I filed an amicus curiae brief on behalf of Oakland County, Macomb County and Wayne County in this case, urging the Supreme Court to grant Michigan Municipal Risk Management Authority’s application or, alternatively, to reverse the Court of Appeals. My brief is attached here: Supreme Court Amicus Curiae Brief for Oakland, Wayne and Macomb Counties stamped copy.
In State Farm v. MMRMA, Supreme Court Case No. 147752, the Court of Appeals held that a police vehicle pursuing a speeding motorcyclist was sufficiently “involved” in a motor vehicle accident between the motorcyclist and another vehicle, even though the police vehicle was nowhere near in proximity to the motorcyclist when he (or his bike) collided with the other vehicle, insured by State Farm. This holding resulted in the apportionment of liability between the no-fault insurance carrier for the county and the insurer of the vehicle. Michigan Municipal Risk Management Authority (MMRMA) filed an application for leave to appeal the Court of Appeal’s decision.
Technically, this case is a pure insurance coverage dispute between two no-fault automobile insurance carriers. Since motorcycles are not covered “vehicles” under Michigan’s No-Fault Act (and motorcyclists are not obligated to carry no-fault coverage), when a motorcyclist suffers injury in a motor vehicle accident, the no-fault act contains a provision “prioritizing” which no-fault insurers are to be “on the risk”. MCL 500.3114(5)(a). Subsection 6 provides if “2 or more” vehicles are involved in the [motor vehicle] accident” the insurers in the same order of priority shall apportion liability among themselves.
There is much debate about this provision and the “scope” of its meaning in terms of which vehicles are, or, are not, “involved in” the motor vehicle accident. Several prior cases from the Supreme Court and Court of Appeals interpreting other provisions of the no-fault act appear to give an “expansive” interpretation of the phrase “involved in”, which results in apportionment of coverage responsibility among multiple insurers.
Governmental entities are affected by this case because they are also responsible to provide the security (insurance) required by the no-fault act for the day-to-day operations involving government owned vehicles. In addition to being contrary to the plain language of the statutory provision, the Court of Appeals decision makes no mention of the effect its ruling has upon government operations and the fiscal consequences of imposing liability under circumstances in which the government is performing an essential function – in this case, the law enforcement function. There are two other applications pending in the Supreme Court requesting the Court to consider this same provision and the “scope” and meaning of the phrase “involved in” when “motor vehicles” are ostensibly involved in an accident in which a motorcyclist suffers injury. I previously wrote about this case, as well as the other two.
For more information about this and other similar cases contact Carson J. Tucker, Chair of the Appeals and Legal Research Group at Lacey & Jones, LLP, a Birmingham law firm serving clients since 1912. Mr. Tucker can be reached at (248) 283-0763.
For more information about Lacey & Jones, click on the following practice area company pages on Linked In.
This opinion provides a classic example of the consequences of an indemnitor ignoring or refusing to take up the defense and then participate in a contractual indemnitee’s settlement discussions against a plaintiff in an underlying lawsuit.
The plaintiff in this case, the hospital, entered into an agreement with a nursing staff company, the defendant, wherein the latter agreed to defend and indemnify the hospital against “all demands, class actions, or causes of action based upon or arising out of the acts or omissions of” the nursing staff company.
Plaintiff in the underlying lawsuit, the estate of a deceased patient of the hospital, filed a wrongful death action against the hospital, alleging negligence and vicarious liability against the hospital “based on acts performed by the nursing staff” provided by the nursing staff company.
The hospital provided notice to the nursing staff company and provided it with a copy of the lawsuit. The hospital also informed the nursing staff company of a scheduled facilitation and formally requested the nursing staff company to participate. Despite receiving notice, the nursing staff company did not participate, nor did it take up the defense of the hospital pursuant to the indemnity agreement.
The hospital entered into a settlement agreement with the decedent’s estate. It then filed suit against the nursing staff company stating causes of action in contractual indemnification, common-law indemnification, and contribution. The trial court entered judgment for the hospital and the nursing staff company appealed.
The Court of Appeals (Riordan, O’Connell, and Hoekstra) affirmed. The Court recited the rule that where an indemnitor has notice of an action and declines the tender of the claim and refuses to participate in the defense of the indemnitee in the underlying lawsuit, the indemnitor will be bound by any reasonable, good faith settlement the indemnitee might thereafter enter into with the plaintiff in the underlying lawsuit. Slip Op. at 2. Moreover, the Court noted, where the indemnitor has notice of the claim and refuses to defend the indemnitee under the indemnity agreement, the indemnitee need only demonstrate potential liability to the claimant in the underlying suit, rather than actual liability.
This principle applies not only to indemnitee agreements but also to insurance policies and where insurance companies receive notice of a claim and refuse to defend under a reservation of rights. The same consequence obtains such that if the insured settles the underlying lawsuit on the basis of potential liability (and, in the insurance context, this would apply even to claims that may not be covered precisely because the insurer did not reserve its rights under the policy), the insurer will be liable for any reasonable, good faith settlement.
It should also be noted that in the insurance context, the rule in Michigan is that the right to recover from the insurer in such circumstances is ex contractu, i.e., outside the policy’s terms and conditions, and thus, neither the policy limits, nor any reserve provisions or “defense costs” limitations (e.g., burning limits policies) apply.
In short, in the latter circumstance, the insurance company would be required by common law principles of indemnity to make the settling insured whole.
With this particular panel of the Court of Appeals having ruled unequivocally in favor of the hospital, I seriously doubt the Supreme Court would take this case up.
Here is the opinion: Henry Ford Health System v. ACT-1 Group et al.opn