DORIS PERNELL V ALLSTATE INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
DORIS PERNELL,
UNPUBLISHED
December 2, 2008
Plaintiff-Appellant,
v
No. 279825
Wayne Circuit Court
LC No. 05-519094-NF
ALLSTATE INSURANCE COMPANY,
Defendant-Appellee,
and
QBE INSURANCE CORPORATION and IPA
INSURANCE PROGRAM ADMINISTRATORS,
L.L.C.,
Defendants.
DORIS PERNELL,
Plaintiff-Appellee,
v
No. 279837
Wayne Circuit Court
LC No. 05-519094-NF
ALLSTATE INSURANCE COMPANY,
Defendant-Appellant,
and
QBE INSURANCE CORPORATION and IPA
INSURANCE PROGRAM ADMINISTRATORS,
L.L.C.,
Defendants.
Before: Zahra, P.J., and Cavanagh and Meter, JJ.
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PER CURIAM.
In this insurance dispute, the trial court ruled that defendant Allstate Insurance Company
was liable for payment of plaintiff’s personal injury protection (PIP) benefits of $28,445, less a
setoff of $7,500 previously paid by defendant QBE Insurance Corporation. The court denied
plaintiff’s motion for no-fault attorney fees under MCL 500.3148. Plaintiff and defendant
Allstate both appeal as of right. We reverse the trial court’s denial of plaintiff’s request for nofault attorney fees and remand for a determination of reasonable attorney fees against Allstate,
but affirm in all other respects.
I. Priority Under MCL 500.3114
In their respective appeals, plaintiff and Allstate both dispute whether either QBE, the
insurer of the vehicle plaintiff was operating when she was injured, or Allstate, the insurer under
a policy issued to plaintiff’s mother, a resident relative, have priority to pay plaintiff’s PIP
benefits under MCL 500.3114. This issue involves the application of MCL 500.3114, which is a
question of law that we review de novo. Dobbelaere v Auto-Owners Ins Co, 275 Mich App 527,
529; 740 NW2d 503 (2007); Farmers Ins Exch v AAA of Michigan, 256 Mich App 691, 694; 671
NW2d 89 (2003).
MCL 500.3114(1) provides, in pertinent part:
Except as provided in subsections (2), (3), and (5), a personal protection
insurance policy described in section 3101(1) applies to accidental bodily injury
to the person named in the policy, the person's spouse, and a relative of either
domiciled in the same household, if the injury arises from a motor vehicle
accident. . . .
Under the no-fault act, insurance policies for the injured person’s household are first in order of
priority of responsibility for payment of no-fault benefits. Therefore, a person who sustains
accidental bodily injury while the occupant of a motor vehicle must first look to no-fault
insurance policies within his or her household for no-fault PIP benefits. Dobbelaere, supra at
530.
However, the Legislature expressly provided exceptions to the general rule, including the
exception in § 3114(2), which provides that “[a] person suffering accidental bodily injury while
an operator or a passenger of a motor vehicle operated in the business of transporting passengers
shall receive the personal protection insurance benefits to which the person is entitled from the
insurer of the motor vehicle.” Section 3114(2) relates to commercial situations. By enacting §
3114(2), the Legislature intended to place the burden of providing no-fault benefits on the
insurers of commercial vehicles, rather than on the insurers of the injured individuals. Farmers
Ins Exch, supra at 698. Such a scheme allows for predictability; coverage in the “commercial”
setting will not depend on whether the injured individual is covered under another policy. Id.
A “primary purpose/incidental nature test” is to be applied to determine whether at the
time of an accident a motor vehicle was operated in the business of transporting passengers
pursuant to § 3114(2). Id. at 701. In other words, § 3114(2) applies if the driver’s transportation
of passengers for hire was the primary function or purpose in operating the vehicle. Id.
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The vehicle in this case was used in the course of plaintiff’s employment of transporting
passengers for hire, which was her primary purpose in operating the vehicle. Therefore, as
between Allstate and QBE, the insurer of the vehicle, QBE, was first in priority to pay plaintiff’s
no-fault benefits. QBE also has priority under MCL 500.3114(3), which provides:
(3) An employee, his or her spouse, or a relative of either domiciled in the
same household, who suffers accidental bodily injury while an occupant of a
motor vehicle owned or registered by the employer, shall receive personal
protection insurance benefits to which the employee is entitled from the insurer of
the furnished vehicle.
As with § 3114(2), § 3114(3) relates to commercial situations, and the same rationale for
it exists. Farmers Ins Exch, supra at 698. Section 3114(3) covers situations involving active,
existing employment relationships. Vitale v Auto Club Ins Ass’n, 233 Mich App 539, 543; 593
NW2d 187 (1999).
Because § 3114(1) expressly indicates that the resident relative’s policy applies, “except
as provided” in subsections (2) and (3), and because subsections (2) and (3) mandate that the
insurer of the motor vehicle has priority in those situations, QBE was first in priority to pay
plaintiff’s no-fault benefits.
But even though we conclude that Allstate was not first in priority, the trial court did not
err in denying its motion for summary disposition. The priority dispute did not excuse Allstate
from paying plaintiff and then seeking reimbursement from QBE. See Bloemsma v Auto Club
Ins Ass’n, 174 Mich App 692, 697; 436 NW2d 442 (1989); Darnell v Auto-Owners Ins Co, 142
Mich App 1, 12; 369 NW2d 243 (1985). The trial court correctly ruled that Allstate should have
paid plaintiff’s PIP benefits and then sought reimbursement from QBE. Id. at 12-13.
Accordingly, we affirm the trial court’s judgment holding Allstate liable for payment of
plaintiff’s PIP benefits.
In light of our decision, it is unnecessary to address plaintiff’s argument that the trial
court erred in permitting Allstate to amend its affirmative defenses. Further, we decline to
review the trial court’s award of penalty interest under MCL 500.3142, because this issue was
decided in plaintiff’s favor and Allstate has not challenged that ruling on appeal.
II. Attorney Fees
Plaintiff argues that the trial court erred in denying her motion for no-fault attorney fees
under MCL 500.3148(1), which provides:
An attorney is entitled to a reasonable fee for advising and representing a
claimant in an action for personal or property protection insurance benefits which
are overdue. The attorney's fee shall be a charge against the insurer in addition to
the benefits recovered, if the court finds that the insurer unreasonably refused to
pay the claim or unreasonably delayed in making proper payment.
Benefits are “overdue” if not paid within 30 days after an insurer receives reasonable proof of the
fact and of the amount of the loss sustained. MCL 500.3142.
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The purpose of the no-fault act’s attorney-fee penalty provision is to ensure prompt
payment to the insured. Beach v State Farm Mut Auto Ins Co, 216 Mich App 612, 629; 550
NW2d 580 (1996). An insurer’s delay in making payments under the no-fault act is not
unreasonable if it is based on a legitimate question of statutory construction, constitutional law,
or factual uncertainty. Ross v Auto Club Group, 481 Mich 1, 11; 748 NW2d 552 (2008).
Whether attorney fees are warranted under the no-fault act does not depend on whether coverage
is ultimately determined to exist, but on whether the insurer’s initial refusal to pay was
unreasonable. Id.
As previously indicated, a priority dispute among insurers will not excuse a delay in
making timely payment. Bloemsma, supra at 697; Darnell, supra at 12. To delay paying a claim
to decide the question of which of two insurers is legally responsible to pay would defeat the
purpose of MCL 500.3148(1). Bach v State Farm Mut Auto Ins Co, 137 Mich App 128, 132;
357 NW2d 325 (1984). When the only question is which of two insurers will pay, it is
unreasonable for an insurer to refuse payment of benefits. Regents of Univ of Michigan v State
Farm Mut Ins Co, 250 Mich App 719, 737; 650 NW2d 129 (2002).
In this case, because Allstate’s sole basis for denying plaintiff’s claim was that another
insurer had priority, it acted unreasonably in refusing to pay plaintiff’s claim. Because benefits
were overdue and Allstate acted unreasonably, the trial court erred by denying plaintiff’s motion
for attorney fees. Accordingly, we remand for an award of reasonable attorney fees under MCL
500.3148(1).
III Worker’s Compensation Setoff
Although plaintiff was injured during the course of her employment, she was unable to
collect worker’s compensation benefits because her employer did not have worker’s
compensation coverage. As our Supreme Court determined in Perez v State Farm Mut Auto Ins
Co, 418 Mich 634, 638-639; 344 NW2d 773 (1984), worker’s compensation benefits payable but
not paid are not required to be set off pursuant to MCL 500.3109(1). Although Allstate argues
that Perez was wrongly decided, this Court is required to follow that decision. People v Hall,
249 Mich App 262, 270; 643 NW2d 253, remanded on other grounds 467 Mich 888 (2002).
Affirmed in part, reversed in part, and remanded for an award of reasonable attorney fees
under MCL 500.3148(1). We do not retain jurisdiction.
/s/ Mark J. Cavanagh
/s/ Patrick M. Meter
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