Adanalic v. Harco National Insurance Company , 309 Mich. App. 173 ( 2015 )


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  •                           STATE OF MICHIGAN
    COURT OF APPEALS
    SALKO ADANALIC,                                                    FOR PUBLICATION
    February 5, 2015
    Plaintiff-Appellee/Cross-Appellant,                  9:00 a.m.
    and
    SPECTRUM HEALTH HOSPITALS,
    Intervening Plaintiff-
    Appellee/Cross-Appellant,
    and
    ORTHOPAEDIC ASSOCIATES OF MICHIGAN,
    Intervening Plaintiff-Appellee,
    v                                                                  No. 317764
    Kent Circuit Court
    HARCO NATIONAL INSURANCE COMPANY,                                  LC No. 12-004231-NF
    Defendant-Appellant/Cross-
    Appellee,
    and
    MICHIGAN MILLERS MUTUAL INSURANCE
    COMPANY,
    Defendant-Appellant/Cross-
    Appellee.
    Before: BORRELLO, P.J., and SERVITTO and SHAPIRO, JJ.
    SHAPIRO, J.
    In this no-fault action, plaintiff Salko Adanalic sought first-party benefits from
    defendants Harco National Insurance Company (Harco) and Michigan Millers Mutual Insurance
    Company (Millers). Spectrum Health Hospitals (Spectrum) and Orthopaedic Associates of
    Michigan (Orthopaedic), who treated Adanalic’s injuries, intervened as plaintiffs. Plaintiffs and
    -1-
    defendants filed cross-motions for summary disposition. The trial court found that Millers was
    liable to plaintiffs for no-fault personal protection (PIP) benefits and, accordingly, awarded
    damages to plaintiffs. Millers appeals on two grounds. First, it asserts that Adanalic was not
    entitled to payment of first-party PIP benefits. Second, it asserts that if Adanalic is entitled to
    PIP benefits, Harco, rather than Millers, was the highest priority PIP insurer.
    On cross-appeal, Spectrum argues that either or both Millers and Harco are liable for
    attorney fees and penalty interest due to their unlawful failure to promptly pay PIP benefits. We
    affirm the trial court’s ruling that plaintiffs were entitled to PIP benefits and that Millers was first
    in priority and so responsible for payment of those benefits and penalty interest. We reverse the
    trial court’s ruling that Millers was not liable for plaintiffs’ attorney fees and so remand for the
    calculation and award of those statutory fees.
    I. FACTS
    Adanalic was seriously injured while unloading a pallet from a disabled box truck onto a
    semi-trailer. He had contracted with DIS Transportation (a nonparty to this action) to pick up,
    haul, and deliver various loads of cargo. On October 1, 2011, he was returning to Grand Rapids
    from an out-of-state delivery, hauling an empty semi-trailer. He accepted a DIS dispatch to a
    truck stop in Indiana for the purpose of removing loaded pallets from the disabled box truck and
    loading them into his semi-trailer.1 Both the truck and the semi-trailer were insured by defendant
    Harco under a policy which included Michigan no-fault coverage. The policy was issued to DIS.
    Adanalic had Michigan no-fault insurance through defendant Millers under a policy issued to his
    wife.
    Upon arriving at the Indiana truck stop, Adanalic backed his semi-trailer to
    approximately nine feet from the disabled box truck which was of a different height. A ramp
    was extended from the box truck to the semi-trailer and used as a path for the transfer of the
    loaded pallets. Adanalic and the driver of the box truck then began moving the loaded pallets,
    one at a time, along the ramp. The other driver pushed the pallets while Adanalic pulled them.
    He did so by using straps attached to the pallets for that purpose. While the two men were
    loading the third pallet onto the truck operated by Adanalic, the loaded pallet fell and it pulled
    Adanalic, who was attached by the pallet straps, down with it, injuring him.
    Adanalic sought PIP benefits from Millers and Harco, but each denied his claim. Several
    months later, on March 12, 2012, he filed suit against defendants, seeking first-party PIP benefits
    for his injuries. Plaintiffs Spectrum and Orthopaedic subsequently filed intervening complaints
    against both defendants. Both defendants responded with denials of coverage.
    1
    The semi-trailer was registered to Trailer X-Press, Inc. (a nonparty), owned by Fleet Service of
    West Michigan, LLC (a nonparty), and leased long-term to DIS. The truck hauling the semi-
    trailer was owned by Adanalic himself but also under long-term lease to DIS. Because both the
    truck and semi-trailer were long-term leased to DIS, DIS is considered the “owner” of both
    vehicles for the purposes of the no-fault act. MCL 500.3101(2)(h)(i).
    -2-
    The parties filed cross-motions for summary disposition under MCR 2.116(C)(10). After
    hearing argument, the trial court issued a written opinion ruling that: (1) Adanalic was entitled to
    PIP benefits; (2) Millers was the insurer of highest priority and, therefore, responsible for
    payment of those PIP benefits; (3) Millers was responsible for penalty interest due to its delay in
    paying Adanalic’s PIP benefits, and; (4) Millers was not responsible for plaintiffs’ attorney fees.
    The parties then submitted stipulations of fact regarding damages. The trial court
    subsequently assessed damages against Millers: $110,560.83 to Adanalic, $96,243.52 to
    Spectrum, and $8,944.83 to Orthopaedic.2 This appeal and cross-appeal followed.
    II. NO-FAULT PIP BENEFITS
    Millers argues that two provisions of the no-fault act, MCL 500.3101 et seq., relieve it of
    responsibility for payment of Adanalic’s PIP benefits. First, it argues that the circumstances of
    Adanalic’s injuries do not satisfy any of the “parked vehicle exceptions” enumerated in MCL
    500.3106(1). Second, it argues that workers’ compensation benefits were “available” to
    Adanalic under MCL 500.3106(2) and, therefore, Millers is not responsible for payment of PIP
    benefits. We conclude that both arguments fail.
    Both of these issues involve questions of statutory interpretation, which we review de
    novo.3 Radina v Wieland Sales, Inc, 
    297 Mich. App. 369
    , 373; 824 NW2d 587 (2012). As our
    Supreme Court has instructed,
    . . . the purpose of statutory construction is to discern and give effect to the intent
    of the Legislature. In determining the intent of the Legislature, this Court must
    first look to the language of the statute. The Court must, first and foremost,
    interpret the language of a statute in a manner that is consistent with the intent of
    the Legislature. As far as possible, effect should be given to every phrase, clause,
    and word in the statute. The statutory language must be read and understood in its
    grammatical context, unless it is clear that something different was intended.
    Moreover, when considering the correct interpretation, the statute must be read as
    a whole. Individual words and phrases, while important, should be read in the
    context of the entire legislative scheme. While defining particular words in
    statutes, we must consider both the plain meaning of the critical word or phrase
    and its placement and purpose in the statutory scheme. A statute must be read in
    conjunction with other relevant statutes to ensure that the legislative intent is
    correctly ascertained. The statute must be interpreted in a manner that ensures
    that it works in harmony with the entire statutory scheme. [Bush v Shabahang,
    2
    The amount of PIP benefits due is not at issue in this appeal.
    3
    We also review de novo a trial court’s grant of summary disposition under MCR 2.116(C)(10).
    Ernsting v Ave Maria College, 
    274 Mich. App. 506
    , 509; 736 NW2d 574 (2007).
    -3-
    
    484 Mich. 156
    , 166-167; 772 NW2d 272 (2009) (formatting and citations
    omitted).]
    And, “[g]iven the remedial nature of the no-fault act, courts must liberally construe its provisions
    in favor of the persons who are its intended beneficiaries.” Frierson v West American Ins Co,
    
    261 Mich. App. 732
    , 734; 683 NW2d 695 (2004) (citations omitted).
    A. PARKED VEHICLE EXCEPTION
    At the time Adanalic was injured, the relevant vehicles were parked. Per MCL
    500.3106(1), PIP coverage does not apply where the relevant vehicle is parked unless one or
    more of three statutory exceptions is present. The statute provides that for purposes of obtaining
    no-fault benefits, “[a]ccidental bodily injury does not arise out of the ownership, operation,
    maintenance, or use of a parked vehicle as a motor vehicle unless any of the following occur”:
    (a) The vehicle was parked in such a way as to cause unreasonable risk of
    the bodily injury which occurred.
    (b) Except as provided in subsection (2), the injury was a direct result of
    physical contact with equipment permanently mounted on the vehicle, while the
    equipment was being operated or used, or property being lifted onto or lowered
    from the vehicle in the loading or unloading process.
    (c) Except as provided in subsection (2), the injury was sustained by a
    person while occupying, entering into, or alighting from the vehicle.
    [Emphasis added.]
    The parties agree that subsection (1)(a) does not apply in this case. Millers argues that neither
    subsection (1)(b) nor (1)(c) was satisfied. The trial court found that plaintiffs satisfied the parked
    vehicle exception of subsection (1)(b).
    As described in Arnold v Auto-Owners Ins Co, 
    84 Mich. App. 75
    , 79-80; 269 NW2d 311
    (1978), MCL 500.3106(1)(b) contains two independent clauses such that it provides coverage
    where the injury was the direct result of physical contact with either: equipment permanently
    mounted on the vehicle or “property being lifted onto or lowered from the parked vehicle in the
    loading or unloading process.”
    Millers agrees that (1) Adanalic was lifting or lowering property from a parked vehicle
    during the loading or unloading process and (2) Adanalic was in physical contact with that
    property when he was injured. It is Millers’ contention that regardless of the fact that the fall of
    the item Adanalic was loading was the direct cause of his fall, his injuries are not covered as they
    did not actually occur until that fall ended with his impact with the ground.
    The trial court found that the requirements of MCL 500.3106(1)(b) were met, stating in
    its opinion:
    -4-
    The parties’ arguments concern the exceptions found in MCL 500.3106(b)
    and (c). This Court finds that the second scenario under MCL 500.3106(1)(b)
    applies in this case, entitling Adanalic to no-fault benefits.
    The second scenario of MCL 500.3106(1)(b) “makes compensable injuries
    which are a direct result of physical contact with property being lifted onto or
    lowered from the parked vehicle in the loading or unloading process.” It is
    undisputed that Adanalic was injured during the loading or unloading process.
    The parties dispute whether Adanalic’s injuries were “a direct result of physical
    contract with [the] property being lifted onto [the trailer.]”
    Millers argues that the injuries did not result from contact with the pallet,
    but, rather from contact with the ground when he fell. Millers seems to contend
    that MCL 500.3106(1)(b) requires that the injuries result from “direct physical
    contact” with the property. However, the statute only requires that the injuries
    were “a direct result of physical contact with [the] property.”
    In this case, Adanalic was pulling the pallet with the belt wrapped around
    the pallet. The ramp connecting the trailer and the disabled box car collapsed,
    which caused the pallet to fall to the ground, which, in turn, caused Adanalic to
    fall to the ground. These facts establish that Adanalic’s injuries were “a direct
    result of physical contact” with the pallet. Therefore, MCL 500.3106(1)(b) is
    satisfied in this case.
    Had the pallet landed on Adanalic or had Adanalic fell on the pallet, i.e.,
    “direct physical contact,” that certainly would satisfy MCL 500.3106(1)(b). But
    the statute does not require that the property, itself, inflict the injuries. It only
    requires that the injuries directly result from physical contact with the property.
    Therefore, the statute is satisfied here, where Adanalic’s physical contact with the
    pallet caused him to fall to the ground, directly resulting in his injuries.
    We agree with the trial court’s analysis and affirm its conclusion, which is consistent
    with the statute as written. Millers attempts to fundamentally rewrite the statute to state that a
    plaintiff’s injury must occur as a result of being struck by the property being loaded or unloaded.
    However, the word “struck” is nowhere in the statute. Rather, it requires that there be “physical
    contact” with the property being loaded and that such physical contact “directly result” in injury.
    As noted, Millers concedes that Adanalic was in physical contact with the pallet he was loading
    when it fell and that such contact pulled him down with it. And while Millers does not explicitly
    concede it, there is little dispute that Adanalic’s fall and injury occurred in a single, unbroken,
    and immediate course of events that occurred because he was in contact with the pallet. The
    word “direct” is not defined in the no-fault act and, therefore, we may turn to a dictionary for
    assistance. See, e.g., Glenn v TPI Petroleum, Inc, 
    305 Mich. App. 698
    , 708-709; 854 NW2d 509
    (2014). “Direct,” when used as an adjective, is defined as “proceeding in a straight line or by the
    shortest course; straight, not oblique” and “proceeding in an unbroken line of descent.” Random
    House Webster’s College Dictionary (2001). It does not require an instantaneous occurrence,
    but one which proceeds in direct fashion. While hitting the ground when falling occurs at a
    different instant than the moment the fall begins, it begs credulity (and the law of gravity) to
    -5-
    suggest that a fall ending with impact with the ground is not a direct process. Indeed, Adanalic’s
    injuries were literally the result of “proceeding in an unbroken line of descent.” 
    Id. None of
    the cases of record cited by Millers support its proposed reading of the statute.
    Winter v Auto Club of Mich, 
    433 Mich. 446
    , 448-449; 446 NW2d 132 (1989), involved a case
    where the plaintiff was injured by a piece of concrete that fell from the hook of a parked tow
    truck. The Court held that there was not coverage under the “loading” exception, MCL
    500.3106(1)(b), because the concrete piece was not being loaded or unloaded onto a vehicle, but
    simply being temporarily raised so that the soil beneath it could be leveled. 
    Id. at 460.
    Indeed, it
    was never loaded nor intended to be transported.4 
    Id. In Frohm
    v American Motorists Ins Co,
    
    148 Mich. App. 308
    , 309; 383 NW2d 604 (1985), the plaintiff was not loading or unloading a
    vehicle when he was injured; rather, he hurt his back while throwing material he found on one
    loading dock into a waste bin on an adjacent loading dock. Although the waste bin would later
    be loaded onto the subject vehicle, the filling of that bin away from the vehicle was an activity
    preparatory to the actual loading. 
    Id. at 311.
    That bears no relation to the instant case, where
    Adanalic was injured when the actual object that he was directly and actively loading into the
    truck fell and pulled him down, causing injury. The other case cited by Millers, Dowdy v
    Motorland Ins Co, 
    97 Mich. App. 242
    ; 293 NW2d 782 (1980), is even further afield. In that case,
    the plaintiff was injured when a stack of steel on a warehouse floor near a loading dock fell on
    him. 
    Id. at 245.
    The plaintiff was unloading his truck when this occurred, but it was undisputed
    that the steel that injured him was not being loaded or unloaded at the time. 
    Id. at 247.
    Indeed, it
    had not even been transported by the plaintiff. 
    Id. As this
    Court stated, “the injury [was not] due
    to contact with property which was being lifted onto or lowered from the vehicle in the loading
    process.” 
    Id. The trial
    court correctly held that Adanalic satisfied the parked vehicle exception of MCL
    500.3106(1)(b).5
    B. WORKERS’ COMPENSATION EXCLUSION
    Millers also argues that it has no responsibility to pay Adanalic’s PIP benefits because
    workers’ compensation benefits were “available” to him under MCL 500.3106(2). That statute
    provides in pertinent part:
    Accidental bodily injury does not arise out of the ownership, operation,
    maintenance, or use of a parked vehicle as a motor vehicle if benefits under the
    worker’s disability compensation act of 1969[6] . . . or under a similar law of
    4
    The opinion states: “It is undisputed that the cement slab in the instant case was not being lifted
    onto or lowered from the tow truck. No such operation was attempted. . . . At no time did
    anyone intend to load the slab onto the tow truck.” 
    Winter, 433 Mich. at 460
    .
    5
    Pursuant to this finding, we need not address Millers’ argument that Adanalic failed to satisfy
    the parked vehicle exception of MCL 500.3106(1)(c).
    6
    MCL 418.301 et seq.
    -6-
    another state or under a similar federal law, are available to an employee who
    sustains the injury in the course of his or her employment while doing either of
    the following:
    (a) Loading, unloading, or doing mechanical work on a vehicle unless the
    injury arose from the use or operation of another vehicle. As used in this
    subdivision, “another vehicle” does not include a motor vehicle being loaded on,
    unloaded from, or secured to, as cargo or freight, a motor vehicle.
    (b) Entering into or alighting from the vehicle unless the injury was
    sustained while entering into or alighting from the vehicle immediately after the
    vehicle became disabled. This subdivision shall not apply if the injury arose from
    the use or operation of another vehicle. As used in this subdivision, “another
    vehicle” does not include a motor vehicle being loaded on, unloaded from or
    secured to, as cargo or freight, a motor vehicle.
    [Emphasis added.]
    Following his injury, Adanalic filed an application for workers’ compensation benefits from DIS,
    the entity that contracted with him to deliver the subject cargo. DIS denied the workers’
    compensation claim on the grounds that Adanalic was an independent contractor, not an
    employee. Despite this denial, Millers has refused to pay any PIP benefits to Adanalic.7
    “The workers compensation act and the no-fault act are complete and self-contained
    legislative schemes, and neither scheme should be permitted to frustrate the purposes and
    objectives of the other scheme.” Perez v State Farm Mut Auto Ins Co, 
    418 Mich. 634
    , 649-650;
    344 NW2d 773 (1984) (quotation marks and citation omitted).
    Millers relies on the language from Perez mandating that the claimant, in this case,
    Adanalic, make “reasonable efforts” to obtain available workers compensation benefits. 
    Id. at 650.
    However, Millers appears to conflate the set-off provision of MCL 500.3109(1) and the
    exclusion provision of MCL 500.3106(2). Perez states that this “reasonable efforts” requirement
    arises specifically from the “required to be provided” clause of MCL 500.3109(1).8 
    Id. No such
    “required to be provided” language is present in MCL 500.3106(2).
    It is well-settled that under MCL 500.3109(1), workers’ compensation benefits may be
    deducted, i.e., set off, from no-fault benefits. See Sprecht v Citizens Ins Co of America, 234
    7
    It has now been over three years since Adanalic’s injury and he has received neither workers’
    compensation nor PIP benefits.
    8
    “[T]he ‘required to be provided’ clause of § 3109(1) means only that the injured person is
    obliged to use reasonable efforts to obtain available workers’ compensation payments.” 
    Perez, 418 Mich. at 650
    . Even where that requirement applies, “it does not, in light of the underlying
    purpose of the no-fault act, call for a potentially lengthy and costly effort.” 
    Id. -7- Mich App
    292, 295; 593 NW2d 670 (1999). The issue before us in this case, however, does not
    involve a claim for a set-off pursuant to that statute. Rather, the question arises under the
    provision in MCL 500.3106(2) specifically addressing the interplay of no-fault benefits and
    workers’ compensation benefits where certain parked vehicle exceptions are at issue. The statute
    provides that where those exceptions are at issue, no-fault benefits are not paid “if benefits under
    the worker’s disability compensation act . . . are available to an employee who sustains the injury
    in the course of . . . employment.”
    Unlike MCL 500.3109(1), which addresses workers’ compensation benefits that are
    “provided or required to be provided under the laws of any state,” MCL 500.3106(2) addresses
    only those workers’ compensation benefits that are “available” to the employee. “Available” is
    not defined in the no-fault act and so we may turn to the dictionary for assistance. 
    Glenn, 305 Mich. App. at 708-709
    . According to Random House Webster’s College Dictionary (2001),
    “available” means “suitable or ready for use; at hand.” When an alleged employer denies
    workers’ compensation benefits and asserts that the injured individual is not an employee, as DIS
    did in Adanalic’s case, those benefits cannot be said to be “ready for use” or “at hand.”
    Both the workers’ compensation system and the no-fault system are intended to provide
    limited, but prompt payment of benefits to injured persons in order to assure medical care,
    rehabilitation, and income replacement. It is Millers’ position that where the employer and the
    no-fault insurer disagree on which of these two schemes is primarily applicable, the injured
    person is to receive no benefits at all until each of the two insurers are satisfied that their
    assertion of denial has been fully adjudicated. We reject the notion that because an individual
    may be covered by two broad systems of insurance, he is not entitled to any benefits whatsoever
    for however long it takes for the matter to be adjudicated. Indeed, requiring an employee to
    engage in lengthy workers’ compensation litigation before paying PIP benefits “is wholly
    inadequate to accomplish the no-fault act’s purpose of providing assured, adequate, and prompt
    recovery for economic loss arising from motor vehicle accidents.” 
    Perez, 418 Mich. at 650
    .
    The Legislature chose the word “available” to prevent duplicative recovery to an injured
    person under both no-fault and workers’ compensation. See North v Kolomyjec, 
    199 Mich. App. 724
    , 728; 502 NW2d 765 (1993) (“The clear intent of the Legislature in § 3106 was to eliminate
    duplication of . . . benefits of workers’ compensation with . . . benefits afforded by the no-fault
    act.”). In this case, no duplicative recovery is at issue. Adanalic was denied workers’
    compensation benefits and so those benefits are not “available” to him under both the plain
    meaning of the statute and the intent of the no-fault act. The trial court did not err by so ruling.
    Moreover, even if DIS’s denial of Adanalic’s application for workers’ compensation
    benefits was improper, Millers has the right to fully and independently protect its interests as his
    subrogee. It has always been understood that a no-fault insurer is a “party in interest” in a
    workers’ compensation case involving its insured because it has “a direct financial interest in any
    possible workers’ compensation award.” Russell v Welcor, Inc, 
    157 Mich. App. 351
    , 355; 403
    NW2d 133 (1987). And, MCL 418.847(1) provides that “any party in interest” may file a
    workers’ compensation application even where the injured party does not obtain a hearing if the
    application submitted by the injured party is disputed. Any doubt as to the scope of this right
    was fully resolved by Auto-Owners Ins Co v Amoco Production Co, 
    468 Mich. 53
    , 59-62; 658
    NW2d 460 (2003), which held not only that the no-fault insurer has the right to file its own
    -8-
    petition but also that it is entitled to be fully reimbursed by the employer for all reasonable
    expenses should it prevail. As that case explained, the no-fault insurer stands in place of the
    insured and pursuant to MCL 418.315(1), if an employer wrongly refuses to pay benefits and the
    injured worker must pay for his own medical treatment, the worker “shall be reimbursed for the
    reasonable expense paid by [him]” and such reimbursement is not subject to the cost containment
    provisions of the workers’ compensation act. 
    Id. at 62
    (“The principle of equitable subrogation
    allows [the no-fault insurer] to assert the right of . . . its insured, to receive full reimbursement
    from [the employer].”). See also Dowd-List v Hagler Bailly & Hartford Ins Co, 2006 Mich
    ACO 112, p 5 (“the statutory language . . . provides for [a no-fault insurer’s application for
    mediation or hearing] even without an application filed by the injured worker.”); Lingane v
    Community Centre/HCM Corp, 1993 Mich ACO 29, p 2 (“a no-fault carrier is a ‘party in
    interest’ under section 847(1) [MCL 418.847(1)] of the workers’ compensation act both for the
    purpose of intervening in a[n] existing action and for the purpose of initiating an action. . . .
    [S]ection 847(1) does not distinguish between intervention and initiation.”).
    In sum, workers’ compensation benefits were not “available” to Adanalic and Millers
    was not entitled withhold payment of PIP benefits under MCL 500.3106(2). To hold otherwise
    would be contrary to the purpose of the no-fault act, which is to ensure the prompt payment of
    PIP benefits owed. 
    Perez, 418 Mich. at 650
    . The law provides Millers with ample recourse to
    protect its reimbursement interest and a “no-fault carrier is not entitled to delay payments in
    order to wait for the [workers’ compensation] determination.” 
    Specht, 234 Mich. App. at 296
    .
    Accordingly, the trial court did not err by ruling that MCL 500.3106(2) did not relieve Millers of
    its responsibility to promptly pay Adanalic’s PIP benefits.
    C. SUMMARY DISPOSITION
    We find that the trial court did not err by finding that Adanalic satisfied the parked
    vehicle exception of MCL 500.3106(1)(b) and that workers’ compensation benefits were not
    available to him under MCL 500.3106(2)(a). The actual facts of Adanalic’s accident and
    resulting injuries are undisputed and we have held that where “[t]he dispute is not as to what
    occurred, but as to whether what occurred came within the insurance coverage of loading[,]”
    summary disposition may be properly granted. Dembinski v Aetna Cas & Surety Co, 76 Mich
    App 181, 183-184; 256 NW2d 69 (1977). Accordingly, we affirm the trial court’s summary
    disposition ruling that plaintiffs are entitled to PIP benefits.
    III. INSURER PRIORITY
    Millers argues that Adanalic was an employee of DIS when his injuries occurred and that,
    therefore, Harco, as DIS’s no-fault insurer, is responsible for Adanalic’s PIP benefits under MCL
    500.3114(3), which provides:
    An employee . . . who suffers accidental bodily injury while an occupant
    of a motor vehicle owned or registered by the employer, shall receive personal
    protection insurance benefits to which the employee is entitled from the insurer of
    the furnished vehicle.
    -9-
    It is undisputed that Harco was the no-fault insurer, under a policy issued to DIS, of both
    the semi-truck and semi-trailer used by Adanalic at the time of the accident. Thus, Harco was
    the insurer of the “furnished vehicle.” The trial court ruled, however, that Adanalic was not an
    “employee” of DIS at the time he sustained his injuries.
    For the purposes of MCL 500.3114(3), whether an injured party was an “employee” is
    determined by applying the “economic reality test.” Parham v Preferred Risk Mut Ins Co, 
    124 Mich. App. 618
    , 624-625; 335 NW2d 106 (1983). “By this test, factors to be considered include:
    (a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and
    (d) the performance of the duties as an integral part of the employer’s business towards the
    accomplishment of a common goal.” 
    Id. at 62
    3. An independent contractor is not considered an
    “employee” for purposes of the no-fault act. Citizens Ins Co of America v Auto Club Ins Ass’n,
    
    179 Mich. App. 461
    , 465; 446 NW2d 482 (1989). The trial court applied the economic reality test
    and found that Adanalic was not an employee, but an independent contractor, of DIS, writing:
    To begin with, the Contractor Operator Agreement (“the Agreement”)
    between DIS and Adanalic refers to Adanalic as “Contractor.” It also specifically
    states at Paragraph 17 that the Agreement creates a carrier-independent contractor
    relationship, not an employer-employee relationship.
    For the first factor, Paragraph 3 of the Agreement states that Adanalic had
    the right to decline to haul any load offered by DIS. Deposition testimony of
    Adanalic and DIS’ employee confirmed that this was the actual practice between
    the parties. Paragraph 6 of the Agreement states that it was up to Adanalic to
    “determine the means and methods of the performance of all transportation
    services . . . .” DIS’ employee confirmed this, testifying that Adanalic was free to
    determine how a load would be delivered.
    For the second factor, Paragraph 4 of the Agreement states that DIS
    compensated Adanalic based on a percentage of the loads he delivered. However,
    under Paragraph 8 of the Agreement, Adanalic was responsible for withholding
    all taxes and for workers compensation insurance. DIS’ employee confirmed this
    at deposition.
    For the third factor, Paragraph 12 of the Agreement states that the
    Agreement was terminable at will by either party. As for the fourth factor, Harco
    argues that the services provided by Adanalic were fungible, in that DIS had
    numerous other drivers that could deliver a load if Adanalic declined one.
    Therefore, the performance of his duties were not an integral part of DIS’
    business.
    Considering the language of the Agreement that specifically sets forth the
    parties’ relationship, as well as the other provisions of the Agreement and the
    parties’ actual practices under the four factors of the economic reality test, this
    Court finds that Adanalic was an independent contractor, not an employee.
    -10-
    Millers first argues that the trial court “relied exclusively upon the provisions of a
    ‘Contractor Operator Agreement.’” See Kidder v Miller-Davis Co, 
    455 Mich. 25
    , 45-46; 564
    NW2d 872 (1997) (when conducting the economic reality test, the contractual language used by
    the parties “is neither dispositive nor controlling”). This is an inaccurate characterization of the
    trial court’s ruling. The trial court, as quoted above, did reference the Contractor Operator
    Agreement. However, it only mentioned the contract’s definition of Adanalic as an independent
    contractor as a preliminary matter, and there is no indication that it solely relied on that
    designation. Moreover, while the court also referenced the Contractor Operator Agreement in
    discussing the four factors, it bolstered its conclusions as to each factor with reference to the
    depositions of Adanalic and DIS’s operations manager. In sum, the trial court only relied on the
    Contractor Operator Agreement as but one factor in its analysis, as expressly permitted by
    caselaw. See 
    id. at 46.
    Second, Millers takes issue with the trial court’s findings as to the four factors of the
    economic reality test. However, having criticized the trial court for relying on employment
    classifications in the Contractor Operator Agreement, Millers then relies on employment
    classifications in other DIS documents to argue that Adanalic was not an independent contractor.
    Millers also relies on tangentially related deposition testimony wherein Adanalic referred to DIS
    as his “employer.” These arguments do nothing to contradict the trial court’s inquiry into the
    legal import of the actual practices between Adanalic and DIS, all of which support the court’s
    finding that Adanalic was an independent contractor for purposes of the no-fault act.
    With regard to “control of the worker’s duties,” it is undisputed that it was Adanalic’s
    contractual right to refuse any load offered by DIS. Whether he frequently exercised that right is
    immaterial. It was similarly Adanalic’s right to determine the means of hauling any load he
    accepted, i.e., he was under very little specific control of DIS and, upon the exercise of his right
    to refuse a load, under no control at all. There was similarly no agreement that Adanalic could
    only drive or haul loads for DIS. With regard to the payment of wages, Adanalic was paid on
    commission based solely on the loads he accepted. While deductions were made for DIS’s
    advances on insurance costs, there was no withholding of federal or state taxes, and Adanalic
    was issued 1099 forms. See Loos v JB Installed Sales, Inc, 
    485 Mich. 993
    ; 775 NW2d 139
    (2009) (income tax records “are directly relevant to the question of employee status”). Adanalic
    was not only responsible for payment of his own taxes, but for his own operating expenses. As
    to the “right to hire, fire and discipline,” the Adanalic-DIS relationship was terminable by either
    party at will. Adanalic was also free to hire his own employees, who would be responsible to
    him, not DIS; he would be required to train and supervise those employees with no aid from DIS.
    Finally, the fourth factor of the economic reality test, “the performance of the duties as an
    integral part of the employer’s business towards the accomplishment of a common goal,” does
    nothing to contradict the trial court’s ruling. DIS had numerous contracted drivers, of which
    Adanalic was merely one. He was free to terminate the relationship at any time or refuse to haul
    any load dispatched by DIS. Such a relationship cannot be said to be “integral” to DIS’s general
    goals, presumably making a profit by dispatching contracted drivers to haul cargo.
    Accordingly, we find that the trial court did not err by finding that, for purposes of the
    no-fault act, Adanalic was an independent contractor, not an employee, of DIS. Thus, the trial
    court did not err by finding that Millers, as Adanalic’s no-fault insurer, was responsible for
    payment of his PIP benefits.
    -11-
    IV. ATTORNEY FEES
    On cross-appeal, Spectrum argues that the trial court erred by denying its request for
    attorney fees under MCL 500.3148(1). We agree.
    The trial court’s decision to grant or deny attorney fees under the no-fault
    act presents a mixed question of law and fact. What constitutes reasonableness is
    a question of law, but whether the defendant’s denial of benefits is reasonable
    under the particular facts of the case is a question of fact. We review de novo
    questions of law, but review the trial court’s findings of fact for clear error. A
    finding is clearly erroneous where this Court is left with a definite and firm
    conviction that a mistake as been made. [Univ Rehab Alliance, Inc v Farm
    Bureau Gen Ins Co of Mich, 
    279 Mich. App. 691
    , 693; 760 NW2d 574 (2008)
    (quotation marks and citations omitted).]
    In this case, there is no significant factual dispute. Thus, whether Millers’ actions were
    reasonable turns on the relationship between those actions and the settled law governing its
    responsibilities under the no-fault act.
    “MCL 500.3148 establishes two prerequisites for the award of attorney fees.” Moore v
    Secura Ins, 
    482 Mich. 507
    , 517; 759 NW2d 833 (2008). “First, the benefits must be overdue,
    meaning ‘not paid within 30 days after [the] insurer receives reasonable proof of the fact and the
    amount of loss sustained.’” 
    Id., quoting MCL
    500.3142(2). It is undisputed that Adanalic’s
    benefits are “overdue” in this case. Second, the insurer must have “unreasonably refused to pay
    the claim or unreasonably delayed in making proper payment.” MCL 500.3148(1). “[A]n
    insurer’s refusal or delay places a burden on the insurer to justify its refusal or delay.” Ross v
    Auto Club Group, 
    481 Mich. 1
    , 11; 748 NW2d 552 (2008). “”The insurer can meet this burden
    by showing that the refusal or delay is the product of a legitimate question of statutory
    construction, constitutional law, or factual uncertainty.” 
    Id. Millers argues
    that its failure to promptly pay Adanalic’s PIP benefits was based on
    legitimate questions of statutory construction,9 i.e., that Adanalic did not satisfy the parked
    vehicle exception and because worker’s compensation benefits were “available” to him. Given
    our earlier and extensive discussion of the relevant law, we find it beyond question that Millers
    “unreasonably refused to pay the claim[.]” MCL 500.3148(1).
    Regarding its suggested interpretation of MCL 500.3106(1)(b), the parked vehicle
    exception discussed earlier, there is absolutely no caselaw support for Millers’ argument. More
    to the point, the argument is wholly inconsistent with the plain language of the statute. Millers is
    asking this Court to rewrite the statute and ignore what was written by the Legislature. Millers
    9
    Millers does not argue that its refusal or delay was the product of a legitimate question of
    constitutional law or factual uncertainty.
    -12-
    does not pose a legitimate question of statutory interpretation by simply inventing an alternative
    reading that is inconsistent with the statute as written and the prior caselaw applying it.10
    Millers’ denial of PIP benefits on the grounds that worker’s compensation benefits were
    “available” to Adanalic under MCL 500.3106(2) is similarly unreasonable. It is undisputed that
    Adanalic applied for workers’ compensation benefits and was denied. Indeed, Millers appears to
    agree that Adanalic was entitled to benefits, the only question being whether the benefits were to
    be paid by workers’ compensation or no-fault. Yet, as discussed, it is well-settled that in such a
    situation, the no-fault insurer is to pay the benefits and then exercise its rights as a party in
    interest to pursue the workers’ compensation benefits. Further, under 
    Auto-Owners, 468 Mich. at 62-63
    , the no-fault insurer will be made completely whole if it prevails on the worker’s
    compensation claim.
    The mechanism Millers proposes is wholly inconsistent with the no-fault act’s “purpose
    of providing assured, adequate, and prompt recovery for economic loss arising from motor
    vehicle accidents.” 
    Perez, 418 Mich. at 650
    . It is also inconsistent with the basic and long-
    settled principle that a “no-fault carrier is not entitled to delay payments in order to wait for the
    [worker’s compensation] determination.” 
    Specht, 234 Mich. App. at 296
    . Where workers’
    compensation benefits are denied, they are not “at hand” and the no-fault insurer must pay
    benefits to the injured party while it adjudicates the priority dispute with the employer. If the no-
    fault insurer prevails in the workers’ compensation claim, it will be made whole. If it does not
    prevail in the workers’ compensation matter, then its entire basis for the denial of the no-fault
    claim was without merit.
    The final basis for Millers’ denial of Adanalic’s PIP benefits was the priority dispute
    between Millers and Harco. And, as a matter of law, “when the only question is which of two
    insurers will pay, it is unreasonable for an insurer to refuse payment of benefits.” Regents of
    Univ of Mich v State Farm Mut Ins Co, 
    250 Mich. App. 719
    , 737; 650 NW2d 129 (2002).
    Accordingly, we find that Millers’ refusal to pay Adanalic’s PIP benefits was
    unreasonable and that the trial court erred in concluding otherwise. We reverse the trial court’s
    ruling that Millers’ refusal was reasonable and remand for calculation and award of plaintiffs’
    reasonable attorney fees.11
    10
    Because Adanalic need only satisfy one parked vehicle exception to be entitled to PIP benefits,
    at least with regard to MCL 500.3106(1), and we find that Millers’ rationale for withholding
    benefits under MCL 500.3106(1)(b) was unreasonable, we need not address Millers’ additional
    argument that its withholding of benefits under MCL 500.3106(1)(c) was reasonable.
    11
    Millers is liable for the full amount of assessable attorney fees. Pursuant to 
    Moore, 482 Mich. at 526
    , and given our conclusion that Harco is not responsible for Adanalic’s subject no-fault
    benefits, Harco is not liable for plaintiffs’ attorney fees incurred in obtaining said benefits.
    -13-
    Affirmed in part and reversed and remanded in part. We do not retain jurisdiction.
    /s/ Douglas B. Shapiro
    /s/ Stephen L. Borrello
    /s/ Deborah A. Servitto
    -14-
    

Document Info

Docket Number: Docket 317764

Citation Numbers: 309 Mich. App. 173

Judges: Borrello, Servitto, Shapiro

Filed Date: 2/5/2015

Precedential Status: Precedential

Modified Date: 11/10/2024