MUHAMED BESIC V CITIZENS INSURANCE CO OF THE MIDWEST
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STATE OF MICHIGAN
COURT OF APPEALS
MUHAMED BESIC,
FOR PUBLICATION
September 14, 2010
9:05 a.m.
Plaintiff/CounterdefendantAppellee,
v
CITIZENS INSURANCE COMPANY OF THE
MIDWEST,
No. 291051
Wayne Circuit Court
LC No. 07-730094-NF
Defendant/Cross-DefendantAppellee,
and
CLEARWATER INSURANCE COMPANY,
Defendant/Counterplaintiff/CrossPlaintiff-Appellant,
and
LINCOLN GENERAL INSURANCE COMPANY,
Defendant/Cross-DefendantAppellee.
Before: MURRAY, P.J., and DONOFRIO and GLEICHER, JJ.
PER CURIAM.
The dispute before us concerns which of three insurance companies must shoulder
responsibility for payment of plaintiff Muhamed Besic’s first-party no-fault insurance benefits.
In a summary disposition ruling, the circuit court imposed liability for all of Besic’s first-party
benefits on defendant Clearwater Insurance Company (Clearwater), which issued plaintiff a
bobtail insurance policy. Clearwater appeals as of right, and we affirm.
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I. UNDERLYING FACTS & PROCEEDINGS
In January 2007, Besic, a Michigan resident, sustained personal injuries in an Ohio motor
vehicle accident. At the time of the accident, Besic drove a tractor and trailer rig, hauling freight
from Illinois to New York. Besic owned the tractor, registered and licensed the vehicle in
Michigan, and leased it to MGR Express, Inc. (MGR) pursuant to a “Contractor Operating
Agreement” (COA). The COA identified Besic Express, a corporation solely owned by Besic, as
the contractor and owner of the truck; Besic testified at his deposition that he owned the truck
personally. The COA contemplated that during the term of the lease, MGR would “assume all
responsibility and pay for all liability insurance” for the truck “while [Besic] is operating under
the terms of this Agreement,” and that Besic “has and reserves the right to contract
independently for Workers’ Compensation coverage, bobtail,[1] or physical damage insurance
required hereunder and for health and accident or other insurance . . . .”
MGR bought liability insurance for the truck from defendant Lincoln General Insurance
Company (Lincoln). Besic purchased bobtail insurance coverage from Clearwater. Defendant
Citizens Insurance Company of the Midwest (Citizens) insured Besic’s household vehicles.
In November 2007, Besic sued Citizens in the Wayne Circuit Court, seeking payment of
first-party no-fault benefits related to the injuries he sustained in the Ohio accident. Besic
subsequently amended his complaint to add Clearwater and Lincoln as defendants. In February
2008, Clearwater filed cross-claims against Citizens and Lincoln, requesting “reimbursement or
recoupment … for the entire amounts of monies paid” by Clearwater, and asserting that Citizens
and Lincoln shared “a higher order of priority to pay Michigan no-fault benefits.” The crossclaim also sought reformation of the Lincoln policy if the court determined that it “does not
include an express provision for Michigan no-fault coverage . . . .”
All parties filed motions for summary disposition. At a September 2008 hearing, the
circuit court expressed on the record its finding that the
Lincoln contract, MGR contract with Muhamed Besic doesn’t require him to
provide PIP coverage, and they provided liability only, so the Court will grant
Lincoln’s motion for Summary Disposition. . . .
And Clearwater’s argument under the exclusions of page two subsection
C, the Court finds that none of those apply. Clearwater’s motion for Summary
Disposition is denied.
In October 2008, the court entered an order granting summary disposition to Citizens and
Lincoln, denying summary disposition in favor of Clearwater, and granting Besic summary
1
“Generally, a ‘bobtail’ policy is a policy that insures the tractor and driver of a rig when it is
operated without cargo or a trailer.” Integral Ins Co v Maersk Container Service Co, Inc, 206
Mich App 325, 331; 520 NW2d 656 (1994).
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disposition as to Clearwater only. Besic’s claim against Clearwater settled,2 and in March 2009
the circuit court dismissed the action with prejudice.
II. SUMMARY DISPOSITION STANDARD OF REVIEW
Clearwater challenges the circuit court’s summary disposition rulings, which we review
de novo. Walsh v Taylor, 263 Mich App 618, 621; 689 NW2d 506 (2004). The circuit court did
not specify pursuant to what subrule of MCR 2.116(C) it found summary disposition appropriate,
but a review of the record reflects that the court considered documentation beyond the pleadings,
and thus made its summary disposition rulings under MCR 2.116(C)(10). Subrule (C)(10) tests a
claim’s factual support. “In reviewing a motion under . . . (C)(10), this Court considers the
pleadings, admissions, affidavits, and other relevant documentary evidence of record in the light
most favorable to the nonmoving party to determine whether any genuine issue of material fact
exists to warrant a trial.” Id.
III. COVERAGE OF BESIC’S FIRST-PARTY PERSONAL INJURY PROTECTION (PIP)
BENEFIT CLAIM UNDER CLEARWATER’S BOBTAIL POLICY
Clearwater initially submits that its bobtail policy of insurance plainly offered only
limited coverage that did not apply when Besic had an accident while under dispatch, the
situation in this case. Clearwater emphasizes that the bobtail policy endorsement with respect to
Michigan personal injury protection (PIP) coverage must be read in conjunction with the rest of
the policy, which excludes coverage when the insured suffers injury while under motor dispatch.
When reviewing an insurance policy dispute, an appellate court looks “to the language of the
insurance policy and interpret[s] the terms therein in accordance with Michigan’s wellestablished principles of contract construction.” Citizens Ins Co v Pro-Seal Service Group, Inc,
477 Mich 75, 82; 730 NW2d 682 (2007), quoting Henderson v State Farm Fire & Cas Co, 460
Mich 348, 353-354; 596 NW2d 190 (1999).
“First, an insurance contract must be enforced in accordance with its
terms. A court must not hold an insurance company liable for a risk that it did not
assume. Second, a court should not create ambiguity in an insurance policy
where the terms of the contract are clear and precise. Thus, the terms of a
contract must be enforced as written where there is no ambiguity.” [Citizens Ins
Co, 477 Mich at 82, quoting Henderson, 460 Mich at 354.]
In deciding whether an insured is entitled to insurance benefits, we employ a two-part
analysis. Heniser v Frankenmuth Mut Ins Co, 449 Mich 155, 172; 534 NW2d 502 (1995).
“First, we determine if the policy provides coverage to the insured.” Id. (internal quotation
omitted). “An insurer is free to define or limit the scope of coverage as long as the policy
2
The appellate brief prepared by Citizens represents that Clearwater paid Besic $175,000 in
settlement and continues to pay him personal injury protection (PIP) benefits. Besic has not filed
a brief on appeal.
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language fairly leads to only one reasonable interpretation and is not in contravention of public
policy.” Id. at 161. If the policy does supply coverage, “we then ascertain whether that coverage
is negated by an exclusion. It is the insured’s burden to establish that his claim falls within the
terms of the policy.” Id. at 172 (internal quotation omitted).
The Clearwater policy contains a “Certificate of Non-Trucking Automobile Liability
Insurance,” which states in relevant part, “No coverage is afforded when the described vehicle(s)
is (are): (1) Under motor carrier direction, control or dispatch.” The policy also incorporates an
endorsement entitled “Michigan Truckers—Insurance for Non-Trucking Use,” which reads:
For the covered “auto” described in this endorsement, LIABILITY
COVERAGE, Michigan Personal Injury and Property Protection coverages are
changed as follows:
A.
LIABILITY COVERAGE does not apply while the covered “auto”
is used in the business of anyone to whom it is leased or rented if the lessee has
liability insurance sufficient to pay for damages in accordance with Chapter 31 of
the Michigan Code.
B.
Michigan Personal Injury and Property Protection coverages do not
apply to “bodily injury” or “property damage” resulting from the operation,
maintenance or use of the covered “auto” in the business of anyone to whom it is
leased or rented if the lessee has Michigan Personal Injury and Property
Protection coverages on the “auto.” [Emphasis added.]
As discussed in greater detail in part IV, infra, the lessee of Besic’s truck, MGR, did not
buy “Michigan Personal Injury and Property Protection” coverage for Besic’s truck. In light of
the plain and unambiguous language of the Clearwater “Michigan Truckers—Insurance for NonTrucking Use” endorsement, the Clearwater policy thus affords coverage. Clearwater essentially
concedes this conclusion in its brief:
While [Besic] relied upon this provision as creating a duty to pay personal
protection (“PIP”) benefits, the Endorsement’s language did not create such a new
duty. Rather, the Endorsement’s language serves instead to limit any such duty
which may otherwise exist to pay PIP benefits under the policy to those instances
where PIP coverage is not available under any other policy. However, as
explained, the duty to pay PIP benefits does not otherwise exist under the policy
when the truck is under dispatch. [Emphasis added.]
We reject Clearwater’s contention that because the policy language in general excludes
coverage while the truck is under dispatch, the endorsement should be similarly construed.
“[E]ndorsements often are issued to specifically grant certain coverage or remove the effect of
particular exclusions. Thus, such an endorsement will supersede the terms of the exclusion in
question.” 4 Holmes’ Appleman on Insurance (2d ed), § 20.1, p 156. “When a conflict arises
between the terms of an endorsement and the form provisions of an insurance contract, the terms
of the endorsement prevail.” Hawkeye-Security Ins Co v Vector Constr Co, 185 Mich App 369,
380; 460 NW2d 329 (1990). “[E]ndorsements by their very nature are designed to trump general
policy provisions, and where a conflict exists between provisions in the main policy and the
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endorsement, the endorsement prevails.” Nationwide Mut Ins Co v Schmidt, 307 F Supp 2d 674,
677 (WD Pa, 2004). Here, the Clearwater endorsement unambiguously extended no-fault
coverage under the existing circumstances, in which no-fault PIP coverage was otherwise
unavailable under the Lincoln policy.
Moreover, the Clearwater bobtail policy also included an endorsement for Michigan PIP
benefits. An endorsement entitled “Michigan Personal Injury Protection” sets forth in pertinent
part the following:
A. Coverage
We will pay personal injury protection benefits to or for an “insured” who
sustains “bodily injury” caused by an “accident” and resulting from the
ownership, maintenance or use of an “auto” as an “auto.” These benefits are
subject to the provisions of Chapter 31 of the Michigan Insurance Code. . . .
In straightforward fashion, the terms of the Clearwater PIP endorsement apply to the basic facts
of Besic’s January 2007 accident in Ohio.
We conclude that on the issue of liability for Besic’s PIP benefits, the circuit court
properly (1) denied Clearwater summary disposition, (2) granted Besic summary disposition with
respect to Clearwater, and (3) granted summary disposition to Citizens and Lincoln, pursuant to
MCR 2.116(C)(10).
IV. APPLICABILITY OF LINCOLN POLICY TO BESIC’S CLAIM FOR PIP BENEFITS
Clearwater next maintains that even if the Lincoln policy covering Besic’s truck does not
“on its face” extend PIP coverage, this Court should imply PIP coverage under the Lincoln
policy because Michigan law mandates that all insurance companies doing business in Michigan
include PIP benefits in all automobile insurance policies. According to Clearwater, the Lincoln
policy contemplates no-fault coverage in a policy section detailing “out of state coverage
extensions.” Clearwater alternatively urges that, if this Court interprets the Lincoln policy
language as inapplicable to the present circumstances, we should reform Lincoln’s policy to offer
Besic Michigan no-fault PIP benefits.
Clearwater relies on the following italicized policy language, found in the Truckers
Coverage Form, Liability Coverage section, in support of its position that the Lincoln policy
covered Besic’s no-fault PIP expenses:
SECTION II—LIABILITY COVERAGE
A.
Coverage
We will pay all sums an “insured” legally must pay as damages because of
“bodily injury” or “property damage” to which this insurance applies, caused by
an “accident” and resulting from the ownership, maintenance or use of a covered
“auto.”
***
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2.
Coverage Extensions
a.
Supplementary Payments
We will pay for the “insured”:
(1)
All expenses we incur.
(2)
Up to $2000 for the cost of bail bonds (including bonds for
related traffic law violations) required because of an “accident” we cover. We do
not have to furnish these bonds.
(3)
The cost of bonds to release attachments in any “suit”
against the “insured” we defend, but only for bond amounts within our Limit of
insurance.
(4)
All reasonable expenses incurred by the “insured” at our
request, including actual loss of earnings up to $250 a day because of time off
from work.
(5)
All costs taxed against the “insured” in any “suit” against
the “insured” we defend.
(6)
All interest on the full amount of any judgment that accrues
after entry of the judgment in any “suit” against the “insured” we defend; but our
duty to pay interest ends when we have paid, offered to pay or deposited in court
the part of the judgment that is within our Limit of Insurance.
b.
Out-of-State Coverage Extensions
While a covered “auto” is away from the state where it is licensed
we will:
(1)
Increase the Limit of Insurance for Liability Coverage to meet the
limit specified by a compulsory or financial responsibility law of the jurisdiction
where the covered “auto” is being used. …
(2)
Provide the minimum amounts and types of other coverages, such
as no-fault, required of out-of-state vehicles by the jurisdiction where the covered
“auto” is being used. [Emphasis added.]
The emphasized language does not apply in this case because at the time of the accident
Besic undisputedly was using the covered “auto” in Ohio, a state that does not have a no-fault
liability scheme. Most likely, this section of the Lincoln policy enabled the coverage to comply
with laws such as MCL 500.3163, which contains the following relevant language:
(1)
An insurer authorized to transact automobile liability insurance and
personal and property protection insurance in this state shall file and maintain a
written certification that any accidental bodily injury or property damage
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occurring in this state arising from the ownership, operation, maintenance, or use
of a motor vehicle as a motor vehicle by an out-of-state resident who is insured
under its automobile liability insurance policies, is subject to the personal and
property protection insurance system under this act.
If Besic had been an Ohio resident injured in a Michigan crash, MCL 500.3163(1) and the “outof-state-coverage extensions” would have compelled Lincoln to supply first-party no-fault PIP
coverage. However, neither the statute nor the Lincoln policy language applies when a Michigan
resident suffers a vehicle-related injury in Ohio.
Nor did Lincoln have any statutory obligation to incorporate no-fault PIP coverage into
the policy it sold to MGR. Clearwater correctly observes that “[w]here an automobile insurance
policy contains an exclusionary clause that was not contemplated by the Legislature, that clause
is invalid and unenforceable.” Universal Underwriters Ins Co v State Farm Automobile Ins Co,
172 Mich App 342, 346; 431 NW2d 255 (1988). But Lincoln sold the policy at issue to MGR in
Illinois, and not to Besic in Michigan. Furthermore, “[t]he requirements for a motor vehicle
liability policy may be fulfilled by the policies of more than one insurance carrier.” State Farm
Mut Automobile Ins Co v Auto-Owners Ins Co, 173 Mich App 51, 55; 433 NW2d 323 (1988).
Because the Clearwater policy supplied no-fault PIP coverage for the injuries Besic endured in
his January 2007 accident, no basis exists for reforming the Lincoln policy to similarly provide
such coverage.
V. REIMBURSEMENT FOR PIP BENEFITS PAID BY CLEARWATER
Clearwater lastly avers that pursuant to MCL 500.3114, Citizens, the insurer of Besic’s
personal vehicles, shares responsibility to pay Besic incurred no-fault PIP benefits. In
Clearwater’s view, Citizens stands within the same order of priority as Clearwater, and thus
Clearwater should receive a pro rata reimbursement for the first-party no-fault benefits it has
paid Besic.
“To determine the priority of insurers liable for [no-fault personal protection] benefits,
the claimant must look to § 3114, MCL 500.3114.” Auto-Owners Ins Co v State Farm Mut
Automobile Ins Co, 187 Mich App 617, 619; 468 NW2d 317 (1991). The pertinent sections of
MCL 500.3114 instruct as follows:
(1)
Except as provided in subsections (2), (3), and (5), a personal
protection insurance policy described in section 3101(1) applies to accidental
bodily injury to the person named in the policy, the person’s spouse, and a relative
of either domiciled in the same household, if the injury arises from a motor
vehicle accident. …
***
(3)
An employee, his or her spouse, or a relative of either domiciled in
the same household, who suffers accidental bodily injury while an occupant of a
motor vehicle owned or registered by the employer, shall receive personal
protection insurance benefits to which the employee is entitled from the insurer of
the furnished vehicle.
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MCL 500.3101(1) states, in relevant part:
The owner or registrant of a motor vehicle required to be registered in this
state shall maintain security for payment of benefits under personal protection
insurance, property protection insurance, and residual liability insurance. Security
shall only be required to be in effect during the period the motor vehicle is driven
or moved upon a highway. …
In Celina Mut Ins Co v Lake States Ins Co, 452 Mich 84, 89; 549 NW2d 834 (1996), the
Supreme Court held that
it is most consistent with the purposes of the no-fault statute to apply § 3114(3) in
the case of injuries to a self-employed person. The 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.
The Supreme Court explained that
requiring both insurers to contribute to the payment of benefits would run
contrary to the overall goal of the no-fault insurance system, which is designed to
provide victims with assured, adequate, and prompt reparations at the lowest cost
to both the individuals and the no-fault system. Splitting the obligation to pay
would result in duplicative administrative costs, by requiring several insurers to
adjust a single claim. [Id.]
In State Farm Mut Automobile Ins Co v Sentry Ins, 91 Mich App 109, 114-115; 283
NW2d 661 (1979), this Court set forth the same rationale later adopted in Celina:
The exceptions in § 3114(2) and (3) relate to “commercial” situations. It
was apparently the intent of the Legislature to place the burden of providing nofault benefits on the insurers of these motor vehicles, rather than on the insurers of
the injured individual. This scheme allows for predictability; coverage in the
“commercial” setting will not depend on whether the injured individual is covered
under another policy. A company issuing insurance covering a motor vehicle to
be used in a (2) or (3) situation will know in advance the scope of the risk it is
insuring. The benefits will be speedily paid without requiring a suit to determine
which of the two companies will pay what is admittedly due by one of them. . . .
Here, Besic owned the truck and worked as a self-employed independent contractor for
MGR. Consistent with the Michigan Supreme Court’s analysis in Celina Mut Ins Co, 452 Mich
at 89, the priority language in MCL 500.3114(3) extends to the self-employment situation of
Besic. With respect to the additional language comprising MCL 500.3114(3), Besic suffered
“accidental bodily injury while an occupant of a motor vehicle owned or registered by [his]
employer,” given that MRG had leased Besic’s truck. MCL 500.3101(h) (defining “owner” as
“[a] person renting a motor vehicle or having the use thereof, under a lease or otherwise for a
period that is greater than 30 days”). Because MCL 500.3114(3) applies to the undisputed facts
of this case, subsection (3) dictates that Besic “shall receive personal protection insurance
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benefits to which . . . [he] is entitled from the insurer of the furnished vehicle.” In light of the
fact that only Clearwater extended personal protection insurance benefits to the truck involved in
Besic’s accident, it has first priority to pay Besic’s first-party benefits.
Clearwater suggests that Smith v Continental Western Ins Co, 169 F Supp 2d 687 (ED
Mich, 2001), compels a different result. In Smith, id. at 689, the plaintiff owned a tractor
registered in Indiana, and sustained personal injuries in a Michigan accident. The plaintiff
sought PIP benefits, and sued (1) the insurer for the company “with whom [the p]laintiff had
long-term lease to haul; (2) the short-term lessor for whom [the p]laintiff hauled on the day of
the accident; and (3) the company” that provided bobtail coverage for the tractor. Id. The
federal district court ruled that although Michigan’s no-fault act applied, none of the defendants
bore responsibility for paying no-fault benefits because the plaintiff’s personal insurer occupied a
higher priority. Id. at 689-694. In reaching its decision, the district court expressly and
repeatedly disclaimed any consideration of MCL 500.3114(3), the controlling insurer priority
provision here. Id. at 694 n 3, 695. Therefore, Smith is readily distinguishable from the instant
case.3
Finally, Clearwater asserts in its reply brief that “there is no record to support which
entity may be properly identified as [Besic’s] employer: Besic Express, Inc. or MGR Express,
Inc., or both.” This potential distinction among employers is immaterial. In light of the
undisputed fact that Besic was self-employed at the time of the accident, Celina Mut Ins Co, 452
Mich at 89, and MCL 500.3114(3) remain the controlling authorities.
Affirmed. Costs to Citizens and Lincoln as the prevailing parties. MCR 7.219(A).
/s/ Christopher M. Murray
/s/ Pat M. Donofrio
/s/ Elizabeth L. Gleicher
3
In any event, this Court is “not bound to follow a federal court’s interpretation of state law . . .
.” Doe v Young Marines of Marine Corps League, 277 Mich App 391, 399; 745 NW2d 168
(2007).
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