TITAN INSURANCE COMPANY v. AMERICAN COUNTRY INSURANCE COMPANY

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Court of Appeals of Michigan.

TITAN INSURANCE COMPANY, Plaintiff–Appellant, v. AMERICAN COUNTRY INSURANCE COMPANY, Defendant–Appellee,

Safe Arrival Transportation and Shonnise Woods, Defendants. Bronson Methodist Hospital, Plaintiff–Appellee, v. Titan Insurance Company, Defendant–Appellee. American Country Insurance Company, Defendant–Appellant.

Docket Nos. 319342, 321598.

Decided: September 15, 2015

Before: RONAYNE KRAUSE, P.J., and GLEICHER and STEPHENS, JJ.

This consolidated appeal stems from motor vehicle accidents involving uninsured drivers. At issue is which insurance providers are responsible for the claims in issue. In Docket No. 319342, the Wayne Circuit Court granted defendant American Country Insurance Company's (American Country) motion for summary disposition under MCR 2.116(C)(10) (no genuine issue of material fact). Plaintiff Titan Insurance Company (Titan) appeals as of right. In Docket No. 321598, the Kalamazoo Circuit Court affirmed the district court's decision granting judgment in favor of Titan against American Country.1 American Country appeals by leave granted. Bronson Methodist Hosp v. Titan Ins. Co., unpublished order of the Court of Appeals, entered September 29, 2014 (Docket No. 321598). We reverse in Docket No. 319342 and affirm in Docket No. 321598.

In Docket No. 319342, Stanley Hughes was injured in a motor vehicle accident while operating a van owned by and registered to Safe Arrival Transportation, which is in the business of transporting passengers. The van was uninsured. Hughes, an independent contractor for Safe Arrival, did not have a personal no-fault policy. Titan was assigned to handle Hughes's claim. Titan thereafter filed suit against American Country, which insured another vehicle owned by Safe Arrival, asserting that American Country is the higher priority insurer and that Titan was entitled to reimbursement from American Country. The parties filed cross-motions for summary disposition, each asserting that the other was the higher priority insurer. Following oral argument, the trial court granted American Country's motion and denied Titan's. Titan moved for reconsideration, which the trial court denied.

In Docket No. 321598, George Slack was injured in a motor vehicle accident while driving a van for Bronco Express Company, a taxi service company. Slack did not have a personal insurer. The van was uninsured, but American Country insured other vehicles owned by Bronco Express. Slack was treated at Bronson Methodist Hospital, which later sought reimbursement. The claim was assigned to Titan, but Titan denied it, asserting that American Country was responsible for the claim under the no-fault act, MCL 500.3101 et seq., because it insured other vehicles owned by Bronco Express. However, American Country also denied the claim. Bronson thereafter filed suit in district court against Titan and American Country, and Titan cross-claimed against American Country. American Country then moved for summary disposition. The district court held that American Country was responsible for the claim. American Country then appealed in the circuit court, which affirmed the district court's holding. American Country moved for reconsideration, which the court denied.

At issue in this case is the priority of insurers under MCL 500.3114, a question of statutory interpretation, which this Court reviews de novo. Vitale v. Auto Club Ins. Ass'n., 233 Mich.App 539, 542; 593 NW2d 187 (1999). That statute provides as follows:

(1) Except as provided in subsections (2), (3), and (5), a personal protection insurance policy described in section 3101(1) applies to accidental bodily injury to the person named in the policy, the person's spouse, and a relative of either domiciled in the same household, if the injury arises from a motor vehicle accident. A personal injury insurance policy described in section 3103(2) applies to accidental bodily injury to the person named in the policy, the person's spouse, and a relative of either domiciled in the same household, if the injury arises from a motorcycle accident. When personal protection insurance benefits or personal injury benefits described in section 3103(2) are payable to or for the benefit of an injured person under his or her own policy and would also be payable under the policy of his or her spouse, relative, or relative's spouse, the injured person's insurer shall pay all of the benefits and is not entitled to recoupment from the other insurer.

(2) A person suffering accidental bodily injury while an operator or a passenger of a motor vehicle operated in the business of transporting passengers shall receive the personal protection insurance benefits to which the person is entitled from the insurer of the motor vehicle. This subsection does not apply to a passenger in the following, unless that passenger is not entitled to personal protection insurance benefits under any other policy:

(a) A school bus, as defined by the department of education, providing transportation not prohibited by law.

(b) A bus operated by a common carrier of passengers certified by the department of transportation.

(c) A bus operating under a government sponsored transportation program.

(d) A bus operated by or providing service to a nonprofit organization.

(e) A taxicab insured as prescribed in section 3101 or 3102.

(f) A bus operated by a canoe or other watercraft, bicycle, or horse livery used only to transport passengers to or from a destination point.

(3) An employee, his or her spouse, or a relative of either domiciled in the same household, 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.

(4) Except 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.

(b) The insurer of the operator of the vehicle occupied.

(5) A person suffering accidental bodily injury arising from a motor vehicle accident which shows evidence of the involvement of a motor vehicle while an operator or passenger of a motorcycle shall claim personal protection insurance benefits from insurers in the following order of priority:

(a) The insurer of the owner or registrant of the motor vehicle involved in the accident.

(b) The insurer of the operator of the motor vehicle involved in the accident.

(c) The motor vehicle insurer of the operator of the motorcycle involved in the accident.

(d) The motor vehicle insurer of the owner or registrant of the motorcycle involved in the accident.

(6) If 2 or more insurers are in the same order of priority to provide personal protection insurance benefits under subsection (5), an insurer paying benefits due is entitled to partial recoupment from the other insurers in the same order of priority, together with a reasonable amount of partial recoupment of the expense of processing the claim, in order to accomplish equitable distribution of the loss among all of the insurers.

Generally, pursuant to MCL 500.3114(1), a person must seek PIP benefits from his own insurer. Farmers Ins. Exch. v. Farm Bureau Ins. Co., 272 Mich.App 106, 111; 724 NW2d 485 (2006). However, the exceptions in subsections (2), (3), and (5) supersede this general rule. Id. If no insurance is available, a person may obtain benefits through the Assigned Claims Facility, which is the insurer of last priority. MCL 500.3172; Cason v. Auto Owners Ins. Co., 181 Mich.App 600, 610; 450 NW2d 6 (1989).

All parties agree that because Hughes and Slack were operators of motor vehicles in the business of transporting passengers, parties must first look to subsection (2). However, because the vehicles in both cases were uninsured, that subsection does not apply. At issue, then, is whether a party must progress through the other subsections of MCL 500.3114. Titan argues that other subsections of the statute indeed apply and because insurance is not available under subsection (1), subsection (4) should apply. Under this reading of the statute, American Country would be liable under MCL 500.3114(4)(a), because it insured other vehicles owned by Safe Arrival and Bronco Express. See Farmers Ins. Exch. v. Farm Bureau Ins. Co., 272 Mich.App at 113–114; Pioneer State Mut. Ins. Co. v.. Titan Ins. Co., 252 Mich.App 330, 335–337; 652 NW2d 469 (2002). American Country counters that there is no indication in the statute that once it is determined that insurance is unavailable pursuant to subsection (2), subsection (4) applies. It argues that because there is no insurance available pursuant to subsection (2), Titan, as the assigned insurer, is responsible.

In Docket No. 319342, the circuit court held that because subsection (2) was the most relevant subsection given the circumstances of this case, it was “the only provision that applies to [Hughes's] injuries.” The court concluded that because there was no insurance available pursuant to subsection (2), the Assigned Claims Facility was responsible for Hughes's claim. The court also reasoned that there was nothing in MCL 500.3114 indicating that if insurance is not available under subsection (2) that subsection (4) would then apply.

In Docket No. 321598, the circuit court reached the opposite conclusion. American Country had relied on “[e]xcept as provided in subsections (1) to (3),” found at the beginning of subsection (4), to argue that if subsections (1) through (3) could apply but insurance was not available, subsection (4) would not apply. The court rejected that argument, saying that it “would make that particular provision of four mean that if anyone, for whatever reason, could show that for subparagraph 1 or subparagraph 3 that there was not an insurer available that somehow that would accept [sic] that individual ․ from resorting to subsection (4).” The court said that it did not “believe that the language as relates to the quoted passage is saying that an individual is precluded from using four if it could theoretically fall within the purview of one, two, or three.” The court accordingly held that because insurance was not available under subsections (1) through (3), subsection (4) applied, and American Country was responsible for the claim.

Turning for guidance to cases looking to the interaction of other subsections of the statute, we discern a general rule that where an exception to subsection (1) should apply but insurance is not available, the general rule of subsection (1) applies. In Auto–Owners Ins. Co. v. Lombardi Food Serv., Inc., 137 Mich.App 695, 696–697; 358 NW2d 923 (1984), an employee was injured while riding in a truck that was owned or leased by his employer, and thus subsection (3) would have been applicable. However, the employer had failed to insure the truck. Id. at 696. The Court held that the employee's personal insurer was liable under subsection (1). Id. at 697. See also Parks v. Detroit Auto Inter–Ins. Exch., 426 Mich. 191, 206; 393 NW2d 833 (1986) (stating that where no insurance is available pursuant to subsection (3), the employee is entitled to benefits from his personal insurer under subsection (1)). In Frierson v. West American Ins. Co., 261 Mich.App 732, 733–737; 683 NW2d 695 (2004), the plaintiff was injured while a passenger on a motorcycle in an accident involving a motor vehicle, and thus subsection (5) would have been applicable. However, the insurers who would have been liable under that subsection were unidentifiable. Id. at 737. The Court held that under Parks, the plaintiff's personal insurer was liable under subsection (1). Id. at 737–738. In addition, the Court broadly stated, “[W]hen an insurer that would be liable under one of the exceptions in MCL 500.3114(1) cannot be identified, the general rule applies and the injured party must look to her own insurer for personal protection insurance benefits.” Id. at 738. As applied in the present case, because there is no identifiable insurance under subsection (2), if Hughes and Slack had personal insurers, they would be responsible for their benefits under subsection (1).

Caselaw demonstrates that where subsection (1) applies but an insurer is not available, as is the case here, subsection (4) applies next. See Michigan Mut. Ins. Co. v. Farm Bureau Ins Group, 183 Mich.App 626, 630; 455 NW2d 352 (1990) (stating that where insurance is not available under subsection (1), subsection (4) applies). In Parks, 426 Mich. at 203 n. 3, our Supreme Court stated, “Those injured while occupants of motor vehicles must look to the rules provided in subsections 1, 2, and 3 before applying the priorities listed in subsection 4.” (Emphasis omitted.) Indeed, this Court has stated that subsections (1) and (4) together establish “the general order of priority.” Michigan Mut. Ins. Co., 183 Mich.App at 631. Thus, if an exception provided in subsections (2), (3), or (5) would apply but insurance is not available, subsections (1) and (4) apply in tandem.

It is always possible that a person injured in a motor vehicle accident will have a personal policy and insurance will thus be available under subsection (1). Under American Country's argument, because subsection (1) could theoretically apply, subsection (4) could never apply. This Court must avoid an interpretation that would render statutory language surplusage. Robinson v. City of Lansing, 486 Mich. 1, 21; 782 NW2d 171 (2010). Instead, subsection (4) plainly governs which insurance applies when insurance is unavailable under subsection (1). That is, “[e]xcept as provided in subsection (1) to (3)” at the beginning of subsection (4) means “if insurance is not available under subsections (1) to (3).” As applied in the present case, under subsection (4), because American Country insured other vehicles owned by Safe Arrival and Bronco Express, it is responsible for the claims in these cases.

We reverse in Docket No. 319342 and affirm the lower court in Docket No. 321598. We remand Docket No. 319342 for further proceedings consistent with this opinion. We do not retain jurisdiction.

These consolidated cases arise from two accidents involving two uninsured vans engaged in the business of transporting passengers. Defendant American Country Insurance Company insured other vehicles registered to the vans' owners. In both cases, plaintiff Titan Insurance Company was tapped by the assigned claims plan to handle the ensuing personal injury protection (PIP) claims. The lead opinion holds that pursuant to a single sentence of obiter dictum contained in a 1986 footnote, American Country stands in higher priority than Titan and therefore must adjust the claims. I concur, but write separately to suggest that the text of the governing statute merits renewed consideration by the Supreme Court.

This case turns on the formula governing priority. MCL 500.3114 addresses “the order in which various potentially liable insurers will be required to cover a claim for benefits.” Parks v. Detoroit Auto Inter–Ins. Exch., 426 Mich. 191, 201; 393 NW2d 833 (1986). The lead opinion holds that a subsection of the statute—MCL 500.3114(4)—controls the priority analysis in this case. According to subsection (4), the lead opinion declares, American Country must manage the claims because it insured other vehicles owned by or registered to the two transportation businesses. I agree that a footnote in Parks compels this result. See Parks, 426 Mich. at 203 n. 3. Were we writing on a clean slate, I would hold the priority rules set forth in MCL 500.3114 ambiguous when applied to PIP claims arising from commercial vehicle accidents such as the two involved here.

A trio of foundational principles animates Michigan's No–Fault Act, MCL 500.3101 et seq. Losses occasioned by accidental bodily injury arising from the operation of a motor vehicle are compensated through a system of PIP benefits, payable without regard to fault. The owner or registrant of a vehicle must purchase PIP coverage, which usually covers any losses sustained by the individual. MCL 500.3105. “[I]n a majority of cases, specific recognized losses suffered as a result of motor vehicle accidents will be compensated for by a person's own insurer.” Belcher v. Aetna Cas. & Surety Co., 409 Mich. 231, 240; 293 NW2d 594 (1980).

The Legislature understood that despite the Act's coverage imperative, the no-fault system would necessarily have to accommodate the PIP needs of uninsured occupants of uninsured vehicles. This recognition yielded the contemporaneous enactment of a back-up plan, a priority system specifying a method for payment of PIP benefits when an injured person lacked no-fault coverage. MCL 500.3114 maps the course of such priority determinations. At the end of the priority road stands the insurer of last priority: the Michigan Assigned Claims Plan (MACP) (successor to the Michigan Assigned Claims Facility). MCL 500.3172(1). An injured person looks to the MACP for PIP coverage:

if no [PIP] is applicable to the injury, no [PIP] applicable to the injury can be identified, the [PIP] applicable to the injury cannot be ascertained because of a dispute between 2 or more automobile insurers concerning their obligation to provide coverage or the equitable distribution of the loss, or the only identifiable [PIP] applicable to the injury is, because of financial inability of 1 or more insurers to fulfill their obligations, inadequate to provide benefits up to the maximum prescribed. MCL 500.3172(1).

Before resorting to the MACP, the No–Fault Act contemplates that claimants will utilize MCL 500.3114's priority system to determine where to seek coverage among no-fault insurers. MCL 500.3114(1) states the general rule that a PIP policy applies to “the person named in the policy, the person's spouse, and a relative of either domiciled in the same household[.]” Thus, an injured person usually turns to his or her own policy first, even if the injury arises from the operation of an uninsured vehicle.

Subsection (2) creates an exception to the rule set forth in subsection (1). An injured driver or occupant of a motor vehicle “operated in the business of transporting passengers” must look to “the insurer of the motor vehicle” for PIP benefits, and not his or her own insurer. This rule is subject to its own discrete exceptions, narrowing its reach. The statute states in its entirety:

A person suffering accidental bodily injury while an operator or a passenger of a motor vehicle operated in the business of transporting passengers shall receive the [PIP] benefits to which the person is entitled from the insurer of the motor vehicle. This subsection does not apply to a passenger in the following, unless that passenger is not entitled to [PIP] benefits under any other policy:

(a) A school bus, as defined by the department of education, providing transportation not prohibited by law.

(b) A bus operated by a common carrier of passengers certified by the department of transportation.

(c) A bus operating under a government sponsored transportation program.

(d) A bus operated by or providing service to a nonprofit organization.

(e) A taxicab insured as prescribed in [MCL 500.3101 or MCL 500.3102].

(f) A bus operated by a canoe or other watercraft, bicycle, or horse livery used only to transport passengers to or from a destination point. [MCL 500.3114(2) (emphasis added).]

This Court has thoughtfully summarized that MCL 500.3114(2) and its exceptions

relate to “commercial” situations. It was apparently the intent of the Legislature to place the burden of providing no-fault benefits on the insurers of these motor vehicles, rather than on the insurers of the injured individual. This scheme allows for predictability; coverage in the “commercial” setting will not depend on whether the injured individual is covered under another policy. A company issuing insurance covering a motor vehicle to be used in a(2) ․ situation will know in advance the scope of the risk it is insuring. The benefits will be speedily paid without requiring a suit to determine which of the two companies will pay what is admittedly due by one of them. [State Farm Mut. Auto Ins. Co. v. Sentry Ins., 91 Mich.App 109, 114–115; 283 NW2d 661 (1979).]

MCL 500.3114(2) plainly provides that (with carefully delineated exceptions) when a vehicle used in the commercial transportation of customers is involved in an injury-producing accident, the insurer of the commercial vehicle provides PIP coverage. The Legislature omitted from this subsection any priority fall-back rules, despite that the Legislature undoubtedly foresaw that injuries would arise from accidents involving uninsured commercial vehicles. Although the Legislature took pains to carve out discrete exceptions to subsection (2), it notably omitted mention of or reference to a back-up plan governing the foreseeable risk that an owner of a commercial vehicle in the business of transporting passengers would fail to insure it.1

In this sense, subsection (2) could logically be interpreted to function in a manner akin to a light switch. When turned on, coverage responsibility falls to the vehicle's insurer. When turned off, there is no coverage, which means that coverage automatically defaults to the insurer of last resort—the assigned claims plan. The Legislature's omission of an alternative priority scheme in the subsection specifically addressing vehicles operated in the business of transporting passengers could mean that the Legislature did not intend to place responsibility on a specific insurer that had not undertaken the risk of insuring the commercial vehicle. After all, “[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; 489 NW2d 431 (1992).2

Alternatively, and as the lead opinion holds, subsection (4) serves as the priority road-map for vehicles operated in the business of transporting passengers, even though such vehicles are not mentioned in that subsection and appear to be specifically exempted from its reach:

Except 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.

(b) The insurer of the operator of the vehicle occupied. [MCL 500.3114(4) (emphasis added).]

What does the phrase “[e]xcept as provided in subsections (1) to (3)” mean in the context of subsection (4)? It could mean that “except where there is coverage, as set forth in subsection (2),” the rules of subsection (4) apply. The lead opinion affords this meaning to the “except” clause, and I concur that this is a rational reading of MCL 500.3114(4). Moreover, the Supreme Court's footnote in Parks seems to dictate this result, as it states: “Those injured while occupants of motor vehicles must look to the rules provided in subsections 1, 2, and 3 before applying the priorities listed in subsection 4.” Parks, 426 Mich. at 203 n. 3.3

Application of that rule in this case means that American Country is responsible for the PIP claims at issue, despite that American Country never agreed to insure the commercial vehicles involved in the accidents and never received a single dollar in premium payments for coverage of those vehicles. If MCL 500.3114(4) governs this priority dispute, the law has created a contract that did not exist, and holds American Country liable for risks it never assumed.

I submit that an alternate interpretation is equally valid: subsection (2) operates as a stand-alone provision because it deals with a subset of vehicles presenting unique considerations. Owners of vehicles used to transport passengers are required to purchase PIP policies from no-fault insurers. Those no-fault insurers are required to pay PIP benefits to drivers and passengers of such insured commercial vehicles. Here, the vehicles were uninsured. Parks dictates that we burden American Country with coverage responsibility because American Country insured other vehicles owned or registered by the same (lawbreaking) businesses, rather than spreading the risk to all insurers writing no-fault policies in Michigan (as ordinarily occurs when the MACP serves as the default). American Country bears responsibility despite that it had no opportunity to underwrite the risks it undertook by insuring some (or perhaps even one) vehicle in a larger fleet.

Perhaps this is what the Legislature intended. But given the plain language of subsections (2) and (4), I find it equally plausible that the Legislature envisioned that if a commercial transportation service owner failed to obtain PIP coverage for some vehicles in his or her fleet, the risk would be spread to all insurers subject to assigned claims obligations, rather than being borne solely by the innocent insurer for the remaining vehicles.

FOOTNOTES

1.  Disputed claims involving Bronson Methodist Hospital are not at issue in this appeal, as this Court granted Bronson's motion to be dismissed as a party to the appeal. Bronson Methodist Hosp. v. Titan Ins. Co., unpublished order of the Court of Appeals, entered June 12, 2015 (Docket No. 321598).

1.  The exceptions for school buses, taxicabs, and other specifically identified commercial vehicles place the responsibility for PIP coverage on the passenger's no-fault carrier, “unless that passenger is not entitled to [PIP] benefits under any other policy.” MCL 500.3114(2). Thus, the exceptions reinstate the general rule that one looks to one's own insurer for PIP coverage. The Legislature decreed that the insurers of a relatively small subset of commercial vehicles, such as the two vans involved in this case, would be liable for PIP benefits regardless of whether the injured person owned her own no-fault policy.

2.  The [MACP] serves as an exception to this rule. The plan is a safety net, of sorts, designed to supply coverage for injured and uninsured automobile accident victims. The plan shifts the costs of care from the taxpayers or medical care providers, placing it on the insurers who write most of the no-fault coverage policies in this state.

3.  Parks involved a claim governed by MCL 500.3114(3), and not subsection (2).

RONAYNE KRAUSE, P.J.

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