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Carter v Owners Ins Co (COA – UNP 5/12/2022; RB #4409)   


Michigan Court of Appeals; Docket #356556; Unpublished  
Judges Letica, Markey, and O’Brien; Per Curiam 
Official Michigan Reporter Citation: Not Applicable; Link to Opinion

Obligations of Admitted Insurers to Pay PIP Benefits on Behalf of Nonresidents Injured in Michigan [§3163(1)]

Equitable Estoppel
Mend the Hold

In this unanimous, unpublished, per curiam decision, the Court of Appeals reversed the trial court’s denial of Defendant Auto-Owners Insurance Company’s (“Auto-Owners”) motion for summary disposition seeking dismissal of Plaintiff Christopher Carter’s first-party action, and remanded to the trial court for entry of an order granting summary disposition in Auto-Owners’ favor.  The Court of Appeals held, first, that Carter, an Ohio resident at the time of the subject motor vehicle collision, was not entitled to no-fault PIP benefits for the injuries he sustained in the collision under the pre-2019-amendments version of MCL 500.3163(1).  The Court of Appeals held, second, that the “mend the hold” doctrine did not apply in this case such as would estop Auto-Owners from raising MCL 500.3163(1) as a defense after it had previously given an alternative, contradictory basis for denying Carter’s claim for PIP benefits.

Christopher Carter was riding his scooter across the road at a crosswalk when a vehicle driven by Michael Ragland crashed into him.  At the time of the crash, Carter was attending Wayne State University and living in an apartment in Detroit.  Carter’s father, an Ohio resident, had automobile insurance through Auto-Owners.  Carter filed a claim for benefits with Auto-Owners, who wrote Carter a letter denying coverage because Carter was not a named insured on his father’s policy, nor a domiciled relative of his father.  The letter then directed Carter to Ragland’s insurer, Farm Bureau Insurance Company (“Farm Bureau”).  Carter proceeded to file claims for PIP benefits with both Auto-Owners and Farm Bureau, but did not receive any benefits for nearly a year, at which point he filed a first-party action against Auto-Owners, only.  Auto-Owners moved for summary disposition, albeit based on a different reason than that which it proffered in its original denial letter to Carter: it now conceded that Carter was a non-resident at the time of the crash (a domiciled relative of his father, in Ohio), but argued that he was still excluded from benefits under the version of MCL 500.3163(1) in effect prior to the 2019 amendments to the No-Fault Act because his injuries did not arise out of his own use of a motor vehicle as a motor vehicle, as is required under the pertinent statutory language.  The trial court ultimately denied Auto-Owners’ motion, ruling that MCL 500.3163(1) did not apply to the present case due to Carter’s status as a pedestrian and, alternatively, that because Carter detrimentally relied on Farm Bureau’s original basis for denial, Farm Bureau was estopped from subsequently relying on a contradictory defense under MCL 500.3163(1).

The Court of Appeals reversed the trial court’s denial of Auto-Owners’ motion for summary disposition, holding, first, that Carter was not entitled to PIP benefits from Auto-Owners under the pre-amendment version of MCL 500.3163(1).  The plain language of the pre-amendment version of MCL 500.3163(1) provided that out-of-state residents were only entitled to no-fault PIP benefits from certified insurers if their injuries arose out of their use of motor vehicles as motor vehicles.  In this case, it was undisputed that Carter’s injuries did not arise from his use of a motor vehicle, but rather from Ragland’s.  Thus, Auto-Owners was not liable for his claim under the pre-amendment version of MCL 500.3163(1).

“Under the plain language of the statute, the out-of-state insurer is liable for Michigan PIP benefits under no-fault act only if the nonresident’s injuries arose from ‘the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle by [the] out-of-state resident.’ MCL 500.3163(1) (emphasis added). There is no dispute that plaintiff here was doing none of those things—everyone agrees that he was a pedestrian when he was hit by Ragland’s vehicle. Because plaintiff’s injuries did not arise from his ‘ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle,’ defendant was not obliged under MCL 500.3163(1) to cover plaintiff’s PIP expenses, and the trial court erred when it concluded differently.” 

The Court of Appeals next turned to the issue of whether Auto-Owners should be estopped from raising MCL 500.3163(1) as a defense based on the “mend the hold” doctrine.  The Court observed that in Smit v State Farm Mut Auto Ins Co, 207 Mich App 674 (1994), it held that the “mend the hold” doctrine does not apply in cases where “application would result in broadening the coverage of a policy, such that it would ‘cover a loss it never covered by its terms,’ ”  However, in Lee v Evergreen Regency Co-op & Mgt Sys, Inc, 151 Mich App 281 (1986), the Court identified two exceptional classes of cases, in which estoppel can be used “ ‘to bring within coverage risks not covered by the policy terms’ ”: 

“The first class involves companies which have rejected claims of coverage and declined to defend their insureds in the underlying litigation. In these instances, the Court has held that the insurance company cannot later raise issues that were or should have been raised in the underlying action. . . . 

The second class of cases allowing the limits of a policy to be expanded by estoppel or waiver . . . involves instances where the inequity of forcing the insurer to pay on a risk for which it never collected premiums is outweighed by the inequity suffered by the insured because of the insurance company’s actions. The insurance company has either misrepresented the terms of the policy to the insured or defended the insured without reserving the right to deny coverage. [Id. at 286-287 (citations omitted).]” 

In this case, application of the “mend the hold” doctrine would broaden the coverage of the Auto-Owners policy such that it would cover a loss Auto-Owners was not required to cover under the policy or the no-fault act, and the Court of Appeals held that this case did not fall under either class of exceptional cases identified in Lee.  It clearly did not fall under the first class, as there was “no underlying action in which defendant could have raised the arguments now at issue,” nor did it fall under the second class. despite Carter’s argument regarding prejudice—specifically, that “if defendant is found not liable, [Carter] will be unable to collect any of the PIP benefits to which he is statutorily entitled from any other insurers as those claims would be barred by the one-year-back rule.”  Any such detriment, according to the Court, would be solely attributable to Carter’s decision to name only Auto-Owners in this action, not to Auto-Owners original basis for denying his claim.

“Plaintiff argues that he will be prejudiced if defendant is able to raise this belated argument for non-coverage because, if defendant is found not liable, plaintiff will be unable to collect any of the PIP benefits to which he is statutorily entitled from any other insurers as those claims would be barred by the one-year-back rule. This, however, is the result of plaintiff’s decision to name only defendant in this action, and is not related to defendant’s belated argument under MCL 500.3163. 

Plaintiff counters that when he named only defendant as a party to this suit, he did so in reliance on defendant’s stated reason for denying his claim in the initial denial letter. Accepting this as true, plaintiff was simply not justified in relying on defendant’s denial letter to file his complaint against defendant only. The letter in no way suggested that defendant was the only insurer possibly liable for plaintiff’s PIP benefits. To the contrary, the letter explicitly directed plaintiff to the appropriate insurer to cover his claim—Ragland’s insurer, Farm Bureau. Plaintiff alone is responsible for his decision to name only defendant in this action. To any extent that plaintiff relied on defendant’s initial denial letter in naming only defendant as a party to this suit, the reliance was not justifiable. Accord Lee, 151 Mich App at 288 (holding that the plaintiff’s case did not fall into the ‘second class of cases,’ and thus estoppel did not apply, because the ‘plaintiff’s reliance on Lexington’s denial letter was not justifiable’).” 

Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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