State Farm Mutual Automobile Ins Co v Michigan Municipal Risk Management Authority; (COA-UNP, 2/19/2015; RB #3412)


Michigan Court of Appeals; Docket #319709; #319710; Unpublished  
Judges Riordan, Murphy, and Boonstra; Unanimous; Per Curiam  
Official Michigan Reporter Citation: Not Applicable; Link to Opinion alt
On 9/9/2015, the Michigan Supreme Court denied leave to appeal; Link to Order alt

Exception for Motorcycle Injuries [§3114(5)]
Determination of Involved Vehicle [§3125]

Not Applicable 

In this unanimous unpublished per curiam Opinion involving a priority dispute among various insurers, the Court of Appeals held:

1) QBE Insurance was estopped from asserting fraud and rescinding its policy because the claimant was an innocent third party, and

2) the trial court erred in finding that a police vehicle was not “involved” in the accident within the meaning of MCL 500.3114(5), even though the vehicle had no physical contact with the injured driver.

The accident in this case occurred when William Johnson ran a red light in his Grand Prix while being pursued by the police, striking Martin Bongers, who was riding a motorcycle. State Farm insured Bongers’ personal vehicle, but did not insure the motorcycle. Although the Grand Prix was titled and registered to Whitney Gray, Johnson’s girlfriend, it was uninsured. QBE Insurance (QBE) insured an Oldsmobile Cutlass driven by Gray, which was titled and registered to another person named Tina Poole. The QBE policy on the Cutlass listed Gray as the named insured, and QBE claimed it did not know that Poole was listed as the Cutlass’s title and registered owner. Meanwhile, Michigan Municipal Risk Management Authority (Michigan Municipal) insured the police vehicle, a Toyota Prius, driven by Officer Anson. The insurers disputed which had priority for paying PIP benefits to Bongers.

QBE moved for summary disposition, seeking a declaration that it was entitled to rescission of the Cutlass policy on the grounds of fraud. QBE claimed the Cutlass was not registered to Gray nor owned by her, and it would not have issued the policy had it known this. State Farm and Michigan Municipal disputed whether the Prius driven by the officer was “involved” in the accident because there was no physical contact between the motorcycle and the Prius, and State Farm moved for summary disposition on this issue.

The trial court denied QBE’s summary disposition motion, finding that Gray owned the Cutlass and no-fault coverage could not be rescinded as to an innocent third-party. The trial court also denied State Farm’s summary disposition motion, finding that issues remained about whether the police vehicle was involved in the accident.

QBE and State Farm both appealed, and the cases were consolidated. On appeal, QBE argued the innocent third-party rule was abrogated by the Michigan Supreme Court in Titan Ins Co v Hyten, 491 Mich 547 (2012). Meanwhile, State Farm argued the trial court erred in finding the police vehicle was not involved in the accident under §3114(5), and that Michigan Municipal had a higher priority to pay benefits.

Innocent Third-Party Rule

The Court of Appeals rejected QBE’s claim that the innocent third-party rule was abrogated by Titan.

In so holding, the Court of Appeals relied primarily on Katinsky v Auto Club Ins Ass’n, 201 Mich App 167 (1993), for the proposition that an insurer is estopped from asserting fraud and rescinding a contract as it applies to an innocent third party.

In this regard, the Court of Appeals pointed out that Bongers’ entitlement to PIP benefits was statutory, not contractual. The court said:

“The insurer in Titan did not seek to avoid payment of statutorily mandated no-fault benefits; in fact, that insurer acknowledged its liability for the minimum liability coverage limits. ... Nor did Titan address a claim for PIP benefits from an innocent third party. Thus, the holding of Titan, that an insurance carrier may seek reformation to avoid liability for contractual amounts in excess of statutory minimums, does not compel a finding that Titan overruled the many binding decisions of this Court applying the ‘innocent third-party rule’ in the context of PIP benefits and an injured third party who is statutorily entitled to such benefits. … QBE has provided this Court with no authority for the proposition that Titan overruled these decisions. We therefore affirm the trial court’s denial of summary disposition … relative to the ‘innocent third-party rule.’”

Accordingly, the Court of Appeals affirmed the trial court’s denial of summary disposition for QBE.
“Involvement” of Police Vehicle

The Court of Appeals agreed with State Farm that the police vehicle (Prius) was “involved” in the accident within the meaning of §3114(5). In so holding, the court looked to Turner v Auto Club Ins Ass’n, 448 Mich 22 (1995), for guidance, noting Turner had similar facts and circumstances as the present case.

Relying on Turner, the Court of Appeals said:

“Anson’s use of his [police] vehicle … ‘prompted [Johnson] to ignore the red light and collide with the other vehicle[].’ … Even viewing the evidence in the light most favorable to MMRMA, … there exists no material basis to distinguish this case from Turner. Nor is this Court at liberty to find that Turner was wrongly decided. … Nor would finding for defendant be as simple as ignoring Turner (which in any event neither the trial court nor this Court can do), as the test for vehicular involvement in Turner is based upon and comports with numerous other decisions of this Court that considered the meaning of the phrase ‘involved in the accident.’”

Therefore, the Court of Appeals reversed and remanded for entry of summary disposition in State Farm’s favor.