6.2 Michigan PPI, Residual Tort Liability, Mini-Tort, One-Year-Back Rule & Aftermarket Parts

Michigan PPI, Residual Tort Liability, Mini-Tort, One-Year-Back Rule & Aftermarket Parts

Quick Answer: Michigan's Property Protection Insurance (PPI — MCL 500.3121–.3127) provides mandatory $1,000,000 per-accident no-fault coverage for damage to stationary tangible property (buildings, fences, signs, bridges, trains) and legally parked vehicles occurring inside Michigan, while excluding moving vehicles. Damage to moving vehicles is handled through optional Collision coverage and the Michigan Mini-Tort (MCL 500.3135(3)(e)), which allows an insured driver who is 50% or less at fault to recover up to $3,000 (reduced by comparative fault) for uninsured vehicle damage. Claims adjusters must also enforce the 1-year PIP notice/filing deadline and One-Year-Back Rule (MCL 500.3145), 30-day overdue PIP payment window with 12% simple interest (MCL 500.3142), and 10-point boldface aftermarket crash part disclosures (MCL 257.1363).

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Property Protection Insurance (PPI — MCL 500.3121–500.3127)

Under MCL 500.3121(1), every Michigan No-Fault auto policy includes mandatory Property Protection Insurance (PPI), under which the insurer is liable to pay benefits for accidental damage to tangible property arising out of the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle within the State of Michigan.

Core Characteristics of PPI

• Strict No-Fault Liability (MCL 500.3121(2)): PPI benefits are payable without regard to fault.
• Coverage Composition (MCL 500.3121(3)): Damage to tangible property consists of physical injury to or destruction of the property AND loss of use of the property so injured or destroyed (for example, lost business income while a damaged storefront is boarded up for repairs).
• Statutory Limit of Liability (MCL 500.3121(5)): PPI pays up to $1,000,000 per accident (representing the lesser of reasonable repair cost or actual cash value replacement cost, plus loss of use). No-fault PPI carries no deductible for the third-party property owner.

What PPI Covers vs. What PPI Excludes (MCL 500.3123)

Understanding the boundary between PPI, Part D Collision, Homeowners Insurance, and Out-of-State PD Liability is one of the most heavily tested skills on the Michigan adjuster exam:

PPI Order of Priority & Statute of Limitations (MCL 500.3125 & 500.3145(5))

• PPI Priority (MCL 500.3125): A person suffering accidental property damage in Michigan shall claim PPI benefits from insurers in the following strict order of priority:
  1. First Priority: Insurers of owners or registrants of vehicles involved in the accident;
  2. Second Priority: Insurers of operators of vehicles involved in the accident. (If two moving vehicles collide and ricochet into a bakery storefront, the PPI insurers of both vehicle owners share the bakery's repair and loss-of-use claim, distributing the loss equitably among insurers of the same priority under MCL 500.3127 (which applies MCL 500.3115(2)), regardless of which driver ran the red light!)
• PPI Statute of Limitations (MCL 500.3145(5)): An action for recovery of Property Protection Insurance (PPI) benefits shall not be commenced later than 1 year after the accident.

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Abolition of Tort Liability & The Four Residual Tort Exceptions (MCL 500.3135)

Under MCL 500.3135(3), tort liability arising from the ownership, maintenance, or use within Michigan of a motor vehicle for which compulsory No-Fault security is in effect is abolished, EXCEPT as to the following four statutory exceptions:

1. Intentionally Caused Harm (MCL 500.3135(3)(a))

Tort liability remains intact if a person intentionally caused bodily injury or property damage. Harm is caused intentionally if the person intended both the act that caused the harm and the resulting harm (not mere negligence or gross negligence).

2. Noneconomic Damages (Pain & Suffering) Tort Threshold (MCL 500.3135(1)–(2))

A person remains subject to tort liability for noneconomic loss (pain, suffering, mental anguish, fright, shock, denial of social pleasure and enjoyments) ONLY IF the injured person has suffered at least one of the three statutory threshold injuries:

1. Death;
2. Serious impairment of body function—defined under MCL 500.3135(5) as an objectively manifested impairment (observable or perceivable from actual symptoms or conditions by someone other than the injured person) of an important body function (a body function of great value, significance, or consequence to the injured person) that affects the injured person's general ability to lead his or her normal life; or
3. Permanent serious disfigurement.

Two Absolute Bars to Noneconomic Tort Recovery (MCL 500.3135(2)):

• Modified 50% Comparative Fault Bar (MCL 500.3135(2)(b)): Damages are assessed on the basis of comparative fault, except that damages shall NOT be assessed in favor of a party who is more than 50% at fault.
• Uninsured Owner/Operator Bar (MCL 500.3135(2)(c)): Damages shall NOT be assessed in favor of a party who was operating his or her own motor vehicle or motorcycle involved in the accident without compulsory No-Fault security (MCL 500.3101 or 500.3103) in effect.

3. Excess Economic Damages (MCL 500.3135(3)(c))

An injured person may sue the at-fault driver in tort for allowable medical expenses, work loss, and survivors' loss in excess of the daily, monthly, and 3-year statutory limitations, OR in excess of the dollar limit ($500,000, $250,000, $50,000, or $0 opt-out) selected under MCL 500.3107c or 500.3107d. Note that the injury threshold (death / serious impairment / permanent serious disfigurement) is not required to recover excess economic medical or wage losses in tort, though pure comparative fault reduces the award.

4. The Michigan Mini-Tort: Limited Property Damage Liability (MCL 500.3135(3)(e) & (4))

Because moving vehicles are excluded from PPI and tort liability for vehicle damage is generally abolished, MCL 500.3135(3)(e) creates a narrow exception known as the Michigan Mini-Tort. It allows the owner of a damaged motor vehicle to recover up to $3,000 from the at-fault driver for damage to a motor vehicle, to the extent that the damages are NOT covered by insurance (such as an insured's Standard Collision deductible or out-of-pocket vehicle repair costs when the claimant did not carry Collision coverage).

Three Mandatory Mini-Tort Rules (MCL 500.3135(4))

1. Comparative Fault Applies: Damages are assessed on the basis of comparative fault up to the $3,000 statutory cap.
2. More Than 50% Fault Complete Bar: Damages shall NOT be assessed in favor of a party who is more than 50% at fault (if the claimant is 51% or more at fault, Mini-Tort recovery is $0).
3. Uninsured Claimant Complete Bar: Damages shall NOT be assessed if the damaged motor vehicle was being operated at the time of the accident without compulsory No-Fault security (MCL 500.3101) in effect!

Worked Michigan Mini-Tort Numerical Examples

• Scenario A (Standard Collision Deductible with Comparative Fault): Driver A carries Standard Collision coverage with a $1,000 deductible and suffers $6,000 in vehicle damage. Driver A is 20% at fault and Driver B is 80% at fault. Driver A's own insurer pays $5,000 ($6,000 minus the $1,000 deductible). Driver A's uninsured vehicle loss is $1,000. In a Mini-Tort claim against Driver B, Driver A recovers 80% × $1,000 = $800.
• Scenario B (No Collision Coverage — Capped at $3,000): Driver C carries compulsory No-Fault liability/PIP/PPI only (no Collision coverage), suffers $5,000 in repair damage, and is not at fault (Driver D is 100% at fault). Driver C's uninsured vehicle damage is $5,000, but Mini-Tort recovery is capped at $3,000, so Driver C recovers $3,000 and absorbs the remaining $2,000.
• Scenario C (Broad Form Collision when 50% or Less at Fault): Driver E carries Broad Form Collision with a $500 deductible and is 10% at fault (not substantially at fault). Because Broad Form Collision waives the deductible when the insured is 50% or less at fault, Driver E's insurer pays 100% of the repair bill ($0 out-of-pocket uninsured loss), leaving $0 for Driver E to claim in Mini-Tort.
• Scenario D (Claimant 55% at Fault OR Uninsured): If Driver F is 55% at fault (more than 50%), OR if Driver F was driving their own car without compulsory No-Fault insurance, Driver F recovers $0 in Mini-Tort.

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The One-Year Notice Rule, One-Year-Back Rule & 30-Day Overdue PIP Interest

1. One-Year PIP Statute of Limitations & Written Notice (MCL 500.3145(1))

An action for recovery of Personal Protection Insurance (PIP) benefits may not be commenced later than 1 year after the date of the accident causing the injury UNLESS:

• Written notice of injury has been given to the insurer within 1 year after the accident (identifying the name and address of the claimant and in ordinary language the time, place, and nature of the injury); OR
• The insurer has previously made a payment of PIP benefits for the injury.

2. The One-Year-Back Rule & Statutory Tolling (MCL 500.3145(2)–(3))

Even when the 1-year notice rule is satisfied (allowing a lawsuit to be filed more than a year after the crash), the claimant may NOT recover benefits for any portion of the loss incurred more than 1 year before the date on which the court action was commenced (MCL 500.3145(2)). Under MCL 500.3145(3) (added by the 2019 reform), this 1-year-back limitation period is tolled from the date the person claiming benefits makes a specific claim for payment of benefits until the date the insurer formally denies the claim, provided the claimant pursues the claim with reasonable diligence.

3. Overdue PIP Benefits: 30-Day Payment Window & 12% Simple Interest (MCL 500.3142)

Under MCL 500.3142(2), Personal Protection Insurance benefits are payable as loss accrues and are overdue if not paid within 30 days after an insurer receives reasonable proof of the fact and of the amount of loss sustained. (If a medical provider fails to submit a bill within 90 days after rendering treatment, the insurer has an additional 60 days—90 days total—before the bill becomes overdue under MCL 500.3142(3).) All overdue PIP payments bear simple interest at the rate of 12% per annum (MCL 500.3142(4)).

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Aftermarket Crash Parts Act (MCL 257.1361–.1364)

Under Michigan's Aftermarket Crash Parts Act (1991 PA 158, MCL 257.1361–.1364, effective February 1, 1992), an "aftermarket crash part" replaces a nonmechanical sheet metal or plastic exterior part (such as an inner or outer panel), and a non-OEM part is one not made by or for the vehicle's manufacturer. When an insurer requests non-OEM aftermarket crash parts for an insured's vehicle, a repair facility or installer may use them only if:

1. The insured receives a written repair estimate that clearly identifies each non-OEM aftermarket crash part; and
2. The estimate contains or has attached, in not less than 10-point bold type, the statutory notice: "This estimate has been prepared based on the use of aftermarket crash parts supplied by a source other than the manufacturer of your motor vehicle. Warranties that apply to these replacement parts are provided by the manufacturer, distributor, or insurer of these parts." (MCL 257.1363)