Allstate Ins. Co. v. Citizens Ins. Co. of America

• Decision Date: 09 November 1982
• Docket Number: Docket No. 55533
• Citation: 118 Mich.App. 594,325 N.W.2d 505
• Parties: ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, v. CITIZENS INSURANCE COMPANY OF AMERICA, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 505

325 N.W.2d 505

118 Mich.App. 594

ALLSTATE INSURANCE COMPANY, Plaintiff-Appellee, v. CITIZENS INSURANCE COMPANY OF AMERICA, Defendant-Appellant.

Docket No. 55533.

Court of Appeals of Michigan.

Submitted April 6, 1982.

Decided Aug. 23, 1982.

Released for Publication Nov. 9, 1982.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. by James L. Borin, Detroit, for plaintiff-appellee.

Plunkett, Cooney, Rutt, Watters, Stanczyk & Pedersen, P.C. by John P. Jacobs and Ernest R. Bazzana, Detroit, for defendant-appellant.

Before ALLEN, P.J., and RILEY and FERGUSON, ^* JJ.

ALLEN, Presiding Judge.

When an insurer issues a no-fault policy to a closely held corporation, and the corporation provides cars for the sole stockholder and his family for business and personal use and the family has no other family car, must the insurer provide no-fault benefits to the minor son when he is injured in an automobile accident that involves none of the corporation vehicles? We think that the trial court correctly found no liability on the part of the corporation's insurer.

Plaintiff issued a policy of no-fault insurance to B.C. Lynn Construction, Inc., of which Bernard C. Lynn was the president and sole shareholder. In 1975, Patrick Lynn lived with his father, Bernard, and performed some work as a laborer for his father's company. The corporation provided three automobiles for the personal use of Bernard Lynn and his family; all three autos were owned, registered, and insured in the name of the corporation, which paid for the cars and the insurance. No member of the Lynn family owned a personal car.

In April 1975, Patrick Lynn was injured while a passenger in an automobile driven by Keith Ragap, owned by Harry Ragap, and insured by defendant Citizens Insurance Company of America. After the accident, plaintiff paid medical and work loss benefits to Patrick Lynn. In February 1976, plaintiff asked defendant to take over the payments, but defendant refused. Plaintiff suspended payments, but reinstituted them after Patrick Lynn brought suit against both insurers. That suit was then dropped. At the time of trial, Patrick Lynn had received $23,012.49 from plaintiff.

Plaintiff initiated the instant action as equitable subrogee of Patrick Lynn to compel defendant to make future payments and to seek repayment of benefits that plaintiff had paid to Patrick Lynn. After a bench trial on February 4, 1980, the court awarded judgment to plaintiff for $44,518.73, which included statutory interest, an interest penalty, attorney fees and costs. Defendant has appealed by right, arguing first, that it should not be held liable; second, that the amount of the judgment was wrongly computed; and third, that it should not be asked to pay an interest penalty.

We must first examine whether the trial court erred in ruling that the corporate insurer was not liable for personal protection benefits. Such benefits are available under M.C.L. § 500.3114; M.S.A. § 24.13114, which provides in pertinent part:

"(1) Except as provided in subsections (2), (3), and (5), a personal protection insurance policy * * * applies to accidental bodily injury to the person named in the policy, the person's spouse, and a relative of either domiciled in the same household, if the injury arises from a motor vehicle accident."

Subsections (2) and (5) are inapplicable to this case. Subsection (3) provides:

"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."

The parties agree that had Patrick Lynn been occupying a corporation car at the time of the injury, plaintiff, as the insurer of the furnished vehicle, would bear responsibility for providing personal protection benefits to Patrick. Here, however, Patrick occupied another automobile, so this section is inapplicable. As none of the exceptions listed in § 3114 apply, plaintiff must provide personal protection benefits only if § 3114(1) can be read as requiring coverage by a corporate insurer under the facts of this case.

To do so requires us to rewrite the insurance policy issued to B.C. Lynn Construction, Inc., replacing a named insured, the corporation, with an individual insured, Bernard Lynn. Were we to do so, Patrick Lynn, who was a relative domiciled in the same household, would be covered under § 3114(1). The trial court declined to do so, however, and we agree.

Defendant argues that Bernard Lynn was an owner of the company car, so the insurance on the car should cover his family. We recognize that in certain situations, an individual with exclusive use of a vehicle for more than 30 days may be regarded as the owner of the vehicle. M.C.L. § 257.37; M.S.A. § 9.1837; State Farm Mutual Automobile Ins. Co. v. Sentry Ins., 91 Mich.App. 109, 113, 283 N.W.2d 661 (1979), lv. den., 407 Mich. 911 (1979). Here, however, a holding that Bernard Lynn is the individual owner of the vehicles will not affect the outcome of the case. Personal protection insurance benefits are payable to the person named in the policy, the person's spouse, or a relative domiciled in the same household, not to the owner of the vehicle. M.C.L. § 500.3114(1); M.S.A. § 24.13114(1). As it is unquestioned that the named insured in the policy at issue was B.C. Lynn Construction, Inc., a redetermination of the ownership based on statutory construction does little to advance defendant's cause.

Defendant's remaining argument about liability has more merit. It asserts that we should pierce the corporate veil and hold that under the facts of this case, where a sole stockholder has exclusive use of a corporate vehicle, the stockholder should be regarded as the insured person.

Generally, a corporation is treated as a legal entity distinct from its shareholders. Robards v. Estate of Leopold J. Kantzler, 98 Mich.App. 414, 417, 296 N.W.2d 265 (1980). The corporate form is valid and will be protected by courts even when there is a single stockholder who is entitled to dominate the company and receive all of its profits. Gottlieb v. Arrow Door Co., 364 Mich. 450, 110 N.W.2d 767 (1961).

The fiction of a distinct corporate entity separate from the stockholders is a convenience introduced in the law to serve the ends of justice. When this fiction is invoked to subvert justice, it may be ignored by the courts. Paul v. University Motor Sales Co., 283 Mich. 587, 602, 278 N.W. 714 (1938).

The traditional application of "piercing the corporate veil" has been to protect a corporation's creditors, or other outsiders, when there is a unity of interest of the stockholders and the corporation and where the stockholders have used the corporate entity in an attempt to avoid legal obligations. People, ex rel. Attorney General v. Michigan Bell Telephone Co., 246 Mich. 198, 204, 224 N.W. 438 (1929). This Court has held that the corporate veil should not be pierced in such a situation in the absence of fraud, illegality, or injustice. Soloman v. Western Hills Development Co. (After Remand), 110 Mich.App. 257, 263, 312 N.W.2d 428 (1981). This traditional application of the piercing the corporate veil doctrine is inapplicable in the present case, where there has not even been an allegation of any fraud, illegality, or injustice by any member of the corporation. Moreover, the corporation and its shareholder are not parties in this action, so even had they been involved in some illegality, equity would not be served by piercing the corporate veil in this case.

Michigan courts have recognized that it may be appropriate to pierce the corporate veil in other situations. Williams v. American Title Ins. Co., 83 Mich.App. 686, 698, 269 N.W.2d 481 (1978). In Montgomery v. Central National Bank & Trust Co. of Battle Creek, 267 Mich. 142, 255 N.W. 274 (1934), the Supreme Court upheld piercing a corporate veil to benefit a shareholder when necessary to uphold deed restrictions in a deed executed by the individual shareholder. Similarly, in Brown Brothers Equipment Co. v. State Highway Comm., 51 Mich.App. 448, 215 N.W.2d 591 (1974), this Court ruled that in a condemnation action where all parties had ignored the corporate structure during settlement negotiations, it would be inequitable to recognize the corporate form for determining damages in an appeal. In both of these situations, a shareholder who was a party to the action sought to avoid the corporate form. In the case at bar, however, it is a stranger to the corporation that is seeking to pierce the corporate veil.

Defendant points to a single Minnesota case that it claims supplies authority for us to ignore the corporate structure. The facts in Roepke v. Western National Mutual Ins. Co., 302 N.W.2d 350 (Minn.1981), are indeed similar to those before us. In each, an individual who received a corporate car as a perquisite of his job was not insured under any personal no-fault policy. The Minnesota Supreme Court, addressing an entirely different legal issue than is before us, permitted the shareholder's widow to pierce the corporate veil to permit stacking of six corporate no-fault policies so as to provide insurance coverage coextensive with the full loss. We do not believe that it is appropriate to follow Minnesota's example of piercing the corporate veil when an entirely different legal issue is involved here. Moreover, we observe that the Roepke opinion was specifically limited to its facts and is not totally consistent with a prior opinion written by the same judge, when other issues were before the court. Compare, Kaysen v. Federal Ins. Co., 268 N.W.2d 920 (Minn.1978). Accordingly, we decline to follow Minnesota's example and pierce the corporate veil in this case.

We believe that our conclusion is supported by public policy. In writing a...