A $1-million reimbursement dispute between Farmers Insurance Exchange and Hudson Insurance Company is set to influence how Michigan insurers handle priority and personal protection insurance (PIP) claims.
On October 22, the Michigan Court of Appeals approved for publication its decision in Farmers Insurance Exchange v Hudson Insurance Company. The case arose from a 2016 trucking accident involving Syrja Lekli, who was injured while driving a Peterbilt truck leased by Pergjoni Transport to B&W Cartage Company. At the time, the truck was insured under two policies, one from Great American and one from Hudson Insurance Company.
After the accident, Lekli applied for PIP benefits through the Michigan Automobile Insurance Placement Facility (MAIPF), citing a dispute between his personal auto insurer, Farm Bureau, and Great American. The MAIPF initially denied the claim, stating that higher identifiable coverage existed, and requested additional information from Lekli, which was not supplied.
The litigation focused on which insurer was responsible for paying the PIP benefits. Great American’s policy included an exclusion for accidents occurring when the truck was being used in the business of a lessee or for transporting cargo. The court determined this exclusion was valid, which meant Great American was not responsible for the claim. Hudson was identified as the highest priority insurer.
Farmers Insurance Exchange, assigned the claim through the MAIPF, paid $967,521.23 in PIP benefits to Lekli, plus loss adjustment costs, attorney fees, and interest, seeking a total of $1,089,319.10 from Hudson. Farmers filed suit against Hudson for reimbursement under Michigan law.
Hudson argued that prior court decisions had found it not liable to Lekli due to lack of timely notice under MCL 500.3145, and that doctrines such as collateral estoppel and res judicata barred Farmers’ reimbursement action. Hudson also contended that Farmers’ claim was essentially subrogation and should be subject to the same procedural bars as Lekli’s original claim.
The Michigan Court of Appeals rejected these arguments. The court held that Farmers’ statutory right to reimbursement under MCL 500.3175 is independent of Lekli’s ability to recover directly from Hudson. The court found that Michigan law allows an insurer assigned a claim under the MAIPF to seek reimbursement from a higher-priority insurer, regardless of whether the injured party could have recovered directly. Collateral estoppel and res judicata did not apply, as Farmers was not in privity with Lekli and its reimbursement claim had not been litigated in prior actions.
The appellate court affirmed the trial court’s decision to grant summary disposition in favor of Farmers, allowing it to recover the full amount paid in PIP benefits from Hudson. The decision clarifies that assigned insurers have a separate statutory right to reimbursement, reinforcing the obligations of insurers under Michigan’s no-fault system.
