Exception for Employer Provided Vehicles [§3114(3)]
In this majority published per curiam decision (Riordan, concurring), the Court of Appeals reversed the trial court’s priority determination, in which the trial court determined that defendant Progressive Insurance Company (Progressive) was the insurer of highest priority. Plaintiff, James Duckworth, was driving a vehicle owned by Speed Express, LLC (Speed Express)—a company Duckworth had contracted with to deliver goods across the country—when he was injured in a crash. The trial court determined Duckworth was an independent contractor, not an employee, of Speed Express, and that Progressive, not Speed Express’s no-fault insurer, Cherokee Insurance Company (Cherokee), was the insurer of highest priority. The Court of Appeals reversed the trial court’s determination, and held that, under the economic reality test, Duckworth was an employee of Speed Express, LLC at the time of the collision, and that Cherokee was thus the insurer of highest priority under MCL 500.3114(3).
Duckworth was injured in a motor vehicle crash while driving a vehicle owned by Speed Express, a company for which Duckworth contracted to deliver goods throughout the country. After the crash, Duckworth sought no-fault PIP benefits from Speed Express’s no-fault insurer, Cherokee, which denied Duckworth’s claim, arguing that Duckworth’s personal no-fault insurer, Progressive, was the insurer of highest priority. In Duckworth’s resultant first-party action, Cherokee argued that it was not the insurer of highest priority under MCL 500.3114(3) because Duckworth was an independent contractor, as opposed to an employee of Speed Express. The trial court agreed, ultimately ruling that Duckworth was an independent contractor under the economic reality test, and that MCL 500.3114(3) therefore did not apply, and that Progressive was thus the insurer of highest priority.
The Court of Appeals reversed the trial court’s priority determination, and held that, under the economic reality test, Duckworth was, in fact, an employee of Speed Express. As for the factors to be considered in conducting the economic reality test, the Court held that both the four factors laid out in Parham v. Preferred Risk Mut. Ins. Co., 124 Mich. App. 618 (1983) and Adanalic v. Harco Nat. Ins. Co., 309 Mich. App. 173 (2015), as well as the eight factors laid out in McKissic v. Bodine, 42, Mich. App. 203 (1972) ought to be considered. The four factors laid out in Parham and Adanalic are: “(a) control of the worker’s duties, (b) payment of wages, (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.” The eight factors laid out in McKissic are:
First, what liability, if any, does the employer incur in the event of the termination of the relationship at will?
Second, is the work being performed an integral part of the employer’s business which contributes to the accomplishment of a common objective?
Third, is the position or job of such a nature that the employee primarily depends upon the emolument for payment of his living expenses?
Fourth, does the employee furnish his own equipment and materials?
Fifth, does the individual seeking employment hold himself out to the public as one ready and able to perform tasks of a given nature?
Sixth, is the work or the undertaking in question customarily performed by an individual as an independent contractor?
Seventh, control, although abandoned as an exclusive criterion upon which the relationship can be determined, is a factor to be considered along with payment of wages, maintenance of discipline and the right to engage or discharge employees.
Eighth, weight should be given to those factors which will most favorably effectuate the objectives of the statute.
The Court of Appeals analyzed each of these factors, and determined (1) that Speed Express had significant control over Duckworth’s duties; (2) that Duckworth was paid biweekly, and based on mileage, which is indicative of an employee-employer relationship; (3) that the contract between Speed Express and Duckworth indicated an at-will employee relationship that could be terminated for any reason, and that Speed Express retained the right to discipline Duckworth and subject Duckworth to random drug tests; (4) that Duckworth’s work as a truck driver was integral to Speed Express’s business; (5) that Speed Express was Duckworth’s sole source of income; and (6) that Duckworth did not “‘furnish his own equipment and materials,’” or “hold himself out to the public as being available to drive trucks.” Furthermore, the Court held that “under the eighth McKissic factor, the objectives of MCL 500.3114(3) would be effectuated by ruling that plaintiff was an employee, thus making Cherokee first in priority.”
When all of the relevant factors are considered, the economic reality test clearly shows that an employee-employer relationship existed between plaintiff and Speed Express for purposes of the no-fault act. Accordingly, the trial court erred by determining that plaintiff was not an employee under MCL 500.3114(3). Because that subsection applies, Cherokee is first in priority to pay PIP benefits to plaintiff.