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The Insurance Company of the State of Pennsylvania v Empire Fire and Marine Ins


Michigan Court of Appeals; Docket Nos. 151331 and 156338; Unpublished  
Judges Shepherd, Holbrook, and MacKenzie; Unanimous; Per Curiam  
Official Michigan Reporter Citation:  Not Applicable; Link to Opinion alt    

Exclusion for Parked Vehicles Covered by Workers Comp [§3106(2)]  
General Rule of Priority [§3114(1)]   
Exception for Employer Provided Vehicles [§3114(3)]

Workers Disability Compensation Act (MCL 418.1, et seq.)   

In this unanimous unpublished per curiam Opinion, the Michigan Court of Appeals consolidated two cases involving a priority dispute between four insurance companies. The Court of Appeals upheld the trial court's determination that the injured person was an independent contractor, rather than an employee of one of the insured parties and, therefore, was not excluded from receiving no-fault benefits under §3106(2).  

The injured person, Faye Carpenter, was a trucker who slipped and fell while in the process of preparing to unload his truck. At the time of the accident, Carpenter had leased his truck to Malone for continuous 31 day intervals. Malone was insured by National American Insurance Company. The Insurance Company of the State of Pennsylvania and Empire had both issued policies covering Carpenter's tractor-trailer. Carpenter was also the named insured under a policy issued by Michigan Mutual covering other vehicles owned by Carpenter.   

Empire and Michigan Mutual attempted to show that Carpenter was an employee of Malone and therefore entitled to workers' compensation benefits, rather than no-fault benefits, in accordance with §3106(2) of the no-fault act, because Carpenter's injury occurred while unloading a parked vehicle. Defendants Empire and Michigan Mutual also argued that North American, as Malone's insurer, was liable for any no-fault benefits payable to Carpenter in accordance with §3114(3).    

The Court of Appeals upheld the trial court's application of the economic reality test to determine whether Carpenter was Malone's employee or an independent contractor. In this regard, the court applied the following factors:

1.      control over a worker's duties;

2.      payment of wages;

3.      right to hire, fire and discipline; and

4.      performance of the duties as an integral part of the employer's business towards accomplishment of a common goal.

The Court of Appeals noted that all the above factors are viewed as a whole, and no single factor is controlling.  

The Court of Appeals upheld the application of the economic reality test as applied by the trial court. The lease agreement between Carpenter and Malone provided that Carpenter is subject to limited control of Malone necessary to assure compliance with federal regulations. However, Carpenter set his own hours, selected his own loads, and chose the route to deliver his load. Furthermore, Carpenter did not receive sick pay, workers' compensation or pension or profit sharing benefits. In addition, Malone did not deduct federal or state withholding taxes. In light of these factors, the trial court held that Carpenter was an independent contractor rather than an employee of Malone, and thus, not excluded by §3106(2).  

The Court of Appeals upheld the trial court's ruling that under the priority section of §3114(1), The Insurance Company of the State of Pennsylvania, Empire and Michigan Mutual were equally responsible for Carpenter's no-fault benefits because each of the three insurers listed Carpenter as a named insured in their no-fault policies.  

The Court of Appeals also considered exclusions relied upon by the various insurance companies in attempts to escape the obligation to provide coverage. Michigan Mutual and Empire attempted to assert "business use" exclusions. However, those exclusions were found in the liability coverage section of each defendants' policy and therefore were inapplicable to the claim for PIP benefits. Second, a "business vehicle" exclusion in Empire's policy was found to merely paraphrase §3114(3) of the no-fault act. This exclusion was inapplicable because Carpenter was not Malone's employee. An "other insurance" exclusion in Empire's policy was contrary to the priority scheme set forth in §3114 of the no-fault act, and therefore, it was found invalid. Finally, an "owned vehicle exclusion" found in Michigan Mutual's policy was held invalid because it violated the priority plan set forth in §3114 of the no-fault act.  

Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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