Summary
allowing insurer to sell optional or supplemental insurance coverage apart from required Michigan no-fault coverage
Summary of this case from Hahn v. GEICO Indem. Co.Opinion
No. 340323
05-14-2019
Niles JOHNSON, Plaintiff, v. USA UNDERWRITERS, Defendant/Cross-Defendant-Appellant, and Courtney Eisemann and Steven Vandeinse, Defendants, and Citizens Insurance Company of America, Defendant/Cross-Plaintiff/Appellee.
Varnum LLP, Novi (by Bradley S. Defoe ) for USA Underwriters. Conlin, McKenney & Philbrick, PC (by Erik Duenas and Joy M. Glovick, Ann Arbor) for Citizens Insurance Company of America.
Varnum LLP, Novi (by Bradley S. Defoe ) for USA Underwriters.
Conlin, McKenney & Philbrick, PC (by Erik Duenas and Joy M. Glovick, Ann Arbor) for Citizens Insurance Company of America.
Before: Beckering, P.J., and Riordan and Cameron, JJ.
Cameron, J.
Defendant/cross-defendant, USA Underwriters, appeals the trial court’s orders (1) denying USA’s motion for summary disposition, (2) granting the motion for summary disposition filed by defendant/cross-plaintiff, Citizens Insurance Company of America, on its cross-claim against USA, (3) granting Citizens’ motion for entry of judgment, and (4) granting Citizens’ motion for attorney fees. We reverse the trial court’s orders and remand this case for proceedings consistent with this opinion.
Some of the no-fault statutes have been amended since the events in this case took place. The versions of the statutes quoted or cited in this case are identified by their effective dates and the public act numbers when appropriate.
I. FACTUAL AND PROCEDURAL BACKGROUND
In June 2015, defendant Steven Vandeinse purchased a 2011 Chevy Impala from a used-car dealership in Ypsilanti. Before the dealership would finalize the sale, Vandeinse was required to obtain automobile insurance. Vandeinse went to a nearby L.A. Insurance agency and asked the insurance agent, Jennifer Essak, for a policy to cover the Impala. According to Vandeinse, he asked her for a "full coverage policy." Vandeinse left the agency with a USA insurance policy that provided collision and comprehensive insurance coverages only. The insurance agent, however, stated in an affidavit she provided during discovery that she had "explained to [Vandeinse] the difference between no-fault coverage and collision and comprehensive coverage and offered to assist him with obtaining both." Sometimes, "it was less expensive for the customer to obtain no-fault coverage from one carrier and then collision and comprehensive coverage through [USA]." She further asserted that Vandeinse "declined my offer to assist him with obtaining no-fault coverage, and asked only for collision and comprehensive coverage through [USA]."
The application for automobile insurance that Vandeinse completed was entitled "Application for Physical Damage Insurance Economy Program" through USA. The declarations section of the application stated: "This application is for Auto Physical Damage Insurance only. It does not provide bodily injury, property damage or any other Michigan statutory No-Fault coverages." Additionally, Vandeinse initialed a provision in the application that stated: "PHYSICAL DAMAGE ONLY . This insurance is physical damage only coverage and does not meet the requirements of the Michigan No-fault Act, Chapter 31 of the Michigan Insurance Code." After obtaining the collision and comprehensive insurance policy, Vandeinse purchased the Impala from the dealership using a certificate of insurance that USA provided. Like the insurance application, the certificate of insurance stated, "This insurance is physical damage only, coverage does not meet the requirements of the Michigan No-fault Act, Chapter 31 of the Michigan Insurance Code." At the hearing on Citizens’ motion for summary disposition, an attorney for plaintiff Niles Johnson asserted that the certificate "looks like a regular no-fault certificate ... that you would take to the Secretary of State to get your tabs renewed." The Michigan Secretary of State apparently accepted this certificate and registered the Impala with the state of Michigan.
"Certificate of insurance" is defined as "a document, regardless of how [it is] titled or described, that is prepared by an insurer or insurance producer that is a statement or summary of an insured’s property or casualty insurance coverage. Certificate of insurance does not include a policy of insurance, insurance binder, or policy endorsement." MCL 500.2270(a).
On September 8, 2015, defendant Courtney Eisemann drove the Impala. As Eisemann exited a parking lot, she struck Johnson, who was riding his bicycle on the sidewalk. Johnson sustained injuries and was transported to the hospital. On February 29, 2016, Johnson filed a complaint against Eisemann, Vandeinse, and the Michigan Automobile Insurance Placement Facility (the Facility). The parties eventually stipulated to adding USA as a defendant to the first amended complaint, to substitute Citizens for the Facility as a defendant, and to dismiss the Facility. Citizens moved for summary disposition under MCR 2.116(C)(10), seeking dismissal from the lawsuit because Vandeinse had a no-fault policy through USA, and therefore, Johnson was ineligible for any benefits through the Facility. USA moved for summary disposition under MCR 2.116(C)(8), claiming that USA’s insurance policy did not include mandatory no-fault coverage. The trial court ultimately held that USA’s practice of selling automobile insurance with certificates of insurance but without mandatory no-fault coverages amounted to "an intent to defraud," and it denied USA’s motion for summary disposition. The trial court signaled to the parties that it would wait to rule on any claims to reform the policy until the issue "ripen[ed]." Citizens filed a cross-claim against USA seeking reformation of Vandeinse’s insurance contract with USA to include mandatory no-fault coverages as a matter of law and public policy. USA answered. Citizens then moved for summary disposition against USA under MCR 2.116(C)(10). According to Citizens, issuing an insurance policy with only optional coverages was a violation of MCL 500.3101(1) and against the public policy of the state to ensure that all drivers have mandatory no-fault coverage. Moreover, Citizens argued that USA and the insurance agent misrepresented the type of insurance Vandeinse obtained, therefore, necessitating reformation. In response, USA argued that Citizens had not shown that reformation was an acceptable remedy because there was no mistake or fraud by either party to the insurance contract, especially in light of the insurance agent’s affidavit. Additionally, USA argued that the no-fault act did not prevent insurers from providing insurance policies containing only collision and comprehensive coverages. The trial court granted Citizens’ motion for summary disposition, concluding that USA’s policy was issued "with an intent to deceive the consumer and the Secretary of State, [and] that the policy violates the Michigan No-Fault Act." Therefore, the trial court reformed USA’s insurance policy "to include no fault/PIP coverage, liability coverage, and property damage."
On appeal, USA argues that the trial court erred when it reformed the insurance policy to include mandatory no-fault coverages because (1) there was no mistake or fraud by either party, (2) issuing insurance policies limited to collision and comprehensive coverages did not contravene the no-fault act, and (3) public policy did not allow for reformation under these circumstances. We agree.
II. REFORMATION OF USA'S POLICY
A. STANDARD OF REVIEW
This Court reviews de novo motions for summary disposition under MCR 2.116(C)(10). Johnson v. Recca , 492 Mich. 169, 173, 821 N.W.2d 520 (2012). MCR 2.116(C)(10) provides that a trial court may grant judgment on all or part of a claim where "[e]xcept as to the amount of damages, there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law." The moving party must support its motion with affidavits, depositions, admissions, or other documentary evidence. Bronson Methodist Hosp. v. Auto-Owners Ins. Co. , 295 Mich. App 431, 440, 814 N.W.2d 670 (2012). If the moving party properly supports its motion, the opposing party then has the burden of demonstrating with "evidentiary materials that a genuine issue of disputed material fact exists." Id . at 440-441, 814 N.W.2d 670. "A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." West v. Gen. Motors Corp. , 469 Mich. 177, 183, 665 N.W.2d 468 (2003). This Court, reviewing the record in the same manner as the trial court, "must consider the pleadings, affidavits, depositions, admissions, and any other evidence in favor of the party opposing the motion, and grant the benefit of any reasonable doubt to the opposing party." Radtke v. Everett , 442 Mich. 368, 374, 501 N.W.2d 155 (1993).
Insofar as the motion for summary disposition involves questions regarding the proper interpretation of a contract, this Court’s review is de novo. Rory v. Continental Ins. Co. , 473 Mich. 457, 464, 703 N.W.2d 23 (2005). Additionally, "[t]his Court reviews de novo the trial court’s decision to grant or deny equitable relief." Olsen v. Porter , 213 Mich. App. 25, 28, 539 N.W.2d 523 (1995). When considering whether a trial court properly ordered reformation, this Court must be "mindful that courts are required to proceed with the utmost caution in exercising jurisdiction to reform written instruments." Id . To reform a contract, "the facts necessary for the allowance of the remedy shall be proved by clear and convincing evidence and not by a mere preponderance." Woolner v. Layne , 384 Mich. 316, 319, 181 N.W.2d 907 (1970) (quotation marks and citation omitted). "Evidence is clear and convincing when it produce[s] in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established...." In re Martin , 450 Mich. 204, 227, 538 N.W.2d 399 (1995) (quotation marks and citation omitted; alteration in original).
B. REFORMATION BASED ON MISTAKE AND FRAUD
USA first argues that there was insufficient evidence to support reformation of USA’s insurance policy on the basis of fraud. Therefore, USA asserts that the trial court erred when it granted summary disposition in favor of Citizens and reformed the policy to include no-fault, liability, and property-damage coverages on the basis of USA’s fraudulent conduct. We agree.
Courts of equity have the power to reform an insurance contract so that it conforms to the agreement actually made. See Casey v. Auto Owners Ins. Co. , 273 Mich. App. 388, 398, 729 N.W.2d 277 (2006). Reformation may be appropriate when a plaintiff proves "a mutual mistake of fact, or mistake on one side and fraud on the other, by clear and convincing evidence." Id . Importantly, reformation is not warranted when there is only a mistake in law, i.e., a mistake by one of the parties about the legal effect of an agreement. Id . ; see also Olsen , 213 Mich. App. at 29, 539 N.W.2d 523 ("[R]eformation will generally not be granted for a mistake of law.").
There are two types of fraud: actionable fraud and silent fraud. Actionable fraud has the following requirements:
(1) the defendant made a material representation; (2) the representation was false; (3) when the defendant made the representation, the defendant knew that it was false, or made it recklessly, without knowledge of its truth as a positive assertion; (4) the defendant made the representation with the intention that the plaintiff would act upon it; (5) the plaintiff acted in reliance upon it; and (6) the plaintiff suffered damage. [ M&D, Inc. v. W.B. McConkey , 231 Mich. App. 22, 27, 585 N.W.2d 33 (1998) (quotation marks and citation omitted).]
On the other hand, "[s]ilent fraud, also known as fraudulent concealment, acknowledges that ‘suppression of a material fact, which a party in good faith is duty-bound to disclose, is equivalent to a false representation and will support an action in fraud.’ " Maurer v. Fremont Ins. Co. , 325 Mich. App. 685, 695, 926 N.W.2d 848 (2018), quoting M&D, Inc. , 231 Mich. App. at 28-29, 585 N.W.2d 33 (quotation marks and citation omitted). Furthermore, "the party having a legal or equitable duty to disclose must have concealed the material fact with an intent to defraud." Maurer , 325 Mich. App. at 695, 926 N.W.2d 848.
"However, fraud is not a necessary element of every action to reform an agreement on the basis of a unilateral mistake." Johnson Family Ltd. Partnership v. White Pine Wireless, LLC , 281 Mich. App. 364, 380, 761 N.W.2d 353 (2008). Our Supreme Court has also held:
[I]f one party at the time of the execution of a written instrument knows not only that the writing does not accurately express the intention of the other party as to the terms to be embodied therein, but knows what that intention is, the latter can have the writing reformed so that it will express that intention. [ Woolner , 384 Mich. at 318-319, 181 N.W.2d 907 (quotation marks and citation omitted).]
Stated differently, a contract may be reformed when one party to a contract made a mistake and the other party knows about the mistake but remains silent about it, i.e., there was inequitable conduct. Johnson Family , 281 Mich. App. at 380-381, 761 N.W.2d 353.
Citizens has never claimed mutual mistake. Instead, Citizens claims that USA’s practices were intended to deceive purchasers of its insurance, which constituted fraud. The trial court accepted this argument, concluding that USA’s practice reflected an "intent to defraud." Conversely, USA argues on appeal that its policy and practices were not deceptive and that Vandeinse was not mistaken about what coverages he was purchasing. Moreover, even if he was mistaken about the insurance coverages he purchased, a mistake of law is not a basis to reform a contract. Under these circumstances, we agree that the trial court erred when it reformed the insurance policy on grounds of fraud.
As a preliminary matter, we first differentiate between a mistake of fact and a mistake of law. Reformation is permissible on evidence of a mistake of fact, not a mistake of law. A mistake of law is "a mistake by one side or the other regarding the legal effect of an agreement...." Casey , 273 Mich. App. at 398, 729 N.W.2d 277. In this case, USA correctly asserts that the only mistake alleged by Vandeinse was his belief concerning his insurance coverage. Vandeinse stated after the accident that he believed he had "full coverage," because that is what he requested from his insurance agent. However, Vandeinse’s mistaken belief that he had "full coverage" was simply a mistake about the legal effect of his insurance policy, which is a mistake of law—not fact. Therefore, Vandeinse is not entitled to reformation of the insurance policy.
Additionally, Citizens claims that Vandeinse made a mistake of fact because he mistakenly believed that his policy provided full coverage that could then be used to finance his car and register it with the Michigan Secretary of State. Even if, as Citizens argues, Vandeinse should not have been able to legally finance and register his car using the USA insurance policy, the fact remains that he did indeed finance his new car and register it with the Secretary of State. Vandeinse accomplished exactly what he intended to do when he purchased his insurance policy; thus, there was no mistake of fact at all. Because there was no mistake of fact sufficient to support the reform of the contract, this Court need not determine whether USA committed fraud. Therefore, reformation on this basis was error.
Even if fraud was attributable to Vandeinse’s insurance agent, there was insufficient evidence to find USA liable for purposes of reformation. "An insurance policy constitutes a contractual agreement between the insurer and the insured[,]" and "[w]hen such an agreement is facilitated by an independent insurance agent or broker, the independent insurance agent or broker is considered an agent of the insured rather than an agent of the insurer." West American Ins. Co. v. Meridian Mut. Ins. Co. , 230 Mich. App. 305, 310, 583 N.W.2d 548 (1998). "[A]n agent’s job is to merely present the product of his principal and take such orders as can be secured from those who want to purchase the coverage offered." Harts v. Farmers Ins. Exch. , 461 Mich. 1, 8, 597 N.W.2d 47 (1999). In this case, the insurance agent’s actions are not attributable to USA because she was independent and considered an agent of Vandeinse. She did not represent USA; rather, she presented USA’s product to Vandeinse, who then purchased it knowing that it did not meet the requirements of the no-fault act. Therefore, reformation is not a cognizable remedy.
C. REFORMATION FOR A VIOLATION OF LAW AND PUBLIC POLICY
USA also argues that the trial court erred when it reformed the insurance contract on the basis of a violation of the no-fault act and public policy. We agree.
"It is a ‘bedrock principle of American contract law that parties are free to contract as they see fit, and the courts are to enforce the agreement as written absent ... a contract in violation of law or public policy.’ " Corwin v. DaimlerChrysler Ins. Co. , 296 Mich. App. 242, 256, 819 N.W.2d 68 (2012) (citation omitted). "[W]hen reasonably possible, this Court is obligated to construe insurance contracts that conflict with the no-fault act and, thus, violate public policy, in a manner that renders them ‘compatible with the existing public policy as reflected in the no-fault act.’ " Id . at 257, 819 N.W.2d 68 (citation omitted). Therefore, reformation is the appropriate remedy when such a contract violates law or public policy. Id . Whether a contract is against public policy
depends upon its purpose and tendency, and not upon the fact that no harm results from it. In other words, all agreements the purpose of which is to create a situation which tends to operate to the detriment of the public interest are against public policy and void, whether in the particular case the purpose of the agreement is or is not effectuated. For a particular undertaking to be against public policy actual injury need not be shown; it is enough if the potentialities for harm are present. [ Mahoney v. Lincoln Brick Co. , 304 Mich. 694, 705, 8 N.W.2d 883 (1943) (quotation marks and citation omitted).]
The question here is whether an insurer violates the Michigan no-fault act or public policy when it sells optional coverages without mandatory no-fault coverages, such as personal protection insurance, property protection insurance, and residual-liability insurance. We conclude that it does not.
1. MICHIGAN NO-FAULT LAW
MCL 500.3101(1) provides:
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, property protection insurance, and residual liability insurance. Security is only required to be in effect during the period the motor vehicle is driven or moved on a highway. Notwithstanding any other provision in this act, an insurer that has issued an automobile insurance policy on a motor vehicle that is not driven or moved on a highway may allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion of the policy in effect.[ ]
As amended by 2014 PA 492, effective January 13, 2015.
"A policy of insurance represented or sold as providing security is considered to provide insurance for the payment of the benefits." MCL 500.3101(3). The no-fault act is clear that an owner must register his or her vehicle in the state and "maintain security for payment of benefits under personal protection insurance, property protection insurance, and residual liability insurance" "during the period the motor vehicle is driven or moved on a highway." MCL 500.3101(1). With this in mind, "an insurer that has issued an automobile insurance policy on a motor vehicle that is not driven or moved on a highway may allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy ...." Id . (emphasis added).
Section 3101(1) is clear that an insurer providing mandatory no-fault coverages has the discretion to "allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion" so long as the "motor vehicle ... is not driven or moved on a highway...." MCL 500.3101(1). The no-fault act, however, does not address, let alone bar, an insurer’s ability to sell optional insurance coverages only. In this case, the USA policy did not provide the mandatory no-fault coverages to Vandeinse. Indeed, USA does not offer mandatory coverages to any customers; it only sells collision and comprehensive policies, which, according to Vandeinse’s insurance agent, are sometimes bundled with other insurance policies for a reduced cost. Because the no-fault act does not bar this practice, it does not violate Michigan law, and we cannot read into the statute something that is not there.
The no-fault act’s definition of "automobile insurance policy" supports our conclusion that insurers may sell insurance policies that do not include mandatory no-fault coverages. The Legislature broadly defines automobile insurance:
"Automobile insurance" means insurance for private passenger nonfleet automobiles which provides any of the following:
(a) Security required pursuant to section 3101.
(b) Personal protection, property protection, and residual liability insurance for amounts in excess of the amounts required under chapter 31.
(c) Insurance coverages customarily known as comprehensive and collision.
(d) Other insurance coverages for a private passenger nonfleet automobile as prescribed by rule promulgated by the commissioner pursuant to Act No. 306 of the Public Acts of 1969, as amended, being sections 24.201 to 24.315 of the Michigan Compiled Laws. A rule proposed for promulgation by the commissioner pursuant to this section shall be transmitted in advance to each member of the standing committee in the house and in the senate which has jurisdiction over insurance. [ MCL 500.2102(2) (emphasis added) ].
The no-fault act does not limit the definition of automobile insurance to only those policies that include the mandatory coverages. Instead, the no-fault act recognizes that automobile insurance sold in the state of Michigan can provide "any" of the listed coverages, including "[i]nsurance coverages customarily known as comprehensive and collision." MCL 500.2102(2)(c). This is precisely the policy USA sold to Vandeinse in this case. Without any provision under the no-fault act preventing insurers from issuing collision and comprehensive policies separately, we cannot conclude that USA’s practice is against Michigan law. The dissent concludes that the no-fault act "implicitly" requires that every insurer provide policies that include the mandatory coverages, and then—and only then—can an insurer "delete" coverages after verification that the insured will not operate the vehicle on a roadway. However, the no-fault act does not state that every insurer must provide mandatory coverages. Instead, MCL 500.3101(1) requires that any insured who intends to drive on a highway must have the mandatory coverages. The no-fault act also allows insurers to delete coverages from policies that have already been issued. The dissent has not identified any statutory provision that requires insurers to provide mandatory coverages when issuing policies to insureds. If that was the Legislature’s intent, it would have included such a provision in the no-fault act.
In the same vein, Citizens has not shown that USA "represented or sold" its policy as mandatory no-fault coverage. See MCL 500.3101(3), as amended by 2014 PA 492, effective January 13, 2015. Instead, USA notified Vandeinse in each of its insurance documents that the policy did not include mandatory no-fault coverages.
2. FINANCIAL RESPONSIBILITY ACT
The financial responsibility act, MCL 257.501 et seq. , lends further support to our analysis. The financial responsibility act determines the "scope of coverage regarding an automobile accident" and addresses optional insurance coverage. Integral Ins. Co. v. Maersk Container Serv. Co., Inc. , 206 Mich. App. 325, 330, 520 N.W.2d 656 (1994). Under the financial responsibility act, "[a]ny policy which grants the coverage required for a motor vehicle liability policy may also grant [optional coverage]." MCL 257.520(g). " ‘Optional’ coverage, for purposes of the financial responsibility act, ... consists of ‘any lawful coverage in excess of or in addition to the [mandatory minimum] coverage specified for a motor vehicle liability policy.’ " Lake States Ins. Co. v. Wilson , 231 Mich. App. 327, 332 n. 2, 586 N.W.2d 113 (1998), quoting MCL 257.520(g) (alteration in original). The Legislature has made it clear that when an insurer provides mandatory no-fault coverages, it may also offer optional coverages. MCL 257.520(g). Like the no-fault act, the financial responsibility act does not address whether an insurer may offer optional coverages only. With that said, MCL 257.520(j) states that "[t]he requirements for a motor vehicle liability policy may be fulfilled by the policies of 1 or more insurance carriers which policies together meet such requirements." Thus, MCL 257.520(j) expressly permits insureds to fulfill their insurance needs by way of multiple policies through more than one carrier. In this case, USA was permitted to sell an insurance policy that included only collision and comprehensive coverages with the understanding that the insured had to procure the mandatory no-fault coverages elsewhere before the vehicle could be driven or moved on a highway.
The dissent is unpersuaded that the financial responsibility act provides any guidance to this issue. Instead, the dissent concludes that because USA’s policy violates the no-fault act’s "implicit" requirement that all insurers provide mandatory coverages, the no-fault act—not the financial responsibility act—controls. The dissent’s argument, however, relies on the faulty premise that the no-fault act requires insurers to always provide mandatory coverages in its policies. This is simply not the case. The no-fault act is silent regarding the practice of selling policies that only provide optional coverages, and the financial responsibility act permits it. The dissent has construed a legislative requirement not supported by the text of the no-fault act.
Nevertheless, after finding an irreconcilable conflict between USA’s coverages and the requirements of the no-fault act, the dissent relies on Citizens Ins. Co. of America v. Federated Mut. Ins. Co. , 448 Mich. 225, 531 N.W.2d 138 (1995), to underscore its point that the authorizing language found in the financial responsibility act cannot validate a policy that violates the no-fault act. We agree with the dissent that an insurance policy contravening the no-fault act cannot be justified by the financial responsibility act. See id . at 232, 531 N.W.2d 138 ("An insurance policy that is repugnant to the clear directive of the no-fault act otherwise cannot be justified by the financial responsibility act."). However, in this case, the financial responsibility act simply addresses a gap that the no-fault act left open—whether insurers can sell policies that include only optional coverages. The financial responsibility act clearly allows insurers to combine multiple automobile policies in order to fulfill the requirements of the no-fault act. See MCL 257.520(j). Therefore, unlike in Citizens , in which a residual-liability policy clearly violated the express terms of the no-fault act, there was no such violation here, and the financial responsibility act provided proper guidance for our analysis. See Citizens , 448 Mich. at 232, 531 N.W.2d 138 (stating that "the financial responsibility act continues to present legitimate methods by which vehicle owners may satisfy the insurance obligations created by the no-fault act" and that MCL 257.520(j) provides "a method by which an owner may allocate insurance costs among various policies that he may have purchased for a particular vehicle").
The Citizens Court made clear that when an owner or registrant obtains residual-liability insurance, the policy "must afford coverage for enumerated types of loss caused by or arising from the ‘use of a motor vehicle.’ " Citizens , 448 Mich. at 229, 531 N.W.2d 138, citing MCL 500.3131 ; MCL 500.3135. The Court concluded that the policy at issue in that case, which denied residual-liability coverage for all persons—except those who were uninsured or underinsured—was a clear violation of the residual-liability requirements under MCL 500.3009. Id . at 231, 531 N.W.2d 138. Therefore, the policy contravened the no-fault act, and no provision in the financial responsibility act could save the policy.
A similar question related to bobtail insurance was previously addressed by this Court in Integral , 206 Mich. App. at 331, 520 N.W.2d 656 : Bobtail insurance policies, which do not provide "full coverage," may nonetheless be sold separately from mandatory no-fault policies. In Integral , this Court stated that "[a]dmittedly, the [bobtail] policy itself does not provide full coverage." Id . However, because MCL 257.520(j) allows insureds to meet the requirements for motor vehicle liability coverage through more than one insurance carrier, and because the truck driver was covered by both a bobtail policy and a policy providing no-fault benefits through another carrier, the practice of selling only bobtail insurance was not against the law. Integral , 206 Mich. App. at 331-332, 520 N.W.2d 656. We reach the same conclusion in this case. While Vandeinse did not procure a no-fault policy with the mandatory coverages, USA was not precluded from selling optional insurance coverages in order to satisfy customers who chose to purchase insurance policies from multiple carriers as allowed under MCL 257.520(j). Thus, USA’s practice of selling optional insurance coverages does not violate Michigan law.
The dissent highlights the fact that in Integral the bobtail policy and the no-fault policy both provided mandatory coverages—applicable at different times depending on how the truck was being used. While this is certainly true, it nonetheless supports our conclusion that the financial responsibility act allows more than one insurance policy to fulfill the requirements of the no-fault act, when separately, the insurance policies would not meet the requirements of the no-fault act.
3. PUBLIC POLICY
An insurance contract violates public policy when its purpose "is to create a situation which tends to operate to the detriment of the public interest." Mahoney , 304 Mich. at 705, 8 N.W.2d 883 (quotation marks and citation omitted). Citizens argues that if USA is permitted to continue providing optional coverages only, more cases like this will arise—cases in which the Facility and the assigned insurers are left footing the bill. Citizens claims that insureds will continue to mistakenly believe that they purchased full-coverage insurance and are lawfully driving on Michigan roads.
While we agree that Citizens raises real concerns, the fact remains that the Michigan Legislature has not expressly barred insurance companies from offering optional coverages as stand-alone policies. The parties readily acknowledge that there are circumstances when a person may want to purchase limited coverages that do not meet the requirements of the no-fault act. For instance, limited coverage is entirely appropriate when the vehicle will not be operated on public roads or if, as asserted by Vandeinse’s insurance agent, the insured can obtain less expensive mandatory and optional coverages from multiple carriers. MCL 500.3101(1) puts the onus on the insured to obtain the coverages necessary to meet the requirements of the no-fault act. The Legislature has not imposed the same duty on insurers. To do so would require insurers to verify that every insured who has purchased policies from more than one carrier has procured all the insurance needed to satisfy the no-fault act. It is the role of the Legislature to balance these types of policy considerations, not the role of this Court. USA’s policy is crystal clear that it included coverage for physical damage only and did not meet the requirements of the no-fault act. Vandeinse initialed these contract provisions, indicating that he understood the scope of the coverage he purchased. Vandeinse’s insurance agent even testified that she explained to Vandeinse what each type of coverage entailed. There was no misrepresentation. While it is true Vandeinse was able to purchase and register his vehicle using USA’s policy, this was not because USA failed to alert Vandeinse or anybody else that the policy did not conform to the no-fault act. The insurance application, the insurance policy itself, and the certificate of insurance all provided notice that the USA policy did not satisfy the requirements of the no-fault act. The obligation is on the owner or registrant to procure the proper no-fault coverages. MCL 500.3101(1). Therefore, the trial court erred when it reformed USA’s policy after concluding that it violated public policy.
III. ATTORNEY FEES
USA also appeals the trial court’s award of attorney fees to Citizens. Because we conclude that the trial court erred when it reformed the insurance policy, Citizens is no longer a prevailing party, and attorney fees are not warranted.
"A trial court’s decision to grant or deny a motion for attorney fees presents a mixed question of fact and law." Brown v. Home-Owners Ins. Co. , 298 Mich. App. 678, 689, 828 N.W.2d 400 (2012). The trial court’s findings of fact are reviewed for clear error, and questions of law are reviewed de novo. Id . at 690, 828 N.W.2d 400. With that said, we review a trial court’s ultimate decision to award attorney fees for an abuse of discretion. Id . "An abuse of discretion occurs when the trial court’s decision is outside the range of reasonable and principled outcomes." Smith v. Khouri , 481 Mich. 519, 526, 751 N.W.2d 472 (2008).
The trial court did not cite a statute or court rule that would permit the award of attorney fees, and no such authority is advanced on appeal. Instead, the trial court concluded that courts have long permitted the award of attorney fees when there is fraud or unlawful conduct. "In Michigan, it is well-settled that the recovery of attorney fees is governed by the ‘American rule.’ " Burnside v. State Farm Fire & Cas. Co. , 208 Mich. App. 422, 426, 528 N.W.2d 749 (1995). "Under the American rule, attorney fees are generally not allowed, as either costs or damages, unless recovery is expressly authorized by statute, court rule, or a recognized exception." Id . at 426-427, 528 N.W.2d 749. "An exception to this rule permits a plaintiff to recover as damages from a third party the attorney fees the plaintiff expended in a prior lawsuit the plaintiff was forced to defend or prosecute because of the wrongful acts of the third party." Bonner v. Chicago Title Ins. Co. , 194 Mich. App. 462, 468, 487 N.W.2d 807 (1992), citing Warren v. McLouth Steel Corp. , 111 Mich. App. 496, 508, 314 N.W.2d 666 (1981). However, "[w]here there is no evidence to support a claim that a third party’s wrongdoing caused the prior litigation, recovery of attorney fees under this exception is improper." Bonner , 194 Mich. App. at 469, 487 N.W.2d 807. Because we have concluded that USA engaged in no wrongdoing, attorney fees are not permissible. Moreover, it is a fundamental principle that attorney fees and costs may only be awarded to the prevailing party. See, e.g., MCL 600.2591(1) ; MCR 2.625(A)(1). Therefore, the trial court erred when it awarded attorney fees and costs to Citizens. We reverse the trial court’s orders granting Citizens’ motion for summary disposition and its motion for attorney fees, and we remand the matter to the trial court for further proceedings consistent with this opinion.
Reversed and remanded. We do not retain jurisdiction.
Riordan, J., concurred with Cameron, J.
Beckering, P. J. (dissenting).
When it comes to car insurance, Michigan is a no-fault state. Every owner of a car required to be registered in Michigan must have certain basic coverages in order to drive that car on a highway. MCL 500.3101(1). Those coverages are personal protection insurance (PIP), property protection insurance (PPI), and residual-liability insurance. Id . Under Michigan law, only if a car is not going to be driven or moved on a highway may an insurance company issue an insurance policy that deletes the above-identified mandatory minimum coverages and maintains the nonmandatory comprehensive portion of the policy in effect. MCL 500.3101(2). Our Supreme Court has expressly stated, with clarity, this mandate on owners and insurers: "[U]nder the no-fault automobile insurance act, MCL 500.3101 et seq. , insurance companies are required to provide first-party insurance benefits, referred to as personal protection insurance (PIP) benefits, for certain expenses and losses. MCL 500.3107 ; MCL 500.3108." Johnson v. Recca , 492 Mich. 169, 173, 821 N.W.2d 520 (2012) (emphasis added); see also Citizens Ins. Co. of America v. Federated Mut. Ins. Co. , 448 Mich. 225, 230, 531 N.W.2d 138 (1995) ("[W]hile subject to certain exceptions not at issue here, the no-fault act unambiguously requires that a policy of automobile insurance, sold to a vehicle owner pursuant to the act, must provide coverage for residual liability arising from use of the vehicle so insured.") (emphasis added); and Continental Cas. Co. v. Mich. Catastrophic Claims Ass'n , 874 F. Supp. 2d 678, 680 (ED Mich., 2012) ("The Michigan No-Fault Insurance Act is unique among no-fault regimes; it provides for unlimited lifetime PIP benefits to accident victims. § 500.3101, et seq . The unlimited PIP coverage is mandatory for all registered owners of motor vehicles in the state. Id. Therefore, insurance companies writing automobile insurance in Michigan must provide unlimited PIP coverage to policyholders.") (emphasis added). At its core, this case is about whether an insurance company can sell the nonmandatory portions of a car insurance policy in Michigan and yet not provide any of the mandatory coverages required by Michigan’s no-fault law. Defendant USA Underwriters (USAU) claims that it can, and the majority agrees. I respectfully dissent.
Michigan’s no-fault insurance act, MCL 500.3101 et seq. , became law on October 1, 1973. While it has been a target of certain legislators for years and is currently the subject of much debate and legislative wrangling, our no-fault auto insurance system remains in place.
Although the decisions of the lower federal courts are not binding, we may find their analyses and conclusions to be persuasive. Abela v. Gen. Motors Corp. , 469 Mich. 603, 607, 677 N.W.2d 325 (2004).
Defendant USA Underwriters admitted at oral argument that none of the car insurance policies it sells in Michigan provides any of the basic coverages required by Michigan law pursuant to MCL 500.3101(1). Consequently, if you buy car insurance from USA Underwriters alone, you still can’t legally drive your car on Michigan roads.
I. BASIC FACTS AND PROCEDURAL HISTORY
According to his testimony and the documents produced at defendant Steven Vandeinse’s deposition , Vandeinse purchased a 2011 Chevrolet Impala from Ypsilanti Import Auto Sales for about $11,000 on June 19, 2015. Before he could take possession of the car, Vandeinse had to get insurance, so he went to L.A. Insurance. Vandeinse testified that he told the person working there he wanted "full coverage on the vehicle." He was charged $445.03 up front and agreed to ongoing monthly payments to USAU of approximately $145. Vandeinse was given a "Certificate of Insurance" issued by USAU, which looked like the verification document drivers are required to present to the Secretary of State’s office in order to prove they have no-fault coverage so they can register their car:While the certificate states in small print that the insurance "is physical damage only, coverage does not meet the requirements of the Michigan No-fault Act, Chapter 31 of the Michigan Insurance Code," it also immediately thereafter states in bold type: "Involved in an Accident? Call (855) 230-1656 ." Vandeinse was also handed a one-page document titled "Loss Payable Endorsement" issued by USAU. The document indicated that he was being charged for "Comprehensive" and "Collision" insurance; it does not mention that the coverage failed to meet the requirements of Michigan’s no-fault law. Vandeinse’s policy was effective for six months at a premium rate of $792; that equals $1,584 per year for only collision and comprehensive insurance on a 2011 Chevy Impala.
Although not yet a party at the time, USAU was notified of Vandeinse’s deposition but did not attend.
As noted by the majority, the person who worked with Vandeinse at L.A. Insurance wrote an affidavit for purposes of this litigation indicating that the insurance policy Vandeinse actually bought is exactly what he asked for and that he chose to forgo buying insurance compliant with the no-fault law. USAU also produced a typewritten application, purportedly initialed by Vandeinse, identifying what he was actually getting in terms of coverage. Whether Vandeinse or the agent is telling the truth about how the transaction was actually handled remains a matter of dispute. But it is not material to the legal issue of whether USAU can sell a car insurance policy for a car that is going to be driven or moved on a highway in Michigan that does not comply with MCL 500.3101(1), but instead provides only comprehensive and collision coverages. Importantly, USAU was made well aware of the fact that the car would be driven or moved on the highway because it sold Vandeinse collision insurance.
On the basis of other documents produced in this litigation, it appears that L.A. Insurance sold Vandeinse a comprehensive-and-collision-only policy issued by USAU, as described above, and an Automobile Service Contract, issued by NSD (Nation Safe Drivers), covering roadside assistance for $300. In other words, Vandeinse walked away with just about everything but mandatory no-fault coverage. None of what he was sold allowed him to operate or move his car on a Michigan highway.
According to testimony provided by Hani Kassab, Jr., president and part-owner of USAU and a franchisee of L.A. Insurance, Anthony Yousif owns and is the president and CEO of L.A. Insurance. According to documents submitted by USAU to the Department of Insurance and Financial Services, Yousif was also the primary shareholder in USAU. At the time of Kassab’s 2017 deposition, USAU had been operating for approximately four years, having purchased Southern Michigan Insurance Company.
Vandeinse returned to Ypsilanti Import Auto Sales with his documents, where Vandeinse and a dealership representative completed, and Vandeinse signed, an "Application for Michigan Title & Registration, Statement of Vehicle Sale," which documented that Vandeinse had obtained insurance through USAU, Policy No. USAUW-00002968-00. Vandeinse received a temporary registration number.
On July 7, 2015, the state of Michigan issued a Certificate of Title recognizing Vandeinse as the lawfully registered owner of the Impala. Vandeinse testified that he dutifully paid USAU $145 per month for the insurance.
On September 8, 2015, Vandeinse’s girlfriend, Courtney Eisemann, was driving the Impala with permission when she accidentally struck and injured a bicyclist, plaintiff Niles Johnson. After the accident, the responding police officer documented that the Impala was insured through USAU.
Johnson initially filed a claim with, and later a lawsuit against, the Michigan Automobile Insurance Placement Facility. Defendant/cross-plaintiff-appellee Citizens Insurance Company of America received the claim by assignment. But after the depositions of Vandeinse and Eisemann, Johnson added USAU to the instant lawsuit. Ultimately, the trial court concluded that USAU had issued a policy in violation of Michigan law because it failed to provide the requisite no-fault insurance coverage required by MCL 500.3101. And apparently on the basis of USAU’s issuance of a "Certificate of Insurance," which looked just like that commonly used to register a vehicle with the Secretary of State’s office (and which did, in fact, fool both the Secretary of State’s office and a police officer), the court concluded that USAU acted with an intent to deceive the consumer and the Secretary of State. Therefore, the court ordered reformation of the contract to provide PIP, PPI, and residual-liability insurance, as required by the no-fault act. USAU appeals by right.
II. STANDARDS OF REVIEW
This Court reviews de novo a trial court’s decision on a motion for summary disposition, MEEMIC Ins. Co. v. Mich. Millers Mut. Ins. , 313 Mich. App. 94, 99, 880 N.W.2d 327 (2015), the proper interpretation of a statute, McCormick v. Carrier , 487 Mich. 180, 795 N.W.2d 517 (2010), and a trial court’s decision to grant equitable relief, Corwin v. DaimlerChrysler Ins. Co. , 296 Mich. App. 242, 253, 819 N.W.2d 68 (2012).
III. MANDATORY MICHIGAN NO-FAULT INSURANCE
On appeal, USAU contends that the trial court erred by reforming Vandeinse’s automobile insurance policy because the plain language of the insurance application and disclosures purportedly signed by Vandeinse indicated that the policy did not include no-fault coverage. I would hold that the trial court properly concluded that USAU issued an automobile insurance policy in violation of the mandatory coverage requirements of the no-fault act. An automobile insurance policy in Michigan must be interpreted to include the statutorily required minimum coverage in order to comply with Michigan law.
"An insurer who elects to provide automobile insurance is liable to pay no-fault benefits subject to the provisions of the [no-fault] act." Dobbelaere v. Auto-Owners Ins. Co. , 275 Mich. App. 527, 530, 740 N.W.2d 503 (2007), citing MCL 500.3105(1). "When construing the no-fault act, this Court must be careful to interpret the words used in the statute in light of their ordinary meaning and their context within the statute and must read the various provisions harmoniously to give effect to the statute as a whole." MEEMIC Ins. Co. , 313 Mich. App. at 102, 880 N.W.2d 327 (quotation marks and citation omitted). It has long been held that the no-fault insurance act is remedial in nature and must be liberally construed in favor of persons it is intended to benefit. In re Geror , 286 Mich. App. 132, 134-135, 779 N.W.2d 316 (2009) (quotation marks and citation omitted).
MCL 500.3101(1) of the no-fault act addresses motor vehicle security agreements and provides:
As amended by 2014 PA 492, effective January 13, 2015.
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, property protection insurance, and residual liability insurance. Security is only required to be in effect during the period the motor vehicle is driven or moved on a highway. Notwithstanding any other provision in this act, an insurer that has issued an automobile
insurance policy on a motor vehicle that is not driven or moved on a highway may allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion of the policy in effect. [Emphasis added.]
MCL 500.3101(2)(a) defines "automobile insurance" as meaning "that term as defined in [ MCL 500.]2102." MCL 500.2102 broadly defines "automobile insurance" to include "[i]nsurance coverages customarily known as comprehensive and collision." MCL 500.2102(2)(c). Thus, a comprehensive and collision insurance policy is an "automobile insurance policy" as described in MCL 500.3101(1). Reading the plain language in the third sentence of MCL 500.3101(1), an insurer may only allow an insured to delete the statutorily mandated coverage from an automobile insurance policy and maintain the comprehensive coverage portion under one condition. In other words, an automobile insurance policy starts with the mandatory coverages, because the word "delete" necessarily means initial inclusion. An insurer may allow the insured to delete those mandatory coverages if the motor vehicle is not driven or moved on a highway. I interpret MCL 500.3101(1) of the no-fault act to mean that an insurer may not sell an automobile insurance policy in Michigan—including the policy in question—without the statutorily required minimum coverages, absent circumstances not present here (i.e., for a car that is not going to be driven or moved on a highway).
Similarly, MCL 500.3206, which pertains to cancellation of automobile liability policies, defines "policy of automobile insurance" as used in that chapter to mean "a policy insuring private passenger automobiles ... or that portion of a combination policy which insures private passenger automobiles." Put simply, an "automobile liability policy" and a policy insuring private passenger automobiles are one and the same.
As noted earlier, it cannot be disputed that USAU knew the Impala Vandeinse was seeking to insure would be operated on the highway because USAU sold him collision insurance.
My interpretation of MCL 500.3101(1) is further bolstered by MCL 500.3009, regarding casualty insurance contracts for automobiles:
As amended by 1988 PA 43, effective March 30, 1989.
An automobile liability or motor vehicle liability policy insuring against loss resulting from liability imposed by law for property damage, bodily injury, or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall not be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless the liability coverage is subject to a limit, exclusive of interest and costs, of not less than $20,000.00 because of bodily injury to or death of 1 person in any 1 accident, and subject to that limit for 1 person, to a limit of not less than $40,000.00 because of bodily injury to or death of 2 or more persons in any 1 accident, and to a limit of not less than $10,000.00 because of injury to or destruction of property of others in any accident.
* * *
(3) If an insurer deletes coverages from an automobile insurance policy pursuant to [ MCL 500.]3101, the insurer shall send documentary evidence of the deletion to the insured. [Emphasis added.]
MCL 500.3101(1) and MCL 500.3009(3) both broadly address "automobile insurance policies" and under what circumstances an insurer may delete the requisite statutory minimum coverages from an automobile insurance policy. MCL 500.3101 and MCL 500.3009(3) implicitly require every automobile insurance policy in Michigan to contain the requisite minimum no-fault coverage at the outset, whereafter optional, or nonmandatory, coverage may be added to that policy, "the rights and limitations of [which] are purely contractual and are construed without reference to the no-fault act." Rory v. Continental Ins. Co. , 473 Mich. 457, 465-466, 703 N.W.2d 23 (2005). See also Krohn v. Home-Owners Ins. Co. , 490 Mich. 145, 155 n. 17, 802 N.W.2d 281 (2011) ("[A]ll owners or registrants of automobiles in Michigan are free to purchase insurance contracts that provide greater coverage than the minimum required under the no-fault act.") (emphasis added).
MCL 500.3009(3) had since been renumbered as MCL 500.3009(4). See 2016 PA 346, effective March 21, 2017.
Optional coverages the parties may agree to add to the automobile insurance policy include collision insurance, comprehensive insurance, residual-liability coverage in excess of the statutory minimum, uninsured and underinsured coverage, and mini-tort coverage. However, the fundamental and unavoidable starting point for insurers offering automobile insurance policies to owners and registrants of automobiles in the Michigan marketplace is a policy that provides the statutorily required minimum coverages under our no-fault law.
More explicitly, MCL 500.3131, pertaining to residual liability insurance, provides that "[t]his section shall apply to all insurance contracts in force as of October 1, 1973, or entered into after that date." MCL 500.3131(2) (emphasis added). Thus, the no-fault laws make clear that automobile insurance policies in Michigan must include at least the minimum no-fault coverages identified in MCL 500.3101(1), with those coverages being deletable only if the "motor vehicle is not driven or moved on a highway," and that additional nonmandatory coverages can be added to the policy as agreed upon by the parties. Further exemplifying this statutory scheme, optional collision coverage is addressed in MCL 500.3037, which provides, in pertinent part:
As amended by 1980 PA 461, effective January 15, 1981.
(1) At the time a new applicant for the insurance required by [ MCL 500.3101 ] for a private passenger nonfleet automobile makes an initial written application to the insurer, an insurer shall offer both of the following collision coverages to the applicant:
(a) Limited collision coverage which shall pay for collision damage to the insured vehicle without a deductible amount when the operator of the vehicle is not substantially at fault in the accident from which the damage arose.
(b) Broad form collision coverage which shall pay for collision damage to the insured vehicle regardless of fault, with deductibles in such amounts as may be approved by the commissioner, which deductibles shall be waived if the operator of the vehicle is not substantially at fault in the accident from which the damage arose.
(2) In addition to the coverages offered pursuant to subsection (1), standard and limited collision coverage may be offered with deductibles as approved by the commissioner.
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(6)[ ] At least annually in conjunction with the renewal of a private passenger nonfleet automobile insurance policy , or at the time of an addition, deletion, or substitution of a vehicle under an existing
MCL 500.3037(6) was remembered as MCL 500.3037(7) by 2016 PA 346, effective March 21, 2017.
policy, other than a group policy, an insurer shall inform the policyholder, on a form approved by the commissioner, of all of the following:
(a) The current status of collision coverage, if any, for the vehicle or vehicles affected by the renewal or change and the rights of the insured in the event of damages to the insured vehicle under the current coverage.
(b) The collision coverages available under the policy and the rights of the insured in the event of damage to the insured vehicle under each collision option.
(c) Procedures for the policyholder to follow if he or she wishes to change the current collision coverage. [Emphasis added.]
As manifested by MCL 500.3037, the starting point in Michigan is an automobile insurance policy that includes the mandatory minimum insurance required by MCL 500.3101. The new applicant can then decide whether to add collision coverage to the policy at that time or a later time in the life of the policy. Nowhere in the no-fault act does it say that insurance companies can sell to Michigan automobile owners automobile insurance policies that do not provide the mandatory minimum no-fault coverage. To do so would be a violation of the clear purpose of the no-fault act and a consequent violation of public policy. USAU—which bills itself as carrying "Affordable Car Insurance" and offering "terrific rates on quality coverage from top-rated insurance carriers" to "drivers" allowing them "affordable ways to stay on the road and within the law," according to usaunderwriters.com —sold an automobile policy to Vandeinse that would not even allow him to legally drive his car off the lot.
USA Underwriters, Home Page < < http://www.usaunderwriters.com>> (accessed March 13, 2019) [https://www.perma.cc/62XV-SF6D].
USAU has conceded that none of the automobile insurance policies it sells in Michigan provides the statutorily mandated minimum coverages for PIP, PPI, and residual liability. Therefore, instead of starting with an automobile policy that meets the requirements of Michigan’s no-fault act and deleting or adding coverages as permitted by law, USAU bypasses the no-fault act by underwriting optional insurance only. An insurer who sells automobile insurance in the Michigan marketplace must abide by the no-fault act. See Citizens , 448 Mich. at 232, 531 N.W.2d 138. On the basis of the foregoing interpretation of the applicable statutes and caselaw, I would hold that USAU sold an automobile insurance policy to Vandeinse in violation of Michigan’s no-fault law and its clearly stated public policy. Accordingly, the trial court did not err by reforming the contract to include the statutorily required minimum no-fault coverage required by MCL 500.3101. See Citizens , 448 Mich. at 234, 531 N.W.2d 138.
My colleagues in the majority note that the financial responsibility act, MCL 257.501 et seq ., "permits insureds to fulfill their insurance needs by way of multiple policies through more than one carrier." However, as our Supreme Court indicated in Citizens , the financial responsibility act should not be construed to contradict the no-fault act. Citizens , 448 Mich at 232.
At issue in Citizens was "the validity of a vehicle owner’s policy of liability insurance that denies coverage to any permissive user who is otherwise insured for an amount equal to that specified by the no-fault act." Id . at 227, 531 N.W.2d 138. In Citizens , Federated Insurance Company’s policy provided the mandated residual-liability coverages to permissive drivers of the insured car only if the drivers were uninsured or underinsured, while denying such coverages under all other circumstances. Id . at 231, 531 N.W.2d 138. The Supreme Court held that an insurer may not lawfully deny residual-liability coverages for losses arising from use of a covered vehicle "because the no-fault act clearly directs that a policy sold pursuant to the act must provide residual liability coverage for use of the vehicle insured." Id . Of significance to the case at bar, the Supreme Court addressed and dismissed an argument similar to that made in the instant case by USAU:
Notwithstanding the no-fault act, Federated urges us to focus on the financial responsibility act and contends that the exclusion of coverage contained in its policy is "authorized and contemplated by the financial responsibility act." In particular, Federated relies on subsections (i) and (j) of the financial responsibility act, MCL 257.520, which provide:
(i) Any motor vehicle liability policy may provide for the prorating of the insurance thereunder with other valid and collectible insurance.
(j) The requirements for a motor vehicle liability policy may be fulfilled by the policies of 1 or more insurance carriers which policies together meet such requirements.
According to Federated, because in each of these cases the driver’s insurance policy, when taken together with Federated’s insurance policy, will afford benefits of an amount specified by law, its insurance policy complies with public policy evidenced by the financial responsibility act. We question the premise of Federated’s argument because it suggests that the financial responsibility act manifests the controlling public policy of this state concerning automobile insurance.
The no-fault act, as opposed to the financial responsibility act, is the most recent expression of this state’s public policy concerning motor vehicle liability insurance. Therefore, while Federated’s insurance policy might well be reconciled with the financial responsibility act, its failure to comply with the no-fault act nevertheless renders it violative of public policy. An insurance policy that is repugnant to the clear directive of the no-fault act otherwise cannot be justified by the financial responsibility act . [ Id . at 231-232, 531 N.W.2d 138 (emphasis added; citation omitted).]
The financial responsibility act, particularly MCL 257.520(i) and (j), does "provide a method by which an owner may allocate insurance costs among various policies" or by which "vehicle owners may satisfy the insurance obligations created by the no-fault act." Id . at 232, 531 N.W.2d 138.
However, neither subsection (i) nor subsection (j) of the financial responsibility act permits an insurer ... to circumscribe the coverage directed by the no-fault act ; to reach that conclusion would not accord proper deference to the policy judgment implicit in the Legislature’s decision to require owners and registrants of motor vehicles to obtain insurance for the residual liability arising from the use of their vehicles. See MCL 500.3101 [.] [ Id . at 232-233, 531 N.W.2d 138 (emphasis added).]
Thus, while it is incumbent upon owners and registrants to obtain the statutorily mandated insurance, insurers cannot "circumscribe the coverage required by the no-fault act ...." Id . at 233, 531 N.W.2d 138. The Supreme Court held that the vehicle owner’s policy was invalid because it denied coverage for liability arising from the use of an insured vehicle, in contravention of the no-fault act, and it deemed the policy to provide primary coverage in an amount equal to that required by the no-fault act. Id . at 227, 531 N.W.2d 138. Citizens stands for the proposition that the financial responsibility act neither articulates Michigan’s public policy with regard to motor vehicle insurance nor absolves insurers of the mandate to conform to the requirements of the no-fault act.
As further support for their conclusion that selling automobile insurance policies in Michigan that do not provide the mandatory minimum coverages set forth in MCL 500.3101 does not violate the no-fault act, my colleagues in the majority rely on this Court’s decision in Integral Ins. Co. v. Maersk Container Serv. Co., Inc. , 206 Mich. App. 325, 520 N.W.2d 656 (1994). Integral , however, does not support the majority’s position.
Integral involved a priority dispute between insurers to determine which insurer was liable to pay PIP benefits for injuries suffered by Ralph Scott when the Michigan-registered tractor truck Scott was driving, and the semitrailer the tractor was pulling, overturned in Pennsylvania. Scott owned the tractor, but he had leased it to Maersk for 90 days. Id . at 328, 520 N.W.2d 656. Maersk had agreed to obtain and maintain liability insurance covering bodily injury and property damage for the tractor. And Scott, who drove the tractor for Maersk, had agreed to obtain "bobtail" insurance and workers’ compensation insurance. Accordingly, Maersk obtained from Insurance Company of North America (INA) a policy "covering personal injury protection for automobiles subject to no-fault" that also covered the tractor, and Scott obtained a bobtail policy from Integral Insurance Company. The bobtail policy "expressly excluded coverage (1) while the tractor was being used to carry property for business and (2) while the tractor was being used for the business of anyone who leased the tractor." Id. at 328, 520 N.W.2d 656.
"Generally, a ‘bobtail’ policy is a policy that insures the tractor and driver of a rig when it is operated without cargo or a trailer." Integral , 206 Mich. App. at 331, 520 N.W.2d 656.
Scott was hauling a trailer loaded with cargo for Maersk at the time of the accident. Consequently, one of the issues in the trial court was whether INA under the policy sold to Maersk or Integral under the bobtail policy sold to Scott was first in priority for payment of PIP benefits. Scott also filed a workers’ compensation claim, and the hearing referee ruled that Scott was an employee of Maersk. Id . at 330, 520 N.W.2d 656. On the basis of this ruling, the trial court concluded that Maersk’s insurer, INA, was first in priority for PIP benefits under MCL 500.3114(3) and entered a corresponding order. Id. Subsequently, however, the Worker’s Compensation Appellate Commission reversed the hearing referee’s determination. Id . Thus, by the time the appeals and cross-appeals from the trial court’s order had reached this Court, the basis of the court’s decision no longer existed. Nevertheless, this Court affirmed the trial court’s order, but on different grounds. Id. at 332, 520 N.W.2d 656. The Court affirmed that INA was first in priority on the grounds that Scott had been hauling a trailer with cargo for Maersk at the time of the accident and the bobtail policy validly excluded coverage under such circumstances. Id .
The majority finds Integral ’s relevance to the instant case in the Court’s discussion of the validity of the bobtail policy’s exclusions. The trial court ruled that the exclusions were void as against public policy, but this Court disagreed, observing that:
Integral’s policy provided coverage only when Scott was not hauling cargo for a business or when Scott was not hauling cargo for a business to whom the tractor was rented. Admittedly, the policy itself does not provide full coverage. However, the tractor was fully covered under no-fault by the addition of INA’s policy that provided coverage when Scott was hauling cargo on behalf of Maersk. [ Id . at 331, 520 N.W.2d 656.]
The Court supported its reasoning by noting that MCL 257.520(j) of the financial responsibility act provides that "[t]he requirements for a motor vehicle liability policy may be fulfilled by the policies of 1 or more insurance carriers which policies together meet such requirements." Integral , 206 Mich. App. at 331, 520 N.W.2d 656. The Court then determined that "[t]aken together, the policy issued by INA and the bobtail policy issued by Integral provided continuous insurance coverage to the tractor as required by the motor vehicle financial responsibility act." Id . at 331-332, 520 N.W.2d 656.
The majority interprets the Court’s observation that the bobtail policy did not provide "full coverage" but that the tractor was "fully covered under no-fault by the addition of INA’s policy," id. at 331, as indicating that the bobtail policy did not provide for the PIP benefits mandated under MCL 500.3101(1). This interpretation is incorrect. That the bobtail policy provided PIP benefits is evident from this Court’s characterization of Integral as "a dispute between no-fault insurers" and from the fact that "Integral and INA each agreed to contribute fifty percent of Scott’s personal protection insurance (PIP) benefits during their dispute regarding priority." Integral , 206 Mich. App. at 328, 520 N.W.2d 656. Note that the dispute between the insurers was about priority, not liability. Accordingly, the Court’s observation that the bobtail policy plus Maersk’s policy from INA provided "full coverage" was not an observation about what each policy covered, but about when the policies were in force. Both policies provided PIP benefits, but at different times. The bobtail policy excluded coverage when the tractor was hauling a load or was rented for business, and INA’s policy provided coverage during the period of Maersk’s rental; together, the two policies provided "continuous insurance coverage to the tractor ...." Id . at 331, 520 N.W.2d 656 (emphasis added). Thus, Integral is not about obtaining "full coverage" by combining policies that do not cover PIP benefits with those that do; rather, Integral is about combining policies—each of which provides the statutorily mandated PIP coverages—to achieve temporally "continuous insurance coverage" as required by the financial responsibility act.
In sum, the caselaw relied on by the majority does not support its conclusion that the no-fault act allows an insurance company providing automobile insurance in Michigan to circumvent the no-fault act and sell only optional insurance coverages. The statutory scheme is clear: the starting point for achieving the goals of the no-fault act is an automobile insurance policy that provides the statutorily mandated coverages under MCL 500.3101(1), to which parties may add elective coverages as agreed on and delete the mandatory coverages and maintain comprehensive coverage only if the car is not going to be driven or moved on a highway. Automobile policies underwritten by USAU do not comply with the no-fault act. Accordingly, I would affirm the ruling of the trial court.