Liberty Mutual Ins. v. Michigan Catastrophic Claims Ass'n

Decision Date26 October 2001
Docket Number220168
Citation638 N.W.2d 155,248 Mich. App. 35
CourtCourt of Appeal of Michigan — District of US

Before: Neff, P.J., and Fitzgerald and Markey, JJ.


Plaintiff-counterdefendant Liberty Mutual Insurance Company appeals by right the trial court's order granting defendant-counterplaintiff Michigan Catastrophic Claims Association's (MCCA) motion for summary disposition under MCR 2.116(C)(10). The issue before this Court is whether the MCCA is required to accept plaintiff's post-loss premium payment and reimburse plaintiff for a loss sustained under personal protection insurance coverage in excess of $250,000 pursuant to MCL 500.3104(2) of the no-fault act. We conclude that the MCCA is not required to reimburse plaintiff and affirm the trial court's order granting summary disposition in favor of the MCCA.


The parties do not dispute the facts in this case. In March 1992, plaintiff issued a California automobile insurance policy to California residents Larry and Elaine DeGrave to insure their two vehicles registered in California, including a 1980 Datsun. In July 1992, the DeGraves drove from California to Michigan. They arrived in Michigan on July 17 and stayed for over thirty days without registering their vehicle in Michigan or acquiring Michigan no-fault insurance, contrary to MCL 500.3102(1), which requires nonresidents operating cars in Michigan for longer than thirty days to maintain security for the payment of Michigan no-fault benefits. On September 14, 1992, the DeGraves son, Eric, was driving the Datsun when he hit Michael Lanaville, an uninsured motorcyclist, rendering Lanaville a paraplegic. Since the accident, plaintiff has paid Lanaville's personal injury protection (PIP) benefits, which have exceeded $250,000.

In September 1996, plaintiff sued the DeGraves to reform their California policy into a Michigan no-fault policy that provided security for payment of benefits as required by MCL 500.3101(1),1 retroactively effective to August 1992 (shortly after the DeGraves' thirty days of coverage in Michigan under their California policy ended and before the accident). A consent judgment was entered on August 1, 1997, in which plaintiff and the DeGraves agreed that plaintiff would reissue their California policy as a Michigan no-fault policy providing six months of coverage from August 1992 until March 1993, the expiration date of the original California policy. In November 1997, more than five years after the accident in this case, plaintiff tendered a premium payment as required by MCL 500.3104 to the MCCA to cover the DeGraves' two cars under their newly reformed insurance policy. Plaintiff then asked the MCCA for reimbursement of PIP benefits exceeding $250,000 owed to Lanaville under the policy. The MCCA rejected the proffered premium payment, stating that the reformed policy did not obligate the MCCA to indemnify plaintiff under MCL 500.3104. The MCCA stated that any PIP benefits that plaintiff paid under the policy were paid pursuant to MCL 500.3163, which obligated plaintiff to pay PIP benefits under policies issued outside Michigan under circumstances such as those involved in this case.

Plaintiff subsequently commenced this lawsuit seeking a declaration that the MCCA was obligated under MCL 500.3104 to reimburse plaintiff for payment of PIP benefits in excess of $250,000 to Lanaville. The MCCA counterclaimed, declaring that plaintiff is not entitled to reimbursement under MCL 500.3104. On May 5, 1999, the trial court granted the MCCA's motion for summary disposition after concluding that the MCCA did not have to indemnify plaintiff under the instant circumstances. Relying on In re Certified Question: Preferred Risk Mutual Ins Co v Michigan Catastrophic Claims Ass'n, 433 Mich 710; 449 NW2d 660 (1989), and Travelers Ins Co v Michigan Catastrophic Claims Ass'n, unpublished per curiam opinion of the Court of Appeals, issued June 13, 1996 (Docket No. 156716), the trial court concluded that the MCCA is not required to reimburse under policies issued to nonresidents that are not in compliance with the Michigan law. The court concluded that the DeGraves were California residents and that the insurance policy in effect at the time of the accident was a California policy. The court opined that notwithstanding the reformation of the policy, to rule in favor of plaintiff would be a signal to other members who pay MCCA premiums that if the situation arose where payment was based on an out-of-state policy, the member could merely reform the policy and predate the dates of coverage so the policy could then comply with MCL 500.3102(1). The court concluded that to so allow would undermine the purpose and intent of the statute. Plaintiff now appeals by right.


Plaintiff asserts that the trial court erred in granting summary disposition to the MCCA because the reformation of the DeGraves' California insurance policy into a Michigan policy complying with Michigan no-fault law required the MCCA to reimburse plaintiff for payments made that exceeded $250,000. We disagree. A trial court's grant or denial of summary disposition under MCR 2.116(C)(10) is reviewed de novo on appeal. Spiek v Dep't of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). Statutory interpretation is a question of law that is also reviewed de novo. Consumers Power Co v Dep't of Treasury, 235 Mich App 380, 384; 597 NW2d 274 (1999).

Owners of motor vehicles required to be registered in Michigan must maintain security for payment of no-fault benefits pursuant to MCL 500.3101(1). In addition, MCL 500.3102(1) provides that nonresident owners whose automobiles are not registered in Michigan but are driven or permitted to be driven for more than thirty days in Michigan must also maintain security for payment of no-fault benefits. Insurers authorized to transact PIP insurance in Michigan (which includes plaintiff) are required to pay Michigan PIP benefits to their out-of-state residents in the event of a motor vehicle accident occurring in Michigan pursuant to MCL 500.3163(1), which provides:

An insurer authorized to transact automobile liability insurance and personal and property protection insurance in this state shall file and maintain a written certification that any accidental bodily injury or property damage occurring in this state arising from the ownership, operation, maintenance or use of a motor vehicle as a motor vehicle by an out-of-state resident who is insured under its automobile liability insurance policies, shall be subject to the personal and property protection insurance system as set forth in this act.

The MCCA was created by MCL 500.3104 to indemnify member insurers for single claims exceeding $250,000 made on Michigan policies where a premium is assessed for the claim and security is maintained by the insured. MCL 500.3104 provides in relevant part:

(1) An unincorporated, nonprofit association to be known as the catastrophic claims association, hereinafter referred to as the association, is created. Each insurer engaged in writing insurance coverages which provide the security required by section 3101(1) within this state, as a condition of its authority to transact insurance in this state, shall be a member of the association and shall be bound by the plan of operation of the association. . . .

(2) The association shall provide and each member shall accept indemnification for 100% of the amount of ultimate loss sustained under personal protection insurance coverages in excess of $250,000 in each loss occurrence. . . .

However, not every insurer who pays PIP benefits in excess of $250,000 under the no-fault act is entitled to indemnification. Preferred Risk, supra at 725. The MCCA's obligation to indemnify is limited to those insurers who provide the coverage required by MCL 500.3101(1). Preferred Risk, supra at 714-715.

Premium payments required for membership in the MCCA are determined by MCL 500.3104(7)(d), which provides in relevant part:

Each member shall be charged an amount equal to that member's total earned car years of insurance providing the security required by section 3101(1) or 3103(1), or both, written in this state during the period to which the premium applies, multiplied by the average premium per car. The average premium per car shall be the total premium calculated divided by the total earned car years of insurance providing the security required by section 3101(1) or 3103(1) written in this state of all members during the period to which the premium applies. . . .

Pursuant to sections 3101(1) and 3102(1), the DeGraves were required to obtain security for payment of Michigan no-fault benefits after they had been in Michigan for over thirty days, i.e., by August 16, 1992, but they failed to do so. Further, plaintiff admittedly did not pay a premium to the MCCA for the DeGraves' policy until October 17, 1997, more than five years after the DeGraves were required to comply with sections 3101(1) and 3102(1).

In holding that plaintiff was not entitled to reimbursement from the MCCA, the trial court and the parties relied on two Michigan cases, Preferred Risk, supra, and Travelers Ins, supra, which indicate that an insured's failure to obtain security and an insurer's failure to pay the premium as required by Michigan no-fault law prevent an insurer from being indemnified by the MCCA. In Preferred Risk, supra at 727-728, our Supreme Court stated that the MCCA can refuse to indemnify claims paid under MCL 500.3163. The plaintiff insurer in Preferred Risk paid no-fault benefits on an Illinois insurance policy exceeding $250,000 to an Illinois resident who was injured in an automobile accident in Michigan. A Michigan resident owned and insured the car involved. Id. at 716. The parties agreed that the...

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