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Bulletin No. 96-02
In the matter of auto insurance: named non-owner endorsement or extended non-owned endorsement
Issued and entered June 25, 1996 by D. Joseph Olson, Commissioner of Insurance
INFORMATIONAL STATEMENT ISSUED PURSUANT TO ACT 306 OF THE PUBLIC ACTS OF 1969 AS AMENDED
A named non-owner coverage endorsement to a Michigan no-fault auto insurance policy provides auto liability coverage for someone who does not own an automobile but has an automobile(s) owned by someone else available for his or her use. An extended non-owned coverage endorsement to a no-fault auto insurance policy provides auto liability coverage to a driver of a non-owned vehicle(s) used for business purposes.
When attached to a no-fault policy, these endorsements provide only residual liability coverage and provide such coverage only to the person named in the endorsement and his or her spouse. The other mandatory no fault coverages, personal protection insurance (PIP) and property protection insurance (PPI), as well as physical damage coverage are not provided by these endorsements. The endorsements also exclude coverage for resident relatives other than the insured's spouse.
Section 500.3101(1) of Michigan's no-fault auto insurance law requires owners and registrants of motor vehicles required to be registered in this state to maintain security for payment of benefits under personal protection insurance, property protection insurance and residual liability insurance. Section 500.3101(2) defines an "owner" as any of the following:
Chapter 21 of the Code defines an "eligible person" for automobile insurance as "a person who is an owner or registrant of an automobile registered or to be registered in this state or who holds a valid Michigan license to operate a motor vehicle..." [emphasis added] and defines "auto insurance" as "insurance for private passenger non-fleet automobiles which provides any of the following:
Also in Chapter 21, Section 500.2118(1) states, "... an insurer shall not refuse to insure, refuse to continue to insure or limit coverage available to an eligible person for automobile insurance except in accordance with underwriting rules established pursuant to this section and Sections 2119 and 2120." [emphasis added]
The named non-owner and extended non-owned endorsements, when issued to an individual who is not an "owner" as defined, are not auto insurance under Chapter 21. Therefore, insurers may issue named non-owner or extended non-owned endorsements to applicants with coverage limited to residual liability as required by Section 500.3009(1) which states:
Insurers should keep in mind that a person with a valid Michigan license"renting a motor vehicle or having the use thereof, under a lease or otherwise for a period that is greater than 30 days" is, by the above definitions in Chapters 31 and 21 of the Code, both an "owner" and an "eligible person." Such persons, therefore, are required to have and should not be denied a no-fault policy which includes personal protection insurance (PIP) and property protection insurance (PPI) as well as any other auto insurance policy or product that the insurer makes available to any eligible person who owns a motor vehicle.
Insurers should also note that Section 3101(3) of the Code states:
Therefore, insurers would be well advised to clearly indicate to the policyholder when issuing a policy containing a named non-owner or extended non-owned endorsement or any policy providing a similar type of coverage which does not contain the PIP and PPI coverage, that the policy or endorsement does not meet the requirements for no-fault coverage. This may help to avoid circumstances in which the insurer may be liable to pay PIP and PPI benefits when a premium for such coverage was not received.
Any questions regarding this bulletin should be directed to:
Mr. Randy E. Parlor