LIBERTY MUTUAL INSURANCE COMPANY, Plaintiff-Counterdefendant-Appellant,
v.
MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION, Defendant-Counterplaintiff-Appellee.
Court of Appeals of Michigan.
*156 Garan, Lucow, Miller, P.C. (by Daniel S. Saylor and James L. Borin), Detroit, for the plaintiff.
Dykema Gossett PLLC (by Ronald J. Torbert), Detroit, for the defendant.
Before NEFF, P.J., and FITZGERALD and MARKEY, JJ.
MARKEY, J.
Plaintiff-counterdefendant Liberty Mutual Insurance Company appeals by right the trial court's order granting defendant-counter plaintiff Michigan Catastrophic Claims Association's (MCCA) motion for summary disposition under MCR 2.116(C)(10). The issue before this Court is whether the MCCA is required to accept plaintiff's postloss premium payment and reimburse plaintiff for a loss sustained under personal protection insurance coverage in excess of $250,000 pursuant to M.C.L. § 500.3104(2) of the no-fault act. We conclude that the MCCA is not required to reimburse plaintiff, and affirm the trial court's order granting summary disposition in favor of the MCCA.
I. FACTS
The parties do not dispute the facts in this case. In March 1992, plaintiff issued a California automobile insurance policy to California residents Larry and Elaine DeGrave to insure their two vehicles registered in California, including a 1980 Datsun. In July 1992, the DeGraves drove from California to Michigan. They arrived in Michigan on July 17 and stayed for more than thirty days without registering their vehicle in Michigan or acquiring Michigan no-fault insurance, contrary to M.C.L. § 500.3102(1), which requires nonresidents operating automobiles in Michigan for longer than thirty days to maintain security for the payment of Michigan no-fault benefits. On September 14, 1992, the DeGraves son, Eric, was driving the Datsun when he hit Michael Lanaville, an uninsured motorcyclist, rendering Lanaville a paraplegic. Since the accident, plaintiff has paid Lanaville's personal protection insurance (PIP) benefits, which have exceeded $250,000.
In September 1996, plaintiff sued the DeGraves to reform their California policy into a Michigan no-fault policy that provided security for payment of benefits as required by M.C.L. § 500.310(1),[1] retroactively effective to August 1992 (shortly after the DeGraves' thirty days of coverage in Michigan under their California policy ended and before the accident). A consent judgment was entered on August 1, 1997, in which plaintiff and the DeGraves agreed that plaintiff would reissue their California policy as a Michigan no-fault policy providing six months of coverage from August 1992 until March 1993, the expiration date of the original California *157 policy. In November 1997, more than five years after the accident in this case, plaintiff tendered a premium payment as required by M.C.L. § 500.3104 to the MCCA to cover the DeGraves' two automobiles under their newly reformed insurance policy. Plaintiff then asked the MCCA for reimbursement of PIP benefits exceeding $250,000 owed to Lanaville under the policy. The MCCA rejected the proffered premium payment, stating that the reformed policy did not obligate the MCCA to indemnify plaintiff under M.C.L. § 500.3104. The MCCA stated that any PIP benefits that plaintiff paid under the policy were paid pursuant to M.C.L. § 500.3163, which obligated plaintiff to pay PIP benefits under policies issued outside Michigan under circumstances such as those involved in this case.
Plaintiff subsequently commenced this lawsuit seeking a declaration that the MCCA was obligated under M.C.L. § 500.3104 to reimburse plaintiff for payment of PIP benefits in excess of $250,000 to Lanaville. The MCCA counterclaimed, seeking a declaration that plaintiff is not entitled to reimbursement under M.C.L. § 500.3104. On May 5, 1999, the trial court granted the MCCA's motion for summary disposition after concluding that the MCCA did not have to indemnify plaintiff under the instant circumstances. Relying on In re Certified Question (Preferred Risk Mut. Ins. Co. v. Michigan Catastrophic Claims Ass'n),
II. ANALYSIS
Plaintiff asserts that the trial court erred in granting summary disposition to the MCCA because the reformation of the DeGraves' California insurance policy into a Michigan policy complying with Michigan no-fault law required the MCCA to reimburse plaintiff for payments made that exceeded $250,000. We disagree. A trial court's grant or denial of summary disposition under MCR 2.116(C)(10) is reviewed de novo on appeal. Spiek v. Dep't of Transportation,
Owners of motor vehicles required to be registered in Michigan must maintain security for payment of no-fault benefits pursuant to M.C.L. § 500.3101(1). In addition, M.C.L. § 500.3102(1) provides that nonresident owners whose automobiles are not registered in Michigan but are driven or permitted to be driven for more than thirty days in Michigan must also maintain security for payment of no-fault benefits. Under M.C.L. § 500.3163(1), insurers authorized to transact PIP insurance in Michigan (which includes plaintiff) are required *158 to pay Michigan PIP benefits to their out-of-state resident insureds in the event of a motor vehicle accident occurring in Michigan. MCL 500.3163(1) provides:
An insurer authorized to transact automobile liability insurance and personal and property protection insurance in this state shall file and maintain a written certification that any accidental bodily injury or property damage occurring in this state arising from the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle by an out-of-state resident who is insured under its automobile liability insurance policies, shall be subject to the personal and property protection insurance system as set forth in this act.
The MCCA was created by M.C.L. § 500.3104 to indemnify member insurers for single claims exceeding $250,000 made on Michigan policies where a premium is assessed for the claim and security is maintained by the insured. MCL 500.3104 provides in relevant part:
(1) An unincorporated, nonprofit association to be known as the catastrophic claims association, hereinafter referred to as the association, is created. Each insurer engaged in writing insurance coverages which provide the security required by section 3101(1) within this state, as a condition of its authority to transact insurance in this state, shall be a member of the association and shall be bound by the plan of operation of the association....
(2) The association shall provide and each member shall accept indemnification for 100% of the amount of ultimate loss sustained under personal protection insurance coverages in excess of $250,000.00 in each loss occurrence....
However, not every insurer who pays PIP benefits in excess of $250,000 under the no-fault act is entitled to indemnification. Preferred Risk, supra at 725,
Premium payments required for membership in the MCCA are determined by M.C.L. § 500.3104(7)(d), which provides in relevant part:
Each member shall be charged an amount equal to that member's total earned car years of insurance providing the security required by section 3101(1) or 3103(1), or both, written in this state during the period to which the premium applies, multiplied by the average premium per car. The average premium per car shall be the total premium calculated divided by the total earned car years of insurance providing the security required by section 3101(1) or 3103(1) written in this state of all members during the period to which the premium applies.
Pursuant to subsections 3101(1) and 3102(1), the DeGraves were required to obtain security for payment of Michigan no-fault benefits after they had been in Michigan for more than thirty days, i.e., by August 16, 1992, but they failed to do so. Further, plaintiff admittedly did not pay a premium to the MCCA for the DeGraves' policy until October 17, 1997, more than five years after the DeGraves were required to comply with subsections 3101(1) and 3102(1).
In holding that plaintiff was not entitled to reimbursement from the MCCA, the trial court relied on two Michigan cases, Preferred Risk, supra, and Travelers Ins., supra, which indicate that an insured's failure to obtain security and an insurer's failure to pay the premium as required by Michigan no-fault law prevent an insurer from being indemnified by the MCCA. In *159 Preferred Risk, supra at 727-728,
Six years later, in Travelers Ins., supra, this Court held that the MCCA will not indemnify insurers for benefits paid under M.C.L. § 500.3163 to nonresidents. The insured in Travelers was a Michigan resident who moved to Pennsylvania in July 1989, obtained a Pennsylvania driver's license, purchased and registered a truck in Pennsylvania, and purchased a Pennsylvania insurance policy. Travelers, supra. About October 1, 1989, the insured returned to Michigan and stayed more than thirty days without informing his insurer, obtaining a Michigan driver's license, or registering the truck in Michigan. Id. The insured was in an accident on December 9, 1989, and his passenger was injured. Id. The insured's insurer, Travelers, paid benefits to the passenger but was unsuccessful in its attempt for indemnification from the MCCA. Id.
This Court, like the Supreme Court in Preferred Risk, recognized that insurers who pay benefits to out-of-state residents under M.C.L. § 500.3163 are not entitled to reimbursement from the MCCA where the insureds do not provide security as required by M.C.L. § 500.3101 and the insurers have not paid a premium to the MCCA under M.C.L. § 500.3104. However, the Court suggested that if the insurance policy had been reformed to provide the coverage required of a Michigan resident, then payments would be made as if a Michigan policy had been issued. Plaintiff here relies on this Court's statement in Travelers regarding reformation and retroactivity to support its claim that an insurance policy can be reformed retroactively to comply with M.C.L. § 500.3101 and that after the assessment is paid, the MCCA is required to indemnify. We disagree with plaintiff's assertion. First, we note that Travelers is an unpublished opinion that is not precedentially binding on this Court. MCR 7.215(C)(1); Walker v. Dep't of Social Services,
Regarding the statement in Travelers, supra, that noted that "the policy could be reformed to provide the coverage required of a Michigan resident and payments would be made as if a Michigan policy had been issued," we conclude that the Court was simply indicating that once there was *160 a change in the residency of an insured, the insurer could reform the contract to comply with the coverage requirements of M.C.L. § 500.3101. Not only is that action clearly being allowed, the insured is in fact required to obtain such coverage after thirty days in Michigan. The Travelers panel did not say anything that would allow the conclusion that the reformation could be made retroactively five years after the change in the residency status of an insured as plaintiff in the present case sought to do.
However, in Travelers, supra, the Court also noted that Travelers' normal procedure upon discovering a difference between the addresses in a policy and a notice of loss, was to "code" the policy to Michigan retroactive to the date the insured went to Michigan. The Court indicated that this would have the effect of automatically including the timeframe after the insured returned to Michigan in the "earned car days" total from which the insurer calculated the "total earned car years" figure it reported to the MCCA; therefore, the insurer "would have paid an assessment on that policy and would be entitled to indemnification." Id. Although this language would appear to indicate that an insurer may retroactively reform a policy even after the loss or accident if the premium is paid, we do not believe that the Travelers' panel intended to allow for a reformation five years after the fact as argued by plaintiff in this case. Indeed, to the extent that the case supports such a proposition, we decline to follow it.
First, application of the principles of statutory construction to M.C.L. § 500.3104 defeats plaintiff's argument.
The primary goal of statutory interpretation is to ascertain and give effect to the intent of the Legislature in enacting a provision. Statutory language should be construed reasonably, keeping in mind the purpose of the statute. The first criterion in determining intent is the specific language of the statute. If the statutory language is clear and unambiguous, judicial construction is neither required nor permitted, and courts must apply the statute as written. However, if reasonable minds can differ regarding the meaning of a statute, judicial construction is appropriate. [Rose Hill Center, Inc. v. Holly Twp.,224 Mich.App. 28 , 32,568 N.W.2d 332 (1997) (citations omitted).]
Further, statutes should be construed so as to prevent absurd results, injustice, or prejudice to the interests of the public. Camden v. Kaufman,
To interpret M.C.L. § 500.3104 as requiring indemnification in a circumstance such as this where plaintiff has reformed the insurance policy would circumvent the statute and lead to an unreasonable result. In re Michigan Cable Telecommunications Ass'n Complaint,
In Preferred Risk, supra at 725,
In our view, the fact that the Legislature granted the [MCCA] the authority to charge premiums only with respect to policies written in Michigan providing the security required by § 3101(1) for the owners or registrants of vehicles required to be registered in the state, compels the conclusion that it intended to similarly limit the [MCCA's] liability for indemnification under § 3104(2). Put simply, we can think of no reason why the Legislature would want to provide *161 such indemnification coverage to insurers, even member insurers who do a significant amount of business within this state, absolutely free of charge or, perhaps more appropriately, at no cost to them. [Emphasis in original.]
Portions of M.C.L. § 500.3104 provide that the MCCA "charge to members of the association a total premium sufficient to cover the expected losses and expenses of the association which the association will likely incur during the period for which the premium is applicable," and that the MCCA "[r]equire payment of the premium in full within 45 days after the premium charge [or] [r]equire payment of the premiums to be made periodically to cover the actual cash obligations of the association." MCL 500.3104(7)(d), (7)(e)(i), and (7)(e)(ii) (emphasis added).
We conclude that the clear language of the statute does not allow plaintiff to make a premium payment to cover a period from August 1992 through March 1993 five years after the accident and claim occurred and the covered period expired. To allow reformation of an insurance policy and allow the insurer to make a premium payment to the MCCA at the time of reformation, and not during the applicable period of coverage, would be an absurd interpretation of M.C.L. § 500.3104. If we were to accept plaintiff's argument, we would set a precedent by which an insurer could withhold premium payments for policyholders who moved to Michigan, then, upon a loss exceeding $250,000, the insurer could simply reform the contract, submit the previously due premium payments, and be reimbursed for claims paid in excess of $250,000. Under that situation, the MCCA would be deprived of premiums for policies on which no claims are made, thus defeating the "spread the risk" concept in insurance. Bourne v. Farmers Ins. Exchange,
Next, we address the issue of reformation of the insurance contract. An automobile insurance policy may be reformed as a result of fraud, mutual mistake, or inequitable conduct. Harwood v. Auto-Owners Ins. Co.,
In Troff v. Boeve,
It is further urged that notwithstanding the knowledge of the several plaintiffs that the easement over the driveway must be in writing, their reliance upon the oral statement of defendants' agent could result in reformation of the deed in some cases. Possibly, but in this case there is also involved the property and rights of an innocent third partythe Boeves. If reformation of the deed is granted here the easement must be constructed over the property of defendants Boeve, who acquired such in good faith reliance upon a clear abstract of title which contained no mention of any easement.
Further, this Court has recognized that once an innocent third party is injured in an accident in which coverage was in effect with respect to the relevant vehicle, the insurer generally is estopped from asserting that the policy should be rescinded or reformed. Lake States Ins. Co. v. Wilson, *162
Although Troff and Wilson involve situations where a party is seeking reformation, and not where reformation has already occurred, the holdings in these two cases clearly stand for the principle that innocent third parties should not be burdened by the effects of reformation of a contract entered into by others. In the present case, the MCCA could be considered an innocent third party where the result of the reformation by plaintiff and the DeGraves, if plaintiff's argument is given effect, is that the MCCA would suffer a significant financial loss in indemnifying plaintiff without having received timely premium payments as required by the statute. Therefore, we conclude that the reformation should have no effect on the MCCA's right to deny indemnification under M.C.L. § 500.3104.
In effect, M.C.L. § 500.3104 creates a contract between the MCCA and insurers wherein the MCCA promises to indemnify insurers for claims paid by the insurers in excess of $250,000 and the insurers pay a premium to the MCCA for the coverage. In Preferred Risk, supra at 715, 716,
In Glass v. Harvest Life Ins. Co.,
In Auto Club Ins. Ass'n v. Dennie,
Turning to the present case and considering the relationship between the MCCA and plaintiff as an insurer and insured, the MCCA rejected the late premium payment from plaintiff that was made on the basis of the reformation of the insurance policy. Because the premium payment was tendered after the coverage period expired *163 and after the accident occurred, Michigan case law regarding general insurance principles does not support a finding that the MCCA be required to indemnify plaintiff.
III. CONCLUSION
The trial court did not err in granting the MCCA's motion for summary disposition under MCR 2.116(C)(10) because the reformation of the DeGraves' California automobile insurance policy into a Michigan insurance policy complying with Michigan no-fault law is ineffective; consequently, defendant was entitled to a judgment as a matter of law.
We affirm.
NOTES
Notes
[1] MCL 500.3101(1) provides in relevant part: The owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance, property protection insurance, and residual liability insurance.
[2] We note, however, that Lake States, supra at 331-332,