In an interesting published opinion, the Michigan Court of Appeals examined the issue of “ownership” of a rental motor vehicle and priority for the payment of Michigan No-Fault Personal Protection Insurance benefits. In Abraham v State Farm/Enterprise Leasing, Plaintiff was injured in a motor vehicle accident while driving a Ford Transit van to deliver packages for Amazon. The vehicle was provided for her use by her employer, Nexen. The legal title to the vehicle was held by Enterprise Leasing, which was self-insured.
Nexen had leased the Transit from Enterprise through a continuing series of 28-day rental agreements, with each agreement being “closed out and rewritten” at the end of each rental period. Although each rental agreement was renewed every 28 days, Nexen did not return the vehicle to Enterprise between lease periods, and remained in continuous possession of the Transit for nearly six months. Nexen had not obtained insurance of its own on the Transit van, and State Farm was the insurer of the Plaintiff’s personal auto at the time of the accident.
The issue of priority centered on the application of MCL 500.3114(3), with a separate question relating to coverage brought in to play by MCL 500.3101(1). Both of those issues required a determination of whether Nexen and Enterprise were “owners” of the Transit van. Noting that more than one entity may be considered an “owner” of a vehicle, the Court of Appeals ultimately held that both Nexen and Enterprise were indeed “owners” of the Transit van for purposes of the No-Fault statute.
Under MCL 500.3101(3)(l)(i), the definition of an “owner” includes “[a] person renting a motor vehicle or having the use of a motor vehicle, under a lease or otherwise, for a period that is greater than 30 days.” The Court determined that Nexen was an “owner” of the Transit because it had the right to use the vehicle for more than 30 days prior to the accident. Although each rental agreement between Nexen and Enterprise was for a period of 28 days, and not 30 days, Nexen had the right to use the Transit for a period exceeding 30 days. In this case, Nexen had the right to use the vehicle for six months, and was therefore considered an “owner” under MCL 500.3101(3)(l)(i), as it had use of the vehicle “under a lease or otherwise,” for more than 30 days.
The Court also concluded that Enterprise was an “owner” of the vehicle pursuant to MCL 500.3101(3)(l)(iii). That provision included within the definition of “owner”, “[a] person that holds the legal title to a motor vehicle or motorcycle, other than a person engaged in the business of leasing motor vehicles or motorcycles that is the lessor of a motor vehicle or motorcycle under a lease that provides for the use of the motor vehicle or motorcycle by the lessee for a period that is greater than 30 days.” Enterprise argued that it was excluded from this definition of “owner” as it was “engaged in the business of leasing motor vehicles”.
However, the Court noted that this exclusion from the definition of “owner” only applied to the lessor of a motor vehicle under a lease greater than 30 days[1]. Further, the statutory language referenced the duration of a single lease, and not that of multiple leases, as utilized by the parties in this case. Because the individual lease agreements between Enterprise and Nexen were only for 28 days, and were not “greater than 30 days” as required under the statute, the “business of leasing motor vehicles” exclusion did not apply to Enterprise. As the title holder to the Transit van, the Court held that Enterprise was an “owner” of the vehicle.
The issue of priority for the payment of PIP benefits involved analysis of MCL 500.3114(3). Under that subsection, an employee who is injured while occupying a motor vehicle owned or registered by the employer, is entitled to receive PIP benefits from the insurer of that vehicle.[2]
It was undisputed that Plaintiff had been an employee of Nexen at the time of the accident, and that Nexen had supplied her with the Transit van she was driving. Because Nexen had the right to use the vehicle for more than 30 days, the Court had held that Nexen was an “owner” of the Transit van. Plaintiff was therefore occupying a motor vehicle owned by her employer at the time of the accident. Pursuant to MCL 500.3114(3), the insurer responsible for the payment of her PIP benefits was the insurer of the Transit van.
While Nexen had not procured its own insurance coverage for the vehicle, there was a question regarding whether Enterprise, as a self-insured entity, was the insurer of the Transit and required to provide the necessary PIP coverage. Enterprise argued that because Nexen was an “owner”, then Nexen was required to provide PIP coverage, relieving Enterprise of that responsibility. Having concluded that both Nexen and Enterprise were “owners” of the vehicle, however, the Court disagreed.
The Court noted that under MCL 500.3101(1), owners of motor vehicles are required to maintain security for the payment of PIP benefits. As both Enterprise and Nexen were considered “owners” of the Transit, they were each required by statute to maintain No-Fault PIP coverage on the vehicle. Although Nexen did not have PIP coverage of its own, as a self-insured entity, Enterprise was held to be responsible for the No-Fault coverage on the vehicle at the time of the accident, and responsible for the payment of the plaintiff’s PIP benefits.
Had Enterprise rented the Transit van to Nexen under a lease agreement that had provided for Nexen’s use of the vehicle for more than 30 days, then Enterprise would not have been considered an “owner”, and would not have been required to insure the vehicle. Because Nexen did not have no-fault coverage of its own, Enterprise was left as the priority insurer responsible for the payment of the Plaintiff’s PIP benefits. However, this result was only achieved through a careful examination of the lease agreements and the application of the relevant statutory sections.
[1] MCL 500.3101(3)(n) has a similar caveat with respect to a “registrant” of a vehicle.
[2] MCL 500.3114(3) states: “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.”
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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