LINDA A ULRICH V FARM BUREAU INS
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STATE OF MICHIGAN
COURT OF APPEALS
LINDA A. ULRICH,
FOR PUBLICATION
April 29, 2010
9:10 a.m.
Plaintiff-Appellee,
v
No. 289467
Washtenaw Circuit Court
LC No. 07-743-NF
FARM BUREAU INSURANCE,
Defendant-Appellant,
and
LEN HENRY NAYLOR and TORRON THOMAS
JAMERSON,
Defendants.
Before: SAAD, P.J., and HOEKSTRA and MURRAY, JJ.
SAAD, P.J.
Defendant Farm Bureau Insurance appeals the trial court’s order that denied its motion
for summary disposition. We reverse.
I. FACTS AND PROCEEDINGS
On December 16, 2005, the Office of Financial and Insurance Services1 (“OFIS”) issued
a Notice and Order of Prohibition Pursuant to MCL 500.2236(5), Order No. 05-060-M (“Order
No 05-060-M”).2 Order No 05-060-M was signed by Chief Deputy Insurance Commissioner
Frances K. Wallace. Order No. 05-060-M disapproved no-fault automobile insurance forms that
1
Pursuant to Executive Order No. 2008-2, effective April 6, 2008, OFIS became known as the
Office of Financial and Insurance Regulation. See McDonald v Farm Bureau Ins Co, 480 Mich
191, 201 n 2; 747 NW2d 811 (2008).
2
This order can be found in pdf format on the State of Michigan website at
http://www.michigan.gov/documents/Prohibition_Order_121605_145496_7.pdf
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provided a contractual limitations period of less than three years for claims for uninsured
motorist coverage. The issue presented here is whether a one-year limitations period for
uninsured motorist coverage claims is enforceable where the no-fault policy form predated the
issuance of Order No. 05-060-M, but the policy was renewed after December 16, 2005.
Plaintiff held a no-fault automobile insurance policy issued by defendant. The policy
renewed every six months without any modifications of the terms of the policy. Plaintiff’s
policy had renewed on September 11, 2006, and was scheduled to expire on March 11, 2007.
The accident that gave rise to this action occurred on September 19, 2006. The policy provided
uninsured motorist coverage in the amount of $100,000 per person, $300,000 per accident,
subject to this condition:
3.
Time Limitation for Action Against Us
Any person seeking Uninsured Motorist Coverage must:
a.
present the claim for compensatory damages in compliance with
the Duties After an Accident or Loss listed on page 4 of this policy
and all other terms and conditions of this coverage and the policy;
and
b.
present to us written notice of the claim for Uninsured Motorist
Coverage within one year after the accident occurs.
A suit against us for Uninsured Motorist Coverage may not be
commenced later than one year after the accident that caused the injuries
being claimed, unless there has been full compliance with all the Duties
After an Accident or Loss listed on page 4 of this policy and all other
terms and conditions of this coverage and the policy.
Plaintiff’s accident on September 19, 2006, involved defendant Len Henry Naylor, who
drove an automobile owned by defendant Torron Thomas Jamerson. Plaintiff alleges that Naylor
drove at more than 90 miles per hour when he rolled the vehicle and caused a multi-car collision
that included the vehicle driven by plaintiff. Plaintiff sustained a fractured wrist and other
injuries in this collision.
On July 16, 2007, plaintiff brought this action against defendant, Jamerson, and Naylor
for damages recoverable under the no-fault act. The complaint made no claim for uninsured
motorist benefits. Jamerson and Naylor failed to respond, and plaintiff entered a default against
them. On January 8, 2008, plaintiff moved to amend her complaint to include claims against
defendant for uninsured/underinsured coverage under the policy. She stated that she sought
uninsured motorist coverage because defendants Naylor and Jamerson failed to respond to
plaintiff’s complaint and defaults had been entered.3 Plaintiff sought monetary relief under a
3
Plaintiff did not enter a default judgment against Naylor or Jamerson. Plaintiff has not
(continued…)
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count for breach of contract, and also declaratory relief that defendant was contractually
obligated to provide the coverage. Defendant opposed the motion on the ground that plaintiff
failed to comply with the contract by failing to assert a claim for uninsured motorist benefits
within the one-year contractual limitations period. Defendant asserted that the amendment
would prejudice defendant because it would violate the contractual provision requiring plaintiff
to commence this litigation within one year of the date of the accident.
In response, plaintiff said that the one-year contractual limitations provision was void
pursuant to the Insurance Commissioner’s Notice and Order of Prohibition prohibiting one-year
provisions for policies written after December 16, 2005. Plaintiff contended that this prohibition
applied to the policy that was in effect on the date of the accident, because the policy period
began on September 11, 2006, after the date of the Insurance Commissioner’s Order of
Prohibition. She also contended that defendant’s reliance on the invalidated provision
constituted a frivolous argument, warranting sanctions under MCR 2.114(F).
The trial court heard the motion to amend on March 26, 2008. The trial court granted
plaintiff’s motion, but noted that defendant’s objection on the ground of untimeliness was
preserved.
Defendant moved for summary disposition pursuant to MCR 2.116(C)(8) and (10). It
argued that there was no genuine issue of fact that the policy form in question had legally been in
use since before the Commissioner issued Order No. 05-060-M. Defendant argued that the plain
and unambiguous policy language barred coverage where the insured failed to bring her action
for uninsured motorist coverage within the one-year period following the date of loss. Defendant
maintained that Order No. 05-060-M “expressly left in force contracts already in effect,” as of
December 16, 2005, and therefore did not abrogate the one-year limitations period in plaintiff’s
policy.4 Defendant cited our Supreme Court’s decision in McDonald v Farm Bureau Ins Co, 480
Mich 191, 201 n 2; 747 NW2d 811 (2008) in support of its argument.
Plaintiff argued in response that the Order of Prohibition voided the one-year contractual
limitations period. Plaintiff asserted that her policy was reissued on September 11, 2007, and
therefore was subject to Order No. 05-060-M. Alternatively, plaintiff also argued that she
satisfied the policy’s notice provision because she filed her lawsuit within one year from the date
of the accident, and the amendment should relate back to that date. She stated that the original
complaint included a third-party claim against the owner and insured of the subject vehicle,
which was sufficient to put defendant on notice that she would file an uninsured motorist
coverage claim if these parties had no insurance coverage.
(…continued)
provided documentation that Naylor or Jamerson was uninsured for purposes of obtaining
uninsured motorist coverage under defendant’s policy. Apparently, her claim is based on the
assumption that Naylor or Jamerson’s no-fault carriers would deny any claim on the ground that
their insureds defaulted.
4
Defendant brought a separate motion for summary disposition on the ground that there was no
genuine issue of material fact that plaintiff failed to establish a threshold injury under MCL
500.3135 and Kreiner v Fischer, 471 Mich 109; 683 NW2d 611 (2004). The trial court denied
that motion. There is no issue on appeal concerning this motion.
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Defendant filed a reply and maintained that renewal of the policy after the issuance of
Order No. 05-060-M did not invalidate the one-year contractual provision because the policy had
been legally written before the Order was issued. It also denied that plaintiff’s action for PIP
benefits served as notice of a potential uninsured motorist claim.
Defendant also argued that plaintiff’s original complaint failed to give defendant notice
of the uninsured motorist claim.
The trial court determined that plaintiff’s claim was not barred by the contractual
limitations period because the amended complaint related back to the date of the original
pleading under MCR 2.118(D). The court also concluded that McDonald, 480 Mich 191, did not
apply retroactively. Finally, it determined that the no-fault policy was subject to Order No. 05060-M because it was reissued on September 11, 2006, after the date of the order. The trial court
denied defendant’s motion in an order dated November 26, 2008. We granted defendant leave
for interlocutory appeal.5
II. LEGAL ANALYSIS
In reviewing a trial court’s decision to deny or grant a motion for summary disposition
under MCR 2.116(C)(10), we “ ‘review the pleadings, admissions, and other evidence submitted
by the parties in the light most favorable to the nonmoving party. Summary disposition is
appropriate if there is no genuine issue regarding any material fact and the moving party is
entitled to judgment as a matter of law.’ ” Odom v Wayne Cty, 482 Mich 459, 466-467; 760
NW2d 217 (2008), quoting Brown v Brown, 478 Mich 545, 551-552; 739 NW2d 313 (2007).
This appeal stems from the controversy regarding the enforceability of contractual
limitations clauses in no-fault automobile insurance policies. In Tom Thomas Org, Inc v
Reliance Ins Co, 396 Mich 588; 242 NW2d 396 (1976), our Supreme Court adopted the judicial
tolling doctrine, which provides that an insurance policy’s contractual period of limitations is
tolled from the date that the insured submits a claim to the insurer until the date that the insurer
denies the claim. Id. at 596-597. In Tom Thomas Org, the Court declined to also consider
whether a one-year limitations period was unconscionable or inherently unreasonable. Id. at 597.
But, in Rory v Continental Ins Co, 473 Mich 457; 703 NW2d 23 (2005), the Michigan
Supreme Court overruled Tom Thomas and held that courts may not rewrite insurance policies on
grounds of “reasonableness.” In Rory, the Michigan Court of Appeals held that an insurance
policy’s one-year limitations period for claims for uninsured motorist coverage is unenforceable
because it was unreasonable to require the insured to discover the other driver’s insurance status
and other relevant information within a year of the accident. Rory v Continental Ins Co, 262
Mich App 679, 686-687; 687 NW2d 304 (2004). The Supreme Court reversed this Court’s
decision, and held that unambiguous contracts must be enforced as written, and not abrogated
5
Plaintiff and defendant subsequently executed a settlement regarding her claim for personal
injury protection benefits. This agreement expressly did not affect plaintiff’s claim for uninsured
motorist benefits.
-4-
based on a court’s independent assessment of “reasonableness.” Rory, 473 Mich at 468-469.
The Court noted that MCL 500.2236(5) conferred on the Insurance Commissioner the discretion
to “disapprove, withdraw approval or prohibit the issuance, advertising, or delivery” of any
insurance form that “contains exceptions and conditions that unreasonably or deceptively affect
the risk purported to be assumed in the general coverage of the policy.” Rory, 473 Mich at 474475. It held that “the Legislature has assigned the responsibility of evaluating the
‘reasonableness’ of an insurance contract to the person within the executive branch charged with
reviewing and approving insurance policies: the Commissioner of Insurance.” Id. at 475. “In
this instance, the Commissioner has approved the Continental policy form containing the
shortened limitations provision for issuance and use in the state of Michigan.”
On December 16, 2005, Chief Deputy Insurance Commissioner Frances K. Wallace
signed Order No. 05-060-M. Citing her statutory authority6 to disapprove objectionable policy
forms, the commissioner determined that a one-year limitations period for claims for uninsured
motorist coverage was unreasonable because it does not allow the insured sufficient time to
confirm whether the responsible party was insured on the day of the accident. The commissioner
stated as follows:
Under these circumstances, policyholders who purchase optional uninsured
motorist benefits with a limitation of less than three years to file claims or
commence suit for those benefits will often be paying for coverage that is illusory
as a practical matter. Such a provision is “misleading” and “unreasonably or
deceptively affect(s) the risk purported to be assumed in the general coverage of
the policy” within the meaning of section 2236(5). [Order of Prohibition, p 4.]
The commissioner declared the following prohibition:
Accordingly, effective immediately on the date of this order, Insurance
Company Name shall not issue, advertise, or deliver to any person in this state a
policy or rider that limits the time to file a claim or commence suit for uninsured
motorist benefits to less than three years unless Insurance Company Name was
legally using that policy or rider form in Michigan prior to the date of this notice
and order of prohibition. Moreover, Insurance Company Name shall not modify
in any respect a policy form or rider containing a provision that limits the time to
file a claim or commence suit for uninsured motorist benefits to less than three
years that it was legally using in Michigan prior to this notice and order of
prohibition and thereafter issue, advertise, or deliver the revised policy form or
rider in this state, unless the limitation is deleted entirely or is changed to not less
than three years from the date of the accident.
This notice and order of prohibition does not prohibit Insurance Company
Name from continuing to use any policy form or rider that it may have been
legally using in Michigan prior to the date of this notice of prohibition containing
6
MCL 500.2236(5).
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a limitation of less than three years to claim or file suit for uninsured motorist
benefits, so long as such policy or rider is not revised in any respect. The
Commissioner is currently considering what action is appropriate with regard to
those policies or riders in use before the date of this notice and order. The
Commissioner may withdraw approval of those forms as provided in section
2265(5) at a future time. [Order No. 05-060-M, pp 4-5.]
Here, there is no question of fact that the policy predated the issuance of Order No. 05-060-M.
Plaintiff argues, however, that the order applies because her policy was “rewritten” when it was
renewed on September 11, 2006.
In McDonald, 480 Mich 191, our Supreme Court rejected the insured’s argument that her
no-fault policy’s one-year contractual limitations period for underinsured motorist coverage was
tolled from the time she presented a claim to the insurer until the time that the insurer denied the
claim. Id. at 193, 200-201. In its analysis, the Court considered the plaintiff’s argument that
Order No. 05-060-M established a public policy against enforcing contractual limitations period
shorter than three years. Id. at 201. The Court rejected this argument, stating as follows:
[T]he “Notice and Order” also expressly states that it does not prohibit insurers
from continuing to use policies that were legally in use before December 16,
2005. Moreover, the general rule is that contracts are interpreted in accordance
with the law in effect at the time of their formation. See, e.g., Byjelich v John
Hancock Mut Life Ins Co, 324 Mich 54, 61; 36 NW2d 212 (1949). Thus, the oneyear limitation was valid at the time the parties entered into the contract.
[McDonald, 480 Mich at 201.]
The majority noted that the OFIS had the authority to determine whether an insurance contract
was valid, and the order “expressly left in force contracts already in effect.” Id. at 201-202. The
accident in McDonald occurred in 2001, before Order No. 05-060-M was issued. Id. at 194.
Similarly, in McGraw v Farm Bureau General Ins Co of Michigan, 274 Mich App 298, 304-305;
731 NW2d 805 (2007), this Court held that Notice and Order of Prohibition 06-008-M, which
imposed the same restrictions for underinsured motorist coverage, did not retroactively invalidate
one-year contractual limitations periods in policies that were already in effect. Again, in
McGraw, the insured’s claim arose before Order No. 06-008-M was issued. Id. at 300.
Although McDonald, 480 Mich 191, and McGraw, 274 Mich 298, are instructive, they do
not address the precise question presented here of whether Order No. 05-060-M prohibits the
renewal of grandfathered policies after December 16, 2005. In both McDonald and McGraw, the
insured’s claims arose before the Commissioner’s orders were issued. Plaintiff contends that
under the automatic renewal process for her own policy, once the policy period expires and the
policy is renewed, the renewed policy becomes subject to the requirements of Order No. 05-060M. This is a misreading of Order No. 05-060-M.
Order No. 05-060-M prohibits the issuance, advertisement, or delivery of policies or
riders that limit the time to file a claim or commence suit for uninsured motorist benefits to less
than three years, but it unambiguously provides an exception where the insurer “was legally
using that policy or rider form in Michigan prior to the date of this notice and order of
prohibition.” The order prohibits the modification of such forms, but it does not prohibit their
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renewal or re-issuance. Indeed, the language of the order further states that an insurer is not
prohibited “from continuing to use any policy or form or rider that it may have been legally
using in Michigan prior to the date of this notice . . . so long as such policy or rider is not revised
in any respect.” Moreover, the order indicates that the Commissioner was “currently considering
what action is appropriate with regard to those policies or riders in use before the date of this
notice and order” and commented that it “may withdraw approval of those forms as provided in
section 2265(5) at a future time.” (Emphasis added.) The order contains no sunset provision or
expiration date for forms currently in use, nor does it prescribe any prohibition on renewal.
Plaintiff’s argument is based on an attempt to read terms into the order that are not expressed, or
even implied, by its plain language.
And, importantly, the order specifically states that the commissioner was not, at that time,
taking any action with respect to the grandfathered policies and riders. The order further
provides that future action, including withdrawal of approval, was under consideration. These
provisions are clearly inconsistent with plaintiff’s preferred interpretation of the order. The trial
court clearly erred in ruling that defendant’s one-year contractual limitations period was
unenforceable.
Plaintiff also argues that her claim for uninsured motorist benefits was timely because it
related back to the original complaint, which was filed within the one-year period. MCR
2.118(D) provides as follows:
An amendment that adds a claim or a defense relates back to the date of
the original pleading if the claim or defense asserted in the amended pleading
arose out of the conduct, transaction, or occurrence set forth, or attempted to be
set forth, in the original pleading.
The relation-back doctrine applies to amended pleadings and may affect the analysis of the
timeliness of an action for purposes of compliance with statutes of limitations. Doyle v Hutzel
Hospital, 241 Mich App 206, 212 n 2; 615 NW2d 759 (2000). However, defendant does not
assert that plaintiff’s uninsured motorist claim is untimely pursuant to a statute of limitations, but
rather to the contractual limitations stated in the policy. Plaintiff cites no authority for applying
the relation-back doctrine of MCR 2.118(D) to contractual limitations period. And, there is no
authority for the proposition because to apply the relation-back doctrine in this context would be
inconsistent with the principle of applying private contracts in accordance with their terms as
stated in unambiguous language. See Rory, 473 Mich at 465-468, which held that the rights and
limitations contained in an uninsured motorist insurance provision are purely contractual and are
to be construed employing the principles of contract construction and without reference to
external statute. See also Liparoto Const, Inc v General Shale Brick, Inc, 284 Mich App 25, 3132; 772 NW2d 801 (2009), which held that “[a]pplication of the doctrine of equitable tolling to
contractual limitations periods would be inconsistent with the deference afforded to parties’
freedom to contract, including the freedom to avoid, by contract, what might otherwise be an
applicable rule of law.” Moreover, the policy requires the insured to present defendant written
notice of a claim for uninsured motorist coverage within one year after the accident occurs. It
further provides that a legal action for uninsured motorist coverage “may not be commenced
later than one year after the accident that caused the injuries being claimed, unless there has been
full compliance with all the Duties After an Accident or Loss listed on page 4 of this policy and
all other terms and conditions of this coverage and the policy.” Assuming, arguendo, that the
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relation-back doctrine enabled plaintiff to avoid the one-year limitation for legal action for
uninsured motorist coverage, her failure to present a written claim for that coverage to defendant
within the one-year period would nonetheless bar her claim for relief. Plaintiff’s claim for PIP
benefits, and her legal action to recover the same, cannot be reasonably construed as notice of a
claim for uninsured motorist benefits.
III. CONCLUSION
Plaintiff’s claim for uninsured motorist coverage is barred by her policy’s one-year
contractual limitation provision and the trial court incorrectly held that this provision was voided
by Order No. 05-060-M.
Accordingly, we reverse the trial court’s order that denied Farm Bureau Insurance’s
motion for summary disposition.
/s/ Henry William Saad
/s/ Joel P. Hoekstra
/s/ Christopher M. Murray
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