FARM BUREAU INS CO V MARIA ABALOS
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STATE OF MICHIGAN
COURT OF APPEALS
FARM BUREAU INSURANCE COMPANY,
FOR PUBLICATION
October 18, 2007
9:00 a.m.
Plaintiff-Appellant,
v
No. 269416
Monroe Circuit Court
LC No. 04-018057-CZ
MARIA ABALOS and MARCOS ABALOS,
Defendants,
and
ROBERT CASTELLANOS and ADRIENNE
CASTELLANOS,
Official Reported Version
Defendants-Appellees.
Before: Davis, P.J., and Schuette and Borrello, JJ.
PER CURIAM.
In this action for declaratory judgment, plaintiff appeals as of right from a default
judgment in plaintiff 's favor against its insureds, Maria and Marcos Abalos, in which the court
also ordered and adjudged that "the minimum Michigan statutory residual liability insurance
amount" applies to plaintiff 's liability to defendants Robert and Adrienne Castellanos. We
affirm the trial court's determination that the Abalos defendants' failure to cooperate with
plaintiff is not a defense to the extent that residual liability insurance is compulsory, but modify
its ruling that the minimum amount of residual liability to the Castellanos defendants is governed
by Michigan's financial responsibility law.
I. FACTS
The Castellanos defendants, Ohio residents, were involved in an automobile accident in
Ohio, when their vehicle was hit from behind by a vehicle driven by defendant Marcos Abalos
and owned by defendant Maria Abalos, who were Michigan residents. The Castellanos
defendants filed suit in Ohio against the Abalos defendants, seeking recovery for their injuries.
The Abalos defendants failed to answer the Ohio lawsuit. Plaintiff then sought a declaratory
judgment in Michigan, requesting a declaration that because of the Abalos defendants' lack of
cooperation, plaintiff had no duty to defend or indemnify the Abalos defendants under its
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insurance policy. Alternatively, plaintiff requested a declaration that reduced the Abalos
defendants' policy limits to Michigan's residual liability coverage only, i.e, a maximum of
$20,000. The trial court concluded that plaintiff did not have a duty to defend or indemnify the
Abalos defendants. However, it also concluded that the Castellanos defendants were entitled to
Michigan's statutory residual liability coverage. Plaintiff now appeals.
II. STANDARD OF REVIEW
In a declaratory judgment action, the trial court may declare the rights and other legal
relations of an interested party. MCR 2.605(A)(1). Although plaintiff moved for declaratory
relief with respect to the Castellanos defendants' interest in the insurance policy when seeking a
default judgment against the Abalos defendants, we agree with plaintiff that its motion with
respect to the Castellanos defendants' interest was essentially one seeking summary disposition.
"A trial court's decision on a motion for summary disposition in an action for a declaratory
judgment is subject to review de novo." Farmers Ins Exch v Kurzmann, 257 Mich App 412,
416; 668 NW2d 199 (2003). An appellate court will review a trial court's decision under the
correct rule. Spiek v Dep't of Transportation, 456 Mich 331, 338; 572 NW2d 201 (1998). We
have reviewed the trial court's decision under MCR 2.116(C)(10), because the record presented
to the trial court was not limited to the pleadings. A motion under MCR 2.116(C)(10) tests the
factual support for a claim and is "only appropriate if no genuine issue of material fact exists and
the moving party is entitled to judgment as a matter of law." Farmers Ins Exch, supra at 417.
The affidavits, pleadings, depositions, admissions, and other documentary evidence must be
considered in a light most favorable to the nonmoving party to determine if there is a genuine
issue of material fact for trial. Id.
III. ANALYSIS
Addressing first the parties' dispute regarding whether Michigan or Ohio law applies, we
reject plaintiff 's claim that this case should be treated as a hybrid action sounding in contract and
tort. In general, there must be some breach of duty distinct from a breach of contract to support a
tort. Rinaldo's Constr Corp v Michigan Bell Tel Co, 454 Mich 65, 83-84; 559 NW2d 647
(1997). Here, plaintiff does not seek a declaration regarding tort liability, but only its contractual
obligation to pay insurance benefits to the Castellanos defendants, Ohio residents whose vehicle
was struck in Ohio by a vehicle owned by Maria Abalos and operated by Marcos Abalos, both of
whom were Michigan residents. The Abalos defendants' alleged failure to cooperate, not the
automobile accident in Ohio, was the triggering event for this lawsuit. The Castellanos
defendants' interest in this action arises only from their potential ability to reach insurance
benefits available under plaintiff 's insurance policy. The trial court properly treated this action
as strictly a contract action.
Examined in this context, we reject plaintiff 's argument that Ohio law governs the
insurance policy that plaintiff issued to Maria Abalos. The parties do not dispute that the
insurance policy does not contain a choice-of-law provision. Thus, we must balance the
expectations of the contracting parties and the interests of Michigan and Ohio to determine
which law to apply. Chrysler Corp v Skyline Industrial Services, Inc, 448 Mich 113, 125; 528
NW2d 698 (1995). The principal place of risk can be significant where a case involves an
insurance contract for a chattel, such as an automobile. See 1 Restatement Conflict of Laws, 2d,
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ยง 193, comments a to c, pp 610-613. Here, however, the record indicates nothing more than the
happenstance of an automobile accident in Ohio involving Ohio residents (the Castellanos
defendants) and a Michigan resident (Marcos Abalos), while the Michigan resident's vehicle was
insured under a policy issued to Maria Abalos in Michigan. As a matter of law, we agree with
the trial court's determination that Michigan law governs the insurance policy. Plaintiff has
failed to establish any interest of Ohio in the insurance policy that supports applying Ohio law.
Applying Michigan law to this case, our Supreme Court has held that an insured's failure
to cooperate with an insurer is not a valid defense against a third party seeking residual liability
insurance benefits to the extent that the residual liability insurance is compulsory. Coburn v Fox,
425 Mich 300; 389 NW2d 424 (1986). Therefore, we agree with the trial court that the
Castellanos defendants are entitled to residual liability insurance benefits. But unlike Coburn,
this case does not involve an accident in Michigan. Rather, the accident in this case occurred in
Ohio.
MCL 500.3131(1) provides:
Residual liability insurance shall cover bodily injury and property damage
which occurs within the United States, its territories and possessions, or in
Canada. This insurance shall afford coverage equivalent to that required as
evidence of automobile liability insurance under the financial responsibility laws
of the place in which the injury or damage occurs. In this state this insurance
shall afford coverage for automobile liability retained by section 3135. [Emphasis
added.]
Under this statute, the scope of residual liability insurance is determined by the financial
responsibility laws of the place where the injury occurs. Kleit v Saad, 153 Mich App 52, 56; 395
NW2d 8 (1985). Therefore, because the accident occurred in Ohio, it follows that Ohio's
financial responsibility law must be applied to determine the amount of compulsory residual
liability insurance that is not subject to the defense of noncooperation.
We express no opinion regarding whatever tort law might be available to the Castellanos
defendants in their Ohio civil action against the Abalos defendants. Limiting our review to the
contract dispute before us, we affirm the trial court's decision to apply Michigan law, but modify
its declaratory ruling to require application of Ohio's financial responsibility law, pursuant to
MCL 500.3131(1), to determine the compulsory, minimum residual liability insurance, if any,
that applies to the Castellanos defendants.
Affirmed as modified.
/s/ Alton T. Davis
/s/ Bill Schuette
/s/ Stephen L. Borrello
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