Duckworth v. Cherokee Ins. Co.

• Decision Date: 06 August 2020
• Docket Number: No. 347865,347865
• Parties: James DUCKWORTH, Plaintiff-Appellee, and Zurich American Insurance Company, Intervening Plaintiff, v. CHEROKEE INSURANCE COMPANY, Defendant-Appellee, and Progressive Marathon Insurance Company, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

333 Mich.App. 202

963 N.W.2d 610

James DUCKWORTH, Plaintiff-Appellee,

and

Zurich American Insurance Company, Intervening Plaintiff,

v.CHEROKEE INSURANCE COMPANY, Defendant-Appellee,andProgressive Marathon Insurance Company, Defendant-Appellant.

No. 347865

Court of Appeals of Michigan.

Submitted July 7, 2020, at Detroit.

Decided August 6, 2020, at 9:05 a.m.

Richard D. Wilson, Bloomfield Hills, and Darren M. Cooper for Cherokee Insurance Company.

Lincoln G. Herweyer for Progressive Marathon Insurance Company.

Before: Riordan, P.J., and Shapiro and Ronayne Krause, JJ.

Per Curiam.

Plaintiff James Duckworth was injured on December 9, 2013, when he lost control of the truck he was driving. The truck was owned by Speed Express, LLC, which had contracted with plaintiff to haul and deliver goods on its behalf. Plaintiff sought personal protection insurance (PIP) benefits from Speed Express's no-fault insurer, defendant Cherokee Insurance Company. Cherokee denied the claim on the grounds that plaintiff was an independent contractor of Speed Express and not its employee for purposes of MCL 500.3114(3). The trial court agreed that plaintiff was not an employee of Speed Express under the economic-reality test and therefore ruled that defendant Progressive Marathon Insurance Company, plaintiff's personal no-fault insurer, was first in priority pursuant to MCL 500.3114(1). Progressive appeals the trial court's priority determination. We reverse and remand for further proceedings.¹

I. FACTS AND PROCEDURAL HISTORY

We previously summarized the underlying facts of this case:

Plaintiff's claims arise out of a motor vehicle accident that occurred on December 9, 2013. Plaintiff had contracted with Speed Express, LCC (Speed Express) (a nonparty to this action) to drive various loads of cargo for delivery. On December 9, 2013, plaintiff was driving a tractor truck, owned by Speed Express, through the State of Arkansas, when he lost control of the tractor truck. The cargo in the tractor-trailer shifted, causing the tractor truck to overturn and trapping plaintiff inside. Plaintiff sustained serious physical injuries in the accident, for which he was hospitalized. [ Duckworth v. Cherokee Ins. Co. , unpublished per curiam opinion of the Court of Appeals, issued January 16, 2018 (Docket Nos. 334353 and 335241) (Duckworth I ), p. 3, 2018 WL 442217.]^{[2 ]}

As noted, plaintiff sought PIP benefits from Cherokee, the no-fault insurer of the tractor truck involved in the accident. Cherokee denied payment of the claim and plaintiff brought suit. Cherokee moved for summary disposition on the grounds that Progressive, plaintiff's personal no-fault insurer, was first in priority to pay PIP benefits. Cherokee argued that it did not have priority under MCL 500.3114(3) because plaintiff was an independent contractor rather than an employee of Speed Express. On May 15, 2014, plaintiff filed suit against Progressive, and the trial court denied Progressive's request to consolidate the cases. In the case involving Cherokee, the trial court determined that MCL 500.3114(3) did not apply because plaintiff was Speed Express's independent contractor.

In Duckworth I , we held that the trial court had denied Progressive due process by adjudicating priority in a case to which Progressive was not a party, and we remanded to the trial court to consolidate the cases and allow full argument on the priority issue. Duckworth I , unpub. op. at 4-5, 7. We also addressed Cherokee and Progressive's dispute regarding the interaction of Adanalic v. Harco Nat. Ins. Co. , 309 Mich. App. 173, 870 N.W.2d 731 (2015), and Celina Mut. Ins. Co. v. Lake States Ins. Co. , 452 Mich. 84, 549 N.W.2d 834 (1996). In Adanalic , this Court affirmed the trial court's ruling that MCL 500.3114(3) did not require the truck's insurer to cover the PIP claim because the plaintiff was not an employee under the economic-reality test. Adanalic , 309 Mich. App. at 190-191, 870 N.W.2d 731. However, in Celina , the Supreme Court held that a "self-employed person" is an employee for purposes of MCL 500.3114(3) and so may claim coverage from the insurer of the truck. Celina , 452 Mich. at 89, 549 N.W.2d 834.

Progressive argued that Adanalic could not be reconciled with Celina because independent contractors are necessarily self-employed. We disagreed that the cases were irreconcilable, reasoning that the cases established a two-step inquiry for determining whether MCL 500.3114(3) applies. First, "[u]nder Adanalic , a trial court must apply the economic reality test when evaluating whether an injured party was an employee or an independent contractor for purposes of the no-fault act." Duckworth I , unpub op. at 6. Second, "if an injured party is deemed to be an independent contractor under the economic reality test," then the next inquiry under Celina is "whether the injured party was self-employed, i.e., acting on behalf of his or her business, at the time they were injured." Id. If either inquiry is answered affirmatively, then the worker is an "employee" for purposes of MCL 500.3114(3) and is entitled to benefits from the insurer of the truck.

On remand, the trial court first ruled that plaintiff was an independent contractor for Speed Express under the economic-reality test. Next, the court concluded that plaintiff was not self-employed because he had not established a business entity such as a corporation or partnership that could in turn employ him. Accordingly, the court held that MCL 500.3114(3) did not apply and Progressive was first in priority as plaintiff's personal insurer. The court entered a final judgment barring plaintiff from recovering PIP benefits in the amount of $43,628.48 for the period of December 9, 2013 through May 14, 2014, pursuant to the one-year-back rule. Progressive appealed.

II. ANALYSIS

Progressive argues that the trial court erred by concluding on remand that (1) plaintiff was not a Speed Express employee under the economic-reality test and (2) even if plaintiff was an independent contractor, he was necessarily self-employed and acting on behalf of his own business. Because we conclude that plaintiff was an employee of Speed Express under the economic-reality test, we need not address the trial court's finding that he was not self-employed.³

A. DEFINING THE ECONOMIC-REALITY TEST

"When determining the priority of insurers liable for no-fault PIP benefits, courts must examine MCL 500.3114." Corwin v. DaimlerChrysler Ins. Co. , 296 Mich. App. 242, 254, 819 N.W.2d 68 (2012). "Under MCL 500.3114(1), a person seeking no-fault benefits must generally look first to his or her own insurer, unless one of the exceptions in MCL 500.3114(2), (3), or (5) applies." Turner v. Farmers Ins. Exch. , 327 Mich.App. 481, 493-494, 934 N.W.2d 81 (2019). MCL 500.3114(3) provides in pertinent part:

An employee ... 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.

As an initial matter, the parties dispute what factors may be considered in applying the economic-reality test. In Parham v. Preferred Risk Mut. Ins. Co. , 124 Mich. App. 618, 619-620, 335 N.W.2d 106 (1983), we adopted the economic-reality test to determine when the injured party was an employee for purposes of MCL 500.3114(3). We stated that the factors to be considered under that test "include : (a) control of the worker's duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer's business towards the accomplishment of a common goal." Id. at 623, 335 N.W.2d 106 (emphasis added). We recited the same nonexhaustive factors in Adanalic , 309 Mich. App. at 191, 870 N.W.2d 731. While we have routinely cited these four general factors, we have also recognized that "[n]o single factor is controlling and, indeed, the list of factors is nonexclusive and other factors may be considered as each individual case requires." Rakowski v. Sarb , 269 Mich. App. 619, 625, 713 N.W.2d 787 (2006). See also Chilingirian v. City of Fraser , 194 Mich. App. 65, 69, 486 N.W.2d 347 (1992) ("The economic reality test looks to the totality of the circumstances surrounding the work performed.").

In McKissic v. Bodine , 42 Mich. App. 203, 208-209, 201 N.W.2d 333 (1972), a worker's compensation case, this Court discerned from caselaw a more comprehensive list of eight factors "for determining the nature of the existing relationship between a given employer and employee":

First, what liability, if any, does the employer incur in the event of the termination of the relationship at will?

Second, is the work being performed an integral part of the employer's business which contributes to the accomplishment of a common objective?

Third, is the position or job of such a nature that the employee primarily depends upon the emolument for payment of his living expenses?

Fourth, does the employee furnish his own equipment and materials?

Fifth, does the individual seeking employment hold himself out to the public as one ready and able to perform tasks of a given nature?

Sixth, is the work or the undertaking in question customarily performed by an individual as an independent contractor?

Seventh, control, although abandoned as an exclusive criterion upon which the relationship can be determined, is a factor to be considered along with payment of wages, maintenance of discipline and the right to engage or discharge employees.

Eighth, weight should be given to those factors which will most favorably effectuate the objectives of the statute.

The Supreme Court has cited McKissic with approval, see Askew v. Macomber , 398 Mich. 212, 217 n. 7, 247 N.W.2d 288 (1976), and most recently applied the eight factors, rather than merely four, in Coblentz v. Novi , 475 Mich. 558, 578-580, 719 N.W.2d 73 (2006), to determine whether the...