LISA MICHELLE FROMM V MEEMIC INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
LISA MICHELLE FROMM and EDWARD
FROMM,
FOR PUBLICATION
November 9, 2004
9:00 a.m.
Plaintiffs/Counter-DefendantsAppellants,
v
No. 248879
Oakland Circuit Court
LC No. 2002-045339-CK
MEEMIC INSURANCE COMPANY,
Defendant/Counter-PlaintiffAppellee.
Official Reported Version
Before: Murphy, P.J., and O'Connell and Gage, JJ.
MURPHY, P.J. (dissenting).
I respectfully dissent. The arbitration language contained within the uninsured motorist
provisions of the insurance policy does not allow for arbitration of the issue regarding whether
Lisa Fromm suffered a serious impairment of body function by way of miscarriage because there
was no express written consent to arbitrate matters of coverage. The issue whether Fromm
suffered a serious impairment of body function clearly concerns a question whether plaintiffs are
afforded coverage under the policy and is not related to matters regarding the liability or
negligence of the alleged tortfeasor or the amount of any insurance payment, both of which
matters are not presently at issue. I would find that the trial court properly exercised its subjectmatter jurisdiction over the case by rejecting plaintiffs' arbitration claims and substantively
reviewing defendant's counterclaim seeking a declaratory judgment on the issue of serious
impairment.
The insurance policy, in regards to arbitration and uninsured motorist coverage, provides,
in pertinent part:
If we do not agree with the insured person(s): that they are legally entitled
to recover damages from the owner or operator of an uninsured motor vehicle; or
as to the amount of the payment; either they or we must demand, in writing, that
the issues, excluding matters of coverage, be determined by arbitration. . . .
Unless otherwise agreed by express written consent of both parties, disagreements
concerning insurance coverage, insurance afforded by the coverage, whether or
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not a motor vehicle is an uninsured motor vehicle or the timeliness of a Demand
for Arbitration, are not subject to arbitration and suit must be filed within two
years from the date of the accident. [Alteration in format; emphasis deleted.]
Plaintiffs requested arbitration of their claims following the accident, but according to
plaintiffs, defendant failed to name an arbitrator. Plaintiffs filed a complaint asserting that
defendant was in breach of contract for failing to cooperate with arbitration and sought an order
to enforce arbitration. Defendant filed a counterclaim for declaratory relief, alleging that Lisa
Fromm did not suffer bodily injury that resulted in death, serious impairment of body function,
or permanent serious disfigurement as required to give rise to an obligation by defendant to
provide uninsured motorist coverage under the terms of the insurance policy. The trial court
granted summary disposition in favor of defendant, ruling that Lisa Fromm did not suffer a
serious impairment of a body function because there was no evidence that the miscarriage
affected her general ability to lead a normal life. The trial court denied plaintiffs' motion for
summary disposition and did not directly address the arbitration argument. Plaintiffs' motion for
reconsideration under MCR 2.119(F) was denied.
This Court reviews de novo a trial court's decision on a motion for summary disposition.
Koenig v South Haven, 460 Mich 667, 674; 597 NW2d 99 (1999). The proper interpretation of a
contract, including an insurance contract or policy, is a question of law that this Court reviews de
novo. Wilkie v Auto-Owners Ins Co, 469 Mich 41, 47; 664 NW2d 776 (2003). This Court
reviews a trial court's decision to grant or deny a motion for reconsideration for an abuse of
discretion. Churchman v Rickerson, 240 Mich App 223, 233; 611 NW2d 333 (2000).
MCR 2.116(C)(7) tests, in part, whether claims are barred due to an agreement to
arbitrate. The contents of the complaint are accepted as true unless contradicted by
documentation submitted by the moving party. Pusakulich v Ironwood, 247 Mich App 80, 82;
635 NW2d 323 (2001). In analyzing a motion for summary disposition pursuant to MCR
2.116(C)(7), the trial court must consider all affidavits, depositions, admissions, or other
documentary evidence if submitted or filed by the parties. Id.; MCR 2.116(G)(5). When
material facts are not disputed, the issue becomes whether the defendant is entitled to judgment
as a matter of law. Gilliam v Hi-Temp Products, Inc, 260 Mich App 98, 108-109; 677 NW2d
856 (2003).1
1
With regard to a motion for rehearing or reconsideration, MCR 2.119(F)(3) provides the
following guidelines:
Generally, and without restricting the discretion of the court, a motion for
rehearing or reconsideration which merely presents the same issues ruled on by
the court, either expressly or by reasonable implication, will not be granted. The
moving party must demonstrate a palpable error by which the court and the
(continued…)
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The principles of construction that govern contracts in general are also applicable to
insurance policies. Farm Bureau Mut Ins Co of Michigan v Nikkel, 460 Mich 558, 566; 596
NW2d 915 (1999). "The cardinal rule in the interpretation of contracts is to ascertain the
intention of the parties." McIntosh v Groomes, 227 Mich 215, 218; 198 NW 954 (1924).
"Where no ambiguity exists, this Court enforces the contract as written." Nikkel, supra at 566,
citing Morley v Automobile Club of Michigan, 458 Mich 459, 465; 581 NW2d 237 (1998). An
insurance contract is deemed ambiguous when its provisions are capable of interpretations that
conflict. Nikkel, supra at 566. An insurer may define or limit the scope of coverage under a
policy as long as the policy language fairly leads to only one interpretation and is not in
contravention of public policy. Id. at 568.
The existence of an arbitration agreement and the enforceability of its terms are judicial
questions for the court, not the arbitrators. Huntington Woods v Ajax Paving Industries, Inc
(After Remand), 196 Mich App 71, 74; 492 NW2d 463 (1992). Arbitration is a matter of
contract, and a valid agreement must exist before a party is required to submit to arbitration.
Arrow Overall Supply Co v Peloquin Enterprises, 414 Mich 95, 98; 323 NW2d 1 (1982);
Amtower v William C Roney & Co (On Remand), 232 Mich App 226, 234; 590 NW2d 580
(1998). "To ascertain the arbitrability of an issue, the court must consider whether there is an
arbitration provision in the parties' contract, whether the disputed issue is arguably within the
arbitration clause, and whether the dispute is expressly exempt from arbitration by the terms of
the contract." Huntington Woods, supra at 74-75 (citation omitted).
The majority, relying on the case of Brucker v McKinlay Transport, Inc, 454 Mich 8; 557
NW2d 536 (1997), writes that "a court should not interpret a contract's language beyond
determining whether arbitration applies and should not allow the parties to divide their disputes
between the court and an arbitrator." Ante at ___. The majority further declares, "[d]ispute
bifurcation defeats the efficiency of arbitration and considerably undermines its value as an
acceptable alternative to litigation." Ante at ___.
In Brucker, the defendant, McKinlay, bought several trucking companies owned by U.S.
Truck Company, Inc., and the stock purchase agreement evidencing the sale contained a
provision under which disputes by the buyer regarding any accounting matters shall be submitted
to arbitration. The agreement also provided that any questions of contract interpretation shall be
determined by the circuit court. A dispute arose and McKinlay exercised its right to arbitration.
After years of disagreements and a court battle over issues concerning waiver of arbitration and
the naming of an appropriate arbitrator, BDO Seidman undertook the arbitration. Early in the
arbitration proceedings, a stipulated order adopting rules of arbitration was entered. The rules
included a provision allowing the arbitrator to submit any issues of contract interpretation with
respect to the purchase agreement and accounting matters to the circuit court. Of course, issues
of contract construction arose, with BDO Seidman presenting two alternative conclusions in part
(…continued)
parties have been misled and show that a different disposition of the motion must
result from correction of the error.
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of its arbitration ruling dependent on the circuit court's interpretation of the underlying contract,
and the circuit court rendered a ruling interpreting the contract and subsequently entered
judgment. Brucker, supra at 9-14.
The Michigan Supreme Court first noted that the Court of Appeals had held sua sponte
that the arbitration agreement constituted statutory arbitration under MCL 600.5001 et seq., and
that the arbitration agreement was invalid because it called for questions of contract
interpretation to be decided by the circuit court, which was in violation of the limited role a court
could have in regard to arbitration under statutory arbitration and the accompanying court rule,
MCR 3.602. Brucker, supra at 14-15. Our Supreme Court further noted that the Court of
Appeals had concluded that only the arbitrator could interpret the contract and that this Court
then vacated the circuit court's judgment, setting aside entirely the arbitration and its result. Id.
at 15-16. Finally, the Supreme Court referenced Judge O'Connell's dissenting opinion and his
argument that he would simply strike the offending clauses, leaving a wholly valid and
enforceable arbitration agreement. Id. at 16-17.
Our Supreme Court agreed with this Court to the extent that the statute and the court rule
do "not allow the parties to use the courts as a resource that will issue advisory opinions to guide
the arbitrator through the more difficult portions of the task." Id. at 17-18. Thus, the arbitration
provision in the purchase agreement and the stipulated rules of arbitration were invalid in regard
to those portions calling on circuit court intervention. The Court, however, agreeing with Judge
O'Connell, stated, "it would be unnecessary and improvident to reject entirely the arbitration
agreement in this case." Id. at 18. The Supreme Court concluded:
Our ruling today concerns an arbitration agreement executed in 1982, and
implemented by rules of arbitration that were adopted by stipulation and executed
without protest by the parties and the circuit court. From these events, we can
discern neither prejudice to any party nor significant harm to the integrity of the
court system. Accordingly, our analysis of the arbitration issue raised sua sponte
by the Court of Appeals is prospective, and does not affect the stipulated manner
of arbitration adopted by the parties in this case. [Id. at 18-19.]
I find it important to reflect on footnote 9 of the Brucker opinion, in which the Court
stated that, before a complaint is filed, the parties in a civil dispute can agree that part of the
dispute will be resolved by arbitration. Id. at 18 n 9. The Court then stated that the remaining
portion of the dispute can be resolved by a court if there exists a claim on which relief can be
granted. The Court, after first quoting MCL 600.5025, which provides that "circuit courts have
jurisdiction to enforce the agreement and to render judgment on an award thereunder," concluded
that "[t]he problem in this instance is that the parties produced a sales agreement and arbitration
rules that called on the circuit court to take a role unrelated to any properly pending litigation[.]"
Brucker, supra at 18 n 9.
Footnote 9 of Brucker, in my opinion, indicates that, as a general proposition, parties may
contract to have some controversies or issues dealt with through arbitration while also agreeing
to have other distinct controversies or issues that may arise between those same parties dealt
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with by a court of law. This interpretation of the footnote is consistent with MCL 600.5001(2),
which provides:
A provision in a written contract to settle by arbitration under this chapter,
a controversy thereafter arising between the parties to the contract, with relation
thereto, and in which it is agreed that a judgment of any circuit court may be
rendered upon the award made pursuant to such agreement, shall be valid,
enforceable and irrevocable save upon such grounds as exist at law or in equity
for the rescission or revocation of any contract. Such an agreement shall stand as
a submission to arbitration of any controversy arising under said contract not
expressly exempt from arbitration by the terms of the contract. Any arbitration
had in pursuance of such agreement shall proceed and the award reached thereby
shall be enforced under this chapter. [Emphasis added.][2]
The problem that arose in Brucker, as I view the case, was that accounting disputes were
clearly subject to arbitration, yet, within the determination of the accounting dispute by the
arbitrator, the court was asked to step in and play a role as a contract interpreter, and any court
ruling regarding contract interpretation would bind the arbitrator within the context of the
arbitrator's ruling on the accounting dispute. This bifurcation was not permissible as the parties
could not use the court as a resource "to guide the arbitrator through the more difficult portions
of the task." Brucker, supra at 18. The circuit court's sole role in Brucker was to interpret the
contract within the arbitration proceedings, with the remaining accounting matters being
addressed by the arbitrator but within the confines of the court's contract construction, and the
court's role was thus unrelated to any "properly pending litigation" that could have been heard in
the circuit court. Id. at 18 n 9. Although the parties ostensibly gave the court authority to
interpret the contract for purposes of the accounting dispute subject to arbitration, there was no
independent action on the accounting dispute being litigated in the circuit court, nor could such
an action be litigated in court because of the contract's language requiring arbitration. Brucker
does not require us to reverse the trial court's decision regarding arbitration in the case before us.
Here, on the demand of one party, a dispute concerning whether the insured was legally
entitled to recover damages from the owner or operator of the uninsured motor vehicle (liability
or negligence of the alleged tortfeasor), or a dispute about the amount of payment, shall be
resolved by arbitration. The insurance policy does not call on the circuit court to play a role in
the arbitrator's decision-making process regarding these potential issues. Plaintiffs indeed made
a general arbitration demand. Yet there is no apparent dispute regarding the liability of the
alleged tortfeasor,3 nor is there a current dispute concerning the amount of payment or damages.
2
As in Brucker, the arbitration language at issue here falls under the statutory arbitration
provisions of MCL 600.5001 et seq.
3
Plaintiffs' vehicle was struck from behind by the uninsured vehicle while they waited at a red
light.
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Rather, the dispute is whether plaintiffs are even afforded coverage by the policy, and
more specifically, whether Lisa Fromm suffered a serious impairment of body function. There
are no uninsured motorist benefits afforded under the policy unless the accident resulted in
death, serious impairment of body function, or permanent serious disfigurement. Issues
pertaining to matters of coverage, insurance afforded by the coverage, or disagreements
concerning coverage are not subject to arbitration, under the clear and unambiguous wording of
the policy, unless there is express written consent by the parties. The record does not reveal a
writing reflecting that the parties expressly consented to having issues of coverage determined
by arbitration. There was properly pending litigation in the trial court with respect to the issue
whether coverage was afforded under the policy, considering defendant's counterclaim seeking a
declaratory judgment that Lisa Fromm did not suffer a serious impairment of body function,
thereby precluding plaintiffs from receiving any benefits under the policy. This is undoubtedly
an issue relating to "coverage." Moreover, the trial court's resolution of the issue could not be
affected by any role played by an arbitrator.
I respectfully disagree with the majority's conclusion that the term "coverage" as used in
the policy is vague and requires narrow interpretation; it requires proper interpretation.
"Coverage" is defined as "protection against a risk or risks specified in an insurance policy."
Random House Webster's College Dictionary (2001). The insurance policy does not protect
against the risk of an injury that does not rise to the level of serious impairment of body function.
Whether Lisa Fromm suffered a serious impairment of body function involves the question
whether she is afforded "protection against a risk . . . specified in an insurance policy." The
majority's "narrow" interpretation of the term "coverage" as meaning "the formation and
existence of the contract and its various aspects, such as policy life, limits, and riders[,]" ante at
___, is inconsistent with the use of the term "coverage" in the arbitration provision and would
effectively have us render as nugatory or meaningless the language discussing written consent,
coverage afforded under the policy, and arbitration. The majority is rewriting the parties'
contract, and its interpretation is more than "narrow," it is inaccurate and inconsistent with the
policy.4 Essentially, the majority's interpretation results in sending all likely issues of substance
to arbitration on the demand of one party despite the parties' agreement that only issues
regarding the liability of the alleged tortfeasor and the amount of payment may be arbitrated on
demand of one party. The issue of serious impairment of body function, which is the only
substantive issue in dispute here with any other possible substantive disputes being purely
4
The majority notes that, if the policy is not interpreted as done so in its opinion, defendant
could have coverage issues determined in court and then have issues concerning the amount of
payment or damages resolved in arbitration; the majority would find such an interpretation to
violate the rule against dividing contract disputes between forums. Ante at ___ n 1. While a
court could conceivably determine that there is coverage afforded by the policy and then allow
the parties to resolve any further dispute about the amount of payment in arbitration, the
principles in Brucker would not be offended because the arbitrator would have the full and sole
authority to determine the amount of payment without the trial court playing any role in the
matter.
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speculative, relates to the issue of coverage and whether plaintiffs are entitled to receive any
benefits, not to an issue regarding the amount of payment.
I find of assistance this Court's decision in Linebaugh v Farm Bureau Mut Ins Co, 224
Mich App 494; 569 NW2d 648 (1997). In Linebaugh, the plaintiff brought an action against his
automobile insurer, the defendant, seeking to compel the insurer to have the plaintiff 's claim for
underinsured motorist benefits arbitrated after the plaintiff had previously settled with the insurer
of the underinsured motorist despite the objection of the plaintiff 's insurer. The defendant's
insurance policy contained an exclusion providing that underinsured motorist coverage did not
apply to any claims settled without the defendant insurer's consent. The insurance policy
"allowed either the insurer or the insured to invoke binding arbitration where they disagreed
whether the insured was 'legally entitled to recover damages from the owner or driver of an
[underinsured] motor vehicle' or did 'not agree as to the amount of damages.'" Id. at 496
(alteration in original). The Linebaugh panel stated:
As explained in Port Huron Area School Dist v Port Huron Ed Ass'n, 426
Mich 143, 150-151; 393 NW2d 811 (1986), the scope of an arbitrator's remedial
authority is limited to the contractual agreement of the parties. Parties may agree
to arbitrate disputes covering a broad range of issues or they may agree to
arbitrate only one or a handful of narrow issues. [Linebaugh, supra at 499-500
(emphasis added).]
This Court, reviewing the arbitration clause and the policy exclusion language that was at
issue, stated:
The present case involves a . . . narrow arbitration provision. Pursuant to
this provision, the only issues that the parties agreed to arbitrate are the issues of
the legal liability of the alleged tortfeasor and the extent of the insured's damages.
Neither of these matters is presented in the present appeal. Rather, we are asked
simply to determine whether an exclusion applies, which is to say, we must
determine whether coverage exists and only then, if at all, will the parties reach
the questions of liability and damages. Had the arbitration provision in issue been
of the broad variety, providing that disputes pertaining to coverage "under this
part" or the like were arbitrable, the question whether an exclusion applies would
properly be one for arbitration. However, given that the question presented does
not concern a matter that the parties have agreed to arbitrate, this Court properly
addresses it. [Id. at 502-503.]
Likewise, the only issues subject to arbitration here, considering that there was no
express written consent to arbitrate matters of coverage, concern the legal liability of the alleged
tortfeasor and the amount of the insurance payment, and these issues were not and are not
presented. Rather, the issue in dispute pertains to coverage, i.e., whether Lisa Fromm suffered a
serious impairment of body function so as to be entitled to benefits under the policy. This is
similar to the situation in Linebaugh and its review of whether an exclusion to the policy applied,
which issue would have been subject to arbitration had the arbitration provision applied to
disputes regarding coverage. The Linebaugh panel was not concerned with the possibility that
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had it found that the policy exclusion did not apply, questions of tortfeasor liability and the
extent of damages could be heard and resolved in arbitration despite a court resolving the issue
concerning the policy exclusion. Under the majority's analysis here, the Linebaugh panel should
have deferred and sent the matter of the exclusion, or policy coverage, to arbitration for
resolution.
I conclude that the trial court properly exercised its authority by addressing, in the
context of summary disposition, whether Lisa Fromm suffered a serious impairment of body
function. The court properly rejected plaintiffs' attempt to have the issue addressed in
arbitration. I would uphold the trial court's ruling concerning arbitration and then substantively
address the ruling regarding miscarriage and serious impairment of body function.
I respectfully dissent.
/s/ William B. Murphy
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