Michigan Court of Appeals; Docket #260351; Unpublished
Judges Murphy, White and Smolenski; unanimous; per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion 
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Defaults and Default Judgments
Uninsured Motorist Benefits: Uninsured Motorist Coverage in General; Notice and Statute of Limitations for Uninsured Motorist Coverage
CASE SUMMARY:
In this unanimous unpublished per curiam opinion decided without oral argument, the Court of Appeals reversed summary disposition for defendant State Farm on the plaintiffs’ claim for uninsured motorist benefits even though plaintiffs did not follow the procedures set forth in the uninsured motorist policy when they failed to join the uninsured driver as a defendant in this action and failed to notify defendant of their separate action against the uninsured driver. In this case, plaintiffs were injured in an accident with an uninsured driver. Defendant paid one plaintiff $50,000 in uninsured benefits and paid the other plaintiff $6,000. Plaintiffs believed they were entitled to additional benefits and filed an action against defendant. They also filed suit against the uninsured driver. Although the lawsuit against the uninsured driver was beyond the three-year statute of limitations, the driver defaulted and plaintiffs obtained an $160,000 judgment. The trial court granted defendant summary disposition because plaintiffs did not comply with the policy terms which required the insured to file a lawsuit against the uninsured driver and the insurer and then immediately provide the insurer with copies of the summons and complaint. In finding for the plaintiffs, the Court of Appeals first found that defendant was not prejudiced by plaintiffs’ violation of the policy because, under DAIIE v Hafendorfer, 38 Mich App 709 (1972), the six-year statute of limitations applicable to contract actions controlled rather than the three-year statute of limitations for personal injury actions. In this regard, the court stated:
“We find Hafendorfer, supra, informative on this issue. There, the defendant insured was severely injured by an uninsured driver, and the insured had uninsured motorist coverage through DAIIE. The insured failed to commence an action within three years against anyone. The insurance contract provided that the insurer would pay ‘[a]ll sums which the insured shall be legally entitled to recover as damages[.]’ . . . The Court had to determine whether the three-year limitations period for injuries to persons was applicable, or rather the six-year limitations period for contract actions. After extensive analysis and review of the case law, the Hafendorfer panel concluded: ‘We agree with the decisions of these courts that the “legally entitled to recover” clause denotes only the establishment of fault on the part of the uninsured motorist and proof of the damages caused thereby. The “legally entitled” phrase does not subject insured’s claim to the three-year statute of limitations. . . . We hold that the six-year statute of limitations applies to defendant insured’s claim against plaintiff insurer on the uninsured motorist clause of his insurance contract.’”
The court then found that because this case was controlled by the Hafendorfer decision and, since the Hafendorfer court interpreted the “legally entitled to” language as meaning the “establishment of fault,” the issue whether the uninsured driver was at fault could be addressed even though the action against the uninsured driver was untimely. In this regard, the court explained:
“This Court’s opinion in Hafendorfer implicitly and necessarily encompassed the argument presented to us. . . . Because the Hafendorfer panel construed the phrase ‘legally entitled to recover’ as merely meaning the ‘establishment of fault,’ the question whether the uninsured motorist here was at fault, along with the extent of any damages, can be answered in this action, despite the fact that the action against the driver was technically time-barred.”
The court also remarked that defendant was not barred from enforcing its subrogation rights against the uninsured driver for any benefits it pays to plaintiffs. In this regard, the court noted:
“Aside from the doctrine of equitable subrogation, defendant has subrogation rights by way of contractual assignment language in the insurance policy. . . . As noted earlier, the default judgment against the driver is valid and collectible as between plaintiffs and the driver, and therefore subject to subrogation rights held by defendant. To the extent that it can be argued that, had the suit against the driver been dismissed on the basis of defendant’s presumed involvement in the action on notice given, there would have been no judgment for plaintiffs to assign to defendant, equitable subrogation, along with its six-year limitations period, would be implicated.”
Finally, the court found that defendant was not prejudiced by the default judgment plaintiffs obtained from the uninsured driver because the policy between plaintiffs and defendant provides that defendant is not bound by judgments obtained without its consent. In so ruling, the court stated:
“Moreover, there is no prejudice or injury to defendant predicated on the $160,000 default judgment entered against the uninsured driver. Defendant asserts that it is not bound by the default judgment, and plaintiffs make no claim that defendant is bound by that judgment. In fact, plaintiffs specifically and expressly agree that defendant is not bound by the judgment. More importantly, the insurance policy provides . . . that defendant is ‘not bound by any judgment against any person or organization obtained without [its] written consent.’ Therefore, plaintiffs are precluded from contending that the default judgment entitles them to collect certain sums from defendant in uninsured motorist benefits. Accordingly, there is a lack of prejudice.”
