Titan Insurance Company v. American Country Insurance ( 2016 )

Order Michigan Supreme Court
Lansing, Michigan
May 27, 2016 Robert P. Young, Jr.,
Chief Justice
152492-3 Stephen J. Markman
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
Richard H. Bernstein
TITAN INSURANCE COMPANY, Joan L. Larsen,
Plaintiff-Appellee, Justices
v SC: 152492
COA: 319342
Wayne CC: 12-014301-NF
AMERICAN COUNTRY INSURANCE
COMPANY,
Defendant-Appellant,
and
SAFE ARRIVAL TRANSPORTATION and
SHONNISE WOODS,
Defendants.
_________________________________________/
BRONSON METHODIST HOSPITAL,
Plaintiff-Appellee,
v SC: 152493
COA: 321598
Kalamazoo CC: 2013-000463-AV
TITAN INSURANCE COMPANY,
Defendant-Appellee,
and
AMERICAN COUNTRY INSURANCE
COMPANY,
Defendant-Appellant.
_________________________________________/
On order of the Court, the application for leave to appeal the September 15, 2015
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the question presented should be reviewed by this Court.
MARKMAN, J. (dissenting).
I respectfully dissent from this Court’s order denying leave to appeal. I would
instead grant leave to appeal to address whether the Legislature, when it enacted the no-
fault act, MCL 500.3101 et seq., intended to undermine in these circumstances a
fundamental principle of insurance law that “[i]t is impossible to hold an insurance
company liable for a risk it did not assume.” Auto-Owners Ins Co v Churchman, 440
Mich. 560, 567 (1992).
2
In each of these consolidated cases, a company owned several vehicles and was in
the business of transporting passengers. In each case, an individual who lacked no-fault
insurance was injured in an accident while occupying one of the vehicles. Although the
companies had failed to insure the vehicles involved in the accidents, American Country
Insurance Company insured one or more other vehicles in each company’s fleet. The
Court of Appeals ruled in both cases that American Country was liable to pay no-fault
benefits despite not having contracted to insure the vehicles involved in the accidents,
concluding that under MCL 500.3114(4)(a), “because American Country insured other
vehicles owned by [the companies], it is responsible for the claims in these cases.” Titan
Ins Co v American Country Ins Co, 312 Mich. App. 291, 302 (2015) (emphasis added).
MCL 500.3114(4) provides, in relevant part, that
[e]xcept as provided in subsections (1) to (3), a person suffering accidental
bodily injury arising from a motor vehicle accident while an occupant of a
motor vehicle shall claim personal protection insurance benefits from
insurers in the following order of priority:
(a) The insurer of the owner or registrant of the vehicle occupied.
In my judgment, the Court of Appeals almost certainly erred by concluding that
American Country was the “insurer of the owner or registrant” merely because it insured
another vehicle owned by each of the companies. It is quite likely that the companies
had additional insurers for concerns such as fire, theft, flood, healthcare, and workers’
compensation, and the Court of Appeals’ interpretation fails to address the threshold
question of which of each company’s insurers, if any, constitutes the true “insurer of the
owner or registrant” for purposes of MCL 500.3114(4)(a).
I do not question that the “insurer of the owner or registrant” is limited to no-fault
insurers, and for this reason, the flood insurer cannot be liable for paying no-fault benefits
here. When the no-fault act is read as a whole, it is apparent that “the insurer” must be a
no-fault insurer. See Farmers Ins Exch v Farm Bureau Gen Ins Co of Mich, 272 Mich
App 106, 117 (2006) (“MCL 500.3114 should be read in context with chapter 31 [the no-
fault chapter of the Insurance Code], and therefore ‘the insurer’ as provided in MCL
500.3114(5)(a) is limited to no-fault insurers.”). However, it is also arguable that when
the no-fault act is read as a whole, “the insurer” must be a no-fault insurer of the vehicle
involved in the accident. Stated otherwise, if a court is to avoid the peculiar outcome
whereby the flood insurer is responsible for paying no-fault benefits, it must interpret
MCL 500.3114(4)(a) in the context of the no-fault act and accordingly read language into
the statute: “the insurer [that provides no-fault insurance to] the owner or registrant.” I
see nothing improper with examining this same context in further concluding that the
interpretation of “the insurer” in MCL 500.3114(4)(a) does not give rise to the equally
3
peculiar outcome of referring, not to the insurer of the owner with respect to the vehicle
involved in the accident, but to the insurer of another vehicle.
MCL 500.3113(b) 1 and MCL 500.3173 2 of the no-fault act connect insurance
coverage to the vehicle involved in the accident and specifically exclude from coverage
persons who have failed to obtain a no-fault policy for that vehicle. In addition, MCL
500.3101(1) 3 and MCL 500.3102(1) 4 of the no-fault act require the owner or registrant of
a vehicle to maintain insurance for all vehicles owned and registered in Michigan or
operated here. Put simply, these four statutes together provide that the vehicle involved
in an accident must be covered by a no-fault policy issued by the relevant insurer for that
insurer to be liable to pay no-fault benefits. Accordingly, because American Country did
not issue a no-fault policy for the vehicles involved in the accidents, the Court of Appeals
likely erred by ruling that it was liable to pay benefits under the no-fault act.
1
MCL 500.3113 provides that
[a] person is not entitled to be paid personal protection insurance benefits
for accidental bodily injury if at the time of the accident any of the
following circumstances existed:
* * *
(b) The person was the owner or registrant of a motor vehicle or
motorcycle involved in the accident with respect to which the security
required by [MCL 500.3101 or MCL 500.3103] was not in effect.
2
MCL 500.3173 provides that “[a] person who because of a limitation or exclusion in
[MCL 500.3105 to MCL 500.3116] is disqualified from receiving personal protection
insurance benefits under a policy otherwise applying to his accidental bodily injury is
also disqualified from receiving benefits under the assigned claims plan.”
3
MCL 500.3101(1) provides, in relevant part, that “[t]he 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.”
4
MCL 500.3102(1) provides that
[a] nonresident owner or registrant of a motor vehicle or motorcycle not
registered in this state shall not operate or permit the motor vehicle or
motorcycle to be operated in this state for an aggregate of more than 30
days in any calendar year unless he or she continuously maintains security
for the payment of benefits pursuant to this chapter.
4
Furthermore, insurance entails “a contract between two parties, in which one party
(the insurer) agrees to assume the risk of another party (the insured) in exchange for
consideration, with the insurer distributing the accepted risk across a group of persons
similarly situated with respect to the risk insured.” Auto Club Group Ins Co v Marzonie,
447 Mich. 624, 646 (1994) (Griffin, J., concurring in part and dissenting in part)
(emphasis added). 5 As American Country did not agree to assume the risk of insuring all
vehicles in each company’s fleet, such an obligation cannot be imposed because of
American Country’s mere status as an insurer. Concluding otherwise would be
inconsistent with this Court’s longstanding recognition that “[t]he rights and duties of
parties to [an insurance] contract are derived from the terms of the agreement.” Wilkie v
Auto-Owners Ins Co, 469 Mich. 41, 62 (2003). There is nothing to suggest that the no-
fault act was intended to impose unanticipated liability on a no-fault insurer, contrary to
the terms of its contract with the insured.
Put simply, I discern little basis for imposing responsibility on American Country
to pay no-fault benefits when American Country, as with every other insurer of the
business, had no contractual responsibility — and received no premiums — with respect
to the specific vehicles involved in the accidents. Neither the no-fault act nor principles
of insurance or contract law suggest such a result. Yet as a consequence of the Court of
Appeals’ published opinion, insurers like American Country will now be responsible for
risks extending far beyond what they may have assumed when agreeing to provide
insurance. Such a consequence, in my estimation, will likely compel insurers to
disproportionally increase premiums on individuals and companies that own multiple
vehicles to compensate for the imposition of this unanticipated risk, thereby imposing an
unwarranted financial cost on those individuals and companies. Moreover, I note that
the Court of Appeals has imposed similar responsibility on insurers under other
provisions of the no-fault act, see Farmers Ins Exch, 272 Mich. App. at 113 (“MCL
500.3114(5)(a) states that the insurer need not insure the vehicle in the accident, but must
insure the owner or registrant.”); Pioneer State Mut Ins v Titan Ins Co, 252 Mich. App.
330, 335-336 (2002) (“[MCL 500.3115(1)(a)] does not mandate that the vehicle involved
in the accident must have been insured by the insurer of the owner before an injured
person can seek benefits.”). I would grant leave to appeal to address whether the
outcome in this case is truly consistent with the Legislature’s intentions. I would
5
The Court later adopted the analysis of Justice GRIFFIN’S Marzonie plurality opinion in
Frankenmuth Mut Ins Co v Masters, 460 Mich. 105, 115 (1999).
5
further urge the Legislature itself to assess whether the outcome here is consonant with its
intentions with regard to both the no-fault act and the insurance laws generally.
I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
May 27, 2016
t0524
Clerk