Amerisure Insurance Company v. Graff Chevrolet, Inc.

• Decision Date: 22 July 2003
• Docket Number: No. 238478.,238478.
• Citation: Amerisure Insurance Company v. Graff Chevrolet, Inc. (Mich. App. 2003)
• Parties: AMERISURE INSURANCE COMPANY, Plaintiff/Counterdefendant-Appellant/Cross-Appellee, v. GRAFF CHEVROLET, INC., Defendant-Appellee/Cross-Appellant, and CHRYSLER CORPORATION, Defendant/Counterplaintiff-Appellee/Cross-Appellant, and AUTO CLUB INSURANCE ASSOCIATION, Defendant.
• Court: Court of Appeal of Michigan

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AMERISURE INSURANCE COMPANY, Plaintiff/Counterdefendant-Appellant/Cross-Appellee, v. GRAFF CHEVROLET, INC., Defendant-Appellee/Cross-Appellant, and CHRYSLER CORPORATION, Defendant/Counterplaintiff-Appellee/Cross-Appellant, and AUTO CLUB INSURANCE ASSOCIATION, Defendant.

No. 238478.

Court of Appeals of Michigan.

July 22, 2003.

Appeal from Bay Circuit Court, LC No. 99-003192-CK.

Before: Fitzgerald, P.J., and Hoekstra and O'Connell, JJ.

PER CURIAM.

Plaintiff appeals by right the circuit court's order granting summary disposition to defendants. This case involves a dispute between two insurance companies arising from an automobile accident. The vehicle involved in the accident was owned by defendant Graff Chevrolet (Graff). However, the vehicle was driven by an employee of plaintiff Amerisure Insurance Company's insured, a Hungry Howie's Pizza store. We affirm in part and reverse in part.

I.

While her car was being repaired, Debra Rahn leased a Chevrolet Corsica from Graff. The substitute vehicle agreement (also known as a rental car contract) listed Richard Threehouse Rahn's fiancé, as a permissive user of the vehicle. However, the contract stated that insurance coverage was excluded when the rental vehicle was used "to carry . . . property for consideration . . . ." On January 30, 1994, while he was driving the Corsica delivering pizzas for his employer, Hungry Howie's Pizza, Threehouse collided with another car. The other driver sued Graff, Threehouse, and Hungry Howie's, and, ultimately, the claim was settled for $180,000. Because plaintiff and defendant Chrysler Corporation¹ — Hungry Howie's and Graff's insurers respectively — could not agree who was responsible for coverage, each contributed $90,000 to the settlement and agreed to determine coverage in a subsequent proceeding.

In 1999, plaintiff filed a complaint for declaratory judgment that Chrysler was responsible for payment of the entire judgment. Responding to plaintiff's complaint, defendants² admitted in part that Threehouse was a permissive user of the vehicle at the time the accident occurred. Defendants claimed as their sole affirmative defense that plaintiff's claims were barred by the statute of limitations. Defendants then moved for summary disposition, arguing that because Threehouse negligently caused the accident while he was employed by Hungry Howie's as a pizza delivery person, Hungry Howie's and plaintiff were responsible for Threehouse's negligence according to the doctrine of respondeat superior.³

Defendants' response brief argued that because the lease agreement only granted permissive user status while the driver complied with the terms of the lease agreement, when Threehouse violated the agreement by using the car to deliver pizzas, he immediately ceased his status as a permissive user. Thus, only plaintiff was completely responsible for providing coverage for its insured, Hungry Howie's. At the hearing on the motion for summary disposition in 2001, plaintiff countered in part that nothing in the lease agreement forbade Threehouse from using the car to deliver pizzas. Plaintiff further stated that the exclusion language relied on by defendants in the lease agreement only applied to Rahn, not to Threehouse.

In March 2001, the circuit court ruled that the language of the leasing agreement was clear that the vehicle was not to be used for delivery purposes. Consequently, the court ruled that Threehouse's violation was an absolute defense against any claim filed against either defendant, and summary disposition was granted to defendants for the $90,000 they contributed to the settlement. On rehearing, the court added that defendants were not required to raise the nonpermissive use issue as an affirmative defense in their first responsive pleading, as plaintiff alleged. An order entered November 16, 2001, also ordered plaintiff to pay Chrysler interest from the final hearing on November 15.⁴ Plaintiff subsequently appealed to this Court, and defendants cross-appeal concerning the award of interest.

II.⁵

The first issue is whether Chrysler and Graff are precluded from arguing on appeal that Threehouse was a nonpermissive user of the rental car at the time of the accident because Chrysler and Graff did not raise the issue in their first responsive pleading. We agree with the circuit court that Chrysler's and Graff's argument was procedurally proper.

This Court reviews a decision on a summary disposition motion de novo. Spiek v Dep't of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). MCR 2.111(F) provides, in relevant part:

(3) Affirmative Defenses. Affirmative defenses must be stated in a party's responsive pleading . . . . Under a separate and distinct heading, a party must state the facts constituting

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(b) a defense that by reason of other affirmative matter seeks to avoid the legal effect of or defeat the claim of the opposing party, in whole or in part;

(c) a ground of defense that, if not raised in the pleading, would be likely to take the adverse party by surprise.

This Court explained in Stanke v State Farm Mut Automobile Ins Co, 200 Mich App 307, 312; 503 NW2d 758 (1993), that: "An affirmative defense is . . . a matter that accepts the plaintiff's allegation as true and even admits the establishment of the plaintiff's prima facie case, but that denies that the plaintiff is entitled to recover on the claim for some reason not disclosed in the plaintiff's pleadings" (citation omitted).

In Stanke, supra at 312-313, this Court held that the issue whether an alleged insured party was operating an owned or nonowned vehicle at the time of an accident was not an affirmative defense. This Court stated that the effect of this claim was to deny that the plaintiff could prove his prima facie case. See id. at 315. The instant case presents a situation very similar to Stanke: Defendants claimed that there was no genuine issue of material fact concerning whether Threehouse was operating the rental vehicle in a manner prohibited by the rental agreement at the time of the accident. Thus, it was not subject to the requirement of MCR 2.111(F)(3) that the defense be specifically raised in a separate heading in the first responsive pleading.

Plaintiff also claims that defendants were equitably estopped from claiming that Threehouse's use of the rental vehicle to deliver pizzas was a nonpermissive use because they had previously admitted that Threehouse was a permissive user of the vehicle at the time of the accident. This Court set forth the elements of equitable estoppel in Cook v Grand River Hydroelectric Power Co, Inc, 131 Mich App 821, 828; 346 NW2d 881 (1984):

An estoppel arises where: (1) a party by representation, admissions, or silence, intentionally or negligently induces another party to believe facts; (2) the other party justifiably relies and acts on this belief; and (3) the other party will be prejudiced if the first party is permitted to deny the existence of the facts.

Graff's admissions that Threehouse was a permissive user — even if attributed to Chrysler because Chrysler defended Graff — did not mislead or prejudice plaintiff. See id. Plaintiff and Graff/Chrysler settled the underlying personal injury claim because they agreed that liability existed, but merely disputed between themselves who was responsible to provide coverage. The insured parties were Hungry Howie's and Graff, and neither was prejudiced by Graff's admissions that Threehouse was a permissive user because they agreed to settle the underlying lawsuit and allow their insurance carriers to resolve the coverage dispute between themselves in a declaratory judgment action. Therefore, defendants were not equitably estopped from raising the nonpermissive use defense.⁶

III.

The second issue is whether the phrase at issue in the substitute vehicle agreement, "to carry passengers or property for consideration express or implied," is ambiguous. We hold that it is not.

Plaintiff maintains that the contract must be interpreted against defendants and that a reasonable interpretation does not support its application to Threehouse's act of using the vehicle to deliver pizzas. The substitute vehicle agreement Rahn executed listed her fiancé, Threehouse, as a person who could be permitted by Rahn to drive the vehicle; that is, he was a permissive user according to the contract.⁷ The agreement contained a page of terms and conditions including the following restriction:

5. The Customer agrees that said Automobile shall not be used or operated:

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i. To carry passengers or property for a consideration, express or implied.

Paragraph 12 of the agreement further provided:

12. If there is any violation of any of the terms, conditions, covenants or restrictions of this agreement by the Customer or by any other driver to whom the Customer has granted permission to operate the Automobile, the rights of the Customer and such other driver to use or operate the Automobile shall terminate immediately, and such violations shall constitute an absolute defense against any claim filed against the Owner or its insurance carrier, and the Customer and such other driver, hereby agree, jointly and severally, to indemnify and save harmless the Owner and its insurance carrier of and from any and all damages, loss, cost and expense that the Owner or its insurance carrier, or both, shall sustain including but not limited to, court costs and counsel fees by reason of any claim for personal injury or property damage. [Emphasis added.]

The rental agreement was a contract between Rahn and Graff, but because it provided insurance coverage, implicating Chrysler's insurance coverage, it was also, in a way, an insurance contract. See, e.g., State Farm Mut Automobile Ins Co v Enterprise Leasing Co, 452 Mich 25, 36; 549 NW2d 345 (1996) (example of an automobile rental contract providing automobile insurance coverage only for permissive uses).⁸ Concerning the...