Michigan Supreme Court; Docket Nos. 97016 and 97032; Published
Unanimous opinion by Justice Cavanaugh; 6-0 (with Justice Weaver not Taking Part)
Official Michigan Reporter Citation: 448 Mich 22; Link to Opinion 
STATUTORY INDEXING:
Nature and Scope of PPI Benefits (Property Damage and Loss of Use) [§3121(1)]
General Rule of Priority [§3125]
Determination of Involved Vehicle [§3125]
TOPICAL INDEXING:
Legislative Purpose and Intent
CASE SUMMARY:
In this unanimous Opinion authored by Justice Cavanagh in two consolidated cases, the Michigan Supreme Court affirmed in part and reversed in part the Court of Appeals (Item No. 1602), and set forth a three part test to be satisfied in order for an insurer to be liable for property protection insurance benefits. Specifically, the Michigan Supreme Court held that for property protection benefits to be payable, the following factors must be met:
a. the property damage must "arise out of the use of the insured vehicle as a motor vehicle;"
b. no statutory exceptions to property protection liability apply; and
c. the insured vehicle must be "involved in the accident."
This case arose out of a multiple vehicle accident that left a building and its contents destroyed by fire. A thief had hot-wired a vehicle insured by Royal Insurance Company. The next morning, a Ferndale Police Officer spotted the stolen vehicle and began pursuit in his police car. The thief ran a red light, striking first a pickup truck insured by League General Insurance Company, and second, collided with a truck insured by Auto Club Insurance Association (ACIA). The second truck was split into two pieces by the impact, with the rear portion striking a building and exploding. The building and its contents were a total loss.
The owners and insurers of the destroyed building sought no-fault property protection insurance benefits from insurers of the pickup truck, the truck and the stolen vehicle. ACIA filed a third-party complaint against the City of Ferndale, contending that the City was liable for a pro rata share of the damages.
The Michigan Supreme Court held that the insurer of each vehicle liable for its pro rata share of the property protection insurance benefits, including the City of Ferndale, which satisfied the financial responsibility requirements by being self-insured for its police car involved in the matter. In reaching this conclusion, the court examined each of the three steps in detail with regard to each vehicle involved in the subject accident.
Addressing the first step of the three part test at issue, the court noted that §3121(1) requires that losses must arise out of the "use of a motor vehicle as a motor vehicle." The court previously examined this phrase in Thornton v Allstate Insurance Company, 425 Mich 643 (1986) (Item No. 935), a case involving personal protection insurance benefits. The court adopted the interpretation set forth in Thornton that there "must be a relationship between the injury and the vehicle's use as a motor vehicle" which is "more than incidental, fortuitous, or 'but for' and the vehicle's connection with the injury should be directly related to its character as a motor vehicle."
Applying the Thornton definition to the case at bar, the court held that the property damage arose from the use of all four vehicles connected to the accident. The court rejected the argument of ACIA that the truck it insured was not being used as a motor vehicle because it had split in two and was essentially a piece of wreckage at the time it struck the building. The court held that because the truck was being used as a motor vehicle at the initial moment of the accident, the first step under §3121(1) was satisfied. Likewise, the court rejected the argument of the insurers of the other vehicles that the building damage did not arise out of the use of those vehicles, because those vehicles did not actually strike the building. The court held that where one vehicle in a multi-vehicle accident causes the property damage, the insurers of the vehicles having some "physical connection to the accident'' are potentially liable as well, provided the other steps in the analysis are satisfied.
The court then examined the second step in the three-part test as to whether any of the exceptions to property protection insurance benefits under §3123 were present. Having found that none of the statutory exceptions were applicable, the court also addressed the arguments raised by the insurers, urging the court to create exceptions in addition to those provided by statute. However, the court found that there was no exception for property protection liability when the insured vehicle is being operated by a thief that would relieve Royal (the insurer of the stolen vehicle) of liability. Likewise, the court found that no exception existed for police vehicles being used in such a capacity, rejecting the argument of the City of Ferndale.
The court examined the third step of the analysis and held that a motor vehicle must "involved in the accident" as required by §3125. The court noted that this phrase can be equated with the standard of "arising out of the use of a motor vehicle as a motor vehicle," as that term is used in other sections of the no-fault act, but only in assessing whether a parked vehicle is involved in an accident. This was the situation in the earlier Supreme Court decision in Heard v State Farm. As to moving vehicle accidents, the court held that the analysis must go further, and interpreted the phrase "involved in the accident" at pages 18-19 of its slip opinion as follows:
"[W]e hold that for a vehicle to be considered 'involved in the accident' under §3125, the motor vehicle, being operated or used as a motor vehicle, must actively, as opposed to passively, contribute to the accident. Showing a mere 'but for* connection between the operation or use of the motor vehicle and the damage is not enough to establish that the vehicle is 'involved in the accident.' Moreover, physical contact is not required to establish that the vehicle was 'involved in the accident' nor is fault a relevant consideration in the determination of whether a vehicle is 'involved in the accident' Finally, as already indicated by our [prior] discussion... the concept of being 'involved in the accident' under §3125 encompasses a broader causal nexus between the use of the vehicle and the damage than what is required under §3121(1) to show that the damage arose out of the ownership, operation, maintenance, or use of the motor vehicle as a motor vehicle.
Applying the above test here, the court held that the stolen vehicle was "involved in the accident" because its use made an "active contribution" to the accident. Likewise, the use of the police vehicle perpetuated the flight by the driver of the stolen vehicle and therefore was "involved in the accident." There is no dispute that the two other trucks were "involved in the accident."
As each of the three steps in the analysis had been met, the court held that the insurer for the stolen car, the pickup truck and the truck, as well as the City of Ferndale, which was self-insured, were liable equally for their proportionate share of property protection insurance benefits.
Finally, the court addressed the argument of Royal that it should not be obligated to provide coverage, because the vehicle was stolen and not be operating by the person it had agreed to insure. The court rejected this argument because §3125 provides that property protection benefits are payable by the insurer of the owner or registrant of the vehicle involved in the accident and, unlike PIP benefits, where the coverage is triggered by injury to an insured person, liability for property protection benefits results from damage caused by an insured vehicle, regardless of who is operating the covered vehicle at the time the damage is incurred.
