SCHMALFELDT v NORTH POINTE INSURANCE COMPANY
Docket No. 122634
Supreme Court of Michigan
Decided November 4, 2003
469 MICH 422
Ronald Schmalfeldt brought an action in the Berrien County Trial Court against North Pointe Insurance Company, the liability insurer of Elite Bar, to recover dental expenses necessitated by an injury caused by another patron of the bar. The general civil division of the Berrien County Trial Court, Scott Schofield, J., granted summary disposition for the defendant. On appeal within the general civil division, Lynda Alene Tolen, a district judge, reversed the order of the first district judge and entered an order granting summary disposition for the plaintiff. The Court of Appeals, METER, P.J., and MARKEY and OWENS, JJ., reversed and remanded the case for entry of judgment in favor of the defendant on the basis that the commercial liability insurance policy for payment of medical expenses for accidental bodily injury was primarily for the benefit of the insurer and the insured, and only incidentally for injured claimants, who are not third-party beneficiaries. 252 Mich App 556 (2002). The plaintiff appealed.
In an opinion per curiam, signed by Chief Justice CORRIGAN, and Justices WEAVER, TAYLOR, YOUNG, and MARKMAN, the Supreme Court held:
A person is a third-party beneficiary of an insurance contract only when a promisor has undertaken a promise directly to or for that person.
Nothing in the insurance policy specifically designates Schmalfeldt, or any reasonably identified class, as an intended third-party beneficiary of the medical benefits provision. At best, the policy recognizes the possibility of some incidental benefit to members of the public, but such a class is too broad to qualify for third-party status under the statute.
Affirmed.
CONTRACTS — THIRD-PARTY BENEFICIARIES.
A person is a third-party beneficiary of a contract only when that contract establishes that a promisor has undertaken a promise directly to or for that person; an objective standard is used to determine, from the form and meaning of the contract itself, whether the promisor undertook to give or to do or to refrain from doing something directly to or for the person claiming third-party beneficiary status (
Field & Field, P.C. (by Samuel T. Field), for the plaintiff.
Tupper & Associates (by Thomas M. Tupper and Stacey R. Walters) for the defendant.
PER CURIAM. Plaintiff Ronald Schmalfeldt, injured in a fight at the Elite Bar in Watervliet, directly sued the bar‘s insurer, North Pointe Insurance Company, to secure payment for $1,921 in dental bills. At issue is whether he can sue as a third-party beneficiary of the Elite Bar-North Pointe insurance policy. We affirm the judgment of the Court of Appeals, albeit on other grounds, and hold that he is not a third-party beneficiary of the contract.
I. BACKGROUND
On August 24, 1997, Schmalfeldt was at the Elite Bar playing a game of pool with another bar patron. The game led to an argument. Schmalfeldt tried to
Schmalfeldt needed extensive dental work to repair the damage to his mouth and incurred dental expenses totaling $1,921. He asked the owner of the Elite Bar to pay his dental expenses, but the owner refused.
Schmalfeldt sought payment directly from North Pointe, which had issued a commercial liability insurance policy to the owner of the Elite Bar. He claimed a right to benefits under the medical payments provision of the policy. In this provision, North Pointe agreed to pay up to $5,000 for medical expenses for a “bodily injury” caused by an “accident,” provided the injury occurred on or next to the insured‘s premises or because of the insured‘s operations. Payments are made “regardless of fault.”
North Pointe refused to pay benefits without a request from its insured to do so. When the bar owner told North Pointe that the bar did not want to invoke the medical benefits provision in this case, North Pointe denied Schmalfeldt‘s request.
Schmalfeldt responded by filing a lawsuit against North Pointe in the civil division of the Berrien County Trial Court, claiming to be a third-party beneficiary of the insurance contract.1 He moved for summary disposition on the theory that the medical benefits provision authorized him to sue North Pointe to enforce the terms of the contract. The court denied Schmalfeldt‘s motion, finding that the medical bene-
Schmalfeldt successfully appealed within the civil division of the trial court,2 which held that the medical benefits provision “directly benefited” people situated like plaintiff, who are members of the general public and patrons on the premises of the Elite Bar, and ordered summary disposition in Schmalfeldt‘s favor.
The Court of Appeals granted North Pointe‘s application for leave to appeal and reversed.3 It decided that Schmalfeldt was merely an incidental beneficiary and was not entitled to enforce the insurance contract. The Court of Appeals cited the statute governing third-party beneficiaries,
While the medical payment provision at issue in the instant case differs from the provision at issue in Keillor and Hayes because the instant provision does not refer to
On the basis of its review of Keillor and Hayes, the Court of Appeals held that North Pointe‘s insurance contract benefitted the insured, and that Schmalfeldt was merely an incidental beneficiary who was not entitled to enforce the contract. The Court of Appeals added that this conclusion was supported by case law from other jurisdictions.
Schmalfeldt has sought leave to appeal in this Court.
II. STANDARD OF REVIEW
We review de novo decisions regarding summary disposition motions. First Public Corp v Parfet, 468 Mich 101, 104; 658 NW2d 477 (2003). This case involves the proper interpretation of a contract, which is a question of law that is also reviewed de novo. Archambo v Lawyers Title Ins Corp, 466 Mich 402, 408; 646 NW2d 170 (2002).
III. DISCUSSION
In relevant part, the medical payments provision states:
COVERAGE C. MEDICAL PAYMENTS
1. Insuring Agreement.
a. We will pay medical expenses as described below for “bodily injury” caused by an accident: (1) On premises you own or rent;
(2) On ways next to premises you own or rent; or
(3) Because of your operations;
provided that:
(1) The accident takes place in the “coverage territory” and during the policy period;
(2) The expenses are incurred and reported to us within one year of the date of the accident; and
(3) The injured person submits to examination, at our expense, by physicians of our choice as often as we reasonably require.
b. We will make these payments regardless of fault. These payments will not exceed the applicable limit of insurance ....
Michigan‘s third-party beneficiary statute,
Any person for whose benefit a promise is made by way of contract, as hereinafter defined, has the same right to enforce said promise that he would have had if the said promise had been made directly to him as the promisee.
(1) A promise shall be construed to have been made for the benefit of a person whenever the promisor of said promise has undertaken to give or to do or refrain from doing something directly to or for said person.
As we recently said in Brunsell v Zeeland, 467 Mich 293, 296; 651 NW2d 388 (2002), “the plain language of this statute reflects that not every person incidentally benefitted by a contractual promise has a right to sue for breach of that promise ....” Thus, only intended, not incidental, third-party beneficiaries may sue for a breach of a contractual promise in their favor. Id.
As Brunsell, Koenig, and Kammer Asphalt make clear, a court should look no further than the “form and meaning” of the contract itself to determine whether a party is an intended third-party beneficiary within the meaning of § 1405. Here, the Court of Appeals correctly began with the proposition that third-party beneficiary status is defined by § 1405. But, without the benefit of our decision in Brunsell,5 the Court then turned to case law for resolution of “the issue of direct versus incidental beneficiaries in the context of a medical payment provision such as that at issue in the instant case.” 252 Mich App 562.
We affirm the decision of the Court of Appeals because the contract contains no promise to directly benefit Schmalfeldt within the meaning of § 1405. Nothing in the insurance policy specifically designates Schmalfeldt, or the class of business patrons of the insured of which he was one, as an intended third-party beneficiary of the medical benefits provision. At best, the policy recognizes the possibility of some incidental benefit to members of the public at large, but such a class is too broad to qualify for third-party status under the statute. Brunsell, supra at 297; Koenig, supra at 680.
Only intended beneficiaries, not incidental beneficiaries, may enforce a contract under § 1405. Koenig, supra at 680. Here, the contract primarily benefits the contracting parties because it defines and limits the circumstances under which the policy will cover medical expenses without a determination of fault. This agreement is between the contracting parties, and Schmalfeldt is only an incidental beneficiary without a right to sue for contract benefits. For this reason, North Pointe is entitled to summary disposition. The Court of Appeals judgment in favor of defendant is affirmed. MCR 7.302(G)(1).
KELLY, J. (dissenting). I would not dispose of this case by an opinion per curiam, but would grant leave to appeal to better analyze two issues: whether, given the ambiguity in the contract regarding the scope of individuals covered, the parties to the Elite Bar-North Pointe insurance policy intended a direct benefit to an identifiable class of persons. Also, when insurance contract language is ambiguous, should a reviewing court be free to look further than the “form and meaning” of the language to determine if a third party is contemplated? See, e.g., Klapp v United Ins Group Agency, 468 Mich 459; 663 NW2d 447 (2003).
CAVANAGH, J., concurred with KELLY, J.