Michigan Court of Appeals; Docket No. 210063; Published
Judges Doctoroff, Holbrook, Jr., and Kelly; Unanimous; Per Curiam
Official Michigan Reporter Citation: 239 Mich App 227; Link to Opinion
In this unanimous per curiam published Opinion, the Court of Appeals upheld a claim for indemnification by a car dealership against a lessee of a vehicle from that dealership for damages paid by the dealership to a third party injured by the lessee during the course of the rental agreement.
Marlynne Young rented an automobile from Joe Panian Chevrolet, Inc. while her automobile was being repaired by that dealership. The rental was pursuant to a contract entitled "Joe Panian Rental Cars" and was entitled "Rental Vehicle Agreement." During the term of the rental agreement, Young was involved in an accident which caused injuries to another party. That person brought action against the dealership as owner of the vehicle, and a settlement was reached in the amount of $15,000, preserving the dealership's right to pursue an indemnification claim against Young. From the trial court's order granting indemnification, pursuant to the provisions of the rental agreement, Young appealed.
Young claimed that the Owner Liability Statute, MCLA 257.401, did not apply to a "short term" renting of a vehicle by a dealership to a customer who was having repairs performed on a vehicle. The provisions of MCLA 257.401 (3) state that a person engaged in the "business of leasing motor vehicles” for a period of 30 days or less is liable for an injury caused by the negligent operation of the leased motor vehicle. Subsection (5) of that same statute provides that section (3) shall not be construed to expand or reduce the liability of a person engaged in the business of leasing motor vehicles, or to impair that person's right to indemnity or contribution, or both.
The Court of Appeals, in affirming the trial court determination in favor of the dealership, held that the Motor Vehicle Code defines a "leased vehicle" as a "motor vehicle for which a person is granted possession for a contracted period of time and in return for a contracted sum." Therefore, under the facts of this case, the dealership was in fact engaged in the business of leasing vehicles as contemplated by subsection (5) of the Owner Liability Statute. Further, the court rejected Young's argument that the Owner Liability Statute applied only to short term leases.
The court further held that even if subsection (5) of the Owner Liability Statute were inapplicable to the dealership, the trial court determination of indemnification in favor of the dealership was still correct. The contractual provision at issue accorded the dealership the right of indemnification from Young and there is no legal rule in Michigan that would prohibit a person in the business of renting or leasing vehicles from contracting for such indemnification from the vehicle users.