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Esurance Prop & Cas Ins Co v Mich Assigned Claims Plan, et al (SC – PUB 7/26/2021; RB #4299)

Supreme Court of Michigan; Docket #160592; Published
Judges McCormack, Zahra, Viviano, Bernstein, Clement, Cavanagh, and Welch
Official Michigan Reporter Citation: Forthcoming; Link to Opinion; Link to COA Opinion


STATUTORY INDEXING:
Not Applicable

TOPICAL INDEXING:
Insurer Assigned Claims Reimbursement


SUMMARY:
In this 5-2 published decision (Clement and Viviano, dissenting), authored by Justice Zahra, the Michigan Supreme Court reversed the Court of Appeals’ affirmance of the trial court’s summary disposition order dismissing Plaintiff Esurance Property & Casualty Insurance Company’s (“Esurance”) equitable subrogation action against Defendant Michigan Assigned Claims Plan (“MACP”). The Supreme Court held that Esurance could seek reimbursement from the MACP under a theory of equitable subrogation—for no-fault PIP benefits it paid to Roshaun Edwards for medical treatment Edwards received after he was injured in a motor vehicle collision—because Esurance was neither in the order of priority for paying Edward’s PIP benefits, nor acting as a “mere volunteer” when it promptly, but mistakenly, paid those benefits.

Roshaun Edwards was injured in a motor vehicle collision while operating a vehicle owned by Anthony Robert White II. Neither Edwards nor White had no-fault insurance at the time of the collision, but the vehicle was covered under a Colorado automobile insurance policy issued by Esurance to White’s mother, Luana Edwards-White. Edwards-White procured the policy based on her representation in her original application for insurance that she owned the vehicle and that it would be garaged at her residence in Colorado. After the collision, Edwards applied for PIP benefits through the MACP, but the MACP did not assign his claim because Esurance had already stepped in and started paying his benefits.

Esurance later discovered that Edwards-White’s policy was procured by fraud and voided the policy ab initio. Esurance then filed the underlying lawsuit against the MACP under a theory of equitable subrogation. The MACP moved for summary disposition, arguing that the no-fault act explicitly contemplates reimbursement only in limited circumstances, and that, because this was not one of those circumstances, under the statutory canon expression unius est exclusion alterius (“ ‘[the] general principle of interpretation that the mention of one thing implies the exclusion of another thing’ ”), Esurance was precluded from pursuing its equitable subrogation claim. Esurance argued, in response, that Edwards could have sought benefits from the MACP because (1) he submitted a timely application to the MACP and (2) there was no applicable no-fault insurer under (the former) MCL 500.3114 (because Edwards-White was not, in fact, the owner of the vehicle). Therefore, Esurance argued further, it could, standing in Edwards’s shoes and having paid Edwards’s PIP benefits, pursue a claim against the MACP under a theory of equitable subrogation. The trial court ultimately granted summary disposition in favor of the MACP, which the Court of Appeals affirmed, albeit for the separate reason that Esurance’s claim for equitable subrogation failed. The Court of Appeals reasoned that either (1) Edwards-White’s policy did exist at the time of the collision, in which case Esurance would have been a priority insurer under (the former) MCL 500.3114, and Edwards, therefore, unable to pursue a claim against the MACP pursuant to MCL 500.3172(1), or (2) Edward-White’s policy did not exist at the time of the collision, in which case Esurance was a “mere volunteer” when it paid Edwards’s PIP benefits.

The Supreme Court reversed the trial court’s ruling. In doing so, the Court first affirmed the two prongs of an equitable subrogation claim: that “ ‘the subrogee acquires no greater rights than those possessed by the subrogor, and . . . the subrogee may not be a ‘mere volunteer.’ ”

Regarding the first prong, the Supreme Court held that Esurance did not possess greater rights than Edwards, the subrogor, because Edwards, himself, could have claimed benefits from the MACP. This is because Esurance was not a priority insurer pursuant to the no-fault act’s former priority rules. Under the former priority rules, Edwards was required to first turn to either his own no-fault insurer or the no-fault insurer of a resident relative domiciled in the same household for his PIP benefits. Since there were no such insurers at the time of the collision, he would have next turned to the former MCL 500.3114(4)(a)-(b), which required him to turn first to the owner or registrant of the vehicle occupied, and next to the insurer of the operator of the vehicle occupied. It turned out that White was the owner of the vehicle, not Edwards-White, and since White also did not have no-fault insurance at the time of the collision, Esurance was not a priority insurer.

“Based on the allegations in its complaint, Esurance’s policy was not ‘applicable to the injury’ for purposes of MCL 500.3172(1)(a) because Esurance, whose policy was declared void ab initio after the accident, was not in the order of priority stated in MCL 500.3114(1) and (4)(a) through (b). MCL 500.3114(1) establishes a general rule that a person who sustains an accidental bodily injury in a motor vehicle accident must look first to no-fault insurance policies in his or her own household for no-fault benefits before looking to other insurers for benefits. Moreover, it is persons who are insured against loss, not vehicles; that is, no-fault coverage is tied to persons, not vehicles. At the time of the accident, Edwards did not have no-fault insurance, and he also was not a resident relative of someone who did, which means that he was not covered by the policy issued by Esurance under MCL 500.3114(1). We next turn to MCL 500.3114(4)(a), which provides that Edwards could recover from ‘[t]he insurer of the owner or registrant of the vehicle occupied’ in the accident. In this case, the vehicle was in fact owned by Anthony, regardless of the policy’s rescission, and Esurance was not his insurer, which means Esurance again was not in the order of priority. Finally, we turn to MCL 500.3114(4)(b), which provides that Edwards could recover from ‘[t]he insurer of the operator of the vehicle occupied’ in the accident. Again, the operator of the vehicle was Edwards, who, at the time, did not have no-fault insurance of his own and did not live with a resident relative who had no-fault insurance. Thus, Esurance’s complaint supports the conclusion that Edwards had a viable claim against defendants under MCL 500.3172(1)(a) because there was no policy ‘applicable to the injury’ under the foregoing order-of-priority analysis. As a result, Esurance’s equitable-subrogation claim, as pled by Esurance, can proceed.”

Regarding the second prong of the equitable subrogation analysis, the Supreme Court held that Esurance was not acting as a “mere volunteer” by paying Edwards’s PIP benefits initially. The Court held that a no-fault insurer does not act as a “mere volunteer” by promptly paying benefits that it has “ ‘an arguable duty’ ” to pay. Rather, the Court reasoned that this is precisely the way in which an insurer should proceed whenever a priority dispute arises: pay the benefits first, then sue the other insurer under a theory of equitable subrogation second. The Court further cited MCL 500.3142, MCL 600.6013 and MCL 500.3148 as statutes which incentivize no-fault insurers, like Esurance, to pay “pay promptly, [and] litigate later.” Moreover, the Court noted that,

“the purpose, logic, and incentive structure of Michigan’s no-fault regime all run contrary to the conclusion that Esurance was acting as a volunteer when it promptly complied with the no-fault act’s various payment-incentivizing provisions while at the same time doing so ‘in ignorance of the real state of facts’ and while laboring ‘under an erroneous impression of [its] legal duty.’” “It is helpful to contextualize this dispute in light of both the purpose of the no-fault act and the incentive structure that it puts in place for insurers like Esurance to pay a claimant’s PIP benefits in a timely fashion. The no-fault act is ‘a comprehensive scheme of compensation designed to provide sure and speedy recovery of certain economic losses resulting from motor vehicle accidents.’ For that reason, ‘whenever a priority question arises between two insurers, the preferred method of resolution is for one of the insurers to pay the claim and sue the other in an action of [equitable] subrogation.’ Accordingly, an insurer that pays a claim for which another may be liable has ‘an arguable duty’ to pay. Therefore, when an insurer does pay under those circumstances, it is merely ‘protecting its own interests and not acting as a volunteer,’ which ‘entitle[s] [it] to invoke the doctrine of equitable subrogation . . . .’ The notion that an insurer with an arguable duty to pay PIP benefits must do so promptly to protect its own interests, and that its doing so does not make it a volunteer, stems largely from the operation of three specific statutes, [MCL 500.3142, MCL 600.6013, and MCL 500.3148]. These statutes strongly incentivize insurers like Esurance to adhere to the no-fault act’s ‘pay promptly, litigate later’ logic. 

. . .

What emerges from these statutes is an axiom of both no-fault insurance law and practice: insurers like Esurance must pay PIP benefits to claimants promptly and sort out priority and reimbursement issues later. That axiom is actualized by the very real possibility that steep penalties will be assessed against an insurer that drags its feet in paying PIP benefits to claimants. Thus, the purpose, logic, and incentive structure of Michigan’s no-fault regime all run contrary to the conclusion that Esurance was acting as a volunteer when it promptly complied with the no-fault act’s various payment-incentivizing provisions while at the same time doing so ‘in ignorance of the real state of facts’ and while laboring ‘under an erroneous impression of [its] legal duty.’ Under these circumstances, Esurance had ‘an arguable duty’ to pay Edwards’s claim because Luana had represented that she owned the crashed vehicle, which, if true, would have rendered Esurance the highest-priority insurer under MCL 500.3114. But because Esurance was not in the order of priority, and it was operating under a mistaken understanding of both the facts and its legal duties, Esurance’s payments to Edwards were properly understood to be nonvoluntary, and equitable subrogation is thus available to it as a remedy.”

Justice Clement and Justice Viviano dissented, and in the dissenting opinion, authored by Justice Clement, she argued that the Supreme Court should merely have remanded to the trial court “to resume its consideration of the case from the point it left off when it (erroneously) granted summary disposition to the MACP [based on the negative implication canon, expression unius est exclusion alterius],” rather than reach issues she felt “need not [have been] address[ed].” In her estimation, the correct holdings in this case should have been as follows:

“(1) [T]he trial court’s expressio unius holding was erroneous, (2) whether Roshaun had a claim against defendants to which Esurance can be subrogated turns on whether Roshaun would have had a claim against defendants if the policy Esurance issued to Luana had been rescinded before Roshaun’s accident, and (3) rescission of the policy Esurance issued to Luana does not turn Esurance into an after-the-fact ‘volunteer’ such as to defeat this subrogation action.”

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