A recent Court of Appeals decision addressed a priority dispute revolving around the interpretation of MCL 500.3114(3), and relating to employer-supplied vehicles, as well as coverage under a “bobtail” trucking insurance policy. In Lekli v Farm Bureau, Unpublished Opinion, per curium of the Court of Appeals, decided May 20, 2021 (Doc. No. 350942), Pergjoni Transport entered into an operating agreement with B&W Cartage Company, agreeing to lease a truck to B&W and provide transportation services as an independent contractor of B&W. Pergjoni insured its trucks through Great American and Hudson. Plaintiff was hired as a driver for Pergjoni and signed acknowledgment forms stating that he was an independent contractor to B&W Cartage Company. He was paid by Pergjoni and issued a 1099-MISC. While driving Pergjoni’s truck, and delivering cargo, Plaintiff was injured.
Plaintiff applied for PIP benefits from the Michigan Automobile Insurance Placement Facility (MAIPF), which denied coverage because plaintiff could not prove there was a dispute between his personal insurer, Farm Bureau, and the truck’s insurer, Great American. Plaintiff filed suit against MAIPF, Farm Bureau, Great American, Pergjoni and B&W, and the trial court granted summary disposition in favor of all the defendants finding non-party Hudson to be highest in priority for payment of PIP benefits to plaintiff.
Plaintiff appealed. The Court of Appeals affirmed dismissal of MAIPF finding that plaintiff argued in the trial court that if an insurer of highest priority was determined, then MAIPF should be dismissed. Plaintiff changed that argument on appeal but the Court of Appeals held plaintiff to his prior position. The Court of Appeals also affirmed dismissal of Farm Bureau, plaintiff’s personal insurer, performing an analysis of whether plaintiff was an “employee” of Pergjoni for purposes of priority under MCL 500.3114(3), and relying upon the “economic reality test” and a “totality of the circumstances” approach to evaluate the four factors of that test.
Regarding control of the worker’s duties, the Court concluded that Pergjoni exhibited a high level of control over plaintiff’s duties as a truck driver, plaintiff referred to Pergjoni as his “boss” and “employer” during his deposition, Pergjoni provided plaintiff with a schedule for the performance of his services, and issued him a credit card for refueling the truck, and plaintiff was required to service the truck at the time and location directed by Pergjoni, with such services being paid on Pergjoni’s credit card. Pergjoni also controlled what cargo plaintiff was required to transport. Regarding payment of wages, the Court found that although plaintiff received a 1099-MISC at the end of the year instead of a W-2, Pergjoni paid all of his wages, which represented the entirety of his income. Regarding the right to hire, fire, and discipline, there was little evidence but the Court reasoned that because Pergjoni had the ability to reward plaintiff, it tended to show that it had the ability to sanction him as well. Finally, regarding whether plaintiff was responsible for the performance of duties as an integral part of Pergjoni’s business efforts toward the accomplishment of a common goal, the Court found that because Pergjoni Transport only operated three trucks and plaintiff was the only driver assigned to the vehicle he drove and was in possession of a key to that vehicle, plaintiff was responsible for one-third of Pergjoni’s trucking business and he was a vital part of Pergjoni’s business.
The Court concluded that plaintiff was an employee of Pergjoni at the time of his accident, that Pergjoni provided the vehicle plaintiff was driving at the time of the accident, and pursuant to MCL 500.3114(3), PIP benefits were to be paid by the insurer of the furnished vehicle, and not plaintiff’s personal auto insurer, Farm Bureau.
The Court also affirmed the dismissal of Great American, which had issued a Non-Trucking Use, or “Bobtail”, policy for Pergjoni. The Great American policy included an endorsement for PIP coverage. However, Part II of the Coverage Form, “Liability Coverage For Non-Trucking Use”, contained the following exclusion:
This insurance does not apply to . . .
13. TRUCKING OR BUSINESS USE
Bodily injury or property damage arising out of any accident which occurs while the covered auto is being used in the business of any lessee or while the covered auto is being used to transport cargo of any type.
Although that exclusion only applied to liability coverage, Part III of the policy provided that the exclusions listed under Part II applied to PIP coverage as well. Examining the “Trucking or Business Use” exclusion, the Court concluded that the language of the policy plainly excluded coverage for PIP benefits when the insured vehicle was being used in the business of any lessee, or while being used to transport cargo. Because the truck operated by plaintiff was transporting cargo from Michigan to Missouri at the time of the accident, and was being used in the business of a lessee (Pergjoni), coverage for bodily injury and PIP was excluded.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com