One-Year Back Rule Limitation [§3145(1)]
No-Fault Insurer Claims for Reimbursement
In this 2-1 unpublished per curiam decision (Letica, dissenting), the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff LM General Insurance Company’s (“LM General”) action against Defendant Trumbull Insurance Company (“Trumbull”), in which LM sought reimbursement from Trumbull for no-fault benefits it accidentally paid to Trumbull’s insured, despite Trumbull being the highest priority insurer with respect to its insured’s claim. The Court of Appeals held that the one-year-back rule, MCL 500.3145(1), did not apply to LM’s action for reimbursement from Trumbull.
Fectoria Hana was injured in a motor vehicle collision in 2016. The vehicle Hana was traveling in as a passenger at the time of the collision was insured by LM General, but Hana herself was a named insured under a policy with Trumbull. LM General stepped in and mistakenly paid Hana’s no-fault PIP benefits from September 2016 through June 2019, but then stopped, presumably having discovered that Trumbull was higher in priority. Hana filed a first-party action against LM General and Trumbull, and before a hearing on LM General’s motion for summary disposition, Trumbull’s counsel conceded that it was higher in priority and that the source of its confusion was the fact that Hana’s name was misspelled on her policy. Trumbull’s counsel requested that LM General simply send a proposed order for dismissal in lieu of proceeding with the hearing on LM General’s motion for summary disposition, which LM General did, and the case was ultimately dismissed with prejudice. No judgment was entered, however, and six months elapsed wherein Trumbull did not reimburse LM General. LM General then filed this action in May of 2019, seeking reimbursement of the PIP benefits it paid to Hana through June of 2019, but the trial court granted summary disposition in Trumbull’s favor based on the one-year-back rule.
The Court of Appeals reversed the trial court’s summary disposition order, holding that, for multiple reasons, the one-year-back rule did not apply in this case. First, the Court held that LM General was not a “ ‘claimant’ ” under MCL 500.3145(1). In so holding, the Court relied on its previous holding in Allstate Ins Co v State Farm Mut Auto Ins Co, 321 Mich App 543 (2017). In Allstate, the Court was confronted with an analogous situation and held that the third-party injured person—not the plaintiff insurance company seeking reimbursement from the higher priority defendant insurance company—was the “claimant” for purposes of a similar statute. Thus, the Court held that LM General was not a “claimant” in this case, and that MCL 500.3145(1), therefore, did not apply.
“Allstate is analogous to the case before us. There, the claimant was a pedestrian struck by a car. Id. at 546. The Michigan Assigned Claims Plan (MACP) assigned Allstate to pay the injured claimant’s no-fault benefits, and Allstate did so. Id. at 546-547. Allstate later learned that the driver responsible for the accident was insured by State Farm. Allstate sued State Farm to recoup the no-fault benefits it had paid on the claimant’s behalf. Id. at 547. To avoid repaying Allstate, State Farm invoked a limitations provision pertaining to MACP claimants that is somewhat similar to MCL 500.3145(1). Allstate, 321 Mich App at 547-548. The MACP-related statute, MCL 500.3175(3), stated in part: ‘[a]n action to enforce rights to indemnity or reimbursement against a third party shall not be commenced after the later of 2 years after the assignment of the claim to the insurer or 1 year after the date of the last payment to the claimant.’ Allstate, 321 Mich Ap at 548.
This Court explained that MCL 500.3175(3) did not preclude Allstate from recovering against State Farm despite that Allstate named State Farm as a defendant more than two years after Allstate had been assigned the claim. The injured party was the claimant, we highlighted, ‘because she had a right to PIP benefits from [Allstate].’ Allstate, 321 Mich App at 559. And since Allstate had made two payments on the claimant’s behalf within one year of naming State Farm as a party defendant, we found that the payments satisfied the limitations period applicable to the MACP. Id. at 560-561.
Hana was the claimant in the 2017 action, and her claim for benefits was timely under the one-year-back rule. Because LM General is not a ‘claimant’ under the no-fault act and made payments to Hana in a timely fashion, Allstate counsels that the one-year-back rule does not apply, despite that some of LM General’s timely payments to the claimant (Hana) were made more than a year before it was forced to file this suit.”
The Court of Appeals next rejected Trumbull’s argument that, because LM General was Hana’s “subrogee,” with the same rights as Hana, herself, and because Hana, herself, could not have filed an action against Trumbull at the time LM General filed the instant action because of the one-year-back rule, LM General's action was also barred by the one-year-back rule. The Court of Appeals noted that LM General was not suing Trumbull “to enforce a right, duty, or claim owed to Hana.” Rather, LM General’s was suing Trumbull because “Trumbull violated an entirely separate and distinct agreement to reimburse LM General for the payments LM General had made.” In other words, LM General’s lawsuit was not “an action for recovery of personal protection insurance benefits” under MCL 500.3145(1).
“Trumbull resists this interpretation of the one-year-back rule, insisting that as Hana’s ‘subrogee,’ LM General acquired only the same rights as Hana would have had. Hana could not have recovered no-fault benefits had she filed suit in 2019 when LM General did, Trumbull reasons, because more than a year had elapsed since her last loss was incurred.4 Whether LM General is actually Hana’s ‘subrogee’ is not entirely straightforward. A subrogee is ‘one who is substituted for another in having a right, duty, or claim.’ Harris v Auto Club Ins Ass’n, 494 Mich 462, 472 n 29; 835 NW2d 356 (2013) (cleaned up). Hana brought an action for benefits. LM General is not suing to enforce a right, duty, or claim owed to Hana; her claim for benefits has been paid and liability decided. Rather, LM General alleges that Trumbull violated an entirely separate and distinct agreement to reimburse LM General for the payments that LM General had made. See Cooper v Auto Club Ins Ass’n, 481 Mich 399, 407; 751 NW2d 443 (2008) (finding that a fraud action was not subject to the one-year-back rule ‘because the one-year-back rule applies only to actions brought under the no-fault act’ and a fraud action was ‘a distinct and independent action’). This action was filed not to determine whether a no-fault claimant was entitled to benefits, or which insurance company was responsible for payment. Those questions were answered in chapter one. Although the no-fault insurance system supplies this chapter’s factual background, the central issue is whether Trumbull’s promise to pay is legally enforceable. Accordingly, the one-year-back rule does not apply.”
Lastly, the Court of Appeals held that, “even if we assume LM General is Hana’s subrogee, her claim was timely under the one-year-back rule,” and thus, “[s]tanding in Hana’s shoes, so is LM General’s.” The Court expanded on this reasoning in a footnote, stating:
"Our Supreme Court’s recent decision in Esurance Prop & Casualty Ins Co v Mich Assigned Claims Plan, __ Mich __; __ NW2d __ (2021) (Docket No. 160592), reinforces this conclusion. Esurance involved an equitable subrogation claim arising from an insurance company’s payment of no-fault benefits that it later determined it did not owe. The Supreme Court upheld the insurance company’s right to pursue equitable subrogation against the entity potentially responsible for payment, the Michigan Assigned Claims Plan. Citing several statutory pillars of the no-fault act, the Court summarized:
‘What emerges from these statutes is an axiom of both no-fault insurance law and practice: insurers like Esurance must pay PIP benefits to claimants promptly and sort out priority and reimbursement issues later. That axiom is actualized by the very real possibility that steep penalties will be assessed against an insurer that drags its feet in paying PIP benefits to claimants. [Id., slip op at 18.]
The Supreme Court did not directly address the one-year-back rule in Esurance, but if it applied, Esurance’s victory would be hollow indeed. The Court did point out that the no-fault act ‘strongly incentivize[s] insurers like Esurance to adhere to the no-fault act’s ‘pay promptly, litigate later’ logic.’ Id., slip op at 16. LM General not only paid promptly—it rapidly resolved Hana’s underlying, timely filed lawsuit. The letter and spirit of Esurance buttress our decision here.”
Judge Letica dissented, arguing that because LM General was Hana’s subrogee—and because this case was a subrogation action—the one-year-back rule did apply.
“Although an action to enforce a previous no-fault judgment is not subject to the one-year- back rule, LM General’s argument that this is an action to enforce a prior judgment is unpersuasive. In the previous action brought by Hana, the trial court did not indicate the basis on which it was granting summary disposition. The court merely indicated it was granting LM General’s motion. See Hana v The Hartford Ins Co, unpublished order of the Wayne Circuit Court, entered November 28, 2018 (Docket No. 2017-011268-NF). Even so, the parties agree that the only issue the trial court resolved with its order granting summary disposition was that Trumbull (Hartford) was higher in priority than LM General to pay Hana’s no-fault benefits. That being so, LM General is not seeking to merely enforce the previous judgment8 as it alone would be insufficient to provide the monetary relief LM General seeks. In order to be entitled to the relief LM General seeks, it would have to satisfy a number of additional requirements provided for in the no-fault act. Specifically, LM General would have to establish that the expenses it paid were allowable expenses under MCL 500.3107(1)(a). To be allowable expenses, they must have been reasonable in amount and reasonably necessary for Hana’s care, recovery, or rehabilitation. MCL 500.3107(1)(a). Because LM General must prove such facts before it is entitled to recover PIP benefits it paid to Hana from Trumbull, LM General’s action is not one to enforce a previous judgment; instead, it is ‘[a]n action for recovery of [PIP] benefits payable under’ the no-fault act. MCL 500.3145(1). Stated another way, Trumbull has not breached a substantive obligation to compensate LM General for the PIP benefits LM General paid to Hana that was imposed by a previous judgment. Dorko, 504 Mich at 77. Instead, Trumbull is alleged to have breached a substantive obligation imposed by the no-fault act itself. Accordingly, LM General does not have a cause of action independent of the no-fault act, Dorko, 504 Mich at 77, and the one-year-back rule applies to LM General’s action. Thus, LM General ‘may not recover benefits for any portion of the loss incurred more than 1 year before the date on which the action was commenced.’ MCL 500.3145(1). Because there is no genuine issue of material fact that LM General commenced this action on May 8, 2019, the trial court properly granted partial summary disposition to Trumbull under MCR 2.116(C)(10) as to any loss LM General incurred before May 8, 2018. Highfield Beach, 331 Mich App at 653.”