Michigan Court of Appeals; Docket # 340930; Unpublished
Judges Murray, Riordan, and Cameron; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous unpublished per curiam decision regarding a third-party complaint seeking reimbursement for PIP benefits paid, the Court of Appeals determined that a contractual agreement between the City of Detroit and a garbage collection company, requiring the company to indemnify the City for losses caused by the company’s drivers’ negligence, was unenforceable under the no-fault act. The garbage collection company could not be required to reimburse the City for PIP benefits it paid to an individual who was injured while traveling on a City bus, as a result of a collision between the City bus and one of the garbage collection company’s vehicles.
The City of Detroit entered into a contract with GFL Environmental USA, Inc. for garbage collection services, and shortly thereafter, a GFL driver struck a City-owned bus, injuring one of its passengers. The City, a self-insured entity under the no-fault act, eventually paid PIP benefits to the injured passenger, but sought reimbursement from GFL under the language of the contract. The City then filed a complaint against GFL, alleging:
(1) indemnification from GFL because the City’s obligation to pay no-fault benefits arose out of the negligence of GFL’s driver who caused the accident by his negligent conduct; (2) contribution from GFL because GFL breached a duty to operate its vehicle in a safe and reasonable manner; and (3) breach of contract by failing to indemnify and defend the city. GFL moved the trial court to summarily dispose of the City’s third-party complaint pursuant to MCR 2.116(C)(8), arguing that the City was improperly attempting to avoid liability under the no-fault act. GFL contends that the no-fault statutory scheme does not allow for the City to do so, and that permitting the City to recover pursuant to the services contract would violate the public policy upon which the no-fault act was based.
The trial court granted summary disposition for the City, arguing that the City was entitled to indemnification under the terms of the contract. The Court of Appeals reversed, recognizing first that “the services contract cannot be interpreted as an attempt to shift the GFL into the position of the primary no-fault insurer in this case, as such a contractual shift in priority is void because the City, as the owner of the bus, cannot abdicate its responsibility to pay primary PIP benefits in accordance with the no-fault act.” Since the City had already paid PIP benefits to the injured passenger on its bus, however, “no impermissible shift in priority occurred through the contract.”
The Court also determined that that the indemnification clause in the City’s agreement with GFL was unenforceable under the no-fault act. GFL, therefore, could not be required to reimburse the City for PIP benefits it paid to the injured bus passenger, even though the passenger’s injuries resulted from an accident caused by the negligence of GFL’s employee.
We conclude that the text of the no-fault statute provides the only way for shifting the costs of mandatory PIP coverage after payment is made, and because the private indemnification agreement used in this case is not anticipated by the act, it is unenforceable.
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Although there is no provision expressly prohibiting an insurer from contracting away the cost of its obligation to provide mandatory PIP benefits, this Court has recognized the comprehensive nature of the no-fault act. Citizens Ins Co of Am v Buck, 216 Mich App 217, 223; 548 NW2d 680, 684 (1996) (“The no-fault act provides a comprehensive scheme for payment, as well as recovery, of certain “no-fault” benefits, including personal protection insurance benefits.”). This comprehensive scheme provides limited avenues for insurers, like the City, to recover the costs incurred from paying PIP benefits.
The Michigan Catastrophic Claims Association (MCCA), is one avenue available. The MCCA is a statutorily created organization of all insurers who provide no-fault insurance in Michigan. MCL 500.3104. The MCCA is required to reimburse member companies for the amount of PIP losses they incur in excess of a certain dollar amount per claim (i.e., “catastrophic claims”). To fund its statutory indemnification obligations, the MCCA assesses premiums on member companies in relation to the number of no-fault policies each member writes in Michigan. Insurers then pass these assessments along to their Michigan policyholders.2 For uninsured Michigan automobile accident victims, the Michigan Assigned Claims Plan (MACP) assigns claims to insurers for payment of no-fault benefits, and insurers pass on these costs to policyholders through increased premiums. MCL 500.3171-3172; MCL 500.3385. Finally, MCL 500.3116 permits insurers to recover the cost of PIP benefits by exerting a lien on tort recovery in certain limited circumstances. These statutory provisions represent the only way permitted by the no-fault act for shifting costs after PIP benefits have been paid to the injured party. By negative implication of these provisions, other reimbursement mechanisms are prohibited.