Liberty Mut. Ins. Co. v. MCCALiberty Mut. Ins. Co. v. MCCA
Dykema Gossett PLLC (by Ronald J. Torbert), Detroit, for the defendant.
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
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
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
Plaintiff subsequently commenced this lawsuit seeking a declaration that the MCCA was obligated under
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
Owners of motor vehicles required to be registered in Michigan must maintain security for payment of no-fault benefits pursuant to
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
(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. The MCCA‘s obligation to indemnify is limited to those insurers who provide the coverage required by
Premium payments required for membership in the MCCA are determined by
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 Preferred Risk, supra at 727-728, our Supreme Court stated that the MCCA can refuse to indemnify claims paid under
Six years later, in Travelers Ins., supra, this Court held that the MCCA will not indemnify insurers for benefits paid under
This Court, like the Supreme Court in Preferred Risk, recognized that insurers who pay benefits to out-of-state residents under
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
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
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, 240 Mich.App. 389, 395, 613 N.W.2d 335 (2000).
To interpret
In Preferred Risk, supra at 725, our Supreme Court addressed the legislative intent regarding
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
Portions of
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
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., 211 Mich.App. 249, 254, 535 N.W.2d 207 (1995). The issue whether the insurance policy could be reformed in the present action is moot because pursuant to the consent judgment, the policy was in fact reformed. Thus, the question becomes what effect does the reformation have on defendant‘s obligation to indemnify under
In Troff v. Boeve, 354 Mich. 593, 598, 93 N.W.2d 311 (1958), our Supreme Court discussed the issue of reformation in relation to third parties not involved in any contract and stated:
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 party—the 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, 231 Mich.App. 327, 331, 586 N.W.2d 113 (1998).2
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
In effect,
In Glass v. Harvest Life Ins. Co., 168 Mich.App. 667, 670, 425 N.W.2d 107 (1988), the decedent‘s brother directed his wife, after the decedent‘s death, to mail a predated check to the defendant insurer in order to cover a late life insurance premium. This Court held that “[t]he policy terminated when the decedent failed to pay the premium within the contractual grace period.” However, the Court in Glass also held that the defendant insurer waived its right to assert the policy lapse by accepting the late premium payment without further review or investigation. Id. at 670-671.
In Auto Club Ins. Ass‘n v. Dennie, 188 Mich.App. 634, 635-636, 470 N.W.2d 409 (1991), the defendant was involved in an automobile accident. He had failed to timely pay a premium, but the insurer received a late premium payment three days before the accident. The Dennie Court found in favor of the insurer and denied coverage on the basis that “[t]he mere temporary retention of premium payments, without more, however, is conditional and does not bind the insurer to provide coverage if there is a prompt refund of premium upon the full facts concerning the status of the policy becoming known to the insurer.” Id. at 637.
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
III. CONCLUSION
The trial court did not err in granting the MCCA‘s motion for summary disposition under
We affirm.