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Alghali, et al. v. Hanover Ins. Co. (COA – UNP 7/9/2020; RB #4110)

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Michigan Court of Appeals; Docket # 343359; Unpublished
Judges Gleicher, Sawyer, and Meter; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING:
Exception for Employer Provided Vehicles [§3114(3)]

TOPICAL INDEXING:
Not Applicable


SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order in which it ruled that defendant ACE American Insurance Company was the insurer of highest priority.  The Court of Appeals held (1) that the exception to the general rules of priority contained in MCL 500.3114(3) applied in situations where a self-employed independent contractor is injured while operating an employer-furnished vehicle, and (2) that a policy exclusion that purported to exclude payment of PIP benefits “[t]o anyone entitled to Michigan no-fault benefits as a Named Insured [or as a ‘family member] under another policy[,]” was unenforceable because it conflicted with the statutory scheme of the no-fault act.

Beatrice Alghali and Hamid Alghali were injured in a motor vehicle collision while occupying a Cadillac that she obtained through her work as an independent contractor for Mary Kay.  The circumstances surrounding Beatrice’s obtainment of the vehicle are as follows:

Beatrice obtained the vehicle through the “Mary Kay Career Car Program.” Because she met certain sales requirements, she earned the option to lease a Cadillac, which she elected to do. The Cadillac was leased from Donlen Trust and purchased from Les Stanford Chevrolet. The certificate of title listed both Donlen Trust and Beatrice as the owners. Mary Kay obtained insurance on the Cadillac through ACE. Mary Kay paid 80% of the premiums and Beatrice paid 20% of the premiums from her commissions. The ACE policy listed only Mary Kay as the “Named Insured.”

Furthermore, the ACE policy included an endorsement which “provided for the payment of personal protection insurance (PIP) benefits to ‘insureds,’ but excluded the payment of PIP benefits ‘[t]o anyone entitled to Michigan no-fault benefits as a Named Insured under another policy[,] and ‘[t]o anyone entitled to Michigan no-fault benefits as a ‘family member’ under another policy.” At the time of the subject motor vehicle collision, Hamid Alghali owned a Ford Explorer that was insured by Citizens Insurance Company of America.  Ultimately, a priority dispute arose between ACE and Citizens, and in Citizens’ subsequent action for declaratory relief, the trial court granted ACE’s motion for summary disposition on the basis of the aforementioned endorsement.

The Court of Appeals reversed the trial court’s summary disposition order in favor of ACE, holding firstly that ACE was the highest-priority insurer pursuant to MCL 500.3114(3).  Although Beatrice was an independent contractor, the Court determined that she was also self-employed, and thus, in light of the Court of Appeals’ decision in Besic v. Citizens Ins. Co. of the Midwest, 290 Mich. App, 19 (2010), the employer provided vehicle exception to the general rules of priority still applied.

In Celina, 452 Mich at 85-86, the Court held that MCL 500.3114(3) applies when an injured person is self-employed and operating an insured vehicle. In that case, the injured person was operating a vehicle that he owned. Id. at 87. The injured person was the self-employed owner of a sole proprietorship. Id. The Court concluded that it was most consistent with the purposes of the no-fault act to apply MCL 500.3114(3) in the case of injuries to a self-employed person, stating that “[t]he cases interpreting that section have given it a broad reading designed to allocate the cost of injuries resulting from use of business vehicles to the business involved through the premiums it pays for insurance.” Id. at 89. In Besic, 290 Mich App at 32, this Court similarly concluded that MCL 500.3114(3) applied to the situation of an injured person who owned the vehicle involved and who worked as a self-employed independent contractor.

In this case, there is no dispute that Beatrice was an independent contractor and owned the Cadillac involved in the accident. The question, however, is whether she was self-employed such that the “employer-furnished vehicle” provision applies. Citizens argues that Celina and Besic are controlling because Beatrice was a self-employed independent contractor for Mary Kay. We agree.

In this case, there is no dispute that Beatrice was an independent contractor, which would preclude the application of MCL 500.3114(3) unless she was also self-employed. Under Besic, it appears that there are no qualifications to being self-employed. The only distinguishing fact between this case and Besic is that the plaintiff in Besic was the sole owner of Besic Express, although that fact does not seem to be of any consequence. Thus, Beatrice is considered a self-employed independent contractor.

The Court of Appeals next held that the endorsement in the ACE policy was unenforceable because it conflicted with the statutory scheme of the no-fault act.  Specifically, the Court held that the endorsement “contravene[d] the legislative intent of MCL 500.3114 and MCL 500.3115,” and that, in light of the Court’s decision in Corwin v. DaimlerChrysler Ins. Co., 296 Mich. App. 242 (2012), the endorsement was therefore unenforceable.

Consistent with Corwin, we determine that the exclusionary endorsement in the ACE policy is void because it contravenes the legislative intent of MCL 500.3114 and MCL 500.3115 by enabling ACE to avoid primary liability for PIP benefits that are payable to injured people that ACE personally insures, i.e., plaintiffs. Beatrice is the owner of the Cadillac and purchased no-fault insurance from ACE because a portion of the insurance premiums were deducted from her commissions. Thus, ACE provided no-fault insurance to plaintiffs and was their personal insurer. See Corwin, 296 Mich App at 262-263. However, under the terms of the policy, ACE avoids primary liability under MCL 500.3114 whenever plaintiffs are a named insured in another no-fault policy in their household.

Unlike Corwin, however, we need not reform the ACE policy. “[W]hen reasonably possible, this Court is obligated to construe insurance contracts that conflict with the no-fault act and, thus, violate public policy, in a manner that renders them compatible with the existing public policy as reflected in the no-fault act.” Id. at 257 (quotation marks and citation omitted). As discussed above, Beatrice was a self-employed independent contractor who was injured while occupying an employer-furnished vehicle. Interpreted in light of the application of MCL 500.3114(3) and the void exclusionary endorsement, ACE, as the insurer of the employer-furnished vehicle, is the highest priority insurer. Accordingly, we remand for entry of judgment in favor of Citizens.


Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit SinasDramis.com.

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