Hastings Mutual Insurance Company v. Grange Insurance Company

STATE OF MICHIGAN

COURT OF APPEALS

HASTINGS MUTUAL INSURANCE FOR PUBLICATION

COMPANY, May 16, 2017

9:15 a.m.

Plaintiff-Appellee,

v No. 331612

Berrien Circuit Court

GRANGE INSURANCE COMPANY OF LC No. 14-000258-NF

MICHIGAN,

Defendant-Appellant.

HASTINGS MUTUAL INSURANCE

COMPANY,

Plaintiff-Appellant,

v No. 333193

Berrien Circuit Court

GRANGE INSURANCE COMPANY OF LC No. 14-000258-NF

MICHIGAN,

Defendant-Appellee.

Before: MARKEY, P.J., and MURPHY and METER, JJ.

MURPHY, J.

In Docket No. 331612, defendant Grange Insurance Company of Michigan (Grange)

appeals by right the trial court’s order denying its motion for summary disposition and granting

summary disposition in favor of plaintiff, Hastings Mutual Insurance Company (Hastings). In

Docket No. 333193, Hastings appeals by right the trial court’s order denying its motion for

attorney fees. We affirm.

This case arises out of a fire that occurred on April 15, 2014, in a barn owned by

Williams Farms, LLC, a family-operated farm that grows a variety of vegetables. Ryan Keath, a

salaried employee of Williams Farms, regularly used the barn and its equipment to provide

repairs and maintenance to the farm’s vehicles, as well as to the vehicles of family members.

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Keath was repairing his sister’s motor vehicle when the fire began. The fire ultimately destroyed

the barn and all of its contents. Hastings, the insurer of Williams Farms’s real and personal

property, paid Williams Farms $699,134 in insurance benefits to cover the loss. Hastings later

filed a claim as subrogee for property protection benefits in the same amount from Grange, the

no-fault insurer of the vehicle involved in the fire. Grange denied the claim by Hastings in

August 2014, and Hastings subsequently filed suit against Grange.

Both parties filed motions for summary disposition under MCR 2.116(C)(10). The trial

court granted summary disposition in favor of Hastings, finding that the no-fault act, MCL

500.3101 et seq., rendered Grange liable for the property damage. The trial court specifically

ruled that MCL 500.3121(1) did not relieve Grange of liability, given that Williams Farms was a

farm and was not in the business of repairing, servicing, or maintaining motor vehicles.

Accordingly, the trial court granted Hastings’ motion for summary disposition and denied

Grange’s competing motion.

On appeal, Grange argues that the trial court improperly granted Hastings’ motion for

summary disposition because Williams Farms was in the business of repairing, servicing, or

maintaining motor vehicles for purposes of MCL 500.3121(1) and, therefore, the statute operated

to exclude Grange from liability for the property damage. We disagree.

This Court reviews de novo a ruling on a motion for summary disposition, as well as

issues of statutory construction. Johnson v Recca, 492 Mich 169, 173; 821 NW2d 520 (2012).

With respect to a motion for summary disposition brought pursuant to MCR 2.116(C)(10), this

Court in Pioneer State Mut Ins Co v Dells, 301 Mich App 368, 377; 836 NW2d 257 (2013), set

forth the governing principles, stating:

In general, MCR 2.116(C)(10) provides for summary disposition when

there is no genuine issue regarding any material fact and the moving party is

entitled to judgment or partial judgment as a matter of law. A motion brought

under MCR 2.116(C)(10) tests the factual support for a party's claim. A trial court

may grant a motion for summary disposition under MCR 2.116(C)(10) if the

pleadings, affidavits, and other documentary evidence, when viewed in a light

most favorable to the nonmovant, show that there is no genuine issue with respect

to any material fact. 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. The trial court is not permitted to

assess credibility, weigh the evidence, or resolve factual disputes, and if material

evidence conflicts, it is not appropriate to grant a motion for summary disposition

under MCR 2.116(C)(10). A court may only consider substantively admissible

evidence actually proffered relative to a motion for summary disposition under

MCR 2.116(C)(10). [Citations and quotation marks omitted.]

With respect to the construction of MCL 500.3121 and statutes in general, our Supreme

Court in Whitman v City of Burton, 493 Mich 303, 311-312; 831 NW2d 223 (2013), observed:

When interpreting a statute, we follow the established rules

of statutory construction, the foremost of which is to discern and give effect to the

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intent of the Legislature. To do so, we begin by examining the most reliable

evidence of that intent, the language of the statute itself. If the language of a

statute is clear and unambiguous, the statute must be enforced as written and no

further judicial construction is permitted. Effect should be given to every phrase,

clause, and word in the statute and, whenever possible, no word should be treated

as surplusage or rendered nugatory. Only when an ambiguity exists in the

language of the statute is it proper for a court to go beyond the statutory text to

ascertain legislative intent. [Citations omitted.]

“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.” MCL 500.3101(1) (emphasis added).

MCL 500.3121(1) provides:

Under property protection insurance an insurer is liable to pay benefits for

accidental damage to tangible property arising out of the ownership, operation,

maintenance, or use of a motor vehicle as a motor vehicle subject to the

provisions of this section and sections 3123, 3125, and 3127. However, accidental

damage to tangible property does not include accidental damage to tangible

property, other than the insured motor vehicle, that occurs within the course of a

business of repairing, servicing, or otherwise maintaining motor vehicles.

[Emphasis added.]

In the present case, the parties dispute whether vehicle repairs performed by a salaried

employee of Williams Farms, a business whose primary purpose is farming, qualifies under the

course-of-business exception in MCL 500.3121(1). Our Supreme Court has ruled that a

“business” encompasses a person engaged in a service, activity, or enterprise for benefit, gain,

advantage, or livelihood. Terrien v Zwit, 467 Mich 56, 64; 648 NW2d 602 (2002), quoting

Random House Webster’s College Dictionary (1991) and Black’s Law Dictionary (6th ed); see

also Allied Prop & Cas Ins Co v Pioneer State Mut Ins Co, 272 Mich App 444, 450; 726 NW2d

83 (2006) (a business is a commercial enterprise or establishment). “Course of business” is

defined as “[t]he normal routine in managing a trade or business.” Black’s Law Dictionary (10th

ed).

Using these definitions, it becomes clear that MCL 500.3121(1)’s exception is meant to

exclude property damage where the purpose of the business in question is to provide

maintenance and repair services for motor vehicles—and not meant to cover just any business

that peripherally participates in these activities or any person that performs these activities.

Although Williams Farms undoubtedly benefits from having vehicle repairs done in-house, its

enterprise for gain, advantage, and livelihood is focused on farming, not the repair, maintenance,

and servicing of vehicles. Williams Farms is a farming business, not an automotive-repair

business. Therefore, Williams Farms is not in the “business of repairing, servicing, or otherwise

maintaining motor vehicles.” MCL 500.3121(1). Had the Legislature intended MCL

500.3121(1) to exclude repairing, servicing, or maintaining motor vehicles in any business

environment, the Legislature could have chosen alternate language. Instead, the Legislature

crafted MCL 500.3121(1) so that the prepositional phrase of “of repairing, servicing, or

otherwise maintaining motor vehicles” modifies “a business.”

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This conclusion is supported by this Court’s decision in Allied Prop, 272 Mich App 444,

wherein this Court held that a no-fault insurer was not liable when property damage resulted

from a fire caused by an unlicensed mechanic operating out of his father’s home garage. This

Court stated that the purpose of MCL 500.3121(1)’s exception is “to exempt no-fault carriers

from liability for property damage that occurs within the course of a vehicle-repair business[.]”

Id. at 449. This Court determined that the large amount of equipment in the garage, the

equipment’s $30,000 value, the existence of regular customers, the charging of fixed prices for

jobs, and the income received from the services performed demonstrated that the mechanic’s

work was performed in the course of a vehicle-repair business. Id. at 451.

In sum, MCL 500.3121(1)’s exception applies only to vehicle-repair businesses, which

Williams Farms is not. Williams Farms primary business enterprise is farming and, although

Keath performs services for the farm’s benefit with tools provided by the farm, there are no

regular outside customers or a fixed price list that would indicate that the farm also operates a

vehicle-repair business. Accordingly, MCL 500.3121(1) does not exclude Grange from liability

for the damage, and the trial court properly rejected Grange’s motion for summary disposition

and soundly awarded summary disposition to Hastings.

Following the trial court’s grant of summary disposition, Hastings moved for attorney

fees in accordance with MCL 500.3148(1) based on Grange’s allegedly unreasonable denial of

Hastings’ claim for property protection benefits. The trial court denied the motion, ruling that

Grange’s denial of the claim was not unreasonable because Grange reasonably believed that it

was relieved of liability under MCL 500.3121(1).

On appeal, Hastings argues that the trial court erred in denying its motion for attorney

fees because Grange’s rejection of the claim was unreasonable. MCL 500.3148(1) provides as

follows:

An attorney is entitled to a reasonable fee for advising and representing a

claimant in an action for personal or property insurance benefits which are

overdue. The attorney’s fee shall be a charge against the insurer in addition to the

benefits recovered, if the court finds that the insurer unreasonably refused to pay

the claim or unreasonably delayed in making proper payment.

In Ross v Auto Club Group, 481 Mich 1, 7; 748 NW2d 552 (2008), the Court explained

the standards of review associated with a ruling under MCL 500.3148(1), stating:

The no-fault act provides for attorney fees when an insurance carrier

unreasonably withholds benefits. The trial court's decision about whether the

insurer acted reasonably involves a mixed question of law and fact. What

constitutes reasonableness is a question of law, but whether the defendant's denial

of benefits is reasonable under the particular facts of the case is a question of fact.

Whereas questions of law are reviewed de novo, a trial court's findings

of fact are reviewed for clear error. A decision is clearly erroneous when the

reviewing court is left with a definite and firm conviction that a mistake has been

made. [Citations and quotation marks omitted.]

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In Attard v Citizens Ins Co of America, 237 Mich App 311, 317; 602 NW2d 633 (1999),

this Court examined MCL 500.3148(1):

When determining whether attorney fees are warranted for an insurer's

delay to make payments under the no-fault act, a delay is not unreasonable if it is

based on a legitimate question of statutory construction, constitutional law, or

factual uncertainty. When an insurer refuses to make or delays in making

payment, a rebuttable presumption arises that places the burden on the insurer to

justify the refusal or delay. [Citations omitted.]

A no-fault insurer may have reasonably delayed or refused to pay a claim even where it is

later determined that the insurer is required to pay the benefits. Moore v Secura Ins, 482 Mich

507, 525; 759 NW2d 833 (2008).

Grange, relying on the opinion of its counsel as well as the opinion of outside counsel,

believed that it was excluded from liability under MCL 500.3121(1), and thus denied the claim

for property protection benefits. Although we hold that Grange is not excluded from liability

under MCL 500.3121(1), this does not necessarily mean, as noted in Moore, that Grange acted

unreasonably in refusing to pay Hastings’ claim. Although we believe it to be a close call, given

the dearth of pertinent caselaw construing MCL 500.3121(1) and the factual circumstances of the

case, we conclude that there existed “a legitimate question of statutory construction.” Attard,

237 Mich App at 317. Accordingly, we affirm the trial court’s ruling on the issue.1

Affirmed. Neither party having fully prevailed on appeal, we decline to award taxable

costs under MCR 7.219.

/s/ William B. Murphy

/s/ Jane E. Markey

/s/ Patrick M. Meter

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Given our holding, we need not address other arguments presented by Grange, such as its

assertion that Hastings, as a matter of law, was not entitled to attorney fees under MCL

500.3148(1) considering its status as a “subrogee.”

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