INSURER OF VEHICLE PROVIDED BY EMPLOYER BUT OWNED BY INDEPENDENT CONTRACTOR IS HIGHEST IN PRIORITY FOR PIP

Berton K. May

In Alghali v Citizens Insurance Co and ACE American Insurance Co (unpublished Michigan Court of Appeals, July 9, 2020, docket 343359), the Michigan Court of Appeals reversed the trial court’s granting of summary disposition in favor of ACE on a priority issue between Citizens and ACE.   The Court determined that ACE was in fact the PIP insurer of highest priority and that the provisions in their policy indicating otherwise were void as being in conflict with the intent of the No-Fault Act, MCL 500.3101, et seq.

Plaintiff, Beatrice Alghali, obtained a Cadillac through her work as an independent contractor with Mary Kay Cosmetics.  This was done through Mary Kay in the form of a lease listing Beatrice as the owner of the Cadillac.  In addition, Mary Kay obtained insurance on the Cadillac through ACE, Mary Kay paid 80% of the premium and the other 20% was paid by Beatrice through her commissions with Mary Kay.   The ACE policy listed Mary Kay as the only “named insured”.   In addition, the ACE policy had a provision for PIP benefits to “insureds” but excluded “anyone entitled to Michigan No-Fault benefits as a Named Insured under another policy” and “anyone entitled to Michigan No-Fault benefits as a “family member” under another policy”.   Beatrice’s husband, Hamid Alghali owned a Ford Explorer insured with Citizens.

On September 15, 2020, Hamid was driving the Cadillac with Beatrice in the passenger seat while the two were running personal errands.  They were involved in an accident whereby Beatrice was injured.  Suit was brought by the Alghalis against various parties including the at fault driver of the vehicle and Citizens.  3rd party claims and cross-claims were also asserted between Citizens and ACE.

The trial court determined that Beatrice was not driving an “employer furnished vehicle” under MCL 500.3114(3), and the limiting endorsements on the ACE policy placed Citizens as the highest priority insurer.  Summary disposition under MCR 2.116 (C)(10) in favor of ACE was granted.  Citizens appealed.

The Court of Appeals first addressed whether the Cadillac constituted an “employer-furnished vehicle” for the purposes of MCL 500.3114(3).  MCL 500.3114 (3) reads:

“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.”

Applying the holdings in Celina Mutual Ins v Lake States Ins, 452 Mich 84 (1996), and Besic v Citizens Ins, 290 Mich App 19 (2010), the Court determined that MCL 500.3114(3) applies when the injured person is self-employed and operating an insured vehicle, including a self-employed independent contractor such as Beatrice Alghali.  ACE argued that a self-employed independent contractor must be using the vehicle within the course and scope of their employment at the time of the accident for the statutory provision to apply.  The Court of Appeals disagreed citing multiple cases and clear language of the statute which only requires the person to be an “occupant” of the vehicle.  The Court determined that Beatrice Alghali satisfied the requirements of MCL 500.3114(3) such that ACE was the insurer of highest priority.

The Court then addressed whether ACE’s policy language excluding PIP coverage for “anyone entitled to Michigan No-Fault benefits as a Named Insured under another policy” and “anyone entitled to Michigan No-Fault benefits as a “family member” under another policy” was valid.   ACE argued that because Beatrice was a resident relative of her husband Hamid that his policy with Citizens would be primary due to the ACE policy language.   Citing Corwin v DaimlerChrysler Ins, 296 Mich App 242 (2012), the Court determined that the ACE policy conflicted with the No-Fault statute’s intent and priorities and attempted to engage in an unlawful shifting of PIP liability to other insurers.   The Court noted that Mary Kay was not a titled owner of the Cadillac and had no insurable interest, and Beatrice Alghali paid a portion of the ACE insurance premiums and owned the vehicle.  Further, the ACE provision was void because it enabled ACE to avoid primary liability for PIP benefits that are payable to injured people that ACE personally insures, specifically plaintiffs.  Thus, ACE was considered Beatrice Alghali’s personal insurer and was primarily liable for payment of PIP benefits to Beatrice Alghali.

Due to the determination that MCL 500.3114(3) applied and that the ACE exclusionary language was void, the trial court’s grant of summary disposition in favor of ACE was reversed and the trial court was ordered to enter judgement in favor of Citizens.