Farm Bureau loses effort to avoid paying PIP benefits

Spectrum Health sued Farm Bureau Mutual Insurance to force it to re-pay Spectrum for medical care provided to Craig Smith, Jr., after a car wreck.  Smith's license was suspended at the time of the collision and he was intoxicated and at fault in causing the single-car wreck where he was injured.  The car he was driving was owned by his parents but had been loaned by them to Smith's girlfriend with strict instructions that  Smith wasn't to drive it. 

Under Michigan's no fault act, a vehicle insurer must pay medical expenses arising out of the use of the vehicle, unless the vehicle has been "taken unlawfully."  Farm Bureau argued that since the parents had told Smith's girlfriend that Smith could not drive the car, the court should hold that the car was taken unlawfully and Farm Bureau should be allowed to avoid paying any PIP benefits, including medical.

The trial court rejected Farm Bureau's argument.  Farm Bureau appealed, but the Court of Appeals unanimously upheld the lower court.  It pointed out that there was long-standing precedent for the holding that "when an owner willingly surrenders control of his vehicle to others he 'consents' to assumption  of the risks attendant upon his surrender of control, regardless of admonitions which would purport to delimit his consent."  That long-standing principle controls in this case, as well.

Unfortunately, even though the outcome of this case was directly controlled by a past case that expressly contradicted Farm Bureau's position, both courts refused to award attorneys' fees to Spectrum.  The no fault law allows for attorneys fees to be awarded for PIP [including medical] expense litigation, where the insurer has "unreasonably denied" payment.  The judges apparently concluded that delaying overdue payments and contesting pre-existing law and settled precedent is not unreasonable.