Case Name: STEPHENSON v. ASSOCIATED GENERAL INSURANCE COMPANY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1985-12-17
Citations: 148 Mich. App. 1
Docket Number: Docket No. 78649
Parties: STEPHENSON v ASSOCIATED GENERAL INSURANCE COMPANY
Judges: Before: Hood, P.J., and D. E. Holbrook, Jr. and D. P. Kerwin, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 148
Pages: 1–8

Head Matter:
STEPHENSON v ASSOCIATED GENERAL INSURANCE COMPANY
Docket No. 78649.
Submitted August 6, 1985, at Lansing.
Decided December 17, 1985.
Sylvia Stephenson suffered soft tissue injuries when her vehicle was struck by an uninsured motorist. Mrs. Stephenson and her husband, William Stephenson, filed a claim for benefits under the uninsured motorist coverage of the no-fault insurance policy issued by Associated General Insurance Company on their automobile which provided that the insurer would pay all sums the insured was legally entitled to recover as damages from an uninsured motorist because of bodily injury. Associated General denied the claim. The Stephensons instituted arbitration proceedings pursuant to the provisions of the policy. The arbitrator, while finding that Mrs. Stephenson had suffered noneconomic losses of $8,000 as a result of the injuries arising out of the accident, held that the Stephensons were precluded from recovering under the uninsured motorist coverage since they had not shown that Mrs. Stephenson had suffered a threshold injury. Accordingly, since they had not shown that they had a legally enforceable claim against the uninsured motorist, they were not entitled to benefits under the uninsured motorist coverage. The Stephensons filed a motion in Genesee Circuit Court seeking to modify or vacate the arbitration award on the basis that they did not have to show a threshold injury before becoming entitled to recover for noneconomic losses under their uninsured motorist coverage. The circuit court, Earl E. Borradaile, J., denied the motion to modify or vacate and affirmed the arbitrator’s award, holding that the arbitrator properly applied the law. The Stephensons appealed. Held:
1. Since an uninsured motorist is outside the basic no-fault system of allocating costs of accidents, the uninsured motorist remains subject to tort liability. Accordingly, a person injured in an automobile accident with an uninsured motorist need not prove death, serious impairment of bodily function or permanent disfigurement in order to recover from an uninsured motorist for noneconomic loss.
References
Am Jur 2d, Appeal and Error §§ 156-158.
Am Jur 2d, Arbitration and Award § 145.
Am Jur 2d, Automobile Insurance §§ 340 et seq.
What constitutes sufficiently serious personal injury, disability, impairment, or the like to justify recovery of damages outside of no-fault automobile insurance coverage. 33 ALR4th 767
Appealability of judgment confirming or setting aside arbitration award. 7 ALR3d 608.
2. It was an error of law for the arbitrator to deny recovery under the uninsured motorist coverage on the basis of the failure to establish a threshold injury. Since that error of law was so material as to have governed the award and, but for that error, the award would have been substantially otherwise, it was necessary to reverse the arbitrator’s denial of an award and to order entry of an award in favor of Sylvia Stephenson in the amount of $8,000, the amount the arbitrator found to be Mrs. Stephenson’s noneconomic losses.
Reversed.
D. E. Holbrook, Jr., J., dissented. He would hold that recovery of noneconomic losses from an uninsured motorist, as with an insured motorist, requires a showing of a threshold injury. He would hold that the arbitrator did not make a serious error of law in denying the award. He would affirm.
Opinion of the Court
1. Automobiles — No-Fault Insurance — Torts — Uninsured Motorists — Noneconomic Loss.
An uninsured motorist is outside the basic no-fault system of allocating costs of accidents and remains subject to tort liability; therefore, a plaintiff need not prove death, serious impairment of body function, or permanent serious disfigurement to recover from an uninsured motorist for noneconomic loss (MCL 500.3135; MSA 24.13135).
2. Arbitration — Appeal — Error of Law — Automobiles — Insurance.
Reversal is required in an arbitration case pursuant to an automobile insurance policy where an error of law so material as to have governed the award was made and, but for the error, the award would have been substantially otherwise.
Dissent by D. E. Holbrook, Jr., J.
3. Insurance — No-Fault Insurance — Uninsured Motorists — Noneconomic Loss.
An insured who is injured by an uninsured motorist may collect beneñts for noneconomic loss from his automobile insurer only where he has met the threshold requirements of death, serious impairment of body function or permanent serious disfígurement (MCL 500.3135; MSA 24.13135).
Collins, Stecco & Wascha (by Richard F. McNally, Jr.), for plaintiff.
Neal & Lenguaer (by Stephanie A. Nelson), for defendant.
Before: Hood, P.J., and D. E. Holbrook, Jr. and D. P. Kerwin, JJ.
Recorder’s court judge, sitting on the Court of Appeals by assignment.

Opinion:
Per Curiam.
While plaintiff Sylvia Stephenson was a driver of a van stopped at an intersection for a red light, she was struck from behind by an uninsured motorist. Mrs. Stephenson suffered and was treated for soft tissue injuries.
Sylvia Stephenson and her husband, William Stephenson, were insured with defendant, Associated General Insurance Company, under a no-fault automobile insurance policy which contained the following language in the uninsured motorist coverage clause:
"to pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured motor vehicle because of bodily injury".
The Stephensons filed a claim under the foregoing clause, which defendant denied. The Stephen-sons then instituted arbitration proceedings in conformity with the terms of the policy.
Pursuant to a hearing, the arbitrator found that plaintiffs had failed to establish a threshold injury to Mrs. Stephenson and were therefore precluded from recovering damages under the uninsured motorist coverage clause. The arbitrator explained that except for the requirement of a "threshold showing" he would have awarded plaintiff Sylvia Stephenson the sum of $8,000 and plaintiff William Stephenson nothing.
Plaintiffs then filed a motion in circuit court to vacate or modify the arbitration award. The plaintiffs did not dispute that they had not established a threshold injury. Rather, their position was that they need not show a threshold injury to Mrs. Stephenson in order to recover under the uninsured motorist provisions of their policy. The trial court affirmed the arbitrator's award, finding that the arbitrator properly construed the present law in deciding the issue.
Plaintiffs filed a motion for rehearing which was denied. Plaintiffs appeal as of right.
The issue in this case, whether an insured who is injured by an uninsured motorist must establish a threshold injury in order to recover damages for noneconomic loss from his automobile insurer, is not of first impression in this Court. When first addressed in Caplan v DAIIE102 Mich App 354; 301 NW2d 471 (1980), a panel of this Court relied upon the following language in Bradley v Mid-Century Ins Co, 409 Mich 1, 61-62; 294 NW2d 141 (1980), in determining that a plaintiff must show a threshold injury in order to claim noneconomic damages under the uninsured motorist coverage of a no-fault policy:
"Under the no-fault motor vehicle liability act an insured may collect from his insurer for work loss and medical expenses without regard to fault. He may sue the negligent tortfeasor for excess economic loss and, if the threshold of injury is met, for non-economic loss. The statute requires that motorists carry residual liability insurance in addition to no-fault insurance to provide a source of recovery to persons severely injured as a result of driver negligence. If a motorist is uninsured he may be sued for all economic loss as well as above-threshold non-economic loss." (Footnotes omitted.)
When addressed a second time by a different panel of this Court, no reference was made to either the Bradley or Caplan decisions. Jones v DAIIE, 124 Mich App 363; 335 NW2d 39 (1983), lv den 418 Mich 878 (1983). Rather, the Jones Court focused on the Supreme Court's decision in Citizen's Ins Co of America v Tuttle, 411 Mich 536, 546; 309 NW2d 174 (1981), in arriving at a conclusion completely opposite to the conclusion reached in Caplan, supra:
"Under the no-fault system, a person remains subject to tort liability for nonintentional torts causing noneconomic loss only if the injured person has suffered 'death, serious impairment of body function, or permanent serious disfigurement'. MCL 500.3135(1); MSA 24.13135(1). Otherwise, tort liability has been abolished. MCL 500.3135(2); MSA 24.13135(2). This abolition of tort liability, however, does not extend to all individuals using vehicles. Rather, tort liability arising out of the ownership, maintenance, or use of a vehicle is abolished only if the required no-fault insurance or other security has been obtained. Citizens Ins Co of America v Tuttle, 411 Mich 536, 546; 309 NW2d 174 (1981). The uninsured motorist is outside the basic no-fault system of allocating the costs of accidents and remains, therefore, subject to tort liability. Tuttle, supra, p 547.
"Subsection (1) of MCL 500.3135; MSA 24.13135 serves only as an exception to the general abolition of tort liability in subsection (2). Tuttle, supra, p 548. It is not meant to abolish tort liability in whole or in part for those outside of the no-fault act. To recover against an uninsured motorist for noneconomic loss, a plaintiff does not have to meet the 'serious impairment' threshold of MCL 500.3135(1); MSA 24.13135(1)." 124 Mich App 365-366.
To resolve the issue at bar, this panel must either resolve the conflict presented by Caplan and Jones or choose sides. We find the conflict irreconcilable but conclude that Jones is the better reasoned opinion.
Initially we note that the apparent conflict does not stem from the reliance on two different Supreme Court decisions because those decisions are not incongruous. Both decisions concluded that the Legislature, in promulgating the no-fault insurance act, intended to retain tort liability of uninsured motorists. Compare Tuttle, supra, p 551, and Bradley, supra, p 62. However, neither decision of the Supreme Court directly addressed the present issue. The conflict thus appears to be the result of divergent extrapolations of a single premise under the no-fault insurance act: that tort liability for other than above-threshold injury is abolished only if the required no-fault insurance or other security has been obtained. MCL 500.3135; MSA 24.13135.
Upon reviewing the language of the no-fault insurance act, we find the logic utilized in Jones most persuasive. The threshold requirement serves only as an exception to the general abolition of tort liability under the act. The exception abolishes tort liability neither in whole nor in part for those outside the no-fault insurance act. Because the uninsured motorist is outside the no-fault scheme of allocating the costs of accidents, he or she remains subject to tort liability. The conclusion is thus inescapable that the threshold requirements in MCL 500.3135(1); MSA 24.13135(1) are inapplicable to suits against uninsured motorists for noneconomic loss.
Therefore, we find that the arbitrator erred in precluding plaintiff Sylvia Stephenson from recovering damages under the uninsured motorist clause of her no-fault policy on the basis that she did not meet the threshold requirements of the no- fault act. Moreover, we find that, but for this error, the award would have been substantially otherwise. DAIIE v Gavin, 416 Mich 407; 331 NW2d 418 (1982).
We direct that an order be entered modifying the arbitration award to reflect the sum of $8,000 in favor of plaintiff Sylvia Stephenson against defendant. We retain no further jurisdiction.
Reversed.