Michigan Court of Appeals; Docket No. 202294; Published
Judges Jansen, Holbrook, Jr., and MacKenzie; Unanimous; Per Curiam
Official Michigan Reporter Citation: 235 Mich App 411; Link to Opinion 
STATUTORY INDEXING:
Scope of Mandated Coverages [§3131(1)]
Limits of Liability Insurance [§3131(2)]
TOPICAL INDEXING:
Leased / Rented Vehicles
CASE SUMMARY:
In this unanimous per curiam published Opinion, the Court of Appeals held that a rental contract between an automobile owner and a renter can lower the policy limit of the owner's no-fault insurance provider with respect to an accident for which the owner is held liable under the owner's liability statute.
In this case, Ryder rented a truck to Leon's Homemade Foods, which was subsequently involved in a motor vehicle accident resulting in a verdict in favor of the injured persons in the amount of $210,000. Old Republic insured Ryder Truck Rental for a policy limit of $7,000,000. Auto-Owners insured the Leon's owned trailer that was involved in the accident, with a policy limit of $1,000,000. The rental agreement between Ryder and Leon's further provided that liability coverage for auto related injuries was limited to $100,000 per injured person, and $300,000 per accident, thus yielding an effective policy limit of $200,000. For purposes of appeal, the parties agreed that Auto-Owners and Old Republic were required to pay the verdict on a pro rata basis computed according to their respective policy limits.
Auto-Owners on appeal contended that because the Old Republic policy limit was $7,000,000 that was the limit that was to apply for purposes of pro rata sharing. Old Republic and Ryder contended that the rental contract between Ryder and Leon's provided for a lower limit of $100,000 per claim, which was the limit applicable to the claim.
The Court of Appeals held that an automobile rental contract may properly lower the liability coverage limit of the owner's insurer, as long as the owner's insurer remains primary and provides coverage up to the minimum amounts required by the No-Fault Act. The court rejected Auto-Owners' contention that under State Farm Mutual Automobile Insurance Company v Enterprise Leasing, 452 Mich 25 (1996), a rental contract attempting to completely eliminate the liability coverage of the owner's insurer, violated the No-Fault Act's requirement that an automobile owner provide insurance coverage for liability arising from the use of the automobile under section 3101(1) and 3131 and 3135. In its ruling, the Court of Appeals held that a contract that merely lowers the policy limit does not violate the No-Fault Act, as long as the owner provides the primary insurance coverage with a policy limit equal to or above the minimum amounts required by MCLA 500.3009(1). Thus, the Old Republic policy limit was $200,000.
