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Who is First Priority to Pay an Accident Victim’s Personal Injury Protection (PIP) Coverage?

September 23, 2021

An insurance company recently appealed a trial court’s order finding that it was first in priority for purposes of paying a semi driver PIP or personal injury protection insurance.

Personal injury protection insurance is auto insurance coverage that’s required in Michigan (unless you have a health insurance policy that covers auto injuries and has a deductible of $6,000 or less). These benefits help motor vehicle accident victims by paying for medical expenses and reimbursing lost wages. It doesn’t matter who is at fault in the accident. So, rather than bringing a lawsuit against the at-fault driver, the accident victim’s insurer usually pays. Speak to a Grand Rapids injury attorney to learn more.


On November 6, 2017, the plaintiff was driving a semi that he owned and carrying a commercial load under an agreement with Universal, Mason & Dixon Intermodal (“Universal”) when he was involved in an accident.

At the time, Plaintiff’s company (Toduti 4, LLC) owned three non-commercial vehicles that he’d insured through Progressive, but Progressive didn’t insure his semi. Universal leased the truck from Plaintiff pursuant to an independent contractor agreement and had insurance on the semi-truck through Cherokee Insurance (“Cherokee”).

After the accident, Plaintiff sought personal protection insurance (PIP) benefits from Progressive and Cherokee Insurance. Both insurance companies denied responsibility for the benefits. Plaintiff then filed a complaint for first-party benefits as to both insurers.

Progressive moved for summary disposition, arguing that because Plaintiff was injured while operating a commercial vehicle at the time of the accident, MCL § 500.3114(3) controlled his claim and that the insurer of the semi, Cherokee Insurance, was first in priority to pay his PIP benefits. Cherokee said that Plaintiff was an independent contractor—not an employee—so Progressive was first in priority to pay his no-fault benefits.

The trial court granted Progressive’s motion for summary disposition, finding that a person can be a self-employed independent contractor and thereby retain the status of both employer and employee. The trial court said there was no dispute Plaintiff was an occupant of the commercial big rig and was acting in the scope and course of his employment at the time of the accident. The judge also found that if a person is self-employed, he or she is necessarily both employer and employee for purposes of Michigan Statute § 500.3114(3), which states who is entitled to personal protection insurance benefits. The trial court said even if Plaintiff was an independent contractor, he was still necessarily an employee of himself, so the statute’s employer-employee exception to its general priority provision applied. As a result, Cherokee was highest in priority for payment of his PIP benefits. Cherokee appealed the ruling.

The Appellate Court Decision

On appeal, Cherokee Insurance argued that the trial court erred in finding that Plaintiff was an employee rather than an independent contractor to hold that (1) the exception set forth in MCL 500.3114(3) applied, and (2) that Cherokee Insurance was thus first in priority for payment of plaintiff’s PIP benefits. However, the Court of Appeals disagreed.

In a per curiam opinion, Michigan Court of Appeals Judges Anica Letica, Deborah A. Servitto, and Michael J. Kelly wrote that a person injured in an automobile accident is generally required to seek compensation from his own no-fault insurer, regardless of whether that person’s insured vehicle is involved in the accident. But the Michigan Legislature provided a number of exceptions to that general rule, including the one found at § 500.3114(3). That exception provides, in general, that an employee who suffers accidental bodily injury while an occupant of a motor vehicle owned or registered by the employer is to receive PIP benefits from the insurer of the furnished vehicle.

The Court found that the exception in § 500.3114(3) also applies when an injured person is self-employed and operating an insured vehicle. The subsection states:

An employee, his or her spouse, or a relative of either domiciled in the same household, who suffers accidental bodily injury while an occupant of a motor vehicle owned or registered by the employer, shall receive personal protection insurance benefits to which the employee is entitled from the insurer of the furnished vehicle.

Economic Reality Test Determines if an Injured Party was an “Employee”

The Court of Appeals explained that for purposes of § 500.3114(3), whether an injured party was an ’employee’ is determined by applying the economic reality test. That test has four factors:

  • Who’s in control of the worker’s duties;
  • Who pays his or her wages;
  • Who has the right to hire, fire, and discipline; and
  • Whether the performance of the worker’s duties are an integral part of the employer’s business toward the accomplishment of a common goal.

Moreover, the test looks at the totality of the circumstances surrounding the work performed, and no one factor is controlling. Plus, the list of factors is nonexclusive and other factors may be considered as each individual case requires.

The Court explained that a person can even have dual or co-employers. In those cases, the employee usually has a readily identifiable legal or actual employer, and the determining factor is whether, under the economic realities test, a second entity can also be classified as an employer.

Applying the economic reality factors, the Court of Appeals found that Plaintiff was an employee of Universal.

Who’s in Control of the Worker’s Duties. As to factor (a), the agreement between Plaintiff and Universal is titled “Independent Contractor Agreement” and specifies in several places throughout that he’s an independent contractor and not an employee of Universal. Plaintiff also testified at deposition that he could decide which routes to take to pick up and deliver loads and could refuse to take a load if he wanted. But the Court said these facts have little weight when gauged against the remaining facts.

Plaintiff testified that Universal’s dispatch at acted in a supervisory capacity over him and that there was also a “big manager.” He said that Universal’s dispatch “would control all the routes and everything and if we get on time and if we need to pick up another load and everything.” Plus, he testified that while he was driving the semi-truck under the agreement with Universal he was not allowed to drive or carry loads for other companies and could not use the semi-truck for any purpose but Universal’s business. He kept the 18-wheeler at Universal’s company yard and the truck bore Universal’s logo. He also used a computer log provided by Universal to keep records on everything to do with the semi-truck. Further, the agreement could be terminated by either party, for any reason, indicating an at-will employment agreement.

These facts, in totality, indicated sufficient control over Plaintiff’s company and the driver’s duties to establish that they were employees of Universal. Thus, this factor weighed in favor of plaintiff being an employee.

Who Pays His Or Her Wages. As to factor (b), Plaintiff testified that Universal paid him weekly and the pay varied, based on how many loads he transported. He was paid 69% of the adjusted gross revenue of loads. In addition, Universal issued him a 1099 each year. The form shows that the 1099 was issued to Toduti 4 LLC. Plaintiff testified, however, that he filed taxes in his own name only and all income from Universal was reported on his personal taxes.

Who has the Right to Hire, Fire and Discipline. Concerning factor (c), who has the right to hire, fire and discipline, Plaintiff testified that he had to go through a month and a half of training with Universal before he was allowed to drive for them. The agreement said that Universal had the right to disqualify drivers, which is the same as the right to hire, fire, and discipline.

Whether Performance of the Worker’s Duties is an Integral Part of the Employer’s Business Toward The Accomplishment of a Common Goal. Plaintiff was only one of, in his estimation, hundreds, of drivers used by Universal. The Court of Appeals found that Plaintiff’s duties as a truck driver for Universal were an integral part of the accomplishment of common goals, namely: providing trucking services for income.


As a result, the Court’s application of the economic realities factors favored finding that Plaintiff was an employee and that Cherokee was therefore first in priority for payment of his PIP benefits.

The Court found that because Plaintiff was self-employed by Toduti 4, LLC as its sole employee, and Universal had an agreement to use the semi-truck and Toduti 4 LLC’s trucking services, Plaintiff could be seen as being an employee of both Toduti 4, LLC and Universal. That was demonstrated by the agreement between Toduti 4 LLC and Universal and the fact that plaintiff was the sole proprietor of Tofutti 4 LLC and its only employee. Even if plaintiff was deemed an independent contractor, the Court of Appeals has previously held that § 500.3114(3) applied to the situation of an injured person who owned the vehicle involved and who worked as a self-employed independent contractor. Thus, the trial court properly found that Cherokee Insurance is first in priority for purposes of plaintiff’s no-fault benefits.

The decision of the trial court was affirmed. Toduti v. Progressive Mich. Ins. Co., 2021 Mich. App. LEXIS 5297 (Mich. App., September 2, 2021).

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A traffic crash was reported every 1 minute and 41 seconds in Michigan in 2018. There’s a decent chance that you or a family member will be involved in an auto accident. If so, know that injured victims may be entitled to compensation for serious injuries.

For a free consultation with an experienced accident attorney in Grand Rapids, contact Buchanan Firm. Our firm proudly serves people all across Michigan, including major cities like Grand Rapids, Muskegon, Detroit, Lansing, Holland, St. Joe, and Ann Arbor, and rural towns such as Lowell, Ada, Fremont, Newaygo, Grand Haven, Rockford, and Cedar Springs. We will meet you after-hours, at home or in the hospital, to accommodate you.

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