"Innocent third-party" rule governs controversy between two PIP carriers
Garrit Hewitt was catastrophically hurt in a car accident. He was estranged from his wife and living with his parents at the time. His wife carried auto insurance with Great Lakes Casualty and his parents' insurance was with Auto Owners. He was covered by both policies, and they initially shared the $500,000.00-plus medical expenses equally. Great Lakes then discovered a "material misrepresentation" in Mrs. Hewitt's insurance application and voided her policy. It argued that Auto Owners should bear the full cost of the accident because Mrs. Hewitt's policy was void ab initio [from the outset] and that the "innocent third party" exception should not apply because there was alternative coverage available through Auto Owners. Both the trial court and the Court of Appeals rejected Great Lakes' claim. They concluded that Mr. Hewitt was in fact innocent and therefore Great Lakes was required to provide the statutorily-mandated coverages to him--whether or not other coverage was available. Of course, by operation of this rule, an innocent party with a liability claim would receive only $20,000.00 since that is still the mandatory minimum liability coverage in Michigan. Several attempts to "reform" the statute and increase the 1974 minimum liability coverage (which is still the cheapest aspect of no fault insurance coverage, by far) have been successfully blocked by auto insurance companies.