Husted v. Dobbs
| Decision Date | 27 April 1999 |
| Docket Number | Docket No. 104447,No. 17,AUTO-OWNERS,17 |
| Citation | 591 N.W.2d 642,459 Mich. 500 |
| Parties | Marcia HUSTED, Personal Representative of the Estate of Richard Allen Husted, Jr., deceased, Plaintiff-Appellant, v. Henry Clifton Dobbs, Defendant, andINSURANCE COMPANY, Defendant-Appellee. Calendar |
| Court | Michigan Supreme Court |
Ford & Kobayashi, P.C. (by James B. Ford), Kalamazoo, for the plaintiff-appellant.
Dykema, Gossett, P.L.L.C. (by Donald S. Young, Kathleen McCree Lewis, and Lori M. Silsbury), Lansing, and Bartosiewicz & Kimbrel, P.C. (by Gary P. Bartosiewicz), Kalamazoo, for defendant-appellee.
Willingham & Cote', P.C. (by John A. Yeager), East Lansing, for amici curiae Insurance Information Association of Michigan.
Charters, Heck, O'Donnell, Petrulis & Zorza, P.C. (by Eric S. Goldstein), Troy, for amici curiae Michigan Trial Lawyers Association.
Henry Dobbs struck and killed plaintiff's decedent while driving his employer's uninsured vehicle. Dobbs had a personal automobile insurance policy with defendant Auto-Owners Insurance Company. This policy included an applicable business-use exclusion. We granted leave to determine whether the no-fault act's residual liability coverage requirement voids this business-use exclusion under these circumstances. We conclude that the no-fault act does not require residual liability coverage for an insured's operation of a vehicle that he does not own or has not registered and that is unambiguously excluded from the insured's insurance. We accordingly affirm the Court of Appeals decision.
While driving a truck owned by his employer, defendant Henry Dobbs struck a motorcycle, killing the driver, Richard Husted, Jr. Unknown to Dobbs, the truck he was driving in the course of his employment was uninsured. Richard Husted's estate brought a wrongful death suit against defendant Dobbs. 1 The estate's attorney discovered that Dobbs had a personal automobile insurance policy through defendant Auto-Owners Insurance Company. The policy contained the following exclusion from coverage:
(b) Coverage does not apply:
* * * * * *
(3) to any automobile not of the private passenger type while used in a business or occupation of the named insured, spouse or relative, or to any private passenger automobile used in such business or occupation if operated by a person other than the named insured or spouse or the chauffeur or servant of such named insured or spouse unless the named insured or spouse is present in such automobile....
Auto-Owners determined that this business-use exclusion applied and refused to provide coverage or a defense for Dobbs.
Evidently relying on assurances that his employer would provide for his defense, and claiming that he could not afford an attorney, Dobbs did not appear. The plaintiff obtained a default judgment in the wrongful death action in the amount of $1,255,000.
Dobbs then brought suit seeking coverage from Auto-Owners. He alleged that the insurer breached its duty to defend him and acted in bad faith in refusing to settle the claim of the estate for the policy limits of $50,000. Both Dobbs and Auto-Owners filed motions for summary disposition. Dobbs argued that the policy exclusion was ambiguous and should thus be construed against the insurer. Dobbs also argued that the public policy underlying the no-fault act required Auto-Owners to provide portable residual liability coverage where its insured had an accident while driving another's uninsured vehicle. Auto-Owners argued that the exclusionary clause was enforceable and that it was not against public policy.
The circuit court, finding the policy exclusion unambiguous and that Dobbs had no reasonable expectation of coverage, determined that the exclusion applied and granted summary disposition to Auto-Owners. It did not specifically mention Dobbs' public policy argument. The Court of Appeals affirmed, upholding the circuit court's determination that the exclusionary clause was unambiguous and applied to deny coverage. Unpublished opinion per curiam, issued May 27, 1992 (Docket No. 134674). Regarding the public policy argument, the Court of Appeals concluded that the issue was not properly preserved for appellate review because it was not raised in Dobbs' original motion for summary disposition and was not ruled on by the circuit court. 2 This Court denied leave to appeal. 442 Mich. 855, 498 N.W.2d 740 (1993).
Plaintiff Marcia Husted, personal representative of the estate of the decedent, Richard Husted, then brought the present suit, filing a writ of garnishment against Auto-Owners. Both parties moved for summary disposition. The circuit court granted summary disposition to Auto-Owners, holding that the Michigan no-fault act does not require Auto-Owners to provide portable residual liability coverage that travels with the insured when driving his employer's uninsured vehicle. The Court of Appeals affirmed, holding that the unambiguous policy exclusion did not violate the no-fault act because portable liability coverage is optional, rather than mandatory, under the act. 213 Mich.App. 547, 540 N.W.2d 743 (1995). The Court of Appeals also held that the garnishment claim was not barred under the doctrines of res judicata and collateral estoppel.
This Court, after first denying leave, 3 granted Dobbs' motion for reconsideration. Retaining jurisdiction, we remanded to the Kalamazoo Circuit Court for additional fact finding regarding whether Dobbs knew or had reason to know that the truck was uninsured. 455 Mich. 862, 567 N.W.2d 251 (1997). The circuit court found that Dobbs did not know, nor did he have reason to know, that the truck was uninsured. This Court then granted leave to appeal, limited to the issue whether the business-use exclusion is valid under the no-fault act where an employee is driving his employer's uninsured vehicle. 457 Mich. 852, 577 N.W.2d 693 (1998).
We begin by considering the policy exclusion itself. It is a business-use exclusion that states that coverage does not apply to "any automobile not of the passenger type while used in a business or occupation of the named insured...." In Dobbs' action against Auto-Owners, the Court of Appeals found this exclusion unambiguous and applicable to the accident at issue because Dobbs was driving his employer's truck in the course of his work when the accident occurred. In the present appeal, no one challenges the conclusions that this exclusion is unambiguous and applicable to the circumstances of the accident.
Further, the essential insurance act, M.C.L. § 500.2101 et seq.; MSA 24.12101 et seq., specifically permits insurers to limit insurance coverage on the basis of business use. MCL 500.2118(2)(f); MSA 24.12118(2)(f) states:
(2) The underwriting rules which an insurer may establish for automobile insurance shall be based only on the following:
* * * * * *
(f) Use of a vehicle insured or to be insured for transportation of passengers for hire, for rental purposes, or for commercial purposes.
Thus, in this provision, the Legislature specifically permits insurance companies, in the course of underwriting, to base an exclusion from coverage on business use.
In essence then, we are dealing with an insurance policy exclusion that is valid, unambiguous, and applicable to the circumstances of the accident at issue. Yet raised by plaintiff is a statutory construction argument to the effect that the no-fault act's residual liability coverage requirement voids this otherwise legitimate exclusion.
Plaintiff contends, and the dissent concludes, that when several provisions of the no-fault act are read together, they require portable residual liability coverage, i.e., residual liability insurance to cover an insured's operation of any vehicle, even one that the insured's policy specifically excludes from coverage.
Michigan's no-fault system retains tort liability under certain circumstances. MCL 500.3135(1); MSA 24.13135(1) describes this residual tort liability:
A person remains subject to tort liability for noneconomic loss caused by his or her ownership, maintenance, or use of a motor vehicle only if the injured person has suffered death, serious impairment of body function, or permanent serious disfigurement.
MCL 500.3101(1); MSA 24.13101(1), which sets out the requirement for insurance to cover such residual liability, provides in pertinent part:
The owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance, property protection insurance, and residual liability insurance.
MCL 500.3131(1); MSA 24.13131(1) describes residual liability coverage. It provides:
Residual liability insurance shall cover bodily injury and property damage which occurs within the United States, its territories and possessions, or in Canada. This insurance shall afford coverage equivalent to that required as evidence of automobile liability insurance under the financial responsibility laws of the place in which the injury or damage occurs. In this state this insurance shall afford coverage for automobile liability retained by section 3135.
MCL 500.3009(1); MSA 24.13009(1), which § 3131(2) incorporates into the no-fault act, describes the minimum limits of an automobile policy. It provides:
An automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for property damage, bodily injury, or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall not be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless the liability coverage is subject to a limit, exclusive of interest and costs, of not less than $20,000.00 because of bodily injury to or death of 1 person in any 1...
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