ALLIED PROPERTY AND CASUALTY INS CO V MICHIGAN CATASTROPHIC CLAIM
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STATE OF MICHIGAN
COURT OF APPEALS
ALLIED PROPERTY AND CASUALTY
INSURANCE COMPANY,
UNPUBLISHED
October 16, 2008
Plaintiff-Appellant,
v
No. 277765
Kalamazoo Circuit Court
LC No. 06-000087-CZ
MICHIGAN CATASTROPHIC CLAIMS
ASSOCIATION,
Defendant-Appellee.
Before: Markey, P.J., and Sawyer and Kelly, JJ.
PER CURIAM.
Plaintiff, Allied Property Insurance Company, appeals by right the trial court’s grant of
summary disposition in favor of defendant, the Michigan Catastrophic Claims Association
(MCCA). Plaintiff also appeals the trial court’s refusal to determine that defendant engaged in
discovery to advance a frivolous defense and denying plaintiff’s request for attorney fees. We
affirm.
The parties did not dispute the material facts. Plaintiff’s insured, Troy Hinson, moved
with his two children from Michigan to Texas on July 2, 2004. On August 9, 2004 his son,
Zachary Hinson, was involved in a motor vehicle accident in Texas. The vehicle involved in the
accident, a Buick LeSabre, Troy had purchased the car in Texas two days before the accident,
but he had not yet obtained insurance coverage for it. Troy also owned a 1991 Ford truck when
he resided in Michigan, which Zachary used until the family moved to Texas. Troy left the truck
with a friend in Michigan to sell it, and he maintained his no-fault policy of insurance through
plaintiff on that truck. Plaintiff reviewed Troy’s claim for personal injury protection benefits
(PIP) because of Zachary’s accident and determined that it would pay benefits pursuant to Troy’s
Michigan policy. It thereafter added the Buick to Troy’s Michigan policy. Plaintiff then sought
reimbursement from the MCCA pursuant to the Michigan no-fault act, MCL 500.3101, et seq.
for its payment of PIP benefits, but the MCCA denied plaintiff’s claim. Plaintiff subsequently
commenced this suit seeking a declaration that the MCCA was obligated to reimburse plaintiff
for the payment of PIP benefits in excess of $350,000 under MCL 500.3104, and an award of
costs and attorney fees due to the MCCA’s maintenance of a frivolous defense under MCL
600.2591. The trial court granted the MCCA’s subsequent motion for summary disposition,
finding that the MCCA was not liable for indemnification to plaintiff where the accident
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occurred in Texas and involved a vehicle that was registered and owned in Texas by a Texas
resident.
We review the trial court’s decision to grant summary disposition under MCR
2.116(C)(10) de novo. Universal Underwriters Ins v Kneeland, 464 Mich 491, 495; 628 NW2d
491 (2001). “In reviewing a motion under MCR 2.116(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.” Walsh v Taylor, 263 Mich App 618, 621; 689 NW2d 506 (2004).
Issues of law, such as the trial court’s interpretation of the no-fault act, are also reviewed de
novo. United States Fidelity Ins & Guaranty Co v Mich Catastrophic Claims Ass’n, 274 Mich
App 184, 193; 731 NW2d 481 (2007). The primary purpose of statutory interpretation is to give
effect to the intent of the Legislature, and the clear and unambiguous terms of a statute must be
enforced as written. Sun Valley Foods Co v Ward, 460 Mich 230, 236; 596 NW2d 119 (1999).
Statutory provisions must be read and interpreted as a whole, “and the meaning given to one
section arrived at after due consideration of other sections so as to produce, if possible, an
harmonious and consistent enactment as a whole.” In re Certified Question (Preferred Risk Mut
Ins Co v Mich Catastrophic Claims Ass’n), 433 Mich 710, 721-722; 449 NW2d 660 (1989),
quoting State Treasurer v Wilson, 423 Mich 138, 145; 377 NW2d 703 (1985). The statutory
language is ambiguous only if it is equally susceptible to more than a one meaning, or
irreconcilably conflicts with another provision. Mayor of Lansing v Pub Service Comm, 470
Mich 154, 166; 680 NW2d 840 (2004).
The MCCA is a legislatively-created nonprofit organization “comprising all insurance
companies who write insurance” in Michigan; its principal purpose “is to indemnify member
insurers for losses sustained as a result of the payment of personal protection insurance benefits
beyond the ‘catastrophic’ level.” Preferred Risk, supra at 714-715. MCL 500.3104(1) requires
an insurer that is “engaged in writing insurance coverages that provide the security required by
section 3101(1) within this state” must become a member of the MCCA in order to offer
insurance in Michigan. MCL 500.3101(1) provides in pertinent 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.
As a member, an insurer is entitled to indemnification from the MCCA for PIP payments
pursuant to MCL 500.3104(2), which provides that the MCCA shall indemnify the insurer for
“100% of the amount of ultimate loss sustained under personal protection insurance coverages in
excess of the following amounts in each loss occurrence;” the amount pertinent to this case is
$350,000 under MCL 500.3104(2)(d). The “ultimate loss sustained” means “the actual loss
amounts that a member is obligated to pay and that are paid or payable by the member, and do
not include claim expenses.” MCL 500.3104(25)(c). The MCCA charges its members a
premium or assessment “for the coverage it provides, which is based on the number of car years
of insurance the member writes in Michigan.” Preferred Risk, supra at 716. The MCCA makes
this calculation, according to MCL 50.3104(7)(d), by evaluating “the amount it will need to
cover its expected losses and expenses during the applicable period, its ‘total premium,’ and then
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charges the member insurers individual premiums based on their respective shares of the state’s
auto insurance market.” Id. at 716 n 5.
In Preferred Risk, the Michigan Supreme Court held that the MCCA was “required to
indemnify member insurers only for losses paid to ‘residents’ of this state;” the term “resident”
referred “not only to those insureds who actually live within the state and who must therefore
purchase no-fault automobile insurance policies written in this state which provide the
compulsory security requirements of MCL 500.3101(1) for the owners or registrants of motor
vehicles required to be registered in this state, but also to certain insureds who do not live within
this state but who are nonetheless required to register, and thus insure, their vehicles in this
state.” Id. at 714. The Court also concluded that the phrase “personal protection insurance
coverages” in MCL 500.3104(2) was “a shorthand reference to the no-fault personal protection
insurance coverages that are generally the subject of the act, i.e., those which were written in this
state to provide the compulsory security requirements of § 1301(1) of the no-fault act for the
‘owner or registrant of a motor vehicle required to be registered in this state’ – ‘residents,’ in the
language of the [MCCA’s] plan of operation.” Id. at 723. The Court further noted that
§ 3101(1), “again, requires only the owner or registrant of a motor vehicle ‘required to be
registered in this state’ to maintain personal protection, property protection, and residual liability
insurance on the vehicle. By its terms, § 3101(1) does not apply to vehicles that are not required
to be registered in Michigan.” Id. at 724.
Here, the MCCA asserted that it was not obligated to indemnify plaintiff. Because the
Buick did not have to be registered in Michigan, neither was the compulsory insurance pursuant
to MCL 500.3101(1) required for it. Troy, the nonresident owner and registrant of the Buick,
was also not obligated to provide PIP security under MCL 500.3102(1) because he had no
intention of operating the Buick in Michigan for more than 30 days.
We find that the MCCA was not required to reimburse plaintiff. Troy was a nonresident,
but the Buick was not required to be registered in Michigan, and Ҥ 3101(1) does not apply to
vehicles that are not required to be registered in Michigan.” Preferred Risk, supra at 724. The
Buick was registered and titled in Texas and was not going to be driven in Michigan for more
than 30 days; thus, it was not required to be registered in Michigan and compulsory coverage
under MCL 500.3101(1) was likewise not required. The MCCA need only indemnify an insurer
under MCL 500.3104(2) where the insurer paid benefits pursuant to a policy written in Michigan
that provided for the required security under MCL 500.3101(1) for a vehicle required to be
registered in Michigan. Preferred Risk, supra at 719-720.
Plaintiff’s focus on the truck that Troy left behind in Michigan to sell and the provisions
of the no-fault act, such as MCL 500.3111, 500.3114, and 500.3113, that relate to whether the
insurer is required to pay an individual insured, is misplaced. The pertinent issue in this case is
whether the MCCA is obligated to reimburse an insurer under the no-fault act. The MCCA is not
required, pursuant to MCL 500.3104(2), to indemnify an insurer for any and all Michigan nofault benefits that the insurer may be required to pay. Preferred Risk, supra at 719-723. The
MCCA is only required to provide indemnity where the PIP coverage is compulsory pursuant to
MCL 500.3101(1), i.e., on “residents,” meaning “those insureds who actually live within the
state and who must therefore purchase no-fault automobile insurance policies written in this state
which provide the compulsory security requirements of MCL 500.3101(1) for the owners or
registrants of motor vehicles required to be registered in this state,” and “certain insureds who do
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not live within this state but who are nonetheless required to register, and thus insure, their
vehicles in this state.” Preferred Risk, supra at 714. Although the truck remained in Michigan,
the insured did not live in Michigan, had a Texas license, the Buick was not required to be
registered here, and it was registered in Texas. Compulsory coverage under MCL 500.3101(1)
was not required on the Buick. The Court recognized in Preferred Risk that an insurer may be
treated differently depending on whether the benefits were paid pursuant to compulsory PIP
insurance under MCL 500.3101(1). Preferred Risk, supra at 729-730. Here, according to the
no-fault act and regardless of how plaintiff treated the situation, the benefits were not paid
pursuant to the compulsory insurance requirements set forth in MCL 500.3101(1) because that
provision was inapplicable to the Buick, a Texas-owned and registered vehicle. Thus, the
MCCA is not required to reimburse plaintiff because the compulsory insurance requirements of
MCL 500.3101(1) do not apply here. Id. at 724. Consistent with Preferred Risk’s recognition
that the MCCA has the authority to charge premiums only for “policies written in Michigan
providing the security required by § 3101(1) for the owners or registrants of vehicles required to
be registered in the state,” the MCCA is conversely not required to reimburse plaintiff with
respect to the Buick, which did not require compulsory PIP coverage under MCL 500.3101(1)
because Troy was not a “resident” of Michigan, and the Buick was not required to be registered
in Michigan.
Although plaintiff added the Buick to Troy’s policy, the fact that it may have been
obligated to provide PIP benefits to Zachary under the terms of the policy does not control
whether defendant must likewise reimburse plaintiff for those benefits. This principle was
demonstrated in Preferred Risk, where the insurer was obligated to provide PIP benefits because
of its policy with the nonresident insured that provided for PIP benefits. But the MCCA was only
obligated to indemnify the insurer when benefits were paid over the statutory threshold “under a
policy which was written in this state to provide the security required by § 3101(1) of the nofault act for the ‘owner or registrant of a motor vehicle required to be registered in this state.’”
Preferred Risk, supra at 719.
The MCCA referred to the language in its plan of operation in support of its argument
that it was not required to indemnify plaintiff in this case. In United States Fidelity, supra at
203, the MCCA argued the trial court failed to give due deference to the Office of Financial and
Insurance Service’s interpretation of MCL 500.3104. This Court found that although it “affords
great deference to an agency’s interpretation of the statute it is charged with enforcing, no such
deference is due when the agency’s ‘interpretation is clearly wrong.’” Id., quoting Hoste v
Shanty Creek Mgmt, Inc, 459 Mich 561, 569; 592 NW2d 360 (1999). Also, this Court noted that
in Preferred Risk, our Supreme Court while agreeing with the MCCA’s interpretation of the
statute ultimately rested its analysis upon the language of the no-fault act itself. United States
Fidelity, supra at 204 n 14. Thus, the MCCA’s argument relying on its plan of operation in the
instant case does not control this Court’s interpretation of the no-fault act; rather, this Court
looks to the language contained in the no-fault statutes.
We additionally find plaintiff’s remaining arguments to be without merit. Plaintiff
asserts that the trial court erroneously based its decision on the absurd results doctrine. Although
it is clear from a review of the trial court’s seven-page opinion that it did not base its decision
solely on the absurd results doctrine, this Court nevertheless undertakes a de novo review of the
parties’ motions for summary disposition and a de novo review of the interpretation of statutory
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language. Universal Underwriters, supra at 495-496; United States Fidelity, supra at 193.
Therefore, even if the trial court improperly considered the doctrine, it is immaterial for purposes
of this Court’s de novo review of the no-fault act provisions and their application to the
circumstances presented in this case.
Plaintiff next maintains that no-fault insurance follows the insured and not the vehicle.
Thus, because there was no-fault insurance on the Ford, the insurance followed Troy and his son,
who resided with him. But a review of the case cited in support of this proposition, Pioneer
State Mut Ins Co v Titan Ins Co, 252 Mich App 330; 652 NW2d 469 (2002), reveals that this
Court’s analysis remained faithful to the language in the statute. This Court noted its
interpretation of MCL 500.3114(4) in State Farm Fire & Casualty Co v Citizens Ins Co of
America, 100 Mich App 168, 174; 298 NW2d 651 (1980), disapproved on other grounds by
DAIIE v Home Ins Co, 428 Mich 43; 405 NW2d 85 (1987): “It is clear that the Legislature’s
choice of such language [‘the insurer of the owner’ as opposed to ‘the insurer of the vehicle’]
was not accidental. That the obligation of the insurance company to pay personal protection
benefits is not tied to a particular vehicle in all cases does not, however, mean that the
Legislature intended to discard all ties between the obligation to pay benefits and the vehicle.”
Pioneer, supra at 337 n 7. Thus, while there is an underlying legislative policy that “persons
rather than vehicles be insured against loss,” this principle is not unlimited; the specific statutory
language must be examined and given effect. In addition, the provision at issue in Pioneer was
MCL 500.3115, regarding injury to a pedestrian; a provision which is not at issue in this case.
Pioneer, supra at 336. The coverage of the insured’s son is not an issue in this case.
Reimbursement of plaintiff insurer by defendant is the issue.
Finally, plaintiff argues that Zachary was an innocent third party to the insurance policy.
The record is completely devoid of allegations or supporting facts indicating that Troy made a
material misrepresentation to plaintiff, or that plaintiff even raised this issue with Troy when he
informed them of Zachary’s accident and the purchase of the Buick. Moreover, the record
reflects that plaintiff was apprised of Troy’s change of address to Texas on August 2, 2004; thus,
plaintiff was aware of this fact when it learned of the September 9, 2004, accident and decided to
afford coverage. Although an insurer may have the right to void an insured’s policy because of a
material misrepresentation made by the insured, Katinsky v Auto Club Ins Ass’n, 201 Mich App
167, 170; 505 NW2d 895 (1993), that was not the situation presented in this case. The argument
is irrelevant to a resolution of the reimbursement issue on appeal.
Plaintiff next argues on appeal that the trial court committed clear error in denying its
claim that defendant’s defense was frivolous, entitling it to attorney fees and costs under MCL
600.2591(1) because the MCCA had no reasonable basis to believe that the facts underlying its
legal position were true, and its “legal position was devoid of arguable legal merit.” MCL
600.2591(3)(a)(ii) and (iii).
The trial court’s determination as to whether a claim or defense was frivolous under MCL
600.2591 is reviewed for clear error. Kitchen v Kitchen, 465 Mich 654, 661; 641 NW2d 245
(2002). Clear error is present where the reviewing court is left with a definite and firm
conviction that a mistake has been made, although there may be evidence to support the trial
court’s decision. Id. at 661-662.
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Whether a defense is frivolous is based on the facts of each case. Kitchen, supra at 662.
“To determine whether sanctions are appropriate under MCL 600.2591; MSA 27A.2591, it is
necessary to evaluate plaintiffs’ claim at the time the lawsuit was filed.” Septer v Tjarksen (In re
Attny Fees & Costs), 233 Mich App 694, 702; 593 NW2d 589 (1999).
The MCCA disputed whether it was required to reimburse plaintiff under the no-fault act
at all based on the fact that the injured was a Texas resident, the uninsured vehicle involved in
the accident was registered and titled in Texas, and the vehicle was not required to be registered
in Michigan. The MCCA had a reasonable basis for believing that the underlying facts of its
legal position were true. In fact, as the trial court noted, neither party disputed the essential facts
in this case. The MCCA’s inquiries and discovery related to the circumstances surrounding
plaintiff’s decision to provide coverage to Zachary were not unreasonable given the legal
argument it was asserting. The MCCA has previously contested whether it was obligated to pay
the ultimate loss sustained by a member insurer, not because it disputed the amount of the
ultimate loss the insurer claimed, but because it disputed whether it was statutorily required to
provide reimbursement at all. For example, in Preferred Risk, supra at 713-714, the MCCA
contested whether under the no-fault act it was required to indemnify “member insurers for
losses paid to insureds who are not considered residents of this state.” Because the MCCA
questioned whether it was obligated to reimburse plaintiff on the facts of this case based on id. at
713-714, its defense was not devoid of legal merit. In addition, the MCCA is not statutorily
restricted to simply automatically paying every claim by a member insurer for reimbursement as
plaintiff implies. For example, MCL 500.3104, which created the MCCA, gives the MCCA the
authority to “[e]stablish procedures for reviewing claims procedures and practices of members of
the association”, and if it finds such procedures inadequate, the MCCA “may undertake . . . to
adjust or assist in the adjustment of claims for the member.” MCL 500.3104(7)(g). In addition,
neither party cites a case directly on point regarding the legal issues and the specific facts of this
case. This Court has found that a legal position was not frivolous when it involves an unsettled
area of law. Travelers Ins v U-Haul, Inc, 235 Mich App 273, 290; 597 NW2d 235 (1999).
We find that the trial court’s denial of plaintiff’s claim that the MCCA’s defense was
frivolous was not clearly erroneous, as it cannot be said this Court is left with a “definite and
firm conviction” that a mistake has been made. Kitchen, supra at 661-662.
We affirm.
/s/ Jane E. Markey
/s/ David H. Sawyer
/s/ Kirsten Frank Kelly
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