Michigan Court of Appeals; Docket # 331612 and #333193; Published
Judges Markey, Murphy and Meter; Unanimous Opinion by Judge Murphy
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Nature and Scope of PPI Benefits (Property Damage and Loss of Use) [§3121(1)]
Requirement That Benefits Were Unreasonably Delayed or Denied [§3148(1)]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous published Opinion involving a vehicle that was damaged in a barn fire, the Court of Appeals held that summary disposition was properly granted for Hastings Mutual, the insurer of the barn, on its claim for reimbursement of no-fault property protection insurance benefits it had paid. Because the insured was in the farming business, and not the vehicle repair business, the Court held that the MCL 500.3121(1) “course of business” exception did not apply to exclude Grange Insurance, the no-fault insurer of the damaged vehicle, from liability.
A barn owned by Williams Farms, LLC, a family-operated farming business that grows vegetables, was destroyed in a fire. Ryan Keath, an employee of Williams Farms, regularly used the barn to perform repairs and maintenance on the farming vehicles, as well as the vehicles of family members. At the time of the fire, Keath was repairing his sister’s vehicle, which was destroyed in the blaze. Hastings Mutual, the insurer of Williams Farms’ real and personal property, paid $699,134 to cover the losses. Hastings Mutual then filed a claim for reimbursement from Grange, the no-fault insurer of the vehicle destroyed in the fire. Grange denied the claim and Hastings brought this action for reimbursement. The trial court granted summary disposition for Hastings, finding that Grange was liable for the property damage. The trial court specifically held that §3121(1) did not relieve Grange of liability, given that Williams Farms was not in the business of repairing, servicing or maintaining motor vehicles, pursuant to the language of §3121(1), which says: “Under property protection insurance an insurer is liable to pay benefits for accidental damage to tangible property arising out of the ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle subject to the provisions of this section and sections 3123, 3125, and 3127. However, accidental damage to tangible property does not include accidental damage to tangible property, other than the insured motor vehicle, that occurs within the course of a business of repairing, servicing, or otherwise maintaining motor vehicles.”
The Court of Appeals affirmed, agreeing that the course-of-business exception in §3121(1) did not apply to relieve Grange of liability. In so finding, the Court pointed out the parties disputed whether vehicle repairs performed by Keath, a salaried employee of Williams Farms, a business with the primary purpose of farming, qualified under the §3121(1) course-of-business exception. Analyzing this issue, the Court noted the Michigan Supreme Court has ruled that a “business” includes a person engaged in a service, activity or enterprise for benefit, gain, advantage or livelihood, and that “course of business” is defined in Black’s Law Dictionary as the “normal routine in managing a trade or business.” Looking to these definitions, the Court of Appeals said that §3121(1)’s exception:
“is meant to exclude property damage where the purpose of the business in question is to provide maintenance and repair services for motor vehicles — and not meant to cover just any business that peripherally participates in these activities or any person that performs these activities.”
Accordingly, while Williams Farms benefited from having vehicle repairs done in-house, its enterprise for gain, advantage and livelihood was focused on farming, not the repair, maintenance and servicing of vehicles, the Court of Appeals explained. As such, the Court said that Williams Farms was a farming business, not an automotive-repair business, and therefore was not in the business of repairing, servicing or otherwise maintaining vehicles.
The Court of Appeals further said its decision was consistent with its prior ruling in Allied Property & Casualty Ins Co v Pioneer State Mutual Ins Co, 272 Mich App 444 (2006), where the appellate panel held that a no-fault insurer was not liable when property damage resulted from a fire caused by an unlicensed mechanic operating out of his father’s home garage.
Based on the foregoing, the Court of Appeals held:
“MCL 500.3121(1)’s exception applies only to vehicle-repair businesses, which Williams Farms is not. Williams Farms primary business enterprise is farming and, although Keath performs services for the farm’s benefit with tools provided by the farm, there are no regular outside customers or a fixed price list that would indicate that the farm also operates a vehicle-repair business. Accordingly, MCL 500.3121(1) does not exclude Grange from liability for the damage, and the trial court properly rejected Grange’s motion for summary disposition and soundly awarded summary disposition to Hastings.”
Next, the Court of Appeals rejected Hastings Mutual’s argument that Grange’s denial of the claim was unreasonable and, therefore, it was entitled to attorney fees under MCL 500.3148(1). The Court stated:
“Grange, relying on the opinion of its counsel as well as the opinion of outside counsel, believed that it was excluded from liability under MCL 500.3121(1), and thus denied the claim for property protection benefits. Although we hold that Grange is not excluded from liability under MCL 500.3121(1), this does not necessarily mean … that Grange acted unreasonably in refusing to pay Hastings’ claim. Although we believe it to be a close call, given the dearth of pertinent caselaw construing MCL 500.3121(1) and the factual circumstances of the case, we conclude that there existed ‘a legitimate question of statutory construction.’ … Accordingly, we affirm the trial court’s ruling on the issue.”
