DEPT OF TRANSPORTATION V NORTH CENTRAL COOPERATIVE LLCAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
DEPARTMENT OF TRANSPORTATION,
January 24, 2008
Ingham Circuit Court
LC No. 05-000847-ND
NORTH CENTRAL COOPERATIVE LLC,
Advance Sheets Version
Before: Murphy, P.J., and Zahra and Servitto, JJ.
Plaintiff appeals as of right the circuit court's order granting summary disposition in
defendant's favor. Because the requirement of the Michigan Motor Carrier Safety Act, MCL
480.11 et seq., that transporters of hazardous materials maintain $5 million in security creates an
exception to the no-fault act's $1 million cap on damages, and neither res judicata nor
compulsory joinder bars the present action, we reverse and remand for further proceedings.
This lawsuit arises out of an accident involving a tanker truck, owned by defendant and
operated by defendant's employee, that was transporting liquefied petroleum gas (LPG). The
truck apparently struck a guardrail, which caused the tanker to separate from the trailer, crash
over the barriers of a freeway overpass, and plummet to the road below. Upon impact, the tanker
exploded, enveloping the road and overpass bridge in flames and ultimately causing significant
damage to both. Plaintiff paid nearly $2 million to repair the damage.
Plaintiff brought suit against defendant's insurer, Farmland Insurance Company
(Farmland), under the no-fault act, MCL 500.3101 et seq., to recover the cost of the repairs.
Plaintiff was awarded $658,138.11 in its action against Farmland.1 Plaintiff thereafter initiated
the present negligence action against defendant, contending that defendant was directly liable for
the remaining damages. Plaintiff also alleged that, to the extent that defendant may be immune
The court ruled that Farmland's liability was limited to $1 million for all property damage
arising out of the incident, and because Farmland had already paid $341,861.90 to other
claimants from the accident, plaintiff's recovery was limited to $658,138.11.
from tort liability under the no-fault act, the no-fault act conflicted with and was preempted by
49 USC 5101 et seq., which governs the transportation of hazardous materials. Defendant
moved for summary disposition pursuant to MCR 2.116(C)(8) and (10), and the trial court
granted the motion, opining that the no-fault act controls; that because defendant maintained $1
million in insurance coverage as required by the no-fault act, defendant is immune from liability;
and that the no-fault act does not conflict with 49 USC 5101. The trial court further opined that
res judicata barred the present action.
This Court reviews a trial court's decision on summary disposition de novo. Spiek v Dep't
of Transportation, 456 Mich 331, 337; 572 NW2d 201 (1998). A motion brought under MCR
2.116(C)(8) tests the legal sufficiency of a plaintiff's complaint on the pleadings alone. Maiden v
Rozwood, 461 Mich 109, 119-120; 597 NW2d 817 (1999). In assessing a motion brought under
MCR 2.116(C)(8), all factual allegations are accepted as true, Radtke v Everett, 442 Mich 368,
373; 501 NW2d 155 (1993), as well as any reasonable inferences or conclusions that can be
drawn from the facts. Smith v Stolberg, 231 Mich App 256, 258; 586 NW2d 103 (1998). The
motion should be granted only when the claim is so clearly unenforceable as a matter of law that
no factual development could possibly justify a right of recovery. Wade v Dep't of Corrections,
439 Mich 158, 163; 483 NW2d 26 (1992).
In ruling on a motion for summary disposition under MCR 2.116(C)(10), "a court must
consider the pleadings, affidavits, depositions, admissions, and other documentary evidence
submitted in the light most favorable to the nonmoving party." Scalise v Boy Scouts of America,
265 Mich App 1, 10; 692 NW2d 858 (2005). Summary disposition is appropriate under MCR
2.116(C)(10) when, "[e]xcept as to the amount of damages, there is no genuine issue as to any
material fact, and the moving party is entitled to judgment . . . as a matter of law." This Court
reviews de novo a trial court's ruling on a motion for summary disposition made pursuant to
MCR 2.116(C)(10). Scalise, supra at 10.
On appeal, plaintiff asserts that while the no-fault act may be read to abolish tort liability
for property damage resulting from automobile accidents as long as the owner maintains $1
million in insurance coverage, federal law requires that transporters of hazardous materials carry
at least $5 million of financial responsibility to satisfy any liability for property damage.
Plaintiff contends that to the extent the federal regulation conflicts with the no-fault act, the
federal law is controlling under the Supremacy Clause and thus preempts the no-fault act on this
issue. Plaintiff further contends that the adoption of federal financial requirements for the
transportation of hazardous materials in the Motor Carrier Safety Act creates an exception to the
no-fault act's abolition of tort liability with respect to transporters of hazardous materials.
Because, as addressed below, we find plaintiff 's second argument dispositive, we need not
consider its first argument.
MCL 500.3101(1) requires the owner or registrant of a motor vehicle required to be
registered in this state to "maintain security for payment of benefits under personal protection
insurance, property protection insurance, and residual liability insurance." MCL 500.3135(3)
abolishes tort liability2 arising from the ownership, maintenance, or use of a motor vehicle, as
long as the owner or registrant of the motor vehicle maintained security for payment of benefits
under personal protection insurance, property protection insurance, and residual liability
insurance as required by MCL 500.3101(1). MCL 500.3121 further provides:
(1) Under property protection insurance an insurer is liable to pay benefits
for accidental damage to tangible property arising out of the ownership, operation,
maintenance, or use of a motor vehicle as a motor vehicle subject to the
provisions of this section and sections 3123, 3125, and 3127.
* * *
(5) Property protection insurance benefits consist of the lesser of
reasonable repair costs or replacement costs less depreciation and, if applicable,
the value of loss of use. However, property protection insurance benefits paid
under 1 policy for damage to all tangible property arising from 1 accident shall
not exceed $1,000,000.00.
However, federal law, under 49 USC 31139(d) and 49 CFR 387.9, requires that a $5 million
level of financial responsibility be carried for the transportation of hazardous substances (such as
LPG). Effective January 8, 1996, Michigan adopted by reference certain federal motor carrier
safety regulations (including the above) through the Motor Carrier Safety Act (MCSA), MCL
480.11 et seq. According to plaintiff, the MCSA thus created an exception to the no-fault's act
general abolition of tort liability for owners or registrants of motor vehicles who maintained $1
million in security for payment of benefits as required by MCL 500.3101(1). We agree.
This Court recently addressed this issue in Michigan Dep't of Transportation v Initial
Transport, Inc, 276 Mich App 318; 740 NW2d 720 (2007). In Initial Transport, a cargo tank
trailer containing gasoline detached from the semi-tractor that was towing it, crossed over the
barrier wall, and fell onto the roadway below. The tanker trailer then exploded, causing a fire
that severely damaged parts of the overpass and adjoining structures. The plaintiff 's repair costs
were approximately $3.5 million.
At the time of the accident, the defendant maintained a general insurance policy for $1
million in property protection benefits as well as a separate excess liability policy with an
additional $4 million limit. The plaintiff filed a complaint to reach the higher limit under the
umbrella policy, asserting, among other claims, that the adoption in the MCSA of federal
regulations for transportation of hazardous materials, MCL 480.11, created an exception to the
damages limitation in the no-fault act. A panel of this Court agreed, holding that while the
Legislature intended MCL 500.3121(5) to apply to all vehicles, it later crafted, through
enactment of the MCSA, an exception to the $1 million cap on property damages payable under
With limited exceptions, none of which is at issue in this matter.
one policy, imposing potential liability in addition to that imposed by the no-fault act on motor
carriers carrying hazardous materials. Id. at 326.
This Court reasoned that
because the MCSA requires motor carriers to maintain minimum levels of
financial responsibility, "the financial reserves (e.g., insurance policies or surety
bonds) sufficient to satisfy liability amounts set forth in this subpart covering
public liability," we are bound to presume that benefits from these insurance
policies must be recoverable by parties injured by those motor carriers. [Id. at
The Court further noted that
49 CFR 387.11, incorporated into the MCSA, MCL 480.11a(1)(b), requires
insurers who furnish the necessary insurance policies to be legally authorized to
be "willing to designate a person upon whom process, issued by or under the
authority of any court having jurisdiction of the subject matter, may be served in
any proceeding at law or equity brought in any State in which the motor carrier
operates." This language clearly contemplates actions against insurers to recover
mandated benefits. We conclude that the broad language "any court" and "any
proceeding at law or equity" implies a remedy for a party injured by an insured.
This Court, then, ruled that the MCSA would be rendered meaningless if it did not provide
protection over and above that allowed by the no-fault act and that it served as an exception to
the no-fault act.
In this matter, because defendant was transporting LPG, it was required, under federal
regulations and the MCSA, to maintain $5 million in security to satisfy any financial
responsibility for public liability, property damage, and environmental restoration incurred as a
result of the transportation of the hazardous substance. While it is unclear from the written
record whether defendant had the proper level of security, defense counsel stated at oral
argument that defendant maintained the requisite security in compliance with both the no-fault
act and the MCSA, and indicated in a supplemental brief that it maintained the same through two
separate policies issued by Farmland. Pursuant to Initial Transport, plaintiff can recover that
security. What the Initial Transport Court did not address, however, and what we must address
today, is the proper party against whom a claim should be made to recover the financial security
required by the MCSA.3
It has been held that in an action in which the plaintiff seeks property protection benefits
arising out of the ownership, maintenance, or use of a motor vehicle the insurer, and not the
insured, is the proper party defendant to the action. Matti Awdish, Inc v Williams, 117 Mich App
270, 275-276; 323 NW2d 666 (1982). With respect to an action in which the plaintiff seeks
security provided for in the MCSA, we have no such binding Michigan authority to direct us.
We find guidance on this matter, however, in the code of federal regulations.
Most significant is 49 CFR 387.15, which prescribes the form of endorsements, known as
MCS-90 endorsements, for the required policies of insurance. An illustration of an acceptable
endorsement is included in 49 CFR 387.15, and it includes a definitional section that provides as
In consideration of the premium stated in the policy to which this
endorsement is attached, the insurer (the company) agrees to pay, within the limits
of liability described herein, any final judgment recovered against the insured for
public liability resulting from negligence in the operation, maintenance or use of
motor vehicles subject to the financial responsibility requirements of sections 29
and 30 of the Motor Carrier Act of 1980 regardless of whether or not each motor
vehicle is specifically described in the policy and whether or not such negligence
occurs on any route or in any territory authorized to be served by the insured or
elsewhere. . . .
It is further understood and agreed that, upon failure of the company to
pay any final judgment recovered against the insured as provided herein, the
judgment creditor may maintain an action in any court of competent jurisdiction
against the company to compel such payment.
"Every insurer must use this endorsement or equivalent language." American Inter-Fidelity Exch
v American Re-Insurance Co, 17 F3d 1018, 1021 (CA 7, 1994).
Notably, the endorsement language provides that the insurer agrees to pay any final
judgment entered against the insured for negligence involving vehicles subject to the federal
financial responsibility requirements. Obviously, for a final judgment to enter against the
insured, an action must first proceed against the insured. Only when a final judgment against the
insured is entered is the insurer's responsibility to pay triggered and, if the insurer fails to pay the
judgment, a cause of action against the insurer for repayment of the judgment arises. Given the
required language in endorsements concerning the transportation of hazardous materials, and
The Initial Transport Court had no need to address this issue, as both the tortfeasor and the
insurance company that issued the excess coverage policy were both defendants in the initial
taking into account that "the primary purpose of the MCS-90 is to assure that injured members of
the public are able to obtain judgment from negligent authorized interstate carriers," John Deere
Ins Co v Nueva, 229 F3d 853, 857 (CA 9, 2000) (emphasis added), we conclude that to recover
the security required under the MCSA for the transportation of hazardous materials, a plaintiff
must proceed with a negligence action against the insured.
We fully recognize that such a negligence action would conflict with MCL 500.3135(3),
which states: "Notwithstanding any other provision of law, tort liability arising from the
ownership, maintenance, or use within this state of a motor vehicle with respect to which the
security required by section 3101 was in effect is abolished . . . ."
However, Initial Transport stands not only for the proposition that the required $5 million in
financial responsibility is an exception to the $1 million limitation on damages payable under
one policy that is set forth in the no-fault act, but also that the federal regulations imply the
availability of a cause of action to recover the $5 million policy amount.
Moreover, as this Court stated, although the MCSA does not expressly provide for a
private remedy for a third party against an insured or insurer, implied remedies may be
cognizable. Initial Transport, supra at 327. We agree with the conclusions reached in Initial
Transport that, absent an implied private cause of action, injured parties would be precluded
from recovering damages under the required financial responsibility policies and such a result
"would counteract the entire purpose of setting higher minimum limits for transporters carrying
hazardous materials." Id. at 328. Indeed, as previously indicated, the language in 49 CFR
387.15 itself demonstrates an intent to provide for a private cause of action against a negligent
transporter of hazardous materials. See Office Planning Group, Inc v Baraga-HoughtonKeweenaw Child Dev Bd, 472 Mich 479, 504; 697 NW2d 871 (2005) ("The act . . . does not
expressly provide for a private cause of action . . . . Thus, the question becomes whether the
text of the act demonstrates an implicit intent to provide for a private cause of action.").
Following the binding precedent in Initial Transport and the basic rule of statutory construction
that a specific statute trumps a contradictory general statute, see Baxter v Gates Rubber Co, 171
Mich App 588, 590; 431 NW2d 81 (1988), we hold that to recover the security required under
the MCSA for the transportation of hazardous materials, a plaintiff must proceed with a
negligence action against the insured.
In addition to holding that the no-fault act controlled the present action, the trial court
also ruled that plaintiff 's suit was barred by res judicata, reasoning that "these issues could have
been set forth in the first claim and that there could have been alternative liability pled." The
court did not directly state that collateral estoppel also barred the case, but did recite the
requirements for asserting the defense, and indicated that this doctrine may also be applicable.
On appeal, plaintiff asserts that res judicata is inapplicable and that the trial court erred in ruling
otherwise, while defendant argues that both res judicata and collateral estoppel operate to bar
plaintiff from bringing the instant action. The application of a legal doctrine, such as res judicata
or collateral estoppel, presents a question of law that we review de novo. Pierson Sand &
Gravel, Inc v Keeler Brass Co, 460 Mich 372, 379; 596 NW2d 153 (1999); Barrow v Pritchard,
235 Mich App 478, 480; 597 NW2d 853 (1999).
The doctrine of res judicata (also known as claim preclusion) is employed to prevent
multiple suits litigating the same cause of action. The doctrine bars a second, subsequent action
when (1) the first action was decided on the merits, (2) the matter in the second case was, or
could have been, resolved in the first, and (3) both actions involve the same parties or their
privies. Sewell v Clean Cut Mgt, Inc, 463 Mich 569, 575, 621 NW2d 222 (2001). This Court
has taken a broad approach to the doctrine of res judicata, holding that it bars not only claims
already litigated, but also every claim arising from the same transaction that the parties,
exercising reasonable diligence, could have raised but did not. Dart v Dart, 460 Mich 573, 586;
597 NW2d 82 (1999).
Here, neither party disputes that a decision was rendered on the merits in plaintiff 's
action against Farmland, given that the trial court granted plaintiff recovery in the amount of
$658,138.11. With respect to the second element of res judicata, we do not believe that the issue
of defendant's negligence could or should have been resolved in plaintiff 's no-fault action against
First, MCL 500.3030 provides:
In the original action brought by the injured person, or his or her personal
representative in case death results from the accident, as mentioned in section
3006, the insurer shall not be made or joined as a party defendant, nor, except as
otherwise provided by law, shall any reference whatever be made to such insurer
or to the question of carrying of such insurance during the course of trial.
Farmland could thus not have been named as a party defendant or referenced in a negligence
action against defendant.4 If the claims against defendant and Farmland proceeded to trial in a
single lawsuit, a jury would hear that Farmland issued a no-fault insurance policy to defendant,
contrary to the above.
Second, the test to determine whether the two actions involve the same subject is whether
the facts are identical in both actions or whether the same evidence would sustain both actions. If
the same facts or evidence would sustain both, the two actions are the same for the purpose of res
judicata. Adair v Michigan, 470 Mich 105, 123-124; 680 NW2d 386 (2004). If different facts or
proofs would be required, res judicata does not apply. PT Today, Inc v Comm'r of the Office of
Financial & Ins Services, 270 Mich App 110, 146; 715 NW2d 398 (2006). In plaintiff 's lawsuit
against Farmland for no-fault damages, the issue was whether Farmland alone, or Farmland and
another insurer were responsible for damages payable under the no-fault act, which required
interpretation of the no-fault act itself. The present action, in contrast, concerns itself strictly
with whether defendant was negligent in its operation of the tanker truck. The facts and
evidence necessary for the resolution of these issues are thus significantly different, and the
issues differ in both subject matter and legal basis. The second element of res judicata not
Similarly, the only defendant that could be named in the earlier no-fault action seeking property
protection benefits was Farmland. See Matti Awdish, supra at 275-276.
having been met, the doctrine is inapplicable. Thus, we need not consider whether the third
element was similarly lacking.
Before moving on, we note two practical matters that weigh against the application of res
judicata in this matter. First, because we have found that an injured party's negligence action
against a tortfeasor to recover the financial security required by the MCSA is an exception to the
no-fault act's abolition of tort liability, to bring a no-fault cause of action against an insurer and a
negligence action against the tortfeasor in the same lawsuit would inevitably lead to juror
confusion. Second, until this decision was issued, the no-fault act was viewed as a bar to tort
actions against tortfeasors so long as the tortfeasor carried the requisite no-fault insurance. Until
we determined otherwise, injured parties likely (and very reasonably) believed that an action
against the complying tortfeasor would be futile.
As with res judicata, we find collateral estoppel inapplicable. Collateral estoppel, also
known as "issue preclusion," applies when three elements have been met: "(1) 'a question of fact
essential to the judgment must have been actually litigated and determined by a valid and final
judgment'; (2) 'the same parties must have had a full [and fair] opportunity to litigate the issue';
and (3) 'there must be mutuality of estoppel.'" Monat v State Farm Ins Co, 469 Mich 679, 682684; 677 NW2d 843 (2004), quoting Storey v Meijer, Inc, 431 Mich 368, 373 n 3; 429 NW2d
169 (1988). In contrast to res judicata, "[c]ollateral estoppel conclusively bars only issues
'actually litigated' in the first action." VanDeventer v Michigan Nat'l Bank, 172 Mich App 456,
463; 432 NW2d 338 (1988). "A question has not been actually litigated until put into issue by
the pleadings, submitted to the trier of fact for a determination, and thereafter determined." Id.
Addressing the requirements of collateral estoppel in reverse order, we first note that
mutuality of estoppel is not required in this case, given that collateral estoppel is being asserted
defensively. Monat, supra at 691-692. With respect to the second element of collateral estoppel,
we note that defendant was not a party to the prior action. With respect to the first element, there
is no indication that the core issues in this action (federal preemption and conflict with the state
MCSA) were actually and necessarily determined in that prior proceeding. While defendant
notes that plaintiff cited the state MCSA and 49 CFR 387.9 in its response to Farmland's motion
for summary disposition in the prior litigation, there is no indication that the trial court addressed
these issues. In sum, the doctrines of res judicata and collateral estoppel are inapplicable.
Plaintiff lastly argues that compulsory joinder is not applicable in this matter and thus
serves as no cause to bar the present action. Although both parties addressed compulsory joinder
before the trial court, the trial court did not decide that this action was barred on this basis, nor
did it issue a final ruling on whether or not the rules were applicable. Nevertheless, the
arguments of the parties below are sufficient to preserve this issue for appeal. Peterman v Dep't
of Natural Resources, 446 Mich 177, 183; 521 NW2d 499 (1994).
MCR 2.203(A) governs compulsory joinder, and states as follows:
In a pleading that states a claim against an opposing party, the pleader
must join every claim that the pleader has against that opposing party at the time
of serving the pleading, if it arises out of the transaction or occurrence that is the
subject matter of the action and does not require for its adjudication the presence
of third parties over whom the court cannot acquire jurisdiction.
Because the first action was against defendant's insurers for amounts owed pursuant to insurance
policies, plaintiff was not bound by this court rule to join defendant in that action.
Moreover, MCR 2.205(A), which governs necessary joinder of parties, is inapplicable
because it "places on the defendant the burden of objecting to misjoinder." United Services
Automobile Ass'n v Nothelfer, 195 Mich App 87, 89; 489 NW2d 150 (1992). "If the defendant
fails to make such a timely assertion, he . . . in effect . . . 'acquiesces in splitting causes of action .
. . .'" Id. at 90, quoting Chunko v LeMaitre, 10 Mich App 490, 496; 159 NW2d 876 (1968).
Because Farmland waived its right to assert that joinder of defendant was required in the prior
action, plaintiff cannot be faulted in the present one.
Reversed and remanded for further proceedings consistent with this opinion. We do not
Murphy, P.J., concurred.
/s/ Deborah A. Servitto
/s/ William B. Murphy