Bronner v. City of Detroit

• Decision Date: 27 May 2021
• Docket Number: No. 160242,160242
• Citation: 968 N.W.2d 310,507 Mich. 158
• Parties: Keith BRONNER, Plaintiff, and Angels With Wings Transport, LLC, Intervening Plaintiff, v. CITY OF DETROIT, Defendant/Third-Party Plaintiff-Appellant, and GFL Environmental USA Inc., f/k/a Rizzo Environmental Services, Inc., Third-Party Defendant-Appellee.
• Court: Michigan Supreme Court

507 Mich. 158

968 N.W.2d 310

Keith BRONNER, Plaintiff,andAngels With Wings Transport, LLC, Intervening Plaintiff,

v. CITY OF DETROIT, Defendant/Third-Party Plaintiff-Appellant,andGFL Environmental USA Inc., f/k/a Rizzo Environmental Services, Inc., Third-Party Defendant-Appellee.

No. 160242

Supreme Court of Michigan.

Argued on application for leave to appeal January 7, 2021

Decided May 27, 2021

Charles N. Raimi for the City of Detroit.

Cardelli Lanfear, PC, Royal Oak (by Anthony F. Caffrey III and Thomas G. Cardelli ) for GFL Environmental USA Inc.

BEFORE THE ENTIRE BENCH

Clement, J.

In this case, we consider whether a no-fault insurer—or, as here, a self-insurer—may legally contract with a vendor for indemnification of the no-fault insurer for the cost of no-fault benefits that the insurer is obliged by law to pay when the vendor's negligence caused the injury for which the benefits are compensation. We conclude that such an agreement is legal and reverse the contrary conclusion of the Court of Appeals.

I. FACTS AND PROCEDURAL HISTORY

On September 25, 2014, Keith Bronner was a passenger on a bus operated by the City of Detroit. The bus was in an accident with a garbage truck operated by GFL Environmental USA Inc.¹ The city self-insures its fleet of buses under MCL 500.3101(5),² and Bronner consequently made a claim with the city for personal protection insurance (PIP) benefits under MCL 500.3107. The city initially paid about $58,000 in benefits to Bronner; but eventually the relationship broke down, and Bronner sued the city in September 2015.

GFL's garbage truck was operating under a contract that GFL had signed with the city in February 2014. Section 9.01(a) of that agreement provided that GFL

agree[d] to indemnify, defend, and hold the City harmless against and from any and all liabilities, obligations, damages, penalties, claims, costs, charges, losses and expenses ... that may be imposed upon, incurred by, or asserted against the City ... to the extent caused by ... [a]ny negligent or tortious act, error, or omission attributable in whole or in part to [GFL] or any of its Associates[.]

Shortly after Bronner sued the city, the city filed a third-party complaint against GFL, invoking this indemnification agreement. In June 2016, GFL moved for summary disposition, arguing that the city was "attempting to circumvent the explicit requirements of the No-Fault Act^{[3 ]} by improperly shifting its burden onto [GFL] through language found in an unrelated service contract between Detroit and [GFL], which clearly violates public policy and the legislative intent behind the No-Fault Statute." The trial court denied this motion and instead granted summary disposition in favor of the city. In February 2017, the city reached a settlement with Bronner, and the trial court then ordered GFL to pay the city $107,529.29 to cover the PIP benefits paid by the city,⁴ plus certain other expenses.

In the Court of Appeals, GFL renewed its argument that the indemnification agreement circumvented the Insurance Code's⁵ no-fault rules and was therefore void. The Court of Appeals agreed and reversed in an unpublished opinion.⁶ The Court of Appeals panel emphasized the comprehensive nature of the no-fault system, which includes only a few explicit mechanisms by which a no-fault insurer may recover the cost of benefits paid out. The Court accepted the negative implication that, by stating these options in the no-fault act, the Legislature had denied the availability of any other options. The panel therefore concluded that the indemnification agreement was unenforceable. The city then filed an application for leave to appeal in our Court, and we ordered argument on that application. Bronner v. Detroit , 505 Mich. 1139, 944 N.W.2d 722 (2020).

II. STANDARD OF REVIEW

The question before the Court is not the meaning of the indemnification agreement between the city and GFL as such. GFL's argument in this Court does not concern the proper interpretation of the parties’ contract, and GFL does not argue that the indemnification sought by the city is beyond the scope of that contract. Rather, the question is whether the Insurance Code precludes the contract provision at issue. In other words, the question is whether the provision "runs afoul of the public policy of the state" in the form of "the policies that ... are reflected in ... our statutes," Terrien v. Zwit , 467 Mich. 56, 66-67, 648 N.W.2d 602 (2002), such as the Insurance Code. Whether a contract provision is invalid on these grounds is a question of law subject to de novo review. Id. at 61, 648 N.W.2d 602. "This Court [also] reviews the grant or denial of summary disposition de novo to determine if the moving party is entitled to judgment as a matter of law."

Maiden v. Rozwood , 461 Mich. 109, 118, 597 N.W.2d 817 (1999).

III. ANALYSIS

We have held that " ‘[t]he general rule [of contracts] is that competent persons shall have the utmost liberty of contracting and that their agreements voluntarily and fairly made shall be held valid and enforced in the courts.’ " Terrien , 467 Mich. at 71, 648 N.W.2d 602, quoting Twin City Pipe Line Co. v. Harding Glass Co. , 283 U.S. 353, 356, 51 S. Ct. 476, 75 L. Ed. 1112 (1931). Of course, where there are " ‘definite indications in the law’ " of some contrary public policy, Terrien , 467 Mich. at 68, 648 N.W.2d 602, quoting Muschany v. United States , 324 U.S. 49, 66, 65 S. Ct. 442, 89 L. Ed. 744 (1945), the contract provision must yield to public policy. As the Court of Appeals noted here, however, there is no provision of the Insurance Code which expressly prohibits the sort of indemnification agreement at issue. Even so, the Court of Appeals drew inferences from the comprehensive nature of the no-fault system that we must assess.

No-fault insurance in Michigan is "a comprehensive scheme of compensation designed to provide sure and speedy recovery of certain economic losses resulting from motor vehicle accidents." Belcher v. Aetna Cas. & Surety Co. , 409 Mich. 231, 240, 293 N.W.2d 594 (1980). "In general, where comprehensive legislation prescribes in detail a course of conduct to pursue and the parties and things affected, and designates specific limitations and exceptions, the Legislature will be found to have intended that the statute supersede and replace the common law dealing with the subject matter." Millross v. Plum Hollow Golf Club , 429 Mich. 178, 183, 413 N.W.2d 17 (1987). Although Millross was a case about the dramshop act, we have applied this same principle in the no-fault context. In particular, the Court of Appeals drew upon our line of cases construing the comprehensive nature of the no-fault law as prohibiting certain shifts of liability for no-fault benefits to invalidate the indemnification agreement at issue.

The first case in this line is Citizens Ins. Co. of America v. Federated Mut. Ins. Co. , 448 Mich. 225, 531 N.W.2d 138 (1995). In that case, a car dealership gave a customer a "loaner" automobile while the dealership was working on the customer's own vehicle.⁷ The customer was later in a serious accident. On appeal in this Court, the legal question was which insurer was responsible under MCL 500.3131 to pay residual personal injury benefits: the insurer of the car dealership (as the owner of the vehicle) or the customer (as the operator of the vehicle). The insurance policy issued to the car dealership by its insurer stated that the insurer would not consider as an "insured" anyone to whom the dealership had loaned the vehicle unless that individual was uninsured or underinsured. We held that the dealership's insurer could not, in its policy, unilaterally shift liability for no-fault benefits to fully insured borrowers of the dealership's vehicle because it violated MCL 500.3101(1), which requires the owner of a vehicle to maintain security for residual liability insurance. The policy exclusion was therefore void, and the dealership's insurer had to pay benefits.

We extended Citizens Ins. Co. in State Farm Mut. Auto. Ins. Co. v. Enterprise Leasing Co. , 452 Mich. 25, 549 N.W.2d 345 (1996). There, we held that when an automobile is rented out, the lessor of the vehicle may not enforce a lease condition shifting responsibility to the lessee's no-fault insurer to provide mandatory no-fault benefits if an accident occurs—even if the lessee agreed to this lease condition. Id. at 27-28, 35, 549 N.W.2d 345. We offered various reasons for this conclusion, but one, which the Court of Appeals referred to here, was that the intent of the no-fault system is to hold the owner rather than the operator of a vehicle primarily responsible for paying no-fault benefits, and it would subvert that intent to switch that responsibility:

The driver cannot defeat the provisions of the no-fault act by stating that the owner need not pay insurance. Because the driver cannot bind the driver's insurer, a driver who agreed to shift coverage would remain solely liable for damages caused by use of the vehicle. The rental car would be left uninsured under the terms of the rental agreement stating that the owner provides no insurance. This lack of coverage violates the no-fault act. Even though an injured party could attempt to obtain compensation from the driver, the no-fault act is intended to protect injured parties from having to pursue such suits. Even if the driver qualified as self-insured, we would not allow the rental car companies to avoid the Legislature's intent that a vehicle owner be primarily responsible for providing coverage. Just as the car rental company cannot shift liability to a driver's insurer, it cannot shift liability to a driver personally. Either shift of responsibility away from the owner would violate the act because it requires owners to provide primary coverage. [ Id. at 35-36, 549 N.W.2d 345.]

On the other hand, we gestured toward a limit to the principle established in Citizens Ins. Co. and State Farm in Universal Underwriters...