Auto Club Ins. Ass'n v. State Farm Ins. Companies

• Decision Date: 21 January 1997
• Docket Number: Docket No. 173738
• Parties: AUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellee, v. Omega Communications, d/b/a Cable Vision, Inc., Defendant/Cross-Defendant-Appellant, and STATE FARM INSURANCE COMPANIES, Defendant/Cross-Plaintiff-Appellee, and Morris Associates, Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 445

561 N.W.2d 445

221 Mich.App. 154

AUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellee, v. Omega Communications, d/b/a Cable Vision, Inc. Defendant/Cross-Defendant-Appellant and STATE FARM INSURANCE COMPANIES, Defendant/Cross-Plaintiff-Appellee and Morris Associates, Defendant.

Docket No. 173738.

Court of Appeals of Michigan.

Submitted Nov. 15, 1995, at Grand Rapids.

Decided Jan. 21, 1997, at 9:10 a.m.

Released for Publication April 9, 1997.

Smith, Haughey, Rice & Roegge by Jon D. Vander Ploeg, Grand Rapids, for Auto Club Insurance Association.

Reider & Brown, P.C. by Darrel G. Brown, Muskegon, for State Farm Insurance Companies.

Kluczynski, Girtz & Vogelzang by Richard Radke, Jr., and Kevin J. O'Dowd, Grand Rapids, for Omega Communications.

Before DOCTOROFF, C.J., and MICHAEL J. KELLY and MARKEY, JJ.

MARKEY, Judge.

Defendant Omega Communications, doing business as Cable Vision, Inc., appeals as of right from the trial court's judgment entered upon competing motions for summary disposition, supported by the parties' stipulated facts, finding in favor of plaintiff Auto Club Insurance Association as against Omega and in favor of defendant State Farm Insurance Companies as against Omega. We affirm in part and reverse in part.

This appeal stems from a dispute regarding which insurer has the duty to provide coverage for injuries that Jennifer Schneider suffered in an automobile accident on July 21, 1991. At that time, Jennifer, a minor, was living with her mother, Wanda, who did not have no-fault insurance. Her parents were estranged. Because plaintiff was the no-fault insurance provider for the driver of the vehicle in which Jennifer was riding when the accident occurred, it paid $47,658.09 in no-fault benefits on her behalf. Plaintiff subsequently sought reimbursement from Omega, which provided health benefits to Ross Schneider, Jennifer's father, under an ERISA ¹ employee welfare benefit plan, and State Farm, which provided no-fault coverage to Ross Schneider. State Farm cross-claimed against Omega for indemnity if it were found liable to plaintiff. After the case was mediated in plaintiff's favor for $48,000, State Farm settled with plaintiff for $24,000.

At the hearing on the parties' motions for summary disposition, the trial court found that Omega was solely liable for providing medical coverage to Jennifer because the ERISA plan provided coverage for employees' nonresident dependents if a court order or divorce decree specifies that the employee must provide coverage. The court found that the policy of this state, as set forth in Tousignant v. Allstate Ins. Co., 444 Mich. 301, 303, 506 N.W.2d 844 (1993), and Owens v. Auto Club Ins. Ass'n, 444 Mich. 314, 317, 506 N.W.2d 850 (1993), supports the conclusions that medical expenses are to be borne by health-care providers, even when people are injured in automobile accidents, that Omega is estopped from denying dependent coverage because it accepted dependent-care premiums from Ross Schneider while he was separated and effectively divorced from his wife, that Omega's coordination of benefits (COB) provision should be liberally construed to include the friend of the court's recommendation that Schneider pay for his daughter's insurance coverage as constituting a court order, and that plaintiff is not seeking to exercise subrogation rights against defendants. Accordingly, the trial court granted plaintiff's motion for summary disposition and entered judgment for plaintiff against Omega in the amount of $23,658.09, with $3,075.54 in prejudgment interest, calculated at twelve percent, and $5,000 in attorney fees. The court also granted State Farm's motion for summary disposition and ordered Omega to reimburse State Farm in the amount of $24,000, representing the amount State Farm paid to plaintiff pursuant to mediation. Omega appeals from these awards.

I

First, Omega asserts that the trial court erred in concluding that Jennifer Schneider was a covered dependent within the plan's eligibility requirements; as a result, Omega was held solely responsible for Jennifer's medical bills. Upon review de novo, we partially agree. See Vargo v. Sauer, 215 Mich.App. 389, 398, 547 N.W.2d 40 (1996).

Pursuant to the Omega plan's choice-of-law provision, the plan must be construed according to the ERISA and Indiana law. In Indiana, it is the court's main duty to ascertain the intent of the parties and give the language of an insurance policy its plain and ordinary meaning. First Federal Savings Bank of Indiana v. Key Markets, Inc., 559 N.E.2d 600, 603 (Ind.1990); Aetna Life & Casualty v. Patrick Industries, Inc., 645 N.E.2d 656, 659 (Ind.App.1995). The residency requirement of the plan provides that a child of a participating employee is eligible for health-care coverage if the unmarried child who is financially dependent on the employee for more than one-half of the child's annual support and who is under 19 (or under 25 if a full-time college student) "[r]esides with the Employee." An exception to this residency requirement states that "[t]he residency and support requirements as pertain [sic] to an unmarried natural child of the participant are waived if the participant is required to provide coverage due to court order or divorce decree." Omega's plan also contains a COB provision, which states as follows:

Order of Benefit Determination: If a person is a Participant under this Plan and another plan at the same time, the Plans will pay benefits in this order:

a. Any Plan that has no Coordination of Benefits provision will pay first.

b. When all Plans have a Coordination of Benefits provision, the Plan that covers the participant as an employee will pay first.

The term "plan" is defined within Omega's policy to mean "any policy, contract, or other arrangement to pay the cost of Medical, Dental, or Vision Care," including "any [policy under the] No Fault Automobile Act or similar law."

Although the stipulation of facts that the court used as the basis of its summary disposition ruling contained no reference to the existence or nonexistence of a COB clause in plaintiff's no-fault policy, this Court on its own motion remanded the case to the trial court with instructions to ascertain whether plaintiff's policy contained a COB clause. At the conclusion of the hearing on remand, counsel for all parties acknowledged that plaintiff's policy in effect on July 21, 1991, contained a "coordinated medical benefits" personal protection insurance endorsement. In light of plaintiff's COB provision and the residency requirement in Omega's policy, we believe that plaintiff and Omega share responsibility for Jennifer Schneider's insurance coverage.

On July 21, 1991, the date of the accident, Jennifer was not residing with Ross Schneider, who was a participant in Omega's ERISA plan. Before the accident, several support orders had been entered providing Jennifer's mother with support payments for the benefit of Jennifer and her brother, but none of these court orders required Ross Schneider to provide health-care coverage to Jennifer. Under Indiana law, a court order is defined as "a judgment or conclusion of the court on any motion or proceeding by which affirmative relief is granted or relief is denied." Dep't of Revenue v. Estate of Callaway, 232 Ind. 1, 9, 110 N.E.2d 903 (1953), citing McMillan v. Plymouth Electric Light & Power Co., 70 Ind.App. 336, 341, 123 N.E. 446 (1919). A divorce decree is a type of judgment. Indiana Trial Rule 54(A). Applying Indiana law, we do not believe that the friend of the court's "recommendation" to Ross Schneider that he continue paying for his children's health insurance constitutes a "court order" for purposes of the Omega plan's residency exception. ² In contrast, we find that on August 4, 1992, slightly over one year after the accident, the Mason Circuit Court entered a judgment of divorce requiring Ross Schneider to provide health insurance coverage for his children, including Jennifer. Accordingly, as of August 4, 1992, Jennifer Schneider qualified under the Omega plan's nonresident dependent exception and was entitled to coverage as of that date. Given that Jennifer Schneider was covered by both Omega's plan and plaintiff's policy on August 4, 1992, we then look to the plan and policy language to establish an order of priority between these insurers. Although the stipulation of facts did not specify whether plaintiff's policy contained a COB clause, all parties conceded at the hearing upon remand that plaintiff's policy contained one. As quoted above, Omega's COB states that any uncoordinated plan is primary. Here, however, because both plaintiff's and Omega's plans are coordinated, Omega "will pay first" as "the Plan that covers the participant as an employee." We therefore hold that plaintiff was solely obligated to provide insurance coverage to Jennifer Schneider from July 21, 1991, through August 3, 1992, but Omega became primarily liable when the divorce decree was entered on August 4, 1992. In the absence of any medical records to establish when medical bills were incurred, we must remand this case to the trial court for a proration of medical expenses between plaintiff and Omega.

With respect to benefits that plaintiff paid between July 1991 and August 1992, we also find that equitable estoppel does not apply as against Omega. According to the prevailing federal common-law doctrine concerning equitable estoppel, plaintiff must show (1) conduct or language amounting to a representation of material fact, (2) awareness of the true facts by the party to be estopped, (3) an intention on the part of the offending party that its representations be acted on or that its conduct toward the party asserting estoppel was such that the latter had a right to believe that the former intended its conduct, (4) unawareness of the true facts by the party asserting estoppel, and (5) detrimental and justifiable reliance by the...