NILES JOHNSON, Plaintiff, v. USA UNDERWRITERS, Defendant/Cross-Defendant-Appellant, COURTNEY EISEMANN and STEVEN VANDEINSE, Defendants, and CITIZENS INSURANCE COMPANY OF AMERICA, Defendant/Cross-Plaintiff/Appellee.
No. 340323
Michigan Court of Appeals
May 14, 2019
If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.
S T A T E O F M I C H I G A N
C O U R T O F A P P E A L S
NILES JOHNSON,
Plaintiff,
v
USA UNDERWRITERS,
Defendant/Cross-Defendant-Appellant,
COURTNEY EISEMANN and STEVEN VANDEINSE,
Defendants,
and
CITIZENS INSURANCE COMPANY OF AMERICA,
Defendant/Cross-Plaintiff/Appellee.
FOR PUBLICATION
May 14, 2019
No. 340323
Washtenaw Circuit Court
LC No. 16-000191-NF
Before: BECKERING, P.J., and RIORDAN and CAMERON, JJ.
BECKERING, P. J. (dissenting).
When it comes to car insurance, Michigan is a no-fault state.1 Every owner of a car required to be registered in Michigan must have certain basic coverages in order to drive their car
on a highway.
I. BASIC FACTS AND PROCEDURAL HISTORY
According to his testimony and the documents produced at defendant Steven Vandeinse’s deposition4, on June 19, 2015, Vandeinse purchased a 2011 Chevrolet Impala from Ypsilanti Import Auto Sales for around $11,000. Before he could take possession of the car, Vandeinse had to get insurance, so he went to LA Insurance. Vandeinse testified that he told the person working there he wanted “full coverage on the vehicle.”5 He was charged $445.03 up front and
agreed to ongoing monthly payments to USAU of approximately $145. Vandeinse was given a “Certificate of Insurance” issued by USAU, which looks like the verification document drivers are required to present to the Secretary of State’s Office in order to prove they have no-fault coverage so they can register their car:
Based on other documents produced in this litigation, it appears that LA Insurance7 sold Vandeinse a comprehensive and collision only policy issued by USAU, as described above, and
insurance. USAU also produced a type-written application, purportedly initialed by Vandeinse, identifying what he was actually getting in terms of coverage. Whether Vandeinse or instead the agent is telling the truth about how the transaction was actually handled remains a matter of dispute. But it is not material to the legal issue of whether USAU can sell a car insurance policy covering comprehensive and collision coverage, for a car that is going to be driven or moved on a highway in Michigan, but that does not comply with
an Automobile Service Contract, issued by NSD, covering roadside assistance for $300. In other words, Vandeinse walked away with just about everything but mandatory no-fault coverage. None of what he was sold allowed him to operate or move his car on a Michigan highway.
Vandeinse returned to Ypsilanti Import Auto Sales with his documents, where they completed and he signed an “Application for Michigan Title & Registration, Statement of Vehicle Sale,” which documented that Vandeinse had obtained insurance through USAU, Policy No. USAUW-00002968-00. Vandeinse received a temporary registration number.
On July 7, 2015, the State of Michigan issued a Certificate of Title recognizing Vandeinse as the lawfully registered owner of the Impala. Vandeinse testified that he dutifully paid USAU $145 per month on the insurance premium.
On September 8, 2015, Vandeinse’s girlfriend, Courtney Eismann, was driving the Impala with permission when she accidentally struck and injured bicyclist plaintiff, Niles Johnson. After the accident, the responding police officer documented that the Impala was insured through USAU.
Johnson initially filed a claim with, and later a lawsuit against, the Michigan Automobile
II. STANDARDS OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary disposition, MEEMIC Ins Co v Michigan Millers Mut Ins, 313 Mich App 94; 880 NW2d 327 (2015), the proper interpretation of a statute, McCormick v Carrier, 487 Mich 180; 795 NW2d 517 (2010), and a trial court’s decision to grant equitable relief, Corwin v DaimlerChrysler Ins Co, 296 Mich App 242, 253; 819 NW2d 68 (2012).
III. MANDATORY MICHIGAN NO-FAULT INSURANCE
On appeal, USAU contends that the trial court erred in reforming Vandeinse’s automobile insurance policy because the plain language of the insurance application and disclosures purportedly signed by Vandeinse indicated that the policy did not include no-fault coverage. I would conclude that the trial court did not err because USAU issued an automobile insurance policy in violation of the mandatory coverage requirements of the no-fault act, and
is also the primary shareholder in USAU. At the time of Kassab’s 2017 deposition, USAU had been operating around four years, having purchased Southern Michigan Insurance Company.
thus, it must be interpreted to include the statutorily required minimum coverage in order to comply with Michigan law.
“An insurer who elects to provide automobile insurance is liable to pay no-fault benefits subject to the provisions of the [no-fault] act. Dobbleare v Auto-Owners Ins Co, 275 Mich App 527, 530; 740 NW2d 503 (2007), citing
MCL 500.3101(1) of the no-fault act, regarding motor vehicle security agreements, provides:
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. Security is only required to be in effect during the period the motor vehicle is driven or moved on a highway. Notwithstanding any other provision in this act, an insurer that has issued an automobile
insurance policy on a motor vehicle that is not driven or moved on a highway may allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion of the policy in effect [emphasis added].
MCL 500.3101(2)(a) defines “automobile insurance” as meaning “that term as defined in [MCL 500.]2102.”
minimum coverages, absent circumstances not present here (i.e. for a car that is not going to be driven or moved on a highway).9
My interpretation of
An automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for property damage, bodily injury, or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall not be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless the liability coverage is subject to all of the following limits:
(a) A limit, exclusive of interest and costs, of not less than $20,000.00 because of bodily injury to or death of 1 person in any 1 accident.
(b) Subject to the limit for 1 person in subdivision (a), a limit of not less than $40,000 because of bodily injury or death of 2 or more persons in any 1 accident.
(c) A limit of not less than $10,000 because of injury to or destruction of property of others in any accident.
***
(4) If an insurer deletes coverage from an automobile insurance policy pursuant to section [MCL 500.]3101, the insurer shall send documentary evidence of the deletion to the insured [emphasis added].
MCL 500.3101(1) and
purchase insurance contracts that provide greater coverage than the minimum required under the no-fault act.”).
More explicitly,
(1) At the time a new applicant for the insurance required by section [MCL 500.]3101 for a private passenger nonfleet automobile makes an initial written application to the insurer, an insurer shall offer both of the following coverages to the applicant:
(a) Limited collision coverage, which must pay for collision damage to the insured vehicle without a deductible amount if the operator of the vehicle is not substantially at fault in the accident from which the damage arose.
(b) Broad form collision coverage, which must pay for collision damage to the insured vehicle regardless of fault, with deductibles in the amounts as approved by the director, which deductibles must be waived if the operator of the vehicle is not substantially at fault in the accident from which the damage arose.
(2) In addition to the coverages offered under subsection (1), standard and limited collision coverage may be offered with deductibles as approved by the director.
(3) An insurer may limit collision coverage offered under this section as provided in [MCL 500.]3017.
***
(7) At least annually in conjunction with the renewal of a private passenger nonfleet automobile insurance policy, or at the time of an addition, deletion, or substitution of a vehicle under an existing
policy, other than a group policy, an insurer shall inform the policyholder, on a form approved by the director, all of the following: (a) The current status of collision coverage, if any, for the vehicle or vehicles affected by the renewal or change and the rights of the insured under the current coverage if the vehicle is damaged.
(b) The collision coverages available under the policy and the rights of the insured under each collision option if the vehicle is damages.
(c) Procedures for the policyholder to follow if he or she wishes to change the current collision coverage. [Emphasis Added.]
As manifested by
USAU has conceded that none of the automobile insurance policies it sells in Michigan provide the statutorily mandated minimum coverages for PIP, PPI, and residual liability. Thus, instead of starting with an automobile policy that meets the requirements of Michigan’s no-fault act,
My colleagues in the majority opinion note that the financial responsibility act “permits insureds to fulfill their insurance needs by way of multiple policies through more than one carrier.” However, as our Supreme Court indicated in Citizens, the financial responsibility act should not be construed to contradict the no-fault act.
At issue in Citizens was the “validity of a vehicle owner’s policy of liability insurance that denies coverage to any permissive user who is otherwise insured for an amount equal to that specified by the no-fault act.” Citizens, 448 Mich at 227. Federated Insurance Company’s policy provided the mandated residual liability coverages to permissive drivers of
Notwithstanding the no-fault act, Federated urges us to focus on the financial responsibility act and contends that the exclusion of coverage contained in its policy is “authorized and contemplated by the financial responsibility act. In particular, Federated relies on subsections (i) and (j) of the financial responsibility act,
MCL 257.520[] , which provide:
(i) Any motor vehicle liability policy may provide for the prorating of the insurance thereunder with other valid and collectible insurance.
(j) The requirements for a motor vehicle liability policy may be fulfilled by the policies of 1 or more insurance carriers which policies together meet such requirements.
According to Federated, because in each of these cases the driver’s insurance policy, when taken together with Federated’s insurance policy, will afford benefits of an amount specified by law, its insurance policy complies with public policy evidenced by the financial responsibility act. We question the premise of Federated’s argument because it suggests that the financial responsibility act manifests the controlling public policy of this state concerning automobile insurance.
The no-fault act, as opposed to the financial responsibility act, is the most recent expression of this state’s public policy concerning motor vehicle liability insurance. Therefore, while Federated’s policy might well be reconciled with the financial responsibility act, its failure to comply with the no-fault act nevertheless renders it violative of public policy. An insurance policy that is repugnant to the clear directive of the no-fault act cannot otherwise be justified by the financial responsibility act. [Id. at 231-232 (emphasis added).]
The financial responsibility act, particularly
However, neither subsection (i) nor subsection (j) of the financial responsibility act permits an insurer . . . to circumscribe the coverage directed by the no-fault act; to reach that conclusion would not accord proper deference to the policy judgment implicit in the Legislature’s decision to require owners and registrants of motor vehicles to obtain insurance for the residual liability arising from the use of their vehicles. See
MCL 500.3101 . [Id. at 232-233 (emphasis added).]
Thus, while it is incumbent upon owners and registrants to obtain the statutorily mandated insurance, insurers cannot “circumscribe the coverage directed by the no-fault act.” Id. at 233. The Supreme Court held that the vehicle owner’s policy was invalid because it denied coverage for liability arising from the use of an insured vehicle, in contravention of the no-fault act, and it deemed the policy to provide primary coverage in an
As further support for their conclusion that selling automobile insurance policies in Michigan that do not provide the mandatory minimum coverages set forth in
Integral Ins Co v Maersk Container Serv Co, Inc, 206 Mich App 325; 520 NW2d 656 (1994). Integral, however, does not support the majority’s position.
Integral involved a priority dispute between insurers to determine which was liable to pay PIP benefits for injuries suffered by Ralph Scott when the Michigan-registered tractor truck Scott was driving, and the semitrailer the tractor was pulling, overturned in Pennsylvania. Scott owned the tractor, but he had leased it to Maersk for 90 days. Id., 206 Mich App at 328. Maersk had agreed to obtain and maintain liability insurance covering bodily injury and property damage for the tractor. And Scott, who drove the tractor for Maersk, had agreed to obtain “bobtail” insurance11 and worker’s compensation insurance. Accordingly, Maersk obtained from Insurance Company of North America (INA) a policy “covering personal injury protection for automobiles subject to no-fault[,]” that also covered the tractor, and Scott obtained a bobtail policy from Integral Insurance Company. The bobtail policy “expressly excluded coverage (1) while the tractor was being used to carry property for business and (2) while the tractor was being used for the business of anyone who leased the tractor.” Id. at 328.
Scott was hauling a trailer loaded with cargo for Maersk at the time of the accident. Thus, one of the issues in the trial court was which insurer was first in priority for payment of PIP benefits: INA under the policy sold to Maersk or Integral under the bobtail policy sold to Scott. Scott also filed a worker’s compensation claim, and the hearing referee ruled that he was an employee of Maersk. Id. at 330. Based on this ruling, the trial court concluded that Maersk’s insurer, INA, was first in priority for PIP benefits under
The majority finds Integral’s relevance to the instant case in the Court’s discussion of the validity of the bobtail policy’s exclusions. The trial court ruled that the exclusions were void as against public policy, but this Court disagreed, observing that:
Integral’s policy provided coverage only when Scott was not hauling cargo for a business or when Scott was not hauling cargo for a business to whom the tractor was rented. Admittedly, the policy itself does not provide full coverage. However, the tractor was fully covered under no-fault by the addition of INA’s policy that provided coverage when Scott was hauling cargo on behalf of Maersk. [Id. at 331.]
The Court supported its reasoning by noting that
that, “[t]aken together, the policy issued by INA and the bobtail policy issued by Integral provided continuous insurance coverage to the tractor as required by the motor vehicle financial responsibility act” Id. at 331-332.
The majority interprets the Court’s observation that the bobtail policy did not provide “full coverage” but that the tractor was “fully covered under no-fault by the addition of INA’s policy” as indicating that the bobtail policy did not provide for the PIP benefits mandated under
In sum, the caselaw relied upon by the majority does not support its conclusion that the no-fault act allows an insurance company providing automobile insurance in Michigan to circumvent the no-fault act and sell only optional insurance coverages. The statutory scheme is clear: the starting point for achieving the goals of the no-fault act is an automobile insurance policy that provides the statutorily mandated coverages pursuant to
/s/ Jane M. Beckering