Michigan Court of Appeals; Docket #355841; Unpublished
Judges Borrello, Jansen, and Murray; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
Ways to Provide Required Security [§3101(3) + 3101(4)]
Nature and Scope of PPI Benefits (Property Damage and Loss of Use) [§3121(1)]
PPI Benefits Not Payable for Loss Related to Commercial Business [§3121(1)]
Entitlement to PIP Benefits: Transportational Function Requirement [§3105(1)]
Limitations Period for PPI Claims [§3145(2)]
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition orders dismissing Plaintiff Pete’s Auto and Truck Parts, Inc.’s (“Pete’s”) first-party action for no-fault property protection (“PPI”) benefits against Defendant Fremont Insurance Company (“Fremont”), as well as Pete’s third-party negligence action against Defendants Greg Hibbitts Transport Company and Stewart TRK, LLC (“GHTC” and “Stewart,” respectively, individually; “the Hibbitts defendants,” collectively). The building Pete’s leased for its business operations was damaged after the engine of a semi-truck, owned by the Hibbitts defendants and insured by Fremont, caught fire while parked outside of it. The Court of Appeals held, first, that Pete’s property damages arose out of the use of a motor vehicle as a motor vehicle and that Pete’s tort claims against the Hibbitts defendants, therefore, were properly dismissed pursuant to MCL 500.3135(3). In so holding, the Court of Appeals applied Dye v Esurance Prop & Cas Ins Co, 504 Mich 167 (2019) retroactively to find that GHTC—the registered owner of the truck in question—maintained no-fault security on the truck for purposes of MCL 500.3101(1), even though the named insured on the policy which covered the truck was “Stewart Trucking, LLC,” a different entity owned by GHTC’s owner. As for Pete’s PPI claim against Fremont, the Court of Appeals held that Pete's failed to file suit within one year of the accident and that his action was therefore barred by MCL 500.3145(5).
On October 13, 2017, the engine of a semi-truck owned by GHTC—one of Greg Hibbitts’ numerous businesses—caught fire while parked illegally outside a building leased by Pete’s, and Pete’s business burned down. Although the truck was owned by GHTC, GHTC filed a certificate of dissolution in—and had been winding up its business since—2011, and thus the truck was insured under a policy issued by Fremont to another of Hibbitts’s companies, Stewart TRK, LLC (although the named insured on the Fremont policy was mistakenly listed as “Stewart Trucking, LLC”).
In November of 2017, a fire investigation undertaken by an independent entity concluded that the fire was a result of an ‘electrical failure’ in the truck’s engine compartment. Pete’s counsel then contacted Fremont, and a Fremont adjuster informed Pete’s that ‘liability would not be an issue,’ and that Fremont would provide coverage under its policy.
In May of 2018, Pete’s sent two demand letters to Fremont, and Fremont informed Pete’s that it had retained an adjusting company to adjust Pete’s claim. In July of 2018, Pete’s sent the two demand letters to the adjusting company and also filed a general negligence action against GHTC and Stewart TRK, LLC. Pete’s did not name Fremont in its initial lawsuit, as Pete’s counsel “reviewed the no-fault act and concluded that it did not apply to this case” and “believed that Fremont was processing the claim as a general liability or fire claim.” The Hibbitts defendants proceeded to file motions for summary disposition, arguing that Pete’s property damages arose out of the use of a motor vehicle as a motor vehicle and that, since the no-fault act abolished tort liability for property damage arising out of the use of a motor vehicle as a motor vehicle, they were entitled to dismissal of Pete’s tort claims against them. In response, Pete’s characterized his claim as a casualty claim and argued that the no-fault act did not apply because Pete’s was in the “business of repairing, servicing, or otherwise maintaining motor vehicles” for purposes of MCL 500.3121. Alternatively, Pete’s argued that even if the no-fault act did apply, it was inapplicable because GHTC did not personally maintain no-fault insurance on the truck, as is required by MCL 500.3101(1). Additionally, Pete’s moved for leave to amend its complaint to add Fremont as an alternate defendant.
The trial court granted Pete’s motion to amend its complaint and denied the Hibbitts defendants’ motions for summary disposition. Pete’s did add Fremont as a defendant in 2019, after which all defendants moved for summary disposition. This time, the trial court dismissed all of Pete’s claims against all defendants, ruling that Pete’s claim was governed by the no-fault act and that its claims against Fremont were barred by the statute of limitations for property damage claims, set forth in MCL 500.3145(1).
The Court of Appeals affirmed the trial court’s summary disposition orders, first rejecting Pete’s argument that the no-fault act did not apply to this case because GHTC, as the owner of the truck, was required to personally maintain the security required by MCL 500.3101(1) thereon and failed to do so. The Court of Appeals held that, under Dye—which the Court applied retroactively—GHTC needed only ensure that no-fault insurance was maintained on the truck; GHTC did not have to personally maintain insurance on the truck. Thus, the Hibbitts defendants satisfied their obligations under MCL 500.3101(1) by insuring the truck under the Fremont policy issued to Stewart TRK, LLC.
“As applied here, under Dye GHTC, as the truck’s owner could fulfill its obligation to maintain insurance under MCL 500.3101(1) by having another person or entity maintain insurance. Plaintiffs, however, offer a long list of arguments why Dye should not apply and why the Fremont policy should not be held to satisfy MCL 500.3101(1) or to result in the abolition of tort liability under MCL 500.3135(3).”
The Court decided that Dye should be applied retroactively in light of ‘the general rule . . . that judicial decisions are given retroactive effect,’ unless the decision ‘overrule[s] clear and uncontradicted case law.’ Dye did not overrule clear and uncontradicted case law: it reaffirmed existing case law set forth in Iqbal v Bristol West Ins Group, 278 Mich App 31 (2008), by rejecting a subsequent misinterpretation of Iqbal by Barnes v Farmers Ins Exch, 308 Mich App 1 (2014).
“Plaintiffs’ retroactivity argument fails because, for purposes of the threshold question in Pohutski, Dye did not overrule clear past precedent or clearly establish a new principle of law, given that Barnes did not accord with the statutory language and that it was not uncontradicted insofar as it conflicted with this Court’s earlier decision in Iqbal. In other words, rather than announcing a new rule, Dye simply ‘reaffirmed the existing law, which was misinterpreted by the Court of Appeals’ in Barnes. See Mich Edu Employees Mut Ins Co, 460 Mich at 192. That Dye was intended to reaffirm the existing law—as stated in the statutory language and recognized in Iqbal—is apparent from the discussion of Barnes and Iqbal in
Dye . . .
Given the plain language of the statute and the tension between Barnes and Iqbal, Dye was not unforeseeable and did not announce a new principle of law by overruling clear past precedent. See Mich Ed Employees Mut Ins Co, 460 Mich at 192-197. Instead, the Dye Court adhered to the plain language of the no-fault act—and reaffirmed the holding in Iqbal. Because Dye did not clearly establish a new principle of law, it does not satisfy Pohutski’s threshold question and should be applied retroactively. . . . ”
The Court of Appeals next rejected Pete’s argument that Dye “should be limited to cases involving PIP benefits and not be extended to cases involving [PPI] benefits.” The Court of Appeals characterized Dye’s primary focus as being about MCL 500.3101(1) and what constitutes maintenance of insurance thereunder. The Court then noted that MCL 500.3101(1) explicitly requires maintenance of both “personal protection insurance and property protection insurance,” and that there is “no statutory basis for concluding that Dye should only apply to PIP benefits or that some higher or different standard is required for an owner to ‘maintain’ property protection insurance.” The Court went on to say:
“Further, like the PIP disqualifier in MCL 500.3113(b), the abolition of tort liability in MCL 500.3135(3) also depends on whether ‘the security required by [MCL 500.3101(1)] was in effect.’ Given that the PIP disqualifier in MCL 500.3113(b) and the abolition of tort liability both turn on whether the security required by MCL 500.3101(1) was in effect, there is again no basis in the no-fault act for imposing different requirements for maintaining insurance for purposes of PIP benefits as compared to determining whether tort liability—including tort liability for property damages—has been abolished under MCL 500.3135(3).”
The Court of Appeals next rejected Pete’s argument that GHTC lacked the ability to even maintain insurance because “maintaining insurance is not among the activities a corporation may engage in while winding up and that, in any event, GHTC should have finished the winding-up process long ago.” The Court held that “contrary to plaintiffs’ arguments, the activities that a corporation may engage in while winding-up include actions to preserve and protect assets, such as maintaining insurance.” As for Pete’s objection to the amount of time it took GHTC to wind up its business, Pete’s offered no authority “to support that failing to complete the winding-up process in a reasonable time would invalidate this insurance policy.” Lastly, the Court noted that GHTC’s assets—e.g. the truck—would have passed to its sole shareholder, Hibbitts, upon dissolution, and that Hibbitts, again, continued to maintain security on the truck through Stewart TRK, LLC.
“Notably, part of a dissolved corporation’s power to hold assets necessarily includes the authority to take steps to preserve its assets while winding up. See Kay Furniture Co v Rovin, 312 Mich 290, 294; 20 NW2d 194 (1945) (concluding that a corporation’s renewal of a lease was not improper continuation of business affairs but simply ‘perpetuat[ing] and thereby conserv[ing] a potential asset’); 16A Fletcher Cyclopedia, Corporations 8134 (‘A dissolved corporation may take any necessary action to preserve its assets during the winding up process.’). In this context, the corporation may, for example, pay obligations associated with holding property, such as property taxes. See Kay Furniture Co, 312 Mich at 295. And, to preserve and protect assets, a corporation may also ‘contract to insure its property against fire and other hazards . . . .’ 16A Fletcher Cyclopedia, Corporations 8134. In short, contrary to plaintiffs’ arguments, the activities that a corporation may engage in while winding-up include actions to preserve and protect assets, such as maintaining insurance.
Even if maintaining insurance can be construed as part of winding up a corporation, plaintiffs note that winding-up must be completed in a ‘reasonable time,’ and GHTC failed to complete its activities in a reasonable time. There are several flaws in plaintiffs’ argument. First, plaintiffs fail to explain the significance of GHTC’s protracted winding up; that is, plaintiffs fail to cite any authority regarding the effects of failing to complete the winding-up process in a reasonable time. Plaintiffs certainly offer no authority to support that failing to complete the winding-up process in a reasonable time would invalidate this insurance policy. Second, in addressing the effect of GHTC’s dissolved status in the context of whether GHTC or someone else could ‘maintain’ insurance, the trial court specifically relied on Flint Cold Storage to conclude that, following dissolution, GHTC’s assets would have passed to its sole shareholder—namely, Hibbitts—and that Hibbitts, as an individual, would then be seen to have maintained insurance as the truck’s owner. . . . ”
The Court of Appeals next rejected Pete’s argument that none of the Hibbitts defendants actually maintained insurance on the truck at all, given that the named insured on the Fremont policy was “Stewart Trucking, LLC,” which was not the name of any of Hibbitts’s businesses. The Court held that “[a]lthough the policy incorrectly used the word ‘Trucking’ instead of ‘TRK,’ this variance is immaterial considering the context in which the insurance was obtained and the other language in the policy,’ that context being:
“ . . . Hibbitts, not anyone associated with Stewart Trucking, LLC, obtained the insurance. Hibbitts provided his own personal information when obtaining the policy, and the policy—particularly in light of the reference to Beline Trans, LLC—was clearly intended for the entity associated with Hibbitts and Beline, namely: Stewart TRK. On these facts, any error in the spelling of Stewart TRK is immaterial.”
The Court of Appeals next rejected Pete’s argument that the Fremont policy could not have provided coverage for the truck because, by its express terms, it only provided coverage for vehicles owned by the named insured. Specifically, the policy provided that coverage applied to ‘[o]nly those ‘autos’ you own that are required to have no-fault benefits in the state where they are licensed or principally garaged’ (the policy provided that ‘the words ‘you’ and ‘your’ refer to the Named Insured shown in in the Declarations’). The Court of Appeals held that while this language “purport[ed] to limit coverage to autos owned by the named insured,’ the parties made it clear in the declarations page and throughout the policy, as a whole, that it was their intention to cover the truck. Put another way, the parties reached “their own understanding and agreement regarding what vehicles the named insured ‘owned’ for purposes of the policy,” which the Court deemed perfectly acceptable.
“Notably, although the number 5 designation purports to limit coverage to autos owned by the named insured, the policy does not define what it means to ‘own’ an auto. Absent a definition specific to the policy, contract terms are typically ‘given their commonly used meaning.’ Group Ins Co of Mich v Czopek, 440 Mich 590, 596; 489 NW2d 444 (1992). However, contracts must be read as a whole, and in particular, the declarations page, the application, and the policy itself must be construed together to determine the parties’ intent. Dancey v Travelers Prop Cas Co, 288 Mich App 1, 8; 792 NW2d 372 (2010).
In the endorsement declaration, the parties to the policy included a section labeled: ‘Item Three – Schedule of Covered Autos You Own.’ (Emphasis added). Under a heading of ‘Covered autos you own’ (emphasis added), this schedule lists various vehicles and the applicable coverages. Item Three specifically includes the truck at issue as one that the named insured owns, and it specifies that the coverages for the truck include property protection insurance.
Reading Item Three in harmony with the explanation for numerical designation 5, the contract as a whole evinces the parties’ agreement that the truck was a covered auto owned by the named insured for purposes of the policy. The contracting parties were free to reach their own understanding and agreement regarding what vehicles the named insured “owned” for purposes of the policy, which they did with the adoption of Item Three. Further, there is no question that the truck is required to maintain no-fault insurance. In these circumstances, the truck falls squarely in the parameters set forth for number ‘5,’ meaning that the truck is covered for property protection insurance under Item Two. Confirming this fact, as noted, Item Three details the coverages applicable to the truck, and this list of coverages for the truck specifically includes property protection insurance. Reading the contract as a whole, the Fremont policy included the truck in question as a covered auto with property protection insurance. Plaintiffs’ arguments to the contrary lack merit.”
The Court of Appeals next rejected Pete’s argument that the policy was void as a result of the Hibbitts defendant’s fraud in procuring it—specifically, their “corporate shenanigans and misrepresent[ation of] the owner of the truck when obtaining insurance.” The Court held that Pete’s was a nonparty to the contract and therefore had no right to invoke the fraud provision in the policy. That right belonged exclusively to Fremont, which did not exercise it.
“Based on these principles, even assuming some fraud by the Hibbitts defendants in the procurement of the policy, it would be Fremont’s option, as the insurer and the wronged party, whether to seek rescission of the policy. See Bazzi, 502 Mich at 408-409. At the same time, Fremont would also have the option to elect to affirm the contract; and unless rescinded, the policy remains binding. See id.; 27 Williston on Contracts 69:56 (4th ed.). In contrast, plaintiffs—as nonparties to the contract who were not defrauded by the Hibbitts defendants’ representations made long before the events in this case—have no right to seek rescission of the policy to which they were not a party. . . .
In addition, plaintiffs have no more right to attempt to invoke the fraud provision in the contract than they have to standing to claim fraud as a basis to void the contract under the common law. ‘A nonparty to a contract has the right to enforce a promise in a contract where that promise is made for its benefit.’ Cenovski, Inc v Mich Mut Ins Co, 200 Mich App 725, 728; 504 NW2d 722 (1993) (emphasis added). The provision regarding voiding the policy on the basis of the insured’s fraudulent misrepresentations is designed to benefit and protect Fremont, not plaintiffs.7 Moreover, although plaintiffs contend that the fraud provision is ‘self-effectuating,’ such an assertion ignores the fundamental freedom of the contract and the fact that parties are always free to modify their agreement. Quality Prods & Concepts Co v Nagel Precision, Inc, 469 Mich 362, 372; 666 NW2d 251 (2003). Plaintiffs, as nonparties to the agreement, have no right to seek enforcement of this fraud provision when the parties have not elected to do so. See Cenovski, Inc, 200 Mich App at 728.”
The Court of Appeals next held that Pete’s property damage did arise out of the use of a motor vehicle as a motor vehicle, and since the no-fault act abolished tort liability for property damage arising out of the use of a motor vehicle as a motor vehicle, except in limited circumstances which did not apply in this case, Pete’s could not proceed with its tort claim against the Hibbitts defendants. In so holding, the Court relied on the Supreme Court’s analysis in Kemp v Farm Bureau Gen Ins Co of Mich, 500 Mich 245 (2017), in which the Supreme Court established the following consideration for determining whether injuries caused by a parked vehicle could be said to have arisen out of the “use of a motor vehicle as a motor vehicle”: whether, ‘although the vehicle is parked, its involvement in [the] accident is nonetheless directly related to its character as a motor vehicle.’ In this case, the Court held that the truck’s involvement in the fire was directly related to its character as a motor vehicle, because “the fire arose from the engine compartment of the truck, a component integral to the transportational function of the truck as a motor vehicle.”
“The undisputed facts indicate that the truck was used for transportational purposes—to haul trash for Waste Management. See Kemp, 500 Mich at 259-260. It was used for this purpose on the day of the fire and parked near plaintiffs’ building shortly before the fire. Further, the truck’s function appears to be solely transportational, as this was not a dual-purpose vehicle like those discussed in McKenzie that served some other, nontransportational purpose such as ‘a housing facility, advertising display, construction equipment base, public library, or museum display.’ See McKenzie, 458 Mich at 219. Although the truck was parked at the time of the fire, its role in the accident was not akin to a mere stationary object such as a tree or a wall. Instead, the fire arose from the engine compartment of the truck, a component integral to the transportational function of the truck as a motor vehicle. See Cincinnati Ins Co, 209 Mich App at 382; see also Mich Mut Ins Co v CNA Ins Companies, 181 Mich App 376, 379, 381-382; 448 NW2d 854 (1989). This sort of spontaneous fire in a vehicle falls within the coverage provided by MCL 500.3121(1). . . . ”
Lastly, with respect to the Hibbitts defendants, the Court of Appeals rejected Pete’s argument that the no-fault act did not apply to this case because the truck was being used ‘within the course of a business of repairing, servicing, or otherwise maintaining motor vehicles,’ for purposes of MCL 500.3121(1). The Court of Appeals held that while Hibbitt’s businesses did employ in-house repair departments for their trucks, those “repairs and maintenance activities [were] peripheral to the primary trucking-business purposes of the Hibbitts defendants,” and thus the exception in MCL 500.3121(1) did not apply.
“Here, the undisputed facts demonstrate that the Hibbitts defendants’ primary business enterprise is trucking. Certainly, Hibbitts and his entities benefit from the provision of in-house repairs on the trucks. But these repairs and maintenance activities are peripheral to the primary trucking-business purposes of the Hibbitts defendants. Further, the work is limited to the Hibbitts defendants’ trucks, as there was no evidence of outside customers or a fixed price list for services. On the evidence presented, no material questions of fact remained, and the trial court did not err by concluding that the vehicle-repair exception did not apply.”
The Court of Appeals next turned to Pete’s first-party PPI claim against Fremont, noting, preliminarily, that under MCL 500.3145(5), “A claim involving property protection benefits under the no-fault act ‘may not be commenced later than 1 year after the accident.’ ” In this case, Pete’s did not amend its complaint to add its PPI claim against Fremont until two years after the fire, and thus its claim was barred by the statute of limitations. In that regard, the Court held, first, that Pete’s amended complaint did not relate back to the filing of date of its original complaint because “the relation-back doctrine does not apply to the addition of new parties.” The Court held, second, that Pete’s claim against Fremont was not tolled under MCL 600.5855 because Fremont did not fraudulently conceal the existence of Pete’s PPI claim against it. Pete’s conducted an investigation within one year of the fire which should have made it clear to it that it had a PPI claim against Fremont, and Fremont never denied liability.
“Here, there is no dispute that the fire originated from a truck, i.e., a motor vehicle, and that the fire originated from the truck had been known to plaintiffs since at least November 2017, when the fire investigation report was issued. Viewed objectively, the fact that a motor vehicle caused their property damages should have put plaintiffs on notice that they had a possible claim for property protection benefits under the no-fault act. Certainly, the nature of the claim was not concealed from them. Further, just days after the fire, Hibbitts told plaintiffs that he was insured through Fremont, and Fremont never denied that fact. In other words, nothing was done to conceal Fremont’s identity as a defendant possibly liable for plaintiff’s damages.
Moreover, Visser’s deposition testimony makes it abundantly clear that plaintiffs investigated—and thus were clearly aware of—the possibility of a claim specifically under the no-fault act. Having actually investigated and rejected a possible cause of action under the no-fault act, it is disingenuous to now claim that Fremont somehow prevented plaintiffs from learning of a possible no-fault claim for property protection benefits. MCL 600.5855 does not apply merely because plaintiffs chose not to pursue a possible claim of which they were clearly aware. See Prentis Family Found, 266 Mich App at 45 n 2.”
Lastly, the Court held that Fremont should not be equitably estopped from raising the statute of limitations to bar Pete’s claim because Fremont did nothing to preclude Pete’s from filing its lawsuit against Fremont within one year of the fire. To the contrary, the outside adjuster Fremont employed to adjust Pete’s PPI claim told Pete’s it ‘might as well file suit’ after receiving Pete’s two demand letters in July of 2018.
“Plaintiffs’ equitable-estoppel argument fails for the simple reason that, through Bowne, Fremont informed plaintiffs’ counsel on August 14, 2018—two months before the limitations period expired—that Fremont would not be making payment and that Fremont’s damage estimate was not even close to plaintiffs’ demands. Bowne even specifically told Visser that plaintiffs ‘might as well file suit.’ Plaintiffs indeed presented evidence that, before this denial, Fremont stated that it would cover the claim, subject to proper documentation, and there were discussions of payment between Fremont and plaintiffs’ counsel. But the fact nevertheless remains that, after Fremont told them to ‘file suit,’ plaintiffs still had two months in which to file suit against Fremont before the period of limitations expired. On this record, no reasonable juror could conclude that Fremont’s conduct could have lulled plaintiffs into believing that their claim would be honored after the statutory period, nor that plaintiffs were left ‘with no alternative but to file its action after the statutory period.’ Cf. id. Equitable estoppel does not apply to these facts. See id.”