Michigan Court of Appeals; Docket #301931; Published
Judges Borrello, Beckering, and Gleicher; Unanimous, Per Curiam
Official Michigan Reporter Citation: 296 Mich App 242; Link to Opinion
General Rule of Priority [§3114(1)]
Equal Priority Situations [§3114(6)]
Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
Recoupment Between Equal Priority Insurers [§3115(2)]
In this unanimous published per curiam Opinion, the Michigan Court of Appeals reversed the grant of summary disposition in favor of Daimler Chrysler Insurance Company and determined that Chrysler had equal priority for payment of the plaintiff’s PIP no-fault benefits where the Chrysler insurance policy was determined to be void because it improperly attempted to shift its statutory responsibility for its share of the injured person’s PIP benefits. The court, accordingly, reformed the policy and found that Chrysler was responsible for a portion of the PIP Benefits due.
In this unusual case, John and Vera-Anne Corwin were injured in a motor vehicle accident in June 2007. The vehicle involved was a Jeep Compass leased from Chrysler LLC, pursuant to a vehicle lease program available to John as a retiree of Chrysler. The lease agreement provided that insurance on the vehicle would be provided through Chrysler Insurance. The Chrysler insurance policy stated that Daimler Chrysler Corporation was the “named insured” for the Jeep Compass. The policy stated it would provide personal injury protection benefits to an insured under the policy. However, the policy excluded coverage in the situation where anyone entitled to Michigan no-fault benefits was a “named insured under another policy.” In this case, John and Vera-Anne were named insureds under a policy of insurance under another vehicle in the household, which was insured by defendant Auto Club. Further, John was a “named insured” on a motorhome in the household insured by defendant Foremost. Following the accident, Auto Club paid over $300,000 in PIP benefits to the Corwins. Neither Foremost nor Chrysler Insurance paid any PIP benefits.
In the trial court, Chrysler argued that the exclusion contained in its policy meant that Auto Club and Foremost were of equal priority for payment of PIP benefits and that Chrysler was not responsible for paying such benefits. The trial court agreed and granted summary disposition in favor of Chrysler.
Upon appeal, the Court of Appeals reversed the trial court and held that the Chrysler policy was void and required reformation so that Chrysler was of equal priority for the PIP benefits.
In its ruling, the Court of Appeals held that under MCL 500.3101(1) the “owner or registrant of a motor vehicle required to be registered in this state shall maintain security for payment of benefits under personal protection insurance . . .” Further, MCL 500.3114(1) provides that “a personal protection insurance policy described in § 3101(1) applies to accidental bodily injury to the person named in the policy, the person’s spouse, and a relative of either domiciled in the same household if the injury arises from a motor vehicle accident.” Under Cvengros v Farm Bureau Ins, 216 Mich App 261 (1996), the “person named in the policy” is synonymous with the term “named insured.”
The court held that under Michigan law, an insured must have an “insurable interest” to support the existence of a valid automobile liability insurance policy. The insurable interest must be that of a “named insured.” However, insurable interest need not be in the nature of ownership, but rather can be any kind of benefit from the thing so insured or any kind of loss that would be suffered by its damage or destruction. An individual can have an insurable interest in a motor vehicle without having title to the vehicle. However, public policy forbids the issuance of an insurance policy where the insured lacks an insurable interest, and a policy is void when there is not an insurable interest.
In this case, the court determined that Chrysler LLC did not have an insurable interest to support the existence of the Chrysler insurance policy. Chrysler LLC was not an owner or a registrant of the Jeep Compass, which was leased to the Corwins. MCL 500.3101(2)(h)-(i) expressly excludes a person engaged in the business of leasing motor vehicles from being either an owner or a registrant. Further, Chrysler lacks any insurable interest flowing from protection of a person’s “health and well-being” because Chrysler cannot suffer accidental bodily injury. Because Chrysler does not have an insurable interest as the named insured in the Chrysler insurance policy, the policy violates public policy. Therefore, the Chrysler insurance policy, according to the court, must be reformed to be compatible with public policy so that there is an insurable interest belonging to the named insured.
In addressing the issue of reformation, the court stated that the legislative purpose of MCL 500.3114 and MCL 500.3115 is that it was intended that injured persons who are insured or whose family member is insured for no-fault benefits would have primary resort to their own insurer. The Chrysler insurance policy in this case violates the intent of the No-fault Act by shifting primary liability for no-fault coverage. Because John Corwin was the owner of the Jeep Compass and purchased no-fault insurance from Chrysler Insurance, the Chrysler insurance policy provided no-fault insurance to the Corwin household and was the Corwin’s “personal insurer.” The court described Chrysler’s attempt to exclude coverage where the Corwins have another auto policy in the household in which they are named insureds as a “coordination of benefits clause in disguise.” The court stated that it would not allow Chrysler Insurance to avoid the legislature’s intent that an injured person’s personal insurer stand primarily liable for PIP benefits. Therefore, the court reformed the policy so that Chrysler Insurance is primarily liable along with Auto Club and Foremost for PIP benefits.