In Gorgis v Auto Club Insurance Assoc, the Court of Appeals addressed priority of insurers under MCL 500.3114(3). Plaintiff Gorgis was injured while operating a truck which struck a deer. The vehicle that Plaintiff was driving was owned by one of the principal owners of Transport Systems and insured by Carolina Casualty Insurance Company. Plaintiff held personal automobile insurance through Auto Club (d/b/a AAA). A priority dispute arose between Carolina and Auto Club. The trial court applied the economic reality test and concluded that the Plaintiff was an independent contractor rather than an employee of Transport. Therefore, for purposes of MCL 500.3114(3), Plaintiff’s personal insurer, Auto Club, was the insurer of highest priority for payment of PIP benefits to Plaintiff.
On appeal, the Court did a deep-dive into the history of the “economic reality test” in all its forms and concluded that, the focus in a case such as this rests upon the substantive realities of the work performed as opposed to mere labels or terminology. The enumerated factors of the “economic reality test” must be considered in context, with the overarching inquiry being “whether the relationship is of the type intended to be protected by the relevant statutory scheme.” Powell v Employment Security Comm, 345 Mich 455, 479 (1956). The Court recognized that precedent involving truck drivers establishes a significant cohort of individuals “working in the twilight zone of employment” making the distinction between independent contractors and employees difficult to discern.
The Court noted that the fact that an individual may be regarded as an independent contractor for tax purposes does not control the determination of employee statute under the No-Fault Act. While the arrangements between Plaintiff and Transport in this case appear calculated to create the semblance of an independent contractor relationship, the facts establish that Plaintiff was compensated solely by Transport for whom he exclusively hauled cargo and for whom he worked six days a week prohibiting him from working for any other company. The record supported a finding that Plaintiff was wholly dependent on Transport for the income derived from his primary profession. Thus, the arrangement as a whole more closely aligned with an employer-employee relationship.
The facts regarding the right to hire, fire and discipline collectively pointed to an at-will, terminable relationship which did not reflect any likelihood that Transport would incur liability upon dissolution of the relationship, weighing again in favor of an employer-employee relationship. The record also reflected Plaintiff had only limited discretion regarding the performance of his duties insufficient to undermine an employment relationship. Finally, it was manifest that Transport’s business purpose – commercial transport of cargo – could not be achieved without the services of its truck drivers such that Plaintiff’s duties were integral to Transport’s business, weighing strongly in favor of finding an employer-employee relationship.
In short, the Court concluded:
At the time of the incident, plaintiff operated a truck owned and supplied by Transport Systems, performing cargo deliveries at the direction of the company. Plaintiff devoted six days per week to interstate deliveries for Transport Systems, adhering to schedules and pickup locations established by the employer, and was incentivized financially to maximize efficiency and frequency of deliveries. Minor variations in the degree of autonomy exercised by different truck drivers with respect to nonessential aspects of job performance do not bear upon the determination of insurance priority under MCL 500.3114(3). Considering the totality of the circumstances, the economic reality is that plaintiff functioned as an employee of Transport Systems. Accordingly, Carolina, as the insurer of the vehicle operated by plaintiff, holds first priority under MCL 500.3114(3). Slip Op, p. 17.
The Court found a “Independent Contractor Waiver of Coverage” form provided by Transport and signed by Plaintiff did not warrant a contrary result because, while parties may enter into agreements purporting to define their relationship as one of independent contractor, such agreements are not controlling.
