Farmers Ins. Exchange v. AAA of Michigan

• Decision Date: 03 June 2003
• Docket Number: Docket No. 232188.
• Citation: Farmers Ins. Exchange v. AAA of Michigan, 671 N.W.2d 89, 256 Mich. App. 691 (Mich. App. 2003)
• Parties: FARMERS INSURANCE EXCHANGE, Plaintiff-Appellee, v. AAA OF MICHIGAN, Defendant-Appellant.
• Court: Court of Appeal of Michigan

671 N.W.2d 89

256 Mich. App. 691

FARMERS INSURANCE EXCHANGE, Plaintiff-Appellee, v. AAA OF MICHIGAN, Defendant-Appellant.

Docket No. 232188.

Court of Appeals of Michigan.

Submitted March 3, 2003, at Detroit.

Decided June 3, 2003, at 9:05 a.m.

Released for Publication July 14, 2003.

Richard R. Bachelder, Grand Blanc, for the plaintiff.

Gross, Nemeth & Silverman, P.L.C. (by Mary T. Nemeth), and Schoolmaster, Hom, Killeen, Siefer & Arene (by Kevin S. Carden), Detroit, Bloomfield Hills, for the defendant.

Before: HOEKSTRA, P.J., and SMOLENSKI and HOOD, JJ.

PER CURIAM.

This case involves a priority dispute under Michigan's no-fault act, M.C.L. § 500.3101 et seq., between two insurance companies concerning payment of no-fault benefits related to injuries that two children sustained while passengers in an automobile driven by their day-care provider. The district court granted summary disposition in favor of plaintiff Farmers Insurance Exchange and later entered a judgment for plaintiff in the amount of $18,811.96. Defendant AAA of Michigan filed a claim of appeal in the circuit court from the district court judgment, but the circuit court denied defendant's appeal and affirmed the district court's decision. Defendant now appeals by leave granted. The only issue on appeal is whether plaintiff or defendant is first in priority for payment of automobile insurance benefits in light of subsection 3114(2) of the no-fault act, M.C.L. § 500.3114(2). We hold that the applicability of subsection 3114(2) depends on a primary purpose/incidental nature inquiry with respect to whether a motor vehicle is operated in the business of transporting passengers. Because we conclude that subsection 3114(2) does not apply under the circumstances in the present case, we reverse the lower courts' orders and remand for entry of judgment in favor of defendant.

I. Facts and Procedural Background

In May of 1999, plaintiff filed a complaint in district court, seeking a declaratory judgment that defendant was first in priority for liability for no-fault benefits related to a May 14, 1998, automobile accident. The two minor daughters of plaintiff's insured¹ suffered injuries while passengers in a vehicle driven by their day-care provider and insured by defendant. Plaintiff paid the children's claim for personal injury protection (PIP) benefits, but sought reimbursement from defendant on the basis that pursuant to subsection 3114(2) of the no-fault act, M.C.L. § 500.3114(2), defendant had first priority to pay these benefits. According to plaintiff, at the time the accident occurred, the vehicle the day-care provider used to transport the children in the operation of a for-profit day-care center was "a motor vehicle operated in the business of transporting passengers to and from day care/ school," and thus, pursuant to subsection 3114(2), defendant was responsible for providing PIP benefits. Plaintiff also claimed that defendant had denied plaintiff's requests for reimbursement.

In its answer to the complaint, defendant left plaintiff to its proofs concerning priority under subsection 3114(2) and denied that it had refused plaintiff's request for reimbursement. Subsequently, the parties filed cross-motions for summary disposition. Each party argued that the other party occupied the no-fault insurance position of first priority under M.C.L. § 500.3114 and provided reasonable arguments concerning the applicability of the statute in this case. However, having heard argument on the motions, the district court granted plaintiff's motion for summary disposition and denied defendant's motion for summary disposition; the order stated that defendant was in first priority to pay no-fault PIP benefits. Thereafter, pursuant to the parties' stipulation, the court entered a judgment for plaintiff in the amount of $18,811.96. Defendant filed in the circuit court, a claim of appeal regarding the district court's judgment, but after briefing and oral argument, the circuit court denied defendant relief from the district court's judgment. Thereafter, defendant sought leave to appeal in this Court, which this Court granted.

II. Standard of Review

Resolution of the issue before us requires interpretation and application of subsection 3114(2) of the no-fault act, which are questions of law that this Court reviews de novo. Proudfoot v. State Farm Mut. Ins. Co., 254 Mich.App. 702, 708, 658 N.W.2d 838 (2003); Bloomfield Charter Twp. v. Oakland Co. Clerk, 253 Mich.App. 1, 9, 654 N.W.2d 610 (2002). In a recent case involving interpretation of the no-fault act, Proudfoot, supra, this Court reiterated pertinent rules of statutory construction:

The primary goal when construing a statute is to ascertain and give effect to the intent of the Legislature. When determining the Legislature's intent, this Court must first look to the statute's specific language. Judicial construction is unnecessary if the meaning of the language is clear. However, judicial construction is appropriate when reasonable minds can differ regarding the statute's meaning. Terms contained in the no-fault act are read "`in the light of its legislative history and in the context of the no-fault act as a whole.'" Further, courts should not abandon common sense when construing a statute. Given the remedial nature of the no-fault act, courts must liberally construe its provisions in favor of the persons who are its intended beneficiaries. [Proudfoot, supra at 708-709, 658 N.W.2d 838 (citations omitted).]

III. Analysis

The sole issue on appeal is which insurer, plaintiff or defendant, is first in priority for payment of PIP benefits for two children who sustained injuries in a motor-vehicle accident.

We begin our analysis by noting that generally an injured person is required to seek compensation from his own no-fault insurer, regardless of whether that person's insured vehicle is involved in the accident. MCL 500.3114(1). In Thomas v. Tomczyk, 142 Mich.App. 237, 241, 369 N.W.2d 219 (1985), this Court noted:

The primary goal of the Legislature in enacting the Michigan no-fault act ... was to ensure prompt and adequate compensation to parties injured in automobile accidents by requiring them to first look to their own insurers. Thus, an injured person is generally required to seek compensation from his own no-fault insurer even where that person's insured vehicle is not involved in the accident. [Citations omitted.]

However, the Legislature provided exceptions to this general rule, including the exception found in subsection 3114(2):

A person suffering accidental bodily injury while an operator or a passenger of a motor vehicle operated in the business of transporting passengers shall receive the personal protection insurance benefits to which the person is entitled from the insurer of the motor vehicle. This subsection does not apply to a passenger in the following, unless that passenger is not entitled to personal protection insurance benefits under any other policy:

(a) A school bus, as defined by the department of education, providing transportation not prohibited by law.

(b) A bus operated by a common carrier of passengers certified by the department of transportation.

(c) A bus operating under a government sponsored transportation program.

(d) A bus operated by or providing service to a nonprofit organization.

(e) A taxicab insured as prescribed in section 3101 or 3102.

(f) A bus operated by a canoe or other watercraft, bicycle, or horse livery used only to transport passengers to or from a destination point. [MCL 500.3114(2) (emphasis supplied).]

The parties agree that none of the exceptions within subsections 3114(2)(a)-(f) apply in this case.

With regard to the instant case, the significant language of subsection 3114(2) is "a motor vehicle operated in the business of transporting passengers." The no-fault act does not define this statutory phrase or the operative terms within it that are implicated in this case.² Defendant asserts that "the business of transporting passengers" must constitute the sole or primary purpose of the motor vehicle, while plaintiff suggests that even utilization of a vehicle in the business of transporting passengers incidental to other, primary uses of the vehicle falls within the scope of subsection 3114(2). Because the statutory phrase does not have a clear and unambiguous meaning, this Court must construe it under the rules of statutory interpretation. Proudfoot, supra.

While sparse Michigan case law exists interpreting or otherwise discussing subsection 3114(2), this Court has made relevant observations concerning the Legislature's motives in enacting subsection 3114(2) and its exceptions. In Michigan Mut. Ins. Co. v. Farm Bureau Ins. Group, 183 Mich.App. 626, 633-634, 455 N.W.2d 352 (1990), this Court noted:

As previously indicated, the Legislature generally "intended that an injured person's personal insurer stand primarily liable for ... benefits whether or not its policy covers the motor vehicle involved and even if the involved vehicle is covered by a policy issued by another no-fault insurer." Lee v. DAIIE, 412 Mich. 505, 515, 315 N.W.2d 413 (1982). The "injured person's personal insurer" is, of course, the insurance company providing no-fault insurance in his household which was purchased by an "owner or registrant of a motor vehicle." MCL 500.3101(1) and 500.3114(1).... While a business can be an owner or registrant of a motor vehicle, and thus required to purchase no-fault insurance, a business obviously cannot be a "household," or have a "spouse" or "relative," in the primary and generally understood meaning of those words. Accordingly, insurers of business vehicles usually would not be first in order of priority under the general priority scheme. The Legislature recognized this and created what amounts to a business household in § 3114(2) and (3), so that responsibility for providing benefits would be spread equitably among all insurers of

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