Michigan Court of Appeals; Docket Nos. 160363 and 160375; Published
Judges Reilly, Corrigan, and Jason; Unanimous; Opinion by Judge Reilly
Official Michigan Reporter Citation: 207 Mich App 422; Link to Opinion 
STATUTORY INDEXING:
Rental Car Company Liability Insurance Obligations [§3131]
Liability Policy Exclusions for Owned and Non-Owned Vehicles [§3131]
TOPICAL INDEXING:
Leased / Rented Vehicles
CASE SUMMARY:
In this unanimous published Opinion by Judge Reilly, the Court of Appeals revisited the issue of priority of residual liability coverages where the insured is operating a rental vehicle and has selected a contractual option with the rental company providing that the insured's no-fault insurer is the primary insurer with regard to a personal injury lawsuit resulting from the vehicle operator's involvement in an accident with a vehicle rented from the leasing company.
In affirming the validity of such contractual provisions, the Court of Appeals followed its previous holding in State Farm Mutual Automobile Insurance Company v Snappy Car Rental, Inc., 196 Mich App 143 (1992), which held that the option clause was not void because it does not seek to avoid coverage, but rather, establishes the priority of coverage for the injured party.
In this case, Enterprise leased an automobile to Sako, who exercised an option under his leasing contract which provided that no-fault coverage for the rental car would be provided by the renter or the renter's existing no-fault insurer. State Farm, the no-fault insurer, contended that Enterprise Leasing, as the owner of the vehicle, was responsible for the primary coverage on the vehicle, due to the policy language in State Farm's no-fault policy which provides that where there is "other similar liability coverage" on the temporary substitute car, then State Farm's coverage is excess. State Farm also contended that its coverage does not apply to the rental vehicle, because Enterprise is in the business of leasing automobiles, and State Farm's policy excludes coverage if the vehicle is owned by any person or organization in a car business.
In rejecting these arguments, the Court of Appeals relied upon the previous holdings in State Farm v Snappy, supra, and State Farm v Enterprise Leasing, 206 Mich App 7 (1994).
In holding that the "other similar vehicle liability coverage" provision in State Farm's policy does not apply, the Court of Appeals stated that because Enterprise Leasing had properly contracted to be responsible only for coverage in excess of that provided by the renter, the excess coverage provided by Enterprise is "not similar" to the primary coverage provided by State Farm.
The Court of Appeals also rejected the argument that coverage was excluded under the "car business" provision of State Farm's policy. This argument was rejected in Snappy, supra, because the term "car business" as defined in the policy, is ambiguous and must be construed against State Farm in favor of coverage.
