Cruz v. State Farm Mut. Auto. Ins. Co.

Citation648 N.W.2d 591,466 Mich. 588
Decision Date17 July 2002
Docket NumberDocket No. 117505, Calendar No. 2.
PartiesPeter CRUZ, Jr., Plaintiff-Appellee, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.
CourtSupreme Court of Michigan

R. Kevin Thieme, (Robert J. Riley, of counsel), Grand Rapids, for the plaintiff-appellee.

Tolley, VandenBosch, Walton, Korolewicz & Brengle, P.C. (by Lawrence Korolewicz) Grand Rapids, and Gross, Nemeth & Silverman, P.L.C. (by James G. Gross and Mary T. Nemeth), Detroit, for the defendant-appellant.

Hewson & Van Hellemont, P.C. (by Jerald Van Hellemont), Warren, for amicus curiae the Michigan Chapter of the International Association of Special Investigation Units.

Opinion

TAYLOR, J.

We granted leave to appeal to consider whether the inclusion of an examination under oath (EUO) provision in an automobile no-fault insurance policy is permitted under the Michigan no-fault insurance act. MCL 500.3101 et seq. We hold that EUO provisions may be included in no-fault policies, but are only enforceable to the extent that they do not conflict with the statutory requirements of the no-fault act. Because the insurer in this matter, State Farm Mutual Automobile Insurance Company, impermissibly sought to enforce the EUO as a condition precedent to its duty to pay no-fault benefits, this brought the EUO provision into conflict with the requirements of the no-fault statute. The EUO provision must yield to the statute. Accordingly, the Court of Appeals judgment in favor of plaintiff is affirmed, albeit for different reasons.

I

Plaintiff was injured in an automobile accident while driving a car insured by State Farm. The State Farm no-fault policy provided coverage for no-fault benefits as required by the no-fault act, as well as coverage for bodily injury that was caused by an uninsured motorist and assorted other standard coverages such as comprehensive and collision coverages. After the accident, plaintiff submitted a claim under the policy for both no-fault personal injury protection (PIP) benefits and for uninsured motorist bodily injury benefits. He provided State Farm with what has been acknowledged by State Farm1 to be reasonable proof of the fact and of the amount of the loss sustained (the statutory requirement of what an insured must give to the insurer to make benefits payable pursuant to M.C.L. § 500.3142[2] of the no-fault act). Notwithstanding this compliance by the insured with the statutory requirement, because State Farm had in its policy a provision that conditioned payment of benefits on the submission by the insured to an EUO as often as reasonably asked,2 it declined to pay until the EUO was given. It was State Farm's position that the parties could agree in their contract of insurance, notwithstanding the requirements of the statute regarding prompt payment of benefits, to condition the payment of benefits on the submission by plaintiff to an EUO. Plaintiff refused repeated requests to submit to the EUO, and, because of this, State Farm denied plaintiff's claims for both no-fault PIP benefits and uninsured motorist benefits.

Plaintiff then requested arbitration of his claim for uninsured motorist benefits pursuant to an arbitration provision in the uninsured motorist section of the policy.3 State Farm refused to arbitrate on the basis, again, that plaintiff had, by refusing to submit to an EUO, breached a material condition of the policy and thus could not enforce his right under the policy to arbitration of his claim for these benefits. Moreover, State Farm argued that if plaintiff received an award from the arbitration panel, State Farm did not have to pay it because the condition precedent to any payment — the EUO — had not been met. Despite defendant's refusal to participate, the arbitration proceeded with the arbitrators finding that plaintiff had not breached the policy by refusing to submit to the EUO, that the other driver was not only at fault, but also uninsured, and that defendant accordingly should compensate plaintiff for uninsured motorist damages in the amount of $150,000.

Plaintiff filed suit, seeking in the first count of the complaint to enforce the arbitration decision regarding the uninsured motorist benefits, and seeking in the second count of the complaint an award of no-fault PIP benefits under the policy. Defendant moved for summary disposition arguing that plaintiff's failure to submit to the EUO was a breach of a condition precedent to his right to obtain either arbitration of his uninsured motorist claim or payment of no-fault PIP benefits. The trial court granted defendant's motion with respect to the uninsured motorist claim and vacated the arbitration award concerning that claim. The trial judge also ordered plaintiff to comply with the EUO provision regarding both the uninsured motorist benefits claim and the no-fault PIP benefits claim.

Declining to proceed in the fashion the trial court had established for perfecting his claims, plaintiff refused to submit to the EUO. Because of this, defendant sought, and secured from the trial court, a summary disposition order dismissing plaintiff's case.

On appeal, the Court of Appeals reversed the trial court in part and affirmed in part.4 It concluded that summary disposition was not proper with regard to plaintiff's claim for no-fault PIP benefits because the no-fault act "sets forth the insured's duties of cooperation, and because it does not provide for an EUO provision, the provision is contrary to the no-fault act." Id. at 164, 614 N.W.2d 689. The Court further concluded that the trial court did not err in granting summary disposition to State Farm on plaintiff's uninsured motorist benefits claim. The reason was that uninsured motorist benefits were not a statutorily mandated coverage, and thus an EUO and the rules concerning its use were matters the parties could agree to by contract. As a result, the EUO could be enforced by having it stand as a condition precedent to the insurer's duty to pay uninsured motorist benefits.5Id. at 167-169, 614 N.W.2d 689.

Leave to appeal was granted by this Court to determine whether, by enacting the no-fault act, the Legislature's silence regarding what the parties could agree to with regard to claim discovery should be held to have precluded all methods not mentioned, including EUOs.6 Further, if EUOs were not precluded, could the policy provision that conditioned payment of benefits on submission to an EUO take priority over the no-fault statute's requirement that the insurer pay benefits within thirty days after receipt of proof of the fact and of the amount of loss sustained?

II

This case presents issues regarding statutory interpretation of the Michigan no-fault insurance act. Statutory interpretation is an issue of law that is reviewed de novo. Cardinal Mooney High Sch. v. Michigan High Sch. Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991); Farm Bureau Mut. Ins. Co. v. Nikkel, 460 Mich. 558, 563-564, 596 N.W.2d 915 (1999). The primary rule of statutory construction is that, where the statutory language is clear and unambiguous, the statute must be applied as written. Putkamer v. Transamerica Ins. Corp., 454 Mich. 626, 631, 563 N.W.2d 683 (1997). Similarly, where contract language is neither ambiguous, nor contrary to the no-fault statute, the will of the parties, as reflected in their agreement, is to be carried out, and thus the contract is enforced as written. Farm Bureau, supra at 566-567, 596 N.W.2d 915.

III

As mentioned above, the no-fault act contains no reference either allowing or prohibiting examinations under oath. In order to resolve this appeal, we must first determine whether, given this silence, the inclusion of examination under oath provisions in no-fault automobile insurance policies is allowed. Further, if EUOs are permissible in automobile no-fault policies, we must determine if there are any limits regarding when an insurer can refuse to pay benefits by invoking the insured's failure to comply with an insurer's request to submit to an EUO. That is, can the parties contract out of the statutory duty imposed on the insurer to pay benefits within thirty days of receipt of the fact and of the amount of the loss, sustained by agreeing that no benefits are due until an EUO is given by the insured?

It is by now well understood that the Michigan no-fault insurance act is a comprehensive legislative enactment designed to regulate the insurance of motor vehicles in this state and the payment of benefits resulting from accidents involving those motor vehicles. As we explained in Shavers v. Attorney General, 402 Mich. 554, 578-579, 267 N.W.2d 72 (1978):

The Michigan No-Fault Insurance Act, which became law on October 1, 1973, was offered as an innovative social and legal response to the long delays, inequitable payment structure, and high legal costs inherent in the tort (or "fault") liability system. The goal of the no-fault insurance system was to provide victims of motor vehicle accidents with assured, adequate, and prompt reparation for certain economic losses. The Legislature believed this goal could be most effectively achieved through a system of compulsory insurance, whereby every Michigan motorist would be required to purchase no-fault insurance or be unable to operate a vehicle legally in this state. Under this system, victims of motor vehicle accidents would receive insurance benefits for their injuries as a substitute for their common-law remedy in tort.

The Legislature realized that, with every motorist required to have this insurance, there were many types of injuries and property damage that such insurance would have to cover. These included, for example, medical, hospital, and death benefits7, work loss8, dependent benefits9, and property losses10. To establish the methods for payment of these benefits, the Legislature, in M.C.L. § 500.3141, provided that the insurer "may require written...

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