N. Mut. Ins. Co. v. The Cincinnati Ins. Co.

• Decision Date: 07 September 2022
• Docket Number: 20-cv-11781
• Parties: Northern Mutual Insurance Company, Plaintiff, v. The Cincinnati Insurance Company, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

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Northern Mutual Insurance Company, Plaintiff, v. The Cincinnati Insurance Company, Defendant.

No. 20-cv-11781

United States District Court, E.D. Michigan, Southern Division

September 7, 2022

PATRICIA T. MORRIS MAG. JUDGE

OPINION AND ORDER DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [23]

JUDITH E. LEVY UNITED STATES DISTRICT JUDGE

This is a declaratory judgment action involving a priority dispute between insurance companies under the Michigan No-Fault Act Mich. Comp. Laws § 500.3101 et seq.^[1] Plaintiff Northern Mutual Insurance Company has paid personal injury protection (“PIP”) benefits to Jeremie Schultz an individual who was seriously injured in a motor vehicle accident, because Plaintiff is Schultz's personal automobile insurer. Plaintiff is suing Defendant The Cincinnati Insurance Company, the insurer of Devere Industrial, LLC (“Devere Industrial” or “Devere”), because Devere owned the vehicle Schultz was riding in at the time of the accident. Plaintiff's position is that Defendant is first in priority for PIP benefits under the employer-employee exception found in Mich. Comp. Laws § 500.3114(3) because Schultz was an employee of Devere. Defendant disagrees. It disputes that Schultz was an employee of Devere. Its position is that Plaintiff is first in priority for PIP benefits under Mich. Comp. Laws § 500.3114(1).

On September 1, 2021, Defendant filed a motion for summary judgment. (ECF No. 23.) The motion is fully briefed (ECF Nos. 29, 30), and the Court gave Defendant permission to submit supplemental filings. (ECF Nos. 32, 33, 35.) On January 20, 2022, the Court held a hearing by video conference and heard oral argument. For the reasons set forth below, Defendant's motion is DENIED.

I. Background

This case arises out of a motor vehicle accident that took place on highway M-117 on December 12, 2019. One of the vehicles involved in the accident (1) was being driven by Schultz's coworker Derek Orban,^[2](2) was owned by Devere, and (3) was insured by Defendant. (See ECF No. 1-1, PageID.16.) Schultz was a passenger in the vehicle and was seriously injured. (See id.)

Orban and Schultz are union millwrights who live in Alpena, Michigan. (See ECF No. 23-3, PageID.102; ECF No. 23-4, PageID.129; ECF No. 29-1, PageID.711; ECF No. 29-2, PageID.789.) In December 2019, they were working on a Devere project in Gwinn, Michigan, which is in the Upper Peninsula. (See ECF No. 1-1, PageID.16; ECF No. 23-3, PageID.102; ECF No. 29-2, PageID.789.) Plaintiff states in the complaint that Orban and Schultz “were working for and under the direction of Devere Industrial, LLC through an employee staffing agreement with Commercial Contracting North, LLC” (“CCN”). (ECF No. 1-1, PageID.17.) Plaintiff states that CCN “hired and provided employees, including Derek Orban and Jeremie Schultz, to Devere.” (Id.) According to Plaintiff, Devere “gave express consent for Derek Orban to use the vehicle [involved in the accident] in the course and scope of their employment.” (Id. at PageID.16.)

Plaintiff states that “as a result of the accident, Jeremie Schultz was significantly injured and has claimed and collected first-party personal protection benefits from [Plaintiff,] his own personal automobile insurer.” (Id.; see Id. at PageID.18.) Plaintiff brings this action because it believes that Defendant is obligated to cover Schultz's PIP benefits under the No-Fault Act.^[3] (See id. at PageID.17-19.) Plaintiff states that Defendant is first in priority for PIP benefits under the employer-employee exception found in Mich. Comp. Laws § 500.3114(3) because Schultz was an employee of Devere “based upon the economic reality test” and a passenger in a vehicle owned by Devere. (Id. at PageID.17; see id. at PageID.17-19.)

In the complaint, Plaintiff seeks declaratory and monetary relief that includes damages over $25,000, plus costs, interest, and “no-fault attorney fees.” (Id. at PageID.19.) Defendant indicates in the notice of removal that “Plaintiff seeks damages for substantial medical bills” and that Defendant “has been advised that the amount in dispute is in excess of $75,000.00.” (ECF No. 1, PageID.6.)

Defendant now seeks summary judgment. It argues that “[t]here is no legal basis for imposing upon [it] an obligation to pay PIP benefits” to Schultz because Schultz “was not an employee of [Defendant-]insured Devere.” (ECF No. 23, PageID.76.) Defendant argues that Schultz was either an employee of CCN, “a separately owned and insured business” (id. at PageID.76-77), or an independent contractor. (See id. at PageID.84, 86.) Defendant also argues that it is not “liable for any potential PIP benefits” because “even if it were determined that Mr. Schultz were an employee of Devere, he was not acting within the scope of his employment at the time of the accident.” (Id. at PageID.87-88.)

The “employee staffing agreement” between Devere and CCN that Plaintiff references in the complaint is discussed below. (ECF No. 1-1, PageID.17.) Also discussed below is the deposition testimony of Christopher Crittenden (the owner of Devere), Brock Johnson (the owner of CCN), and Darwin Stienke (Schultz's supervisor in Gwinn).

A. The Reciprocal Employee Staffing Master Agreement Between Devere and CCN

On May 23, 2017, a “Reciprocal Employee Staffing Master Agreement” was signed by the “Managing Member” of Devere- Christopher Crittenden-and the “Managing Member” of CCN-Brock Johnson. (ECF No. 23-6, PageID.198.) The Agreement states that its “Term . . . shall be one year from the date of execution. Upon expiration of the Term, the Agreement will automatically renew for one year unless canceled by either party in writing at least 30 days prior to the expiration of the Term.” (Id.)

Other relevant portions of the Agreement are as follows:

1. PARTIES AND SCOPE. The Parties hereto wish to enter an agreement allowing one another to provide temporary staffing services to each other from time to time for a limited duration. The party whose employees will be provided to the other shall hereinafter be referred to as the “Employer.” The Party to whom employees will be provided shall hereinafter be referred to as the “Staffed Party.”

2. EMPLOYER'S DUTIES AND RESPONSIBILITIES. Employer will: a) provide, upon request by Staffed Party in the form of Exhibit A, its employees (“Assigned Employees”) to perform certain construction labor, project management and/or plant maintenance work under Staffed Party's supervision; b) pay Assigned Employees' wages and provide them with the benefits that Employer offers to them; c) pay, withhold, and transmit payroll taxes; provide unemployment insurance and workers' compensation benefits; and handle unemployment and workers' compensation claims involving Assigned Employees; and d) [r]equire Assigned Employees to sign agreements (in the form of Exhibit B) acknowledging that they are not entitled to holidays, vacations, disability benefits, insurance, pensions, or retirement plans, or any other benefits offered or provided by Staffed Party.

3. STAFFED PARTY DUTIES AND RESPONSIBILITIES. Staffed Party will: a) properly supervise Assigned Employees performing its work and be responsible for its business operations, products, services, and intellectual property; b) properly supervise, control, and safeguard its premises, processes, or systems, and not entrust Assigned Employees with unattended premises, cash, checks, keys, credit cards, merchandise, confidential or trade secret information, negotiable instruments, or other valuables; c) provide Assigned Employees with a safe work site and provide appropriate information, training, and safety equipment with respect to any hazardous substances or conditions to which they may be exposed at the work site; and d) not change Assigned Employees' job duties without express prior written approval from Employer.

4. PAYMENT TERMS. Staffed Party will pay Employer for its performance at the rates set forth on Exhibit A and will also pay any additional costs or fees set forth in this Agreement. Employer will invoice Staffed Party for services provided under this Agreement on a monthly basis. Payment is due on receipt of invoice. Invoices will be supported by the pertinent time sheets or other agreed system for documenting time worked by the Assigned Employees. Staffed Party's authorized signature or other agreed method of approval of the work time submitted for Assigned Employees certifies that the documented hours are correct and authorizes Employer to bill Staffed Party for those hours. If a portion of any invoice is disputed, Staffed Party will pay the undisputed portion.

Assigned Employees, when so directed by Staffed Party and in furtherance of the work of the Assigned Employees, are hereby authorized to purchase construction materials on behalf of Employer for the use by and benefit of Staffed Party. Employer shall invoice Staffed Party for any purchased materials as set forth on Exhibit A.

Assigned Employees are presumed to be nonexempt from laws requiring premium pay for overtime, holiday work, or weekend work. Employer will charge Staffed Party special rates for premium work time only when an Assigned Employee's work on assignment to Staffed Party, viewed by itself, would legally require premium pay and Staffed Party has authorized, directed, or allowed the Assigned Employee to work such premium work time. Staffed Party's special billing rate for premium hours will be the same multiple of the regular billing rate as Employer is required to apply to the Assigned Employee's regular pay rate. (For example, when federal law requires 150% of pay for work exceeding 40 hours in a week, Staffed Party will be billed at 150% of the regular bill rate.)

In addition to the bill rates specified

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