United Serv. Auto. Ass'n v. Mich. Catastrophic Claims Ass'n.
| Decision Date | 11 May 2011 |
| Docket Number | Docket No. 289579. |
| Parties | UNITED SERVICES AUTOMOBILE ASSOCIATIONv.MICHIGAN CATASTROPHIC CLAIMS ASSOCIATION. |
| Court | Court of Appeal of Michigan — District of US |
OPINION TEXT STARTS HERE
Garan Lucow Miller, P.C., Detroit (by Caryn A. Gordon), for plaintiff.Dykema Gossett PLLC, Ann Arbor (by Joseph K. Erhardt and K.J. Miller) for defendant.Before: SHAPIRO, P.J., and JANSEN and DONOFRIO, JJ.DONOFRIO, J.
Plaintiff appeals as of right an order of the circuit court denying its motion for summary disposition and granting summary disposition to defendant. Because the trial court properly concluded, albeit for the wrong reason, that defendant was not required to indemnify plaintiff for personal protection insurance (PIP) benefits over the statutory threshold that plaintiff paid on behalf of its insured, Raoul Farhat, we affirm.
Raoul Farhat, M.D., is a physician who had been an officer in the United States Army and affiliated with the Michigan National Guard. Farhat said that he was licensed to practice medicine in Michigan, Florida, and California. Farhat was in an automobile accident on August 9, 1996 in Florida. Farhat explained that he was driving to work at an emergency room in a Florida hospital in a convertible Chrysler LeBaron when the accident occurred. Farhat stated that he had lived with his ex-wife in Florida from some time in 1995 until the accident, because they were trying to reunite in Florida after their 1993 Michigan divorce. Farhat explained that he owned a residence in Michigan through his mother's trust and that he grew up in Michigan and lived with his wife in Michigan before their divorce.
In December 1995, Farhat insured the LeBaron through his Michigan no-fault automobile insurance policy with plaintiff. According to plaintiff, Farhat had five vehicles insured by plaintiff, but the underwriting department mistakenly omitted the LeBaron from his policy. After the accident, plaintiff retroactively reformed Farhat's insurance policy to include coverage on the LeBaron. After Farhat won a judgment for PIP benefits against plaintiff in Washtenaw Circuit Court, plaintiff sought to recover from defendant the amount in excess of $250,000 that it paid on behalf of Farhat.
The instant case involves plaintiff's effort to recover those benefits. It is plaintiff's position that Farhat properly insured the LeBaron under Michigan law because Farhat intended to drive the vehicle in Michigan and that Farhat had family and property in Michigan, was licensed to practice medicine in Michigan, and traveled to Michigan for obligations to the military, so defendant was required to reimburse plaintiff for benefits that it paid to Farhat. It is defendant's position that it is permissible for it to review coverage decisions and that Farhat should not have been insured under a Michigan no-fault policy written by plaintiff for an accident that occurred in Florida in a vehicle that was both purchased and registered in Florida.
In the trial court, at the hearing on plaintiff's motion for summary disposition, plaintiff stated that it was a member of defendant association and that defendant was required by statute, MCL 500.3104(2), to reimburse plaintiff for benefits that it paid to its insured persons. Plaintiff further argued that the statute does not mention any mechanism for defendant to refuse to reimburse members if defendant determines that a policy was not mandated. Plaintiff represented that it paid $896,106.60 in no-fault benefits to or on behalf of Farhat and that it was entitled to reimbursement from defendant in the amount of $646,106.60. Defendant responded at the hearing that it was not required to reimburse plaintiff because plaintiff failed to make a premium payment to defendant for the vehicle that was involved in the accident. Defendant also argued that the statute provides that it can only reimburse member insurers for losses associated with Michigan vehicles that are registered in Michigan.
The trial court denied plaintiff's motion for summary disposition and granted summary disposition to defendant. The trial court stated that it was following the holding of Liberty Mut. Ins. Co. v. Mich. Catastrophic Claims Ass'n, 248 Mich.App. 35, 638 N.W.2d 155 (2001). The trial court reasoned that Liberty Mut. indicated that if an insurer did not make a premium payment to defendant on a vehicle during the coverage period before it was in an accident, the insurer could not reform the insurance contract to include the vehicle after the accident in order to be reimbursed by defendant.1 The trial court did not address defendant's argument that it can only reimburse for Michigan vehicles that are registered in Michigan. Plaintiff now appeals as of right.
A trial court's determination of a motion for summary disposition is reviewed de novo. Ormsby v. Capital Welding, Inc., 471 Mich. 45, 52, 684 N.W.2d 320 (2004). When reviewing a motion brought under MCR 2.116(C)(10), the court considers the affidavits, depositions, pleadings, admissions, and other evidence submitted by the parties in the light most favorable to the nonmoving party. Rose v. Nat'l Auction Group, 466 Mich. 453, 461, 646 N.W.2d 455 (2002). Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law. Id.
Defendant association was created by the Legislature in 1978 to respond to concerns that Michigan's no-fault law provision for unlimited PIP benefits placed too great a burden on insurers, particularly small insurers, paying “catastrophic” injury claims. In re Certified Question ( Preferred Risk Mut. Ins. Co. v. Mich. Catastrophic Claims Ass'n ), 433 Mich. 710, 714, 449 N.W.2d 660 (1989). MCL 500.3104(1) provides for the creation of the association and requires membership by specified insurers. Defendant's primary purpose is to indemnify member insurers for losses sustained as a result of the payment of PIP benefits beyond the “catastrophic” level, which is established according to a sliding scale depending on the date the policy in question was issued or renewed. MCL 500.3104(2); In re Certified Question, 433 Mich. at 714–715, 449 N.W.2d 660. Defendant “charges each of its members a premium for the coverage it provides, which is based on the number of car years of insurance the member writes in Michigan.” In re Certified Question, 433 Mich. at 716, 449 N.W.2d 660, citing MCL 500.3104(7)(d).
Our Supreme Court in In re Certified Question was faced with a very similar situation. The question certified was the following:
“Does the Motor Vehicle Personal and Property Protection Act, Mich. Comp Laws Ann §§ [500.3101 to 500.3179] ..., require the Michigan Catastrophic Claims Association to indemnify member insurers for losses paid in excess of $250,000 to insureds who are not residents of the State of Michigan but who were injured as a result of an automobile accident occurring in the State of Michigan?”
[ Id. at 713, 449 N.W.2d 660.]
Our Supreme Court held that MCL 500.3104(2) does not require defendant to indemnify its member insurers for losses paid to insureds who are not considered residents of this state. The Court stated that for purposes of the catastrophic claims provisions, “resident” referred to those insureds who actually live within this state and are required to purchase no-fault automobile insurance policies written in this state that provide the compulsory security requirements of MCL 500.3101(1), but also to certain insureds who do not live within this state but are nonetheless required to register, and thus insure, their vehicles in this state. Id. at 719–720, 723, 449 N.W.2d 660. Specifically, the Supreme Court held as follows:
[W]e conclude that [MCL 500.3104(2) ] requires indemnification only when the member insurer has paid benefits in excess of $250,000 under a policy which was written in this state to provide the security required by [MCL 500.3101(1) ] of the no-fault act for the “owner or registrant of a motor vehicle required to be registered in this state....” [Defendant], whose policy of restricting indemnification to “residents of this state” is the subject of this dispute, has acknowledged that for purposes of indemnification under [MCL 500.3104(2) ] it considers all owners or registrants of motor vehicles required to be registered here to be “resident[s] of the State for purposes of the Act,” regardless of whether they actually live within this state.10 With this acknowledgment in mind, we must conclude, in answering the question as certified, that [defendant] is required to indemnify member insurers only for losses paid to “residents” of this state.
The trial court in the instant case saw this action differently, resolving it on the basis of the issue whether defendant was required to indemnify plaintiff in light of the fact that plaintiff had reformed its insurance contract with Farhat after the accident. The trial court stated that it was granting summary disposition to defendant because it had to under Liberty Mut. Ins. Co., specifically relying on the following language of Liberty Mut. Ins. Co.:
We conclude that the clear language of the statute does not allow plaintiff to make a premium payment to cover a period from August 1992 through March 1993 five years after the accident and claim occurred and the covered period expired. To allow reformation of an insurance policy and allow the insurer to make a premium payment to [defendant] at the time of reformation, and not during the applicable period of coverage, would be an absurd interpretation of MCL 500.3104. If we were to accept plaintiff's argument, we would set a precedent by which an insurer could withhold premium payments for policyholders who moved to Michigan, then, upon a loss exceeding $250,000, the insurer could simply reform the contract, submit the previously due premium payments, and be...
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