April 12, 2010
NO FAULT COVERAGE HELD NOT TO APPLY TO SNOWMOBILER’S ACCIDENT WITH PARKED PICKUP AND TRAILER
Persistence on the part of no fault insurer Progressive Michigan, and a willingness to fully develop its defense position, proved to be successful in this particularly high stakes claim for no fault benefits. Progressive and its Garan Lucow Miller attorneys were confident that, despite superficial impressions that would suggest otherwise, the accident simply was not one intended to be covered by no fault insurance. It just took a while to prove it.
The case, Harvey Reaver v Progressive Michigan Ins Co, Ontonagon Circuit Court No. 07-00008-CK, involved an upper peninsula snowmobiler who, traveling at 55 mph along the edge of “Mud Creek Road” at 3:30 a.m., crashed into a small trailer attached to the back of a pickup truck parked on the shoulder of the highway. Although the truck was situated as far to the right as possible against the high, roadside snowbank, the amount of mid-winter, upper peninsula snow was such that the shoulder was barely three feet wide, so more than half of the trailer and pickup truck’s width extended onto the travel portion of the highway. Reaver collided directly into the back of the trailer and suffered severe but non-fatal injuries.
Because Harvey Reaver had no insurance of his own, he submitted his no fault claim on a Progressive policy issued to his resident relative. The claim was denied on grounds that the small trailer only had two wheels (thus is not a “motor vehicle” under No Fault Act definitions) and, since a snowmobile likewise is not a “motor vehicle”, the accident simply was not one covered by no fault insurance. Further, the Act’s parked vehicle exclusion, MCL 500.3106, would bar a no fault claim anyway since the pickup and trailer were parked at the time. Reaver sued, and Progressive moved for summary disposition.
Progressive relied on a Michigan Court of Appeals opinion, Vinkle v Nationwide Ins Co, No. 113706 (9/20/90), in which a person’s injuries sustained while loading a two-wheel trailer were held not to be covered by no fault insurance, even though the trailer was attached to a pickup truck at the time. The court rejected this argument, however, essentially holding that the pickup truck, being involved in this accident, satisfied the motor vehicle requirement.
The court also declined at this time to grant summary disposition on Progressive’s alternative argument. Although the parked vehicle section of the Act clearly applied, Reaver insisted that he was entitled to coverage under the exclusion’s first exception, which allows coverage when “[t]he vehicle was parked in such a way as to cause unreasonable risk of the bodily injury which occurred”. MCL 500.3106(1)(a). Case law routinely applies this exception when a parked vehicle extends onto the travel portion of the roadway.
Progressive’s attorney was John Stenton, managing partner of Garan Lucow Miller’s office in Marquette, Michigan. He maintained that Reaver was not in a position to claim the benefit of the unreasonably parked vehicle exception because the snowmobile should not have been on the roadway in the first place. Such an argument had succeeded in at least two previous cases — Wills v State Farm Ins Co, 437 Mich 205 (1991), and Morey v Auto Club Ins Assoc, Court of Appeals No. 198341 (1/6/98) – but unlike those cases, in which the plaintiff snowmobilers had admitted that their use of the roadway was “unlawful”, Reaver insisted that Michigan’s snowmobile statutes did permit him to travel along the edge of the highway under the circumstances of this case. Given this material dispute, the court denied Progressive’s summary disposition motion and allowed the parties to develop the facts of the case.
Thus commenced an extended period of discovery and investigation. Under the governing statute, MCL 324.82101, et seq. (which regulates snowmobile use in Michigan), and in particular MCL 324.82119, “a person shall not operate a snowmobile upon a public highway . . . except under [certain specified] conditions and circumstances”. Intending to rely on one or more of the listed “conditions and circumstances” that permit snowmobilers to access the roadway surface, Plaintiff Reaver claimed that he was traveling in the extreme right of the highway’s available “right-of-way” at the time, since the snowbank and woods immediately next to the roadway rendered travel off-road impossible; also, citing a separate sub-section of the statute, he claimed that the presence of a “culvert” (a deep ditch ran parallel to the highway) required him to access the roadway to avoid this obstacle.
Mr. Stenton then deposed the investigating police officers, Mr. Reaver (who maintained that he was traveling mainly off-road, only accessing the highway when absolutely necessary), Reaver’s cousin (who, on the night in question, had followed Reaver’s snowmobile tracks along the highway for a full mile before coming upon the accident scene and finding Reaver in the roadway), and Plaintiff’s “snowmobiler expert” (who established the presence of impassable “culverts” and supported the notion that the woods next to the highway were unusable for snowmobile travel). Progressive also retained an accident reconstructionist whose analysis established that
the substantial risk of injury in this case arose primarily out of the dangerous manner in which the snowmobile was being operated, as opposed to any visibility issues with the parked pickup truck and trailer.
Progressive also permitted Mr. Stenton to involve appellate attorney Daniel Saylor, out of Garan Lucow Miller’s Detroit office, to develop the legal arguments and ultimately prepare a renewed motion for summary disposition based on the completed discovery and factual investigation. With blow-up photograph boards of the scene in hand, both Mr. Stenton and Mr. Saylor appeared for the motion hearing in Ontonagon County Circuit Court on June 2, 2008. For well over an hour, the court gave its attention to the details of the accident, the positioning of the pickup truck and trailer parked along the highway, the course of the snowmobile’s travel, and the manner in which it was being operated. Then the court rendered its ruling.
The principal defense again was rejected on grounds that, unlike the essentially uninvolved pickup truck in the Vinkle case, here the truck did play a part since the accident involved the combination of the pickup truck and the two-wheel trailer, even though the snowmobile only directly contacted the trailer. On the other hand, Progressive’s fully developed alternative argument prevailed. The court separately analyzed each of the statutory grounds allowing snowmobilers to utilize highway surfaces and shoulders, and found none that would overcome the established fact that, at least for an extended distance, Mr. Reaver simply was using the open highway as his path of travel rather than the woods. Although the area away from the roadway may well have been unusable for snowmobile travel, the statute could not reasonably be construed to include this as an exception to the general rule that snowmobiles are to remain off the roadway.
The court thus concluded that Plaintiff was unlawfully operating his snowmobile on the roadway, which, under Wills v State Farm Ins Co, removed Reaver “from the class of plaintiffs sought to be protected” by the statutes governing safe parking. 437 Mich at 213-215 (“it is not unreasonable to park a vehicle without regard to the protection of persons who may not legally be on the shoulder where the vehicle is parked”).
The time for appeal has run and this case is now final.
FAULT TERMINATION OF EMPLOYMENT AND THE IMPACT ON PAYMENT OF BENEFITS PURSUANT TO MCL 418.301
Johnson v General Motors Corp
(Mich Ct. Of Appeals, Unpublished, 1/29/08)
BACKGROUND
Plaintiff, Linda Johnson, had received an open award of benefits by the workers’ compensation bureau in 1994 as a result of a knee condition. Thereafter, Plaintiff returned to work at General Motors with medical restrictions. In October 2002, Plaintiff filed a new Petition claiming she sustained an injury while performing restricted or reasonable employment as defined in MCL 418.301(9).
While the Plaintiff’s new petition was pending, General Motors terminated her employment as a result of an altercation between Plaintiff and a General Motors’ representative which occurred after a hearing at the workers’ compensation bureau. It was General Motors’ contention that Plaintiff physically assaulted her manager and as a result, General Motors filed a petition to stop payment of benefits pursuant to the Plaintiff’s prior open award of benefits.
General Motors argued that due to the Plaintiff’s conduct, she effectively refused reasonable employment and removed herself from the workplace. General Motors argued further that since the Plaintiff lost her job through her own fault by attacking her manager, she was no longer entitled to benefits pursuant to MCL 418.301(5).
At the trial level, the Magistrate denied General Motors’ petition to stop the payment of benefits pursuant to the original open award stating that since the parties remained in the grievance process, it was not clear that Plaintiff’s termination was her own fault and that the filing of a grievance by Plaintiff established that she did not wish to voluntarily remove herself from the workplace. On appeal, the Workers’ Compensation Appellate Commission affirmed the Magistrate’s Opinion though it was established that the Plaintiff was employed in reasonable employment for more than 100 weeks and that the termination of Plaintiff’s employment was a result of Plaintiff having attacked her manager.
The issue before the Court of Appeals was whether the parties can only examine the statutory language of MCL 418.301 to determine entitlement to benefits or whether it was proper to look outside the statute to determine entitlement to benefits. MCL 418.301 provides in part:
“(4) As used in this chapter, ‘disability’ means a limitation of an employee’s wage earning capacity in work suitable to his or her qualifications and training resulting from a personal injury or work-related disease. The establishment of disability does not create a presumption of wage loss.
(5) If disability is established pursuant to subsection (4), entitlement to weekly wage loss benefits shall be determined pursuant to this section and as follows:
(a) If an employee receives a bona fide offer of reasonable employment from the previous employer, another employer, or through the Michigan Employment Security Commission and the employee refuses that employment without good and reasonable cause, the employee shall be considered to have voluntarily removed himself or herself from the work
force and is no longer entitled to any wage loss benefits under this act during the period of such refusal.
***
(d) If the employee, after having been employed pursuant to this subsection for 100 weeks or more loses his or her job through no fault of the employee, the employee shall receive compensation under this act pursuant to the following:
***
It was the WCAC’s opinion that since Defendant General Motors alleged that Plaintiff lost her job through some fault of her own and MCL 418.301(5)(d) pertained only to situations where an employee loses his or her job through ‘no fault’ of his or her own, that subsection did not apply to the case at bar.”
ANALYSIS
The Court of Appeals disagreed with the WCAC’s analysis citing Perez v Keeler Brass Co, 461 Mich 602, 610 (2000). In Perez, supra, the Michigan Supreme Court held that the language of MCL 418.301 is clear and that where disability has been established, entitlement to wage loss benefits “shall” be determined pursuant to § 301(5). As a result, the Court of Appeals ruled that only the statute may be examined to determine entitlement to benefits.
Procedurally, the Court of Appeals vacated the Order of the WCAC and remanded the case for the WCAC to determine Plaintiff’s entitlement to benefits and to specifically address the question of whether a termination of employment through the fault of an employee results in the permanent forfeiture of benefits pursuant to MCL 418.301(5)(d). The Court of Appeals did not retain jurisdiction and indicated that the WCAC could remand the case to the Magistrate for further fact finding if necessary. . . .Stay tuned!
COMMENTARY
It is clear that the Court of Appeals does not believe that looking at other factors outside the plain language of the statute is necessary to determine a Claimant’s entitlement to benefits under MCL 418.301 particularly where the Michigan Supreme Court in Perez, supra, stated that the statutory language was clear and that benefits “shall” be determined pursuant to subsection (5). It does not say subsection (5) and other factors to be determined. It is equally clear that while the WCAC did not believe that subsection (5)(d) was applicable to the case at hand, the Court of Appeals did. It would appear from the tone of the Court of Appeals’ Opinion that the only issue to determine, assuming that the Plaintiff lost her job through some fault of her own, is whether same results in the permanent forfeiture of benefits pursuant to MCL 418.301(5)(d).
Tarzwell v State Farm AND REIMBURSEMENT CLAIMS AGAINST PRIMARY HEALTH PLANS
The recent unpublished Michigan Court of Appeals decision in Tarzwell v State Farm Mutual Automobile Ins Co & BCBSM on June 3, 2008, while not particularly notable for its rulings or for its outcome, serves to highlight some important practical considerations for resolving coordination of benefits disputes between no fault automobile insurers providing coordinated coverage under MCL §500.3109a and employer sponsored health plans established under the Employee Retirement Income Security Act (ERISA) 29 USC §1001 et seq.
Eddy Tarzwell suffered spinal cord injuries in an ATV accident resulting in incomplete quadriplegia. Part of the treatment he received was inpatient rehabilitation in a program sponsored by Rehabilitation Institute of Michigan (RIM). He submitted RIM’s bill for $69,128 to Blue Cross Blue Shield of Michigan (BCBSM), the insurer of his employer sponsored health plan. Although the health plan’s coverage was admittedly primary, BCBSM denied payment. State Farm also denied payment, asserting that BCBSM, as the primary coverage, should pay the bills.
Tarzwell sued both State Farm and BCBSM in state court. BCBSM removed the litigation to federal court. State Farm then paid the RIM bills6 and filed a cross claim against BCBSM. State Farm plead their claims against BCBSM as subrogee of Tarzwell. State Farm filed a cross claim against BCBSM seeking reimbursement for the RIM bill which it claimed it paid out of priority. Once the medical expenses were paid Tarzwell dismissed his claim against both State Farm and BCBSM and State Farm’s remaining subrogation claim against BCBSM was remanded to state court because there was no “independent jurisdiction” in federal court over State Farm’s claims against BCBSM.
On remand, the trial court granted State Farm’s motion for summary disposition ruling that State Farm was entitled to reimbursement from BCBSM for the total amount of RIM’s bill. BCBSM appealed arguing that State Farm was not entitled to recovery because, as subrogee, it was subject to the insured’s dismissal of claims
against BCBSM. BCBSM also argued that, even if State Farm was entitled to recovery, it could not recover the $68,128 paid for the RIM bills because the treatment the plaintiff received at RIM was not a covered benefit under the BCBSM certificate; it was an issue of coverage, not priority.
The Court of Appeals agreed that, before State Farm could receive reimbursement from BCBSM, it must be demonstrated that the medical expenses at issue were actually covered under the primary health plan. The Court of Appeals therefore remanded the case for a determination as to whether BCBS actually covered the expenses incurred at RIM.
The important lessons learned from the Tarzwell case involve the often intricate procedural issues surrounding a reimbursement claim against a primary health plan, as well as the substantive nature of the claims that can be asserted against a primary health plan.
From a procedural perspective, it is crucial in these cases to obtain a “benefit analysis” from the primary health carrier before incurring the significant costs associated with litigating a priority of coverage dispute. It makes little sense to obtain a judgment entitling the no fault carrier to reimbursement of sums paid out of priority only to find out that the “sums paid out of priority” end up being insignificant when discounting expenses that turn out to be excluded under the primary plan.7 Obtaining a “benefit analysis” can be done during litigation through carefully prepared discovery requests. They can also be obtained, informally, by submitting a request to the plan administrator for an assessment of the claims.
Perhaps the more important lesson to take from the Tarzwell case is the importance of properly framing the claim against the recalcitrant primary insurer or health plan. In the Tarzwell case, State Farm sued BCBS under both contractual and equitable subrogation theories. Consequently, as the Tarzwell court noted, State Farm was “substituted in the place of the [Tarzwell] and thereby obtains the same and no greater rights to recover against the third-party”. Id. Citing Citizens Ins Co of America v American Community Mut Ins, 197 Mich App 707 (1992). This is a simple statement of the underlying principle of a subrogee’s rights and limitations. However, not all claims against a recalcitrant primary ERISA plan are truly subrogated claims. While the Michigan Court of Appeals has routinely recognized that the no fault carrier suing a primary health insurer for reimbursement is subject to principles of subrogation, the federal courts have recognized a distinct, federal common law cause of action for reimbursement of sums paid out of priority that is based not on principles of subrogation but on a quasi-contractual theory. See, e.g., Prudential Property & Casualty Ins v Delfield Co Group Health Plan, Case No. 98-1493 (6th Cir Slip Op, August 6, 1999); Progressive Michigan Ins Co v United Wisconsin Life Ins Co & American Medical Security, 84 FSupp 2d 848 (ED Mich 2000). Consequently, when suing an ERISA-qualified health plan for reimbursement of sums paid out of priority, the no fault carrier is not subject to the same administrative procedures that would be required of the insured and which would flow to a subrogee under a claim stated as such. Furthermore, a claim against an ERISA plan stated under the federally recognized common law reimbursement action would be a federal common law action and would enjoy original federal court jurisdiction and would not necessarily be subject to remand to state court. This distinction is important because the Michigan appellate courts have not recognized a common law reimbursement claim comparable to the one recognized by the federal courts in Prudential and Progressive,
supra. While the distinction did not impact the outcome of the Tarzwell case, had BCBSM raised procedural defenses to State Farm’s claims or a defense based on contractual period of limitation, State Farm would arguably be immune from such defenses in a federal common law claim for reimbursement. The same defenses would not be available to State Farm in a truly subrogated claim under Michigan subrogation law.
Allison v Aew Capital Management REVERSED! MICHIGAN SUPREME COURT HOLDS THAT ONE TO TWO INCHES OF SNOW IN APARTMENT COMPLEX PARKING LOT DID NOT RENDER IT UNFIT FOR ITS INTENDED PURPOSE
At one time, plaintiffs sued their landlords for slips and falls occurring on their rented residential property under ordinary principles of negligence. Many plaintiffs came to find, however, that the open and obvious doctrine acted as a substantial hurdle to their claims, especially when they slipped and fell due to icy or snowy conditions on the property. In response, plaintiffs began asserting the all too familiar “violation of statutory duty” as a way to bypass the open and obvious doctrine. The Court of Appeals short-circuited those claims too by ruling in Teufel v Watkins, 267 Mich App 425 (2005), that a landlord’s statutory duties do not extend to snow and ice removal. The Teufel rule did not last long, however, because then the Court of Appeals decided Benton v Dart Properties, 270 Mich App 437 (2006), which indicated that sidewalks are common areas subject to a landlord’s statutory duties, and that a defendant cannot use the open and obvious doctrine to bar a claim brought pursuant to statute. The end result is that many plaintiffs avoided dismissal merely by showing that they fell on icy or snowy conditions or with flimsy factual disputes about the extent to which their landlord kept the common areas free of snow and ice.
Then came Allison. In “Allison I”, Docket. No. 269021 (Nov 28, 2006), the Court reluctantly affirmed dismissal, stating it was bound to follow Teufel. On reconsideration, however, the Court reversed its previous opinion and found Benton controlled the case. Allison v AEW Capital Management (“Allison II”), 274 Mich App 663 (2007). Allison II concluded that parking lots, like the sidewalks in Benton, are common areas subject to a landlord’s statutory duties, that one use of a parking lot is for walking upon, and that a parking lot covered in ice is not fit for walking. This panel also concluded that Teufel could not be binding, because its holding was set forth in a footnote. The panel on reconsideration also declared a conflict between the two cases and asked for Supreme Court guidance. After a long wait, the Supreme Court has decided the issue and left intact only portions of the Court of Appeals opinion. In reversing the Allison II decision, the Supreme Court has established a virtual threshold a plaintiff must overcome to avoid dismissal of a claim alleging violation of the covenant to maintain the premises fit for the use intended.
Plaintiff in Allison alleged negligence and a breach of the statutory covenants to maintain the premises (and common areas) fit for their intended use, and to keep the premises in a condition of reasonable repair. The Supreme Court stated that the statutory protections are in addition to the protections afforded under the common law and only arise by virtue of a residential lease. In effect, these covenants are terms of the lease itself. Therefore, a breach of a duty to repair or maintain constitutes a breach of the lease, thus a plaintiff’s remedy under these statutes “consist exclusively of a contract remedy”. The Court maintained this position throughout the opinion, often construing the statutory duties as contractual terms. The Court’s opinion that only tenants and not their guests or any other third party can recover under the statutory provisions only underscores its belief that these statutory protections arise only by virtue of the lease agreement itself. The impact of this decision on a plaintiff’s damages could be great.
Next, the Court assessed whether parking lots are common areas, as defined by MCL 554.139. Common areas are those areas of the property that are shared by two or more tenants, but over which a landlord maintains control. The Supreme Court agreed with the Allison II Court that a parking lot fits this description. As such, the lessor has a “contractual duty” to keep the parking lot “fit for the use intended by the parties”.
The Court then turned to the real issue at hand – whether this duty includes the duty to remove natural snow and ice accumulations from the parking lot. Whether the parking lot remained “fit” in that case depended on the purpose of a parking lot. The intended purpose of a parking lot is to park or store vehicles. The Court found that a parking lot is suitable for this purpose so long as tenants can park their vehicles and have reasonable access to their parked vehicles. A landlord therefore does have a duty to keep the parking lot fit for that stated purpose. The Court opined that fulfilling that duty ordinarily takes the form of ensuring the exit and entrance to the lot remains clear, that tenants can access the parking spaces, and that the tenants have reasonable access to their vehicles.
In this case, however, there could not be a finding that the landlord failed in his obligation to maintain the parking lot fit for its intended use, because plaintiff only had two facts to support his claims of unfitness: that the lot had one to two inches of snow covering the ground, and that he fell. To prove a violation of the statutory, or as the Court refers to it, contractual duty, a plaintiff would have to show that the tenants could not park, enter the parking lot, or access their vehicles. Plaintiff’s claim failed as a matter of law, because none of his evidence supported an argument that tenants were unable to use the lot for its intended purpose. Taking it one step further, the Court went on:
“While a lessor may have some duty…with regard to accumulation of snow and ice in a parking lot, it would be triggered only under much more exigent circumstances than those obtaining in this case.”
There is no requirement that lessor maintain its parking lots in the most ideal condition, and inconvenience of access, or the need to remove snow and ice from cars “will not defeat the characterization of a lot as being fit for its intended purpose”.
The Court was mindful that lessees must traverse a parking lot to access their vehicles, but found that the mere presence of snow and ice does not, by itself, render a parking lot unfit, or inaccessible, to tenants who wish to use it for its intended purpose. With respect to allegations about a landlord’s statutory duty to repair, the Court
found that provision was not applicable to common areas, and that further, that section relates to defects in the condition of a structure. Snow and ice is not a defect in a premises, but a natural accumulation.
Finally, the Court addressed the lower court’s determination that Teufel was not binding because its holding was in a footnote. The Court rejected this assertion, finding that the lower court erred in not applying Teufel, but the Court also overruled Teufel to the extent that it found snow and ice are never subject to a lessor’s duty to maintain under MCL 554.139(1)(a), stating “[t]here are conceivable circumstances in which a lessor may have duty to remove snow and ice under MCL 554.139(1)(a), such as when the accumulation is so substantial that tenants cannot park or access their vehicles in a parking lot”.
In essence, the Supreme Court established what might be considered a threshold faced by plaintiffs who intend to assert violations of statutory covenants against their landlords. Specifically, the Court held that “one to two inches of snow did not render the parking lot unfit for the use intended”, causing the failure of plaintiff’s claims as a matter of law.
On the surface, this case appears to foreclose slip and fall claims asserted by tenants who slipped on an icy patch on their rental property. The Court’s discussion of remedies certainly seems to place a substantial limitation on a plaintiff who wishes to recover noneconomic damages. A word of caution, however. The Court never directly addressed the Court of Appeals decision in the Benton case, which was identical to Allison, except that the plaintiff’s fall occurred on a sidewalk rather than the parking lot. Although the Supreme Court indicated, via footnote, that safety is an element of premises liability, and not contractual/statutory liability, the Court’s focus remained entirely on the intended use of a sidewalk. Because it never opined on the intended use of sidewalks, the case potentially leaves the door open to claims arising from falls on the sidewalk, especially if the plaintiff can successfully call into question whether the safety of a sidewalk is part of its intended use.
Regardless of the ultimate impact this case will have upon the Benton holding, Allison certainly provides the resources needed to reduce damage claims arising from landlord/tenant premises cases, ammunition for negotiation, and a “threshold” from which one can evaluate a plaintiff’s claims.
HOW TO HANDLE A CLAIM FOR DAMAGE TO A LOANER VEHICLE MADE AGAINST YOUR INSURED
Many car dealerships in Michigan provide“courtesy” or “loaner” vehicles while work is being done on the customer’s personal vehicle. However, when that customer is involved in an accident with the loaner vehicle, the dealership can be less than consumer friendly when it comes to the collision bill.
What is the current Michigan law on this issue?
First and foremost, Michigan law does not preclude a dealership (or car rental company) from recovering the collision damage loss from a customer. In Universal Underwriters Ins Co v Kneeland, 464 Mich 491 (2001), an auto dealership and its subrogee insurer sued a customer to recover its loss arising from a collision occurring during the short-term use of a loaner vehicle. The primary issue resolved by the Supreme Court was whether Michigan law (specifically, the No Fault Act’s abolishment of tort liability for damage to vehicles) precluded such an action. The Court held that, while tort liability could not be asserted as a basis for recovery, a valid contract wherein the customer agrees to be responsible for damage to the vehicle is enforceable.
Thus, if a valid contractual basis exists for holding your insured responsible, Michigan law will permit recovery for collision damages against your insured.
First, you should obtain and review any documentation that the dealership relies upon to impose responsibility to your insured. The contract and “shift” of responsibility was one of the most heavily litigated issues in Kneeland. The Supreme Court justices split 4-3 on the question of whether the terms of the particular agreement in that case adequately imposed contract liability on the customer.
The “courtesy car agreement” used by the dealership in Kneeland merely included the provision, “Renter agrees to assume all responsibility for damages while vehicle is in his possession.” The dissenters maintained that, while a clear contractual promise to pay the dealer for collision damage would be enforceable, the language was vague in its failure to specify the kind of “damages” involved. Since personal injury damage could not, as a matter of Michigan law, be included in such a contract provision, the whole provision should be ruled invalid (according to the dissenters). The majority agreed that this contract term was unclear regarding the extent of the shift of liability, but it used the approach that the parties would have wanted their contract to be legal and enforceable. So rather than rule the entire contract term invalid, it construed the term narrowly to apply only to auto collision damage. It thus concluded that the customer was personally responsible for the damage to the automobile.
Importantly, under Kneeland, and in particular how the Court dealt with a similar but distinguishable case, Universal Underwriters v Vallejo, 436 Mich 873 (1990), what becomes clear is that any type of “bailment” theory, or a mere implied contract, will not suffice to make the customer responsible for the collision damage. Tort liability for auto collision damage was abolished by the No Fault Act, and the quasi-contract or bailment theory recognized in Vallejo was determined to be, in essence, tort-based and thus invalid.
In a recent case handled by the Ann Arbor Office of Garan Lucow Miller, a similar issue arose. The Defendant insureds brought their vehicle into their local dealership for some maintenance work. They were given a loaner vehicle by the dealership. No contract or other documents were signed by the insureds. Subsequently, the Defendants’ were involved in a collision. The loaner car was severely damaged. When the customer went back to the dealership and disclosed what had happened, the dealership requested that the insured’s sign, what they were told, was a basic “contract”. Within the contract was language that the insured’s: “acknowledged receipt of the above specified car (loaner) in good and safe mechanical condition and agree to return said car in the same condition as received”. The provision , if binding, would have been satisfactory to shift responsibility to the insureds in light of Kneeland. However, Summary Disposition was granted in favor of the Defendants. The contract, the court held, had clearly been executed after the accident and was unenforceable. There was a
wholesale lack of consideration or “bargained for exchange” between the parties. Without a valid contract to shift liability to the insureds, the dealership was left with the collision bill.
Additionally, not only is it important to review any document signed by the insured, but you must also consider whether the rental agreement is enforceable.
ILLEGAL ALIEN UPDATE
A one day jury trial in Battle Creek finally resulted in a place to call home for four illegal aliens. Each of the aliens was found to be domiciled with an insured relative in Battle Creek and, therefore, entitled to PIP benefits through those insureds rather than through the vehicle insurer. All four aliens were passengers in a vehicle struck head on by an uninsured drunk driver. No fault claims had been pending for nearly five years following this 2003 accident. The Assigned Claims Facility had assumed responsibility for medical payments shortly after suits were filed by the four claimants and the local hospital. The five cases were consolidated for a trial limited solely to the issue of domicile.
As previously reported in Law Fax releases in 2005 and 2006, the Court of Appeals published decision in this case, Cervantes v Farm Bureau, 272 Mich App 410 (2006) held that illegal aliens were not automatically precluded from being “domiciled” in Michigan for no fault purposes. The traditional domicile factors from Workman v DAIIE and Dairyland Ins v Auto Owners were still held applicable to illegal aliens. These include mailing address, driver’s license address, living arrangements and subjective intent of the person. The jury was advised that the claimants were illegal aliens and that was a factor the jury could consider in determining whether the aliens intended to remain indefinitely with their relatives in Battle Creek.
All four of the illegal alien claimants were employed full-time at a factory in Battle Creek. Two of the four illegal aliens had lived with their relative for over five years. They each had identification cards with that address. The other two claimants had purchased a house on land contract with their insured brother shortly before the accident. They had not yet updated the addresses on their previous Michigan identification cards. Those two claimants also still had Mexican identification cards at the time of the accident. Each claimant testified they planned to stay in Battle Creek indefinitely and had no other place to live. All four were still in Michigan five years after the accident.
The jury deliberated approximately 90 minutes before determining that each of the claimants was domiciled in Battle Creek with an insured relative. This resulted in priority for medical benefits under 3114(1) with the insured relatives rather than 3114(4) with the vehicle insurer. This also resulted in our client, the vehicle insurer, being reimbursed for five years of attorney fees under the assigned claims provisions of 3172.
Three years of wage loss claims by two of the seriously injured illegal aliens remain pending. The other two claimants were not seriously injured and each returned to work at the same factory without notice of their illegal status. There may be public policy arguments against allowing the wage loss claims. In a similar situation under the Worker’s Compensation Act, the Court allowed recovery for medical benefits but terminated the wage loss claim upon notification of the illegal status. Sanchez v Eagle Alloys, 254 Mich App 651 (2003). That decision was distinguished by the Court of Appeals, however, in this case as being based upon specific disqualification language in the worker’s compensation statute. There is no similar disqualification language in the no fault statute although court decisions have allowed wage loss benefits to be terminated by subsequent intervening causes, such as an unrelated medical condition. This case may find its way back to the Court of Appeals for a second time on the wage loss issue.