January 05, 2018
In a case having a lengthy procedural history involving multiple prior appeals, the Michigan Court of Appeals has entered a published opinion holding that the “Business Use” Exclusion on a non-trucking use (“bobtail”) automobile insurance policy did not operate to exclude coverage where there was no lease agreement between the companies involved.
In Hunt v Drielick, ___ Mich App ___ (12/14/2017), Empire Fire and Marine Insurance Company issued a Non-Trucking Use, or “Bobtail”, insurance policy to Drielick Trucking. That policy contained a Business Use Exclusion which stated that Empire was not liable for “bodily injury or property damage while a covered auto is used to carry property in any business or while a covered auto is used in the business of anyone to whom the auto is leased or rented.”
On the day of the accident, a semi-tractor (and covered auto) was being driven by Corey Drielick when he was involved in a fatal accident with another vehicle. Corey was on his way to the trucking yard owned by Great Lakes Carriers Corporation (GLC), but he was not transporting any property at the time. He had not yet picked up a trailer, was not under orders to be at the yard at any particular time, was free to complete personal business before arriving at the yard, and there was an oral agreement that Drielick would not be paid until after the tractor was coupled with the trailer.
In an earlier opinion[1], the Michigan Supreme Court held that the first clause in the “Business Use” Exclusion relating to “bodily injury bodily injury or property damage while a covered auto is used to carry property in any business”, did not serve to exclude coverage where the semi-tractor was being driven to the trucking company’s yard without a trailer or cargo. However, the Court then remanded the case back to the trial court for a determination regarding whether the semi-tractor was being, “used in the business of anyone to whom the auto is leased or rented.” The present appeal followed the trial court’s decision on remand, in which the trial court held that there was no lease agreement in effect as contemplated by the leasing clause of the Business-Use Exclusion, and that therefore, the exclusion did not preclude coverage under Empire’s policy with Drielick Trucking.
The Court of Appeals noted that a “lease” is defined as “a contract conveying land, renting property, etc., to another for a specified period”, and that “rent” means “to grant the possession and use of (property, machinery, etc.) in return for payment of rent.”[2] Applying those definitions, the Court concluded that the leasing clause portion of the exclusion made it clear there was no coverage when an accident occurs during the time that the semi-tractor was being used in the business of anyone who had been given possession and use of the semi-tractor for a specified period in return for the payment of rent.
Although Empire argued that an exclusive, ongoing oral lease had existed between Drielick Trucking and GLC, the Court disagreed, based upon the evidence presented:
•According to Drielick Trucking, GLC was “supposed” to prepare a written lease agreement, but never did.
•GLC denied that the semi-tractor was the subject of any type of lease with GLC.
•Driver Corey Drielick used the semi-tractor for personal errands, including transporting another person, during the time period that Drielick Trucking was transporting cargo for GLC.
•Corey kept the semi-tractor at his home, and when dispatched, would drive to the GLC yard, where he would couple the semi-tractor with a trailer and obtain the paperwork necessary from GLC to carry out the delivery.
•There was no evidence that Corey had to be at GLC’s yard at a specific time, that he was not otherwise free to go where he wanted with the semi-tractor, or free to decline an assignment.
•Drielick Trucking did not receive payment until arriving at GLC’s yard and coupling the semi-tractor with the trailer.
•The trucking broker paid Drielick Trucking for deliveries made using the semi-tractor.
•A representative of GLC testified that he did not provide Drielick Trucking with the lettering for the semi-tractor involved in the accident, and that he had no knowledge that GLC lettering had been placed on the semi-tractor.
•Drielick Trucking did not receive a “Michigan Apportioned Registration Cab Card” with GLC’s name on it.
•Corey denied the existence of any documents provided by GLC inside of the semi-tractor.
•The accident report did not reveal that police officers were provided with any document at the scene indicating that the semi-tractor was under lease to GLC at the time of the accident.
In light of this evidence, the Court concluded that Empire had failed to establish that Drielick Trucking and GLC had entered into a relationship where the use, control, and possession of the semi-tractor had been transferred to GLC for a period of time, including at the time of the accident, pursuant to a contract in return for the payment of rent. Instead, the Court concluded that at most the evidence supported a finding that a lease would be formed as of the time that Drielick Trucking arrived at the GLC yard to accept an assignment. Based on the Court’s conclusion that a lease as contemplated by the insurance policy did not exist at the time of the accident, it held that the leasing clause of the Business-Use Exclusion did not apply, and that Empire was responsible for liability coverage and indemnification for this loss.
This case demonstrates that, in the absence of a clear leasing agreement, the Courts will look to the specific facts and circumstances of the subject incident to determine whether the Business-Use Exclusion will apply to preclude coverage under a non-trucking use policy.
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[1] Hunt v Drielick, 496 Mich 366; 852 NW2d 562 (2014), previously reported in Law Fax, August 1, 2014, Volume XXVI, No. 22.
[2] There was no dispute between the parties that the semi-tractor being operated without an attached trailer was a “covered ‘auto'” under the policy.
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