Michigan Court of Appeals; Docket # 346797; Unpublished
Judges Gleicher, Stephens, and Cameron; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Recoupment Between Equal Priority Insurers [§3115(2)]
TOPICAL INDEXING:
Not Applicable
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order dismissing the plaintiff’s negligence claims against Defendant A & R Express, as well as the trial court’s summary disposition order dismissing A & R Express’s claims for liability and collision coverage against defendant Canal Insurance Company. The Court of Appeals first held that A & R could not be held liable for a single vehicle crash involving a Freightliner that it owned and leased to a trucking company, S A & R Trucking. Specifically, the Court of Appeals held (1) that A & R had no duty to inspect, maintain, and repair either the Freightliner that it leased to S A & R or the S A & R-owned trailer affixed to it, (2) that A & R could not be held liable under the owner-liability statute, MCL 257.401(1), because the crash did not result from “the negligent operation” of the Freightliner, (3) that A & R cannot be said to have “caused or knowingly permitted” a vehicle in an unsafe condition to be driven on a highway, in violation of MCL 257.683(1), because A & R provided S A & R with sole discretion and power to dispatch the Freightliner, repair the Freightliner, and take the Freightliner off the road if it came to be in an unsafe condition, and (4) that A & R and S A & R were not engaged in a joint venture such that both would share liability. Next, the Court of Appeals upheld an endorsement in the policy A & R procured through Canal which included a business-use exception to liability and collision coverage, holding that such an exception did not violate the no-fault act.
S A & R’s independent contractor truck driver, Sanan Altaye, was killed in a single-vehicle crash while driving a Freightliner owned by A & R and leased by S A & R. A & R was the registered owner of the Freightliner, but the Freightliner was under the exclusive control of S A & R and was initially insured under S A & R’s commercial trucking insurance policy. Sometime before the collision, A & R’s owner, Ali Adnan, decided it would be cheaper for A & R to insure the Freightliner, itself, and thus purchased a policy with “bobtail/physical damage” coverage through Canal. The policy contained a “non-trucking use endorsement,” however, “which explicitly stated that the policy did not provide liability coverage for when the 2006 Freightliner was operating in the course of business.”
The crash occurred as a result of brakes on the Freightliner failing while Altaye was driving down a mountainous stretch of Wyoming highway. Altaye’s Estate subsequently filed a negligence action against both A & R and S A & R, and Canal, who was initially named as a defendant to the lawsuit, filed a cross-claim against A & R seeking rescission of its policy with A & R or a declaration that it was not required to provide liability or collision coverage. Ultimately, the Court of Appeals granted summary disposition in favor of A & R with regard to the plaintiff’s negligence claims, as well as summary disposition in favor of Canal with regard to payment of liability and collision coverage benefits.
On appeal, the plaintiff argued that questions of fact existed as to whether A & R Express had a duty to inspect, maintain, and repair the Freightliner and a S A & R trailer attached to it. The plaintiff first argued that A & R was an owner of the Freightliner under Michigan Law, and that, as a result, its duty to inspect, maintain, and repair the Freightliner derived from the Federal Motor Carrier Safety Regulations, relevant portions of which had been adopted by the Michigan Legislature. The Court of Appeals noted, however, that the portions of the FMCSR adopted by the Michigan Legislature dealing with inspection, maintenance, and repair of such vehicles applied only to “employers, employees, and commercial motor vehicles that transport property or passengers in interstate property.” The FMCSR does not contemplate “owner” liability, and the Court further held that Altaye could not be considered an “employee” of A & R, nor A & R an “employer” of Altaye.
A & R Express was almost entirely detached from the trucking business being operated by S A & R Trucking and Altaye. Both Hasan and Adnan testified that A & R Express was not involved in obtaining jobs, dispatching drivers, or collecting fees from companies for which deliveries were made. Further, A & R Express did not supervise Altaye, pay him, collect his reports, or ensure that he complied with regulations regarding driving time. While A & R Express recommended Altaye to S A & R Trucking, all parties involved agreed that it was in S A & R Trucking’s sole discretion whether to hire Altaye. A & R Express’s only responsibility was to pay money associated with fees and repairs for the 2006 Freightliner. Even though A & R Express had the responsibility to pay for repairs, A & R Express was not informed of repairs until they were already in progress or completed. Most tellingly, it was undisputed that Adnan, as the sole owner of A & R Express, did not know that Altaye was on the job in Wyoming until Adnan was informed of Altaye’s death.
In sum, although A & R Express was the registered owner of the 2006 Freightliner, A & R Express was not an employer as contemplated by the FMCSR. Consequently, A & R Express’s status as the registered owner of the 2006 Freightliner did not render A & R Express subject to the regulations. Rather, under the FMCSR, Altaye was S A & R Trucking’s employee, and S A & R Trucking was his employer under 49 CFR 390.5.
The Court of Appeals further held that A & R could not be held liable under Michigan’s owner liability statute, because that statute, MCL 257.401(1), applies only to “negligent operation” of a motor vehicle. Here, there was no evidence that negligent operation caused the vehicle to crash; rather, the evidence suggested that the vehicle crashed as a result of brake failure. The plaintiff’s last argument regarding A & R’s liability relied on MCL 257.683(1), but the Court of Appeals similarly held that that statute did not apply because A & R did not cause or knowingly permit Altaye to drive the Freightliner in an unsafe condition.
Plaintiff’s last effort to hold A & R Express liable for Altaye’s death is a citation to MCL 257.683(1), which states that, “the owner shall not cause or knowingly permit to be driven or moved on a highway a vehicle . . . that is in such an unsafe condition as to endanger a person . . . .” Thus, the plain language of that statute puts liability on the owner of a motor vehicle where the owner “cause[s] or knowingly permit[s]” an unsafe vehicle to be driven on a highway. See MCL 257.683(1). As discussed throughout this case, A & R Express provided S A & R Trucking with the sole discretion and power to dispatch Altaye and the 2006 Freightliner on jobs. Similarly, A & R Express was not involved in decisions to repair the truck, take it off of the road when it was in an unsafe condition, or to encourage Altaye to complete a job. In other words, there is nothing on the record to suggest that, on December 19, 2015, A & R Express caused or knowingly permitted Altaye to drive the 2006 Freightliner in an unsafe condition. Indeed, as previously noted, A & R Express did not know that Altaye was even driving the 2006 Freightliner in Wyoming at that time. Consequently, the final statute cited by plaintiff, MCL 257.638(1), also does not impose liability upon A & R Express. Therefore, plaintiff’s arguments with respect to this issue are without merit.
The plaintiff next argued that A & R and S A & R were engaged in a joint venture and thus shared liability. The Court of Appeals again disagreed, reasoning that there was no evidence that the two entities were “engaged in ‘a joint undertaking of . . . a single project for profit in which they shared profits as well as losses[.]” Meyers v Robb, 82 Mich App 549 (1978).
The undisputed description of how the relationship between the companies worked also makes it clear that there was not “community . . . control over the subject matter of the enterprise.” See id. Both Hasan and Adnan testified that A & R Express was not involved in any decisions related to S A & R Trucking’s business. Indeed, the record showed that S A & R Trucking exclusively determined what jobs would be performed by Altaye while he was driving the 2006 Freightliner, dispatched Altaye to those jobs, paid Altaye, and issued him a 1099 income tax form. Altaye, who was required to fill out daily logs regarding his inspections of the 2006 Freightliner and the time he spent driving and on duty, submitted those documents to S A & R Trucking. Altaye also reported any and all necessary repairs to S A & R Trucking, which approved of any given repairs. Hasan and Adnan also agreed that S A & R Trucking had made the decision to hire Altaye, and that under the terms of their business relationship, A & R Express’s recommendation to hire Altaye was not in any way binding on S A & R Trucking. In short, A & R Express had no control over any aspect of S A & R Trucking’s business, especially considering this analysis only covered the portion of S A & R Trucking’s business that specifically related to the 2006 Freightliner titled to A & R Express. In regards to the other portions of S A & R Trucking’s business, A & R Express was completely and entirely uninvolved. Therefore, plaintiff also failed to present any evidence that S A & R Trucking and A & R Express had “community . . . control over the subject matter of the enterprise.” See id.
On cross-appeal, A & R argued that the trial court erred in granting summary disposition to Canal as to payment of collision coverage. The Court of Appeals disagreed, upholding the endorsement in the Canal policy which expressly excluded coverage for crashes in which the involved, insured vehicle was being “‘used to carry property in any business.’” The Court of Appeals held that the endorsement neither contravened the no-fault act or the FMCSR—because neither the no-fault act nor the FMCSR require collision coverage—nor violated public policy. While the no-fault act does require certain categories of insurance, the policy at issue “did not categorically decline to provide [PIP] and [PPI] benefits; rather, the policy just excluded certain accidents from coverage.” Thus, the Court redefined Cana’s argument as positing that “Canal’s policy should be deemed to violate the no-fault act and public policy because it contains a business-use exclusion.” The Supreme Court, however, determined in Johnson v USA Underwriters, 328 Mich App 223 (2019). that such exclusions do not violate the no-fault act:
This Court has held that the sale of a bobtail policy, which our Supreme Court defined as one that provides “coverage only when the tractor is being used without a trailer or with an empty trailer, and is not being operated in the business of an authorized carrier,” Hunt, 496 Mich at 373- 374 (quotation marks and citation omitted), does not violate the no-fault act or public policy, Johnson, 328 Mich App at 245. The Johnson panel began by examining this Court’s prior opinion in Integral Ins Co v Maersk Container Serv Co, Inc, 206 Mich App 325; 520 NW2d 656 (1994):
A similar question related to bobtail insurance was previously addressed by this Court in Integral, 206 Mich App at 331 . . . : Bobtail insurance policies, which do not provide “full coverage,” may nonetheless be sold separately from mandatory no-fault policies. In Integral, this Court stated that “[a]dmittedly, the [bobtail] policy itself does not provide full coverage.” Id. However, because MCL 257.520(j) allows insureds to meet the requirements for motor vehicle liability coverage through more than one insurance carrier, and because the truck driver was covered by both a bobtail policy and a policy providing no-fault benefits through another carrier, the practice of selling only bobtail insurance was not against the law. Integral, 206 Mich App at 331-332. We reach the same conclusion in this case. [Johnson, 328 Mich App at 244-245.]
Notably, the Integral panel’s decision was limited by the fact that the automobile in question had a separate policy that provided adequate coverage under the no-fault act. See Integral, 206 Mich App at 331-332. In the present case, though, the 2006 Freightliner was not covered by any other policy. However, this Court in Johnson, 328 Mich App at 245, expanded the holding in Integral, to include situations where there was not another policy. Specifically, the Johnson Court held “While [the insured] did not procure a no-fault policy with mandatory coverages, [the insurer] was not precluded from selling optional insurance coverages in order to satisfy customers who chose to purchase insurance policies from multiple carriers as allowed under MCL 257.520(j). Thus, [the insurer]’s practice of selling optional insurance coverages does not violate Michigan law.” Johnson, 328 Mich App at 245.
In light of that conclusion, the Johnson Court also held that the sale of only the optional coverage did not violate public policy, even where there was no other insurance in place. Id. at 245. In support of that holding, this Court reasoned that “[t]he obligation is on the owner or registrant to procure the proper no-fault coverages.” Id. at 247, citing MCL 500.3101(1). This Court believed that holding the insurer responsible for determining whether such coverage existed was not appropriate, opining that “[t]o do so would require insurers to verify that every insured who has purchased policies from more than one carrier has procured all the insurance needed to satisfy the no-fault act. It is the role of the Legislature to balance these types of policy considerations, not the role of this Court,” and the Legislature placed “the onus on the insured . . . .” Johnson, 328 Mich App at 246.
We are bound by the published opinion in Johnson.
