Michigan Court of Appeals; Docket No. 150077; Unpublished
Judges Weaver, Murphy, and Jansen; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
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In this per curiam unpublished Opinion, the Court of Appeals interpreted the provisions of §3101(1) requiring the owner or registrant of a motor vehicle to maintain security for payment of benefits under the no-fault act and to provide residual liability insurance for that vehicle. The issue was whether a rental company which was the owner of a vehicle being rented at the time of the accident was obligated to provide primary residual liability insurance, or whether that obligation could be transferred to the person renting the vehicle and that person's insurance company.
In this case, Teasley rented a car from Enterprise and while driving the car was involved in an accident. State Farm, Teasiey's residual liability insurance company, brought suit against Enterprise to determine who was responsible for paying the damage awards in connection with bodily injury claims arising from the accident.
In the rental agreement Teasley signed, she agreed that she had insurance through State Farm and agreed to provide insurance for the rental vehicle and to hold Enterprise harmless. State Farm's policy, on the other hand, provided residual liability coverage only if there was no other coverage available, and excluded coverage if the insured was driving a car owned by a car business if there was other insurance to cover the vehicle. The trial court granted summary disposition in favor of State Farm and held Enterprise responsible for paying the damage claims. On appeal, Enterprise argued that Teasley agreed in the rental agreement to provide her own residual liability insurance coverage for the rental vehicle, and that Enterprise was responsible for damages only on an excess basis.
The Court of Appeals construed the mandatory insurance provisions of §3101(1) in light of its recent decision in State Farm Mutual Insurance Company v Snappy Car Rental, 196 Mich App 143 (1992) and held that a person signing a short term rental agreement for a vehicle can agree that his personal automobile insurance contract will provide primary liability coverage for accidents which occur while he has the rented vehicle. The court held that such agreements to transfer responsibility for providing insurance were not void. The court also noted that although it disagreed with the Snappy holding, it was bound to follow that holding under the Administrative Order 1990-6. Otherwise, the court would hold that an owner's policy of liability insurance is required to provide primary residual liability insurance for any permissive user.
The Court of Appeals further held that since both State Farm and Enterprise were thus primary insurers with conflicting "excess" or "escape" clauses, each was required to pay a pro rata share of the damages. When there are two competing policies, each containing an excess clause, each of which would have provided coverage had the other policy not existed, liability should be pro rated according to the policy's limits.
Judge Murphy, concurring in the result only, disagreed with the majority's interpretation of the Snappy, supra, decision. That case held merely that if a car rental company includes in its car rental contract an optional provision whereby the renter may provide his or her own primary residual liability, this provision is not void as violative of the no-fault act. The no-fault act still requires the owner to provide coverage, however, the car rental agreement can determine the priority of coverage without violating the provisions of the no-fault act.
