In this 2-1 unpublished per curiam opinion, the Court of Appeals affirmed the trial court’s denial of Defendant U-Haul Company of Michigan’s (“U-Haul”) motion for summary disposition regarding its liability under MCL 257.401. The Court affirmed the trial court’s denial of summary disposition because it found that MCL 257.401 was not limited to negligent entrustment cases and it created a duty between a short-term lessor and the public for the purposes of negligence.
Martel Robertson ("Robertson") was involved in a motor vehicle accident with a vehicle owned by U-Haul and driven by Defendant Ladarius Johnson (“Johnson”). Robertson died because of the accident and his estate brought an action against Johnson and U-Haul. The vehicle driven by Johnson had been rented from U-Haul two week earlier by Robert Smith (“Smith”) at the request of Johnson. Smith granted Johnson complete control of the vehicle and had no further communication with U-Haul. Viewing the record in a light most favorable to Plaintiff, the Court found that Johnson had repeatedly extended the rental agreement without Smith’s knowledge. In a light most favorable to Plaintiff, Smith was unaware of any extended contract at the time of the accident and believed the vehicle had been returned to U-Haul. At trial, U-Haul moved for summary disposition arguing that under the circumstances it could only be held liable for negligent entrustment of the vehicle and Plaintiff failed to argue negligent entrustment. The trial court denied summary disposition and U-Haul appealed.
The Court of Appeals upheld the trial court’s denial of summary disposition explaining that MCL 257.401 was not applicable to only negligent entrustment and created a duty to Robertson for the purposes of negligence. The Court explained that under MCL 257.401(1) a short-term lessor (a lessor for fewer than 30 days) is liable for injuries caused by the negligent operation of the motor vehicle that it leased. The Court then explained that under MCL 257.401(3) liability was limited to $20,000-$40,000; however, it could be greater if the “lessor, or his or her agent, was negligent in leasing the motor vehicle.” U-Haul contended that the italicized language was synonymous with common law negligent entrustment. The Court explained that Plaintiff disavowed common-law negligent entrustment and asserted liability under MCL 257.401(3). The Court explained that under MCL 257.401(3) a lessor was liable for the negligent acts of his or her lessee. Negligence in leasing a vehicle is only relevant to the limitation of damages.
“More importantly, plaintiff has expressly disavowed reliance on a common-law negligent entrustment theory and instead asserts that liability arises under MCL 257.401(3). The plain language of MCL 257.401(3) provides that a short-term lessor is liable for “an injury caused by the negligent operation of the leased motor vehicle only if the injury occurred while the leased motor vehicle was being operated by an authorized driver,” and it provides that there are no monetary limitations on that liability if “the lessor, or his or her agent, was negligent in the leasing of the motor vehicle.” MCL 257.401(3). Nothing in the statutory language limits U-Haul’s liability in leasing solely to the common-law negligent entrustment theory, which only imposes a duty on the owner if the owner knows or should know that the person being entrusted with a chattel is incompetent. Therefore, we may not read such a limitation into the statute.”
The Court then found that U-Haul owed a duty to Robertson, for purposes of negligence, because MCL 257.401 imposed such a duty. The Court explained that a statute can impose a duty of care when the purpose of the statute is to (1) prevent the type of injury and harm that was actually suffered and (2) whether Plaintiff was within the class of persons which the statute was designed to protect. The Court first explained that MCL 257.401 was designed to set forth the circumstances where a short-term lessor would be liable for negligence and to lessen the losses to which lessors were being subjected when they had no control over the vehicle after it was leased. The Court concluded that the purpose of the statute was to prevent the loss of life caused by negligent operation of a motor-vehicle leased on a short-term basis. Second, the Court concluded that the statute was designed to protect the general public from harm and Robertson was a member of the general public.
“Thus, a purpose of the statute is to prevent the loss of life caused by negligent operation of a motor-vehicle leased on a short-term basis, which is the exact type of harm that occurred in this case. Furthermore, the statute was designed to protect the general public from the risk of harm caused by the negligent leasing of a motor-vehicle; therefore, plaintiff’s decedent is within the class of individuals the statute is designed to protect. As a result, there is a statutory basis for imposing a duty on U-Haul in this case.”
Dissent by Judge O’Brien:
Judge O’Brien dissented and argued that Plaintiff was not asserting a claim under MCL 257.401(3) because Plaintiff had said in its brief, “Ms. Robertson is not contending that MCL 257.401(3) creates a cause of action against U-Haul for the negligence of its agents committed during the [course] of a rental agreement.” Judge O’Brien contended that Plaintiff was asserting a claim for ordinary negligence. Judge O’Brien then read MCL 257.401(3) to create a cause of action only when the short-term lessor was negligent in leasing the vehicle. Having found no statutory duty under MCL 257.401, Judge O’Brien then found that there was no duty placed upon U-Haul by either the contract nor the common-law. Judge O’Brien thus would have reversed the trial court.