticed how banking scholars and securities scholars don’t really talk to each other. We talked about how these economic phenomena are well known, but everyone has their own tools and their own perspectives. When you have entrenched views, it’s hard to think about the problem from the other side. So we asked ourselves, what would be another approach, even if it’s not perfect?

Rauterberg: We began with an observation that turned out to be massively more complicated than we thought it would be—that securities law provides securities regulators with a lot of jurisdiction over aspects of shadow banking. And as a result, there was this ambiguous relationship that seemed worth exploring between the two bodies of law. That started us thinking about whether that meant that securities regulators could play a more important role.

3. You mentioned that securities regulators already have some authority over shadow banking. What’s an example of that?

Rauterberg: One entire body of law that securities law usually doesn’t think of as relating to shadow banking, but it could, is broker dealer regulation. Broker dealers play a huge role in the financial sector. They can influence financial stability, but broker dealer regulation is designed only with customer protection goals in mind, not broader systemic issues.

For another example, money market fund regulation is at the heart of shadow banking. The Securities and Exchange Commission (SEC) knows that it’s important to financial stability, but has taken only modest action. The paper wrestles with this because it’s an ambiguous proposition, but the SEC could probably do more on that front.

4. What’s an example of the bigger reforms you advocate?

Zhang: To stick with money market funds—they are like banks. We force banks to hold capital for safety and soundness purposes; why not have money market funds do the same? The SEC could do this.

Of course, the counter argument is that this is really aggressive. In fact, this idea has been floated before, and the SEC has not taken it up. The industry certainly balks at it every single time, but that doesn’t mean that, logically, it isn’t a proper solution.

5. The paper discusses how finding political will for these changes could be an issue. Does that become even harder with a new presidential administration?

Rauterberg: Like a lot of the things about the incoming administration, it’s uncertain. The SEC in the first Trump administration was widely regarded as a perfectly reasonable SEC making competent if contestable judgment calls. Overall, though, I think the change makes it less likely the SEC will adopt these proposals.

Most of the people who study shadow banking think that this is such a big problem, we need to plan for whatever moment gives an opening for regulatory reform. That opening might be in six years or in two years. Some of these reforms could be doable as a staff-initiated set of changes. But the presidential administration will shape things.

Zhang: If you focus on the standard talking points, a Republican administration might mean less regulation. But what we are really addressing here is financial crises, system-wide failures. When that happens, everybody loses. Nobody wants that.

This should be thought of as the beginning of an undertaking, of a true synthesis of securities law and banking law. This first collaboration is planting a seed; we’re just going to let it grow, and we think it’s going to grow quite well.

When people divorce, it should be a (mostly) clean break from their former spouse. Most know future earnings are considered for child support and spousal support  if ordered and modifiable.

By Marie E. Matyjaszek

When people divorce, it should be a (mostly) clean break from their former spouse. Most know future earnings are considered for child support and spousal support  if ordered and modifiable.

But what about speculative employment benefits you earn in the future or post-judgment? Those should be yours and yours alone, right?

If you said yes, the Michigan Court of Appeals agrees with you.

In the 2009 published case Skelly v Skelly, 286 Mich App 578, a Wayne County trial court awarded Thomas Skelly’s former wife, Patricia, part of his future benefits with his employer Ford Motor Co. Tom had a lucrative position at Ford which came with a retention bonus, paid out in installments, totaling $108,000. The point of the bonus was to have Tom stay put at Ford through May 31, 2009 to receive the full amount. If he didn’t, he had to reimburse Ford for every payment received.

The lower court did its usual equitable division of marital retirement, assets, and debts, and awarded Patricia spousal support of $5,000 per month.

While recognizing that the future retention bonus payments would likely be separate property, the court ultimately chose to invade it, noting Patricia’s limited ability to earn, and “in the Court’s mind, [the retention award] is based on performance during the marriage,” and awarded Tom 60 percent, and Patricia 40 percent.

The court went on to award Patricia 40 percent of any future bonus received by Tom, in addition to the retention bonus.

Earned bonuses are considered for support, including modifications as they are income, but the parties were divorced July 23, 2008, almost a full year before Tom could even get the last payment of his retention bonus.

Not surprisingly, Tom appealed.

The Court of Appeals noted that assets earned during the marriage are part of the marital estate whether they are received during the marriage or after the judgment has been entered. However, the difference in the Skelly case is that the retention bonus was not truly earned during the marriage, so none of it was marital property.

Don’t forget, Tom had to work until May 31, 2009 to get the full $180,000, and he had to pay it all back, including portions already received, if he didn’t stay with Ford until that time. Because of this, he hadn’t earned the money as “he had not satisfied the condition subsequent ... required by the agreement between him and his employer.”

Ultimately, the Court of Appeals found the lower court erred in considering any portion of the retention bonus as marital property subject to division.

It also held that the third payment was not separate property subject to invasion because he had not yet earned that money when the parties were divorced.

The appellate court ruled that because speculative, future bonuses are not currently in existence, you can’t award them as part of the marital property division.

Once again, they aren’t earned during the marriage and are “based solely on the potential occurrence of future events unrelated to the marriage.”

Not even a crystal ball could’ve helped Patricia win this case.

A judge has vacated the double murder conviction and sentence of Michigan Innocence Clinic (MIC) client LaVone Hill, providing him the relief he has been seeking for more than 22 years.
Hill was convicted in 2002—in part due to the police corruption—of two murders he did not commit.

By Michigan Law

A judge has vacated the double murder conviction and sentence of Michigan Innocence Clinic (MIC) client LaVone Hill, providing him the relief he has been seeking for more than 22 years.
Hill was convicted in 2002—in part due to the police corruption—of two murders he did not commit. Wayne County Judge Patricia Fresard dismissed the charges on October 23 following an investigation by the Wayne County Prosecutor’s Conviction Integrity Unit.

The prosecutor’s office has said that it will not retry Hill.

“For almost 23 years, I’ve had to live with the reality of the nightmare that I may die in prison, an innocent man, based on misconduct and corruption in the Detroit Police Department, namely Sergeant Walter Bates,” Hill said.

“I am happy today to be a free man, but so sad for all of the innocent men I am leaving in prison behind me. I am also very sad that the families of the victims lost their loved ones and were lied to about me being the guy who killed them.”

Hill is the 44th wrongfully convicted person who has been freed by the work of the Michigan Innocence Clinic, housed at the University of Michigan Law School.

Michigan Innocence Clinic Co-Director Jenna Cobb said, “We thank the Wayne County Conviction Integrity Unit for recognizing this awful injustice and agreeing to release Mr. Hill after more than 22 years of wrongful incarceration for a murder that he did not commit.

“This is a remarkable case involving a recanting witness, extreme instances of witness coercion by police, other witnesses who later confirmed that Mr. Hill was not present on the night of the shooting, and an apology from the true perpetrator. While Mr. Hill will never get back the many years he lost in prison, today we join Mr. Hill in celebrating his release and looking forward to the impact he will make outside of prison walls.”

A false statement and a life sentence

On September 8, 2001, two people were shot and killed following a dice game in Detroit.

A few nights later, police picked up a supposed witness to the shooting on unrelated drug charges. The witness—who could neither read nor write proficiently—was detained for seven days, during which Sergeant Walter Bates of the Detroit Police Department wrote a false statement for him to sign. The false statement said that the witness saw Hill shoot the victims with a handgun while walking down the street.

No other witness ever implicated LaVone Hill in the crime.

During the 2002 trial, the witness recanted his false statement implicating Hill. He testified that Hill had not been present on the night of the shooting and that Bates had coerced his false statement. Bates testified that he had not.

On September 6, 2002, Hill was convicted of two counts of first-degree murder and two counts of possession of a firearm during the commission of a felony. He was sentenced to life in prison with no possibility of parole.

New evidence led to vacated decision

The decision to vacate Hill’s convictions comes after the discovery of several pieces of new evidence by Hill’s attorneys at the Michigan Innocence Clinic, including:

• Two independent witnesses who had been present the night of the shooting swore that Hill had not been present at the dice game where the shooting took place.

• New ballistics evidence confirmed that a high-powered rifle was used in the killings rather than a handgun, as stated in the prior witness’s recanted statement.

• The son of one of the victims of the crime said that another man had confessed to killing his father.

• New evidence also showed that Bates was suspended from the police force multiple times during Hill’s case—including while he testified in the case, a fact that was not disclosed to either the defense or the jury at the time of trial.

Moreover, Bates, who had amassed significant gambling debt, was using his experience in the Detroit Police Department to mastermind a string of bank robberies while this case was pending. Bates was later convicted of bank robbery and conspiracy to commit bank robbery.

The recent proceeding resulted in Hill’s immediate release from state custody in Muskegon, where his family, friends, and MIC advocates excitedly greeted him.

The Michigan Innocence Clinic is the first non-DNA innocence clinic in the country. In its 15-year history, the MIC has achieved 44 victories on behalf of its wrongfully convicted clients. MIC exonerees have served anywhere from a few months to 46 years in prison.

Bob Woodward, Wash-ington Post associate editor, journalistic hustler, and huckster is back.
This time with a book titled “War,” in which he claims Donald Trump, after leaving the White House, called Vladimir Putin seven times and sent him COVID kits which would protect the Russian leader.

Bob Woodward, Wash-ington Post associate editor, journalistic hustler, and huckster is back.

This time with a book titled “War,” in which he claims Donald Trump, after leaving the White House, called Vladimir Putin seven times and sent him COVID kits which would protect the Russian leader.

As usual, Woodward uses anonymous sources, except this time he mentions only one source and admits, according to The New York Times, he could not confirm the information with anyone else.

The Times stated 20 members of the career intelligence community as well as President Biden and former Trump administration officials had no knowledge of any contacts between Trump and Putin.

In the book, as he always does, Woodward uses direct quotes to report on controversial issues when no official transcripts are available. He has never explained this violation of journalistic ethics.

At one point, when President Biden’s son, Hunter, came into the room and chatted with his father, the President just “leaned back in his chair, closed his eyes and sighed.”  We can assume Woodward uncovered this information from a secret vault in the White House.

The book also “reveals” profane-laced statements made by Biden when discussing Israel’s Prime Minister Benjamin Net-nyahu. At one point, we are told, he called Netanyahu a “f---- liar.”
We will have to take Woodward at his word.

This book follows one called “Peril” (co-authored with Robert Costa) in which Woodward states Army General Mark Milley, the chairman of the Joint Chiefs of Staff, called his counterpart in China, General Le Zuocheng, to assure him that he (Milley) would alert him if the U.S. planned to attack China.

Before I go on, is there anyone reading this who believes that the highest-ranking U.S. military official who spent 40 years in the military, would undermine the president and the country by providing such a warning and vital secret information of a surprise attack to an arch-enemy?

I did not think so. Indeed, when asked during a congressional hearing if he would do that, Milley responded under oath, “Of course, I wouldn’t,” adding, “My oath is to support the Constitution of the United States of America against all enemies foreign and domestic.”

Woodward also tell us that despite Milley’s assurances, General Li “remained unusually rattled.” Since no source is cited, we must assume that Woodward was sitting in Li’s office in China when Milley made the call.

Throughout the years, Woodward has violated journalistic ethics, not only with his use of anonymous sources or direct quotes that cannot be proven, but also he frequently reported on what officials were “thinking” in meetings they attended decades earlier. At night, I cannot even remember what I “thought” at breakfast.

But I must give Woodward credit for being shrewd in convincing officials to talk to him off-the-record. His sources understand if they answer his questions, they will not have to worry about being implicated in the subjects Woodward explores because he cannot divulge their identities. Woodward cannot criticize his sources even if they are responsible for the very crises Woodward investigates. They have protection.

Woodward knows all that and he exploits this relationship expertly.

In one case, Woodward did reveal a source. In 1985, he said that the late Supreme Court Associate Justice Potter Stewart was his primary source for his book, “The Brethren,” which dealt with the court.

Woodward did so after Stewart died, when the man could not defend himself.  Not only did Woodward violate the ethic of keeping sources secret -- you never reveal sources -- but his revelation can only be described as ugly, mean-spirited and self-serving. How does one point a finger at a man after his death?  What does that say about character?
Woodward’s career has been rampant with his questionable reporting.

Let’s review another major case involving Woodward’s book, “Veil: The Secret Wars of the CIA, 1981-1987.”

In the book, published in 1987, Woodward claimed that the late CIA Director William Casey confessed to him about illegal arms sales to Iran in what was called the Iran-Contra scandal.

Casey, at the time, was in the hospital, paralyzed and gravely ill following brain surgery, but Woodward claimed he managed to visit Casey in his hospital room despite strict security.

“You knew, didn’t you?” Woodward wrote, inquiring whether Casey was aware that funds from the sale of arms to Iran were being diverted to the Nicaraguan contras.

“His head jerked up hard,” Woodward wrote. “He stared, and finally nodded yes.”

“Why?” Woodward said he asked.  Casey replied faintly, “I believed.”

Casey’s family and intelligence officials all said it was impossible for Woodward to have avoided security to gain access into Casey’s hospital room.

At the time, Time Magazine observed: “It was a perfect ending for Woodward’s dramatic spy saga. Too perfect in the view of some…In familiar Woodward style, ‘Veil’ reads as much like a novel as a work of journalism, with scenes, dialogue and characters’ thoughts re-created. Woodward says he talked to more than 250 people, but his revelations are not directly attributed to specific sources.”

When Woodward’s boss, the late Washington Post Executive Editor Ben Bradlee, spoke at the Detroit Press Club years ago, I asked him how Woodward gets away with his “journalistic compromises.”

Bradlee admitted, “He [Woodward] takes some liberties.”

The major question is: How did Woodward become such a hero in journalism? Newsweek Magazine, in examining Woodward’s work, asked that question in a 2013 article headlined: “The Myth of Bob Woodward: Why Is this Man an American Icon?”

No one in the business has ever answered that.

(Full disclosure: I have not read “War.” I don’t read much fiction. This column is based on news stories discussing the book’s release).

But I must confess that I am indebted to Woodward. When I was still teaching at Wayne State University, he provided me with lots of material for my classes on ethics in journalism.

Auto accident victims continue to feel the devastating impact of the 2019 Automobile No-Fault Reform Act (“Reform Act”). While “fee schedules,” caps on medical expenses, and limitations on home attendant care have caused problems for injured motorists and health care providers, the “option menu” drivers are given when applying for auto insurance has left many people with either limited access to medical care or none at all.

Auto accident victims continue to feel the devastating impact of the 2019 Automobile No-Fault Reform Act (“Reform Act”). While “fee schedules,” caps on medical expenses, and limitations on home attendant care have caused problems for injured motorists and health care providers, the “option menu” drivers are given when applying for auto insurance has left many people with either limited access to medical care or none at all.

Today, Michigan auto policy applications contain an option for drivers to exclude family members in their home from Personal Injury Protection (PIP) medical expense coverage, including attendant care benefits. Under the not-so-new law, drivers may elect to waive or reduce their medical coverage in consideration for a reduced premium payment. However, while the selection may be a personal choice for the named insured on the policy, the impact on other persons in their home, including, a driver’s spouse, can be devastating. The amended provisions of the Reform Act allow an “applicant or named insured” to decline medical expense coverage if they are Medicare eligible, or select minimum medical coverage under the policy if they (and every family member of their home) are covered by a qualified health care (QHC) plan. To make this election, the applicant must simply “certify” that all family members living with them are covered under a qualified health insurance plan.

However, there is nothing in the Reform Act that requires the applicant or named insured to produce a copy of the qualified health plan, declaration page or other proof that health care coverage exists when selecting the lower coverage limit and excluding family members from medical coverage under the policy.

Nor does the law require certification or proof from the spouse or resident relatives that they are covered under a qualified plan. What is most concerning is that the applicant or named insured may exclude their spouse or resident relatives without their knowledge or consent.

While the legislature certainly did not foresee this problem when it hastily passed the Reform Act, the Department of Insurance and Financial Services (DIFS) has issued guidelines in an effort to prevent insurance companies from blindly ripping away coverage to family members who do not have a policy of their own.

The DIFS bulletin states, “If an applicant or named insured has made an ‘effective selection’ under MCL 500.3107c (1)(b) ($250k of coverage), but seeks an exclusion under MCL 500.3109a(2) for any or all eligible household members and then fails to provide the requisite proof of QHC for any or all household members to qualify for the exclusion, the insurer must issue a policy with $250,000 in PIP medical benefits for any or all household members that fail to provide the requisite proof of QHC; and must offer the exclusion to any or all household members that provide proof of QHC.” Of course, not all Michigan auto insurance companies make this a requirement for a driver to obtain coverage. Therein lies the problem.

The danger of allowing a named insured to exclude resident relatives from PIP medical coverage without proof that they are covered under a qualified health care plan is self-evident. An example of the devastating medical and economic impact of allowing insurance companies to issue policies excluding resident family members is ever present in the event of a pedestrian motor vehicle accident whereby an excluded family member sustains serious injury. While courts have recognized an insured’s limited right to elect bodily injury coverage limits under the default minimum where the insured does not “waive, release or compromise a claim or defense” belonging to a minor (See Clark v State Farm Mut Auto Insurance, 2022 U.S. Dist LEXIS 233476), it has not weighed in on the exclusion of a spouse or resident family member from PIP medical expense coverage.

Forecasting how the Michigan courts will address what appears to be a growing issue in prevalence, stare decisis suggests that the DIFS “model” will be treated like a bulletin. In cases where DIFS has provided clear direction on insurance law and regulation, courts — while acknowledging they are not required to follow them — have regarded the bulletins as persuasive authority. From a public policy standpoint, it seems counterintuitive to allow innocent third party beneficiaries of the no fault system to suffer the consequences of losing insurance coverage simply because a named insured either mistakenly believed them to be covered under a qualified health plan or fraudulently certified coverage when none exists. The purpose and intent of the Michigan “no fault” system is precisely as the name suggests, to protect victims of automobile accidents from the insufferable pain and expenses that grow out of an accident. Offering reduced premiums to drivers in exchange for excluding family members from the policy without proof they are covered by a qualified health plan is bad for families and should be addressed by state law makers or corrected by the courts.
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A.Vince Colella is a founding partner of personal injury and civil rights law firm Moss & Colella.