Disciplined in Sophisticated Defense and Insurance Litigation

January 02, 2009 | Publication| What Happens When You Cross the State Line?

Ryan M. Garrett

What Happens When You Cross
The State Line?

By Ryan M. Garrett

    This article was originally published in For The Defense magazine, January 2009, Vol. 51, No. 1, page 26.  Copyright © DRI.  Republished with permission.

    This article began as a compendium of state laws governing the application of no-fault personal injury protection, primarily from the standpoint of insurers’ rights to subrogation for benefits paid to their own insureds, and arising from damages allegedly caused by a commercial vehicle. Not surprisingly, most jurisdictions do not preclude such subrogation rights, and the absence of such preclusions is even more highly evident when insurance carriers’ rights against the owners of commercial vehicles are specifically addressed. This compendium should be viewed as a guide rather than a Bible, as the repeal and sometimes reinstitution of such mandatory coverage by state legislatures certainly make them a moving target. See, e.g. Conn. Gen. Stat. Ann. §§ 38a-365 to 38a-369 (West 2008), repealed, 1993 Conn. Pub. Acts. 93-297, § 28, eff. Jan. 1, 1994); Fla. Stat. §§ 627.733, 627.7407(1) (2007); 2007 Fla. Laws, ch. 324 § 19; 1975 Ill. Laws 78-1297, § 22. Although the compendium table is included, litigators should give careful consideration and attention to the add-on features to no-fault legislation, more particularly the links to associated benefits and risks that some states have made to these no-fault benefits. While some states have remained hands-off, with no legislation requiring or governing such benefits, others, like Florida and New Jersey, have passed a plethora of related legislation, which could leave even bar card-carrying practitioners in those states scratching their heads. It is those links rather than the array of benefits provided pursuant to no-fault legislation, which range from $10,000 in medical benefits to $250,000 in benefits associated with spinal injuries available to the injured party, to which this article turns its focus. Sifting through the related links provides some viable defenses and protections in related tort litigation.

    The basic questions, which are addressed in the compendium (See Table 1) are: 1) whether the venue state has a no-fault system of providing personal injury protection benefits; 2) whether the statutory scheme links other benefits and risks to no-fault coverage and/or its absence, and 3) whether the statutory scheme or interpreting case law has restricted insurers’ ability to recoup such expenditures from the owners of commercial vehicles. Particular care should be taken to ensure that the legislation at issue is not referring to uninsured/underinsured motorist coverage, as that coverage is ambiguously identified interchangeably by various state legislatures in some instances.

    Nineteen states have, at some point, adopted some scheme of no-fault legislation. Ark. Code Ann. 23-89-2 (West 2008). The remaining no-fault schemes among those states are particularly identified in Table 1. Here we focus on the links to other legislation as well as the potential benefits to defending parties from the no-fault schemes, which are sometimes quite useful from a defense perspective.

Hitting the Links

  • Does Your Driver Have PIP Benefits?

    In some jurisdictions, whether an alleged tortfeasor is entitled to protections under the no-fault system is dependent on whether the tortfeasor or vehicle owner have procured personal injury protection benefits. See, e.g., Fla. Stat. § 627.737(2) (2007); Ky. Rev Stat. Ann. § 304.39-060 (West 2008); Mich. Comp. Laws Ann. § 500.3135 (West 2008); Minn. Stat. Ann. § 65B.51, Subds. 1,3 (West 2008); Brazinsky v. State Farm Mut. Auto Ins. Co., 624 N.W. 2d 789 (Minn. App. 2001). Many policies provide such protections only when they are legally required. Of course, the point at which your driver is required to have such benefits is highly variable, as is the manner in which they are allocated. Recognizing that a determination of whether such benefits are, in fact, the equivalent of the required minimums is, in some instances, quite problematic. Some state legislatures have specified that such an evaluation need not be made by the courts. Rather, if the policy “purports” to provide such benefits, they are recognized as existing, which seems to ignore whether that policy provision is factually accurate. Fla. Stat. § 627.733(3)(a) (2007); N.D. Cent. Code § 26.1-41-02(6) (West 2008). Here, answers to such issues as whether the vehicle driven by the allegedly negligent driver was within the state for more than 90 days in the preceding year may be critical in determining whether no-fault benefits are required for a vehicle registered out of state. See, e.g., Fla. Stat. § 627.733(2) (2007). Even the placement of such a foreign jurisdiction coverage provision in the liability section of the policy has been upheld as providing no-fault benefits when they are legally required. Meyer v. Hutchinson, 861 So.2d 1185 (Fla. 5th DCA 2004).

    Michigan has added a particularly unique incentive for its insurers. In summary, an insurer writing policies in Michigan is required to afford no-fault coverage for its non-resident insureds when they are visiting that state. Mich. Comp. Laws Ann. § 500.3163(4) (West 2008). In return, the insurer’s liability is capped at $500,000 when its insureds are involved in accidents in Michigan while operating vehicles registered outside that state. Id. New York requires insurers authorized to transact or transacting business in that state, which sell liability policies in any state or Canada, to include no-fault coverage in their policies that afford such coverage when their insured vehicles are operated in New York. N.Y. Insurance Law § 5107(a) (McKinney 2008). Whether the policy provides such coverage on its face appears to be of little consequence in New York, as it is legislatively mandated to be construed as doing so. Id. at subsection (b). As is noted above, one should also be particularly wary of states like Florida, where the legal requirements for such financial security have been repealed by “sunset” provisions, then reinstituted, thereby leaving a gap in the span over which such coverage is mandated. Fla. Stat. §§ 627.733; 627.7407(1) (2007); 2007 Fla. Laws , ch. 324 § 19.

  • Does the Claimant Have PIP Benefits?

Sometimes, the claimant’s purchase of no-fault benefits or the combination of those benefits being available to both the claimant and the negligent driver are determining factors as to the availability of statutory protections for the negligent driver. In Hawaii, the purchase of minimum mandatory no-fault protection shields the insured owner and driver from bodily injury claims, except in certain circumstances, such as where the accident has resulted in death. Claimants are generally barred from pursuing civil remedies for bodily injury claims unless they have extinguished at least half of the $10,000 in minimum mandatory personal injury protection benefits. Haw. Rev. Stat. § 431-10C-306(b)(4) (West 2008); see also Utah Code Ann. § 31A-22-309 (West 2008). In other jurisdictions, such as Massachusetts and Michigan, the shield from general tort liability generally only extends as far as the payments that were made pursuant to the no-fault benefits. Mass. Gen. Laws Ann. ch. 90 § 34M (West 2008); Mich. Comp. Laws Ann. § 500.3116 (West 2008). In other words, the injured party has no right to recovery unless the damages sought exceed, and are not duplicative, of the benefits received through no-fault coverage.

     Michigan’s legislature has also precluded a claimant who failed to purchase personal injury protection on his own vehicle occupied at the time of the accident, from any noneconomic recovery whatsoever, except in cases involving death, serious impairment of body function, or permanent serious disfigurement and/or intentional acts, if the negligently operated vehicle had no-fault coverage in accordance with that state’s legislative requirements. Mich. Comp. Laws Ann. § 500.135 (West 2008). New Jersey requires the existence of death or disfigurement for a claimant to access noneconomic damages when the tortfeasor has no-fault protection, and the claimant was required to have it. N.J. Stat. Ann. § 39:6A-8(a) (West 2008). Unique to New Jersey is the claimant’s apparent ability to opt out of such threshold injury requirements, so long as they extend the same lack of protection in accidents for which they are responsible. Id. Fortunately, the New Jersey legislature has chosen a default position entitling owners and operators to the threshold injury limitations when their insurance policies afford the requisite coverage. N.J. Stat. Ann. § 39:6A-8.1(b) (West 2008). Conversely, Pennsylvania, which also allows its residents to opt out of a “full tort” claim option, presumably in return for a reduced premium on uninsured/underinsured motorist coverage, utilizes the default position for an insured who has not made a selection in the form of the “full tort” claim option, which does not require a threshold injury to seek non-economic damages. 75 Pa. Cons. Stat. Ann. § 1705 (West 2008). New Jersey takes the firm stance that an injured person who failed to comply with the minimum no-fault security requirements may not assert a bodily injury claim, while Pennsylvania simply selects the limited tort option with the threshold injury requirement for him. N.J. Stat. Ann. § 39:6A-4.5 (West 2008); 75 Pa. Cons. Stat. Ann. § 1705 (West 2008). New York requires a threshold “serious injury” for a covered claimant to assert a claim for noneconomic damages against a covered defendant. N.Y. Insurance Law § 5104(a) (McKinney 2008). In Pennsylvania, a properly covered claimant may assert full tort damages if the negligent driver is operating a vehicle registered in another state, seemingly regardless of whether that vehicle is afforded no-fault protection. 75 Pa. Cons. Stat. Ann. § 1705(d)(1)(ii) (West 2008).

  • Jury Instructions

    In some jurisdictions, whether the alleged tortfeasor has procured personal injury protection benefits is the determining factor as to whether he or she is entitled to the benefit of a threshold injury jury instruction. Fla. Stat. § 627.737 (2007); Ky. Rev. Stat. Ann. § 304.39-060 (West 2008); N.D. Cent. Code § 26.1-4-08(1) (West 2008). Essentially, if the alleged tortfeasor has procured such benefits, the claimant must prove the existence of a permanent injury in order to obtain non-economic damages, namely pain and suffering. Id.; Minn. Stat. Ann. § 65B.51, Subds. 1,3 (West 2008); Brazinsky v. State Farm Mut. Auto Ins. Co., 624 N.W. 2d 789 (Minn. App. 2001). In such jurisdictions, should a jury find evidence of permanency lacking, it will be legally required to restrict itself to an award including only economic loss, namely lost wages and earning potential, and medical expenses. Id. The absence of entitlement to such instructions can affect case valuation in a single level soft tissue claim up to 400 percent, as all claimants are entitled to pain and suffering damages, due to the absence of the necessity of a threshold finding of permanency. Unlike with most collateral benefits, a Florida jury is legislatively entitled to be made aware of the extent to which damages are paid and/or payable by personal injury protection benefits, to avoid duplication of recovery by the claimant. Fla. Stat. § 627.736(3) (2007). In some jurisdictions, the claimant is treated as if he or she has such benefits if he or she was required to purchase them, regardless of whether the benefits were actually procured. See, e.g. Haw. Rev. Stat. § 431:10C-306(a)(2) (West 2008).

  • Subrogation

    The majority of states appear to have no impediment to insurance carriers exercising subrogated interests against the owners and drivers of commercial vehicles for collisions, and ultimately those insurers’ payment of no-fault benefits to their insureds. In Florida and New York, where legislation generally provides statutory bars to exercising such subrogation rights against the owner or operator of a motor vehicle for which no-fault benefits have been purchased, those bars are lifted where the negligent party happens to be operating a commercial vehicle. Fla. Stat. § 627.7405 (2007); N.Y. Insurance Law § 5105(a) (McKinney 2008). In New York, such a claim is required to be pursued through arbitration. N.Y. Insurance Law, § 5105(b) (McKinney 2008). In Minnesota, this subrogation right is available only for benefits beyond those recoverable by the injured party, as opposed to a lien against their recovery, unless the tortfeasor was operating a commercial vehicle exceeding 5,500 pounds in curb weight, and is likewise subject to arbitration. Minn. Stat. Ann. 65B.53, Subds. 1,3. (West 2008).

    In Michigan, the procurement of personal injury protection for the negligently operated vehicle, regardless of its commercial classification, shields its owners from a subrogation claim. Mich. Comp. Laws Ann. § 500.3116 (West 2008). Although Colorado’s legislatively mandated personal injury protection benefits requirements were repealed in 2003, Colo. Rev. Stat. Ann. § 10-4-706 (West 2008), there remain common law restrictions on subrogation for the no-fault insurance carrier’s payments. Employers Fire Insurance Co. Lumbermen’s Mut. Cas. Co., 964 P.2d 591 (Colo. App. 1998) (as to workers’ compensation carrier, and based on fee schedules accompanying Colorado’s workers’ compensation legislation). Missouri has taken the unique position that the contractual assignment of such a right to the insurer is viewed as the assignment of a tort claim, and is therefore against public policy. Farmers Ins. Co. v. McFarland, 976 SW 2d 559 (Mo. App. W.D. 1998). North Carolina has rejected such a contention, finding that such a “substitution” is not tantamount to an assignment. Carver v. Mills, 22 N.C. App. 745, 207 S.E.2d 394 (N.C. App. 1974). Montana purportedly allows such claims, but requires that the insured first be “made whole,” even to the extent of any attorneys’ fees and costs expended in pursuing a tort claim, so no insurer has attempted to prove the facts requisite for such a recovery since 2002. Swanson v. Hartford Ins. Co. of Midwest, 309 Mont. 269, 46 P.3d 584 (Mont. 2002). Although the issue does not appear to have been directly addressed in Nebraska, a similar result should be anticipated there, in view of its public policy stance on disallowing the enforcement of insurance policy provisions associated with subrogated interests in the stated priority interest of making the insured whole. See Muller v. Tri-State Ins. Co. Of Minnesota, 252 Neb 1, 560 NW 2d 130 (Neb. 1997).

    While Oklahoma allows subrogation for no-fault payments under some circumstances, the exclusion of such right with regard to the carrier’s payments for the benefit of its insureds and members of their households has probably reduced that legislation to be of questionable value to insurance carriers. Okl. Stat. Ann. tit. 36 § 6092 (West 2008). In those venues where subrogation by the personal injury protection carrier is not permitted, practitioners should give special attention to evaluating the law to determine whether such payments are legally considered collateral benefits that may not be presented to a jury, thereby reducing or eliminating admissible evidence of economic loss at trial.

Conclusion

    While no-fault schemes are widely diverse, their links to add-on protections, benefits, and even penalties for non-compliance are valuable tools for litigators. These links may be associated with mandatory no-fault coverage on the part of the claimant, coverage on the part of the negligent tortfeasor, and sometimes both. Some legislatures have adopted schemes where certain insurers doing business in their state are deemed to provide such coverage, even where their policies are silent, or even inaccurate in their efforts to do so. In foreign jurisdictions where your driver is insured for no-fault benefits, the state legislatures may have enacted legislation selecting certain litigation oriented options associated with his failure (due to the lack of opportunity) to make such a selection. These links may be determinative of a tortfeasor’s entitlement to jury instructions associated with mandatory threshold injuries, thereby creating hurdles to a claimant’s ability to recover non economic damages, as well as the presentation of no-fault benefits paid or payable at trial. Special care should be taken to avoid gaps in the applicability of no-fault legislation, as repeal and even reinstitution of such schemes are frequent occurrences.

Table 1.  PIP Compendium

No-Fault
Scheme

Subro
Available

Links to Damages

Alabama

No

Yes

No

Alaska

No

Yes

No

Arizona

No

Yes

No

Arkansas

Yes

Yes

No

California

No

Yes

No

Colorado

No

Yes

No

Connecticut

No

Yes

No

Delaware

No

Yes

No

Florida

Yes

Yes

Yes

Georgia

No

No

No

Hawaii

Yes

Yes

Yes

Idaho

No

Yes

No

Illinois

No

Yes

No

Indiana

No

Yes

No

Iowa

No

Yes

No

Kansas

Yes

No

No

Kentucky

Yes

Yes

Yes

Louisiana

No

Yes

No

Maine

No

Yes

No

Maryland

Yes

No

No

Massachusetts

Yes

Yes

Yes

Michigan

Yes

Yes
(unless PIP coverage on tortfeasor’s vehicle)

Yes

Minnesota

Yes

Yes

Yes

Mississippi

No

Yes

No

Missouri

No

No

No

Montana

No

Yes

No

Nebraska

No

Yes

No

Nevada

No

Yes

No

New Hampshire

No

Yes

No

New Jersey

Yes

Yes

Yes

New Mexico

No

Yes

No

New York

Yes

Yes

Yes

North Carolina

No

Yes

No

North Dakota

Yes

Yes

Yes

Ohio

No

Yes

No

Oklahoma

No

Yes
(except as to insureds and household members)

No

Oregon

Yes

Yes

No

Pennsylvania

Yes

No

Yes

Rhode Island

No

Yes

No

South Carolina

No

No

No

South Dakota

No

Yes

No

Tennessee

No

Yes

No

Texas

No

Yes

No

Utah

Yes

Yes

Yes

Vermont

No

Yes

No

Virginia

No

Yes

No

Washington

No

Yes

No

West Virginia

No

Yes

No

Wisconsin

No

Yes

No

Wyoming

No

Yes

No

    Ryan M. Garrett is a senior associate with the Tallahassee, Florida, office of Butler , focusing his practice on third-party liability defense. He has litigated commercial trucking claims, automobile negligence, products liability, toxic mold, contractor liability claims, and professional negligence. Mr. Garrett previously served as a board member and president of the Young Lawyers Section of the Tallahassee Bar Association and on the Marketing Subcommittee of the DRI Young Lawyers Committee.

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