Kaitlin Hahn v. Geico Indemnity Company

STATE OF MICHIGAN

COURT OF APPEALS

KAITLIN HAHN, UNPUBLISHED

June 12, 2018

Plaintiff-Appellee,

v No. 336583

Oakland Circuit Court

GEICO INDEMNITY COMPANY, LC No. 2016-152229-NF

Defendant-Appellant,

and

AUTOMOBILE CLUB INSURANCE

ASSOCIATION,

Defendant.

Before: SAWYER, P.J., and CAVANAGH and FORT HOOD, JJ.

PER CURIAM.

Defendant, Geico Indemnity Company (Geico), appeals by leave granted1 the trial court’s

opinion and order, which denied Geico’s motion for summary disposition pursuant to MCR

2.116(C)(10). We affirm in part, reverse in part, and remand for further proceedings.

Plaintiff, Kaitlin Hahn, grew up in Michigan. She met her future husband, Zachary

Waller, while the two were in high school. Waller joined the Marines after graduating high

school. Plaintiff graduated two years later. In April 2015, plaintiff drove to North Carolina to

visit Waller, who was stationed there. While in North Carolina, the two married and purchased a

townhouse, where the two lived together. Both intended to sell or lease the townhouse and

return to Michigan after Waller finished his service with the Marines, which was to occur in

January 2017. On July 17, 2015, plaintiff and Waller began a long drive back to Michigan for a

planned celebration of their wedding. Waller was driving at about 4:00 a.m. the morning of July

1

Hahn v Geico Indem Co, unpublished order of the Court of Appeals, entered May 17, 2017

(Docket No. 336538).

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18, 2015, when he fell asleep. Waller lost control of his truck and drove into a ditch. Plaintiff

was rendered a quadriplegic as a result.

After the accident, plaintiff filed a claim with Geico, who insured Waller’s truck under a

policy issued in North Carolina. Geico responded with a letter dated February 22, 2016

explaining that it had determined that plaintiff was entitled to up to $500,000 in benefits pursuant

to MCL 500.3163. This statute provides, in pertinent part:

(1) An insurer authorized to transact automobile liability insurance and personal

and property protection insurance in this state shall file and maintain a written

certification that any accidental bodily injury or property damage occurring in this

state arising from the ownership, operation, maintenance, or use of a motor

vehicle as a motor vehicle by an out-of-state resident who is insured under its

automobile liability insurance policies, is subject to the personal and property

protection insurance system under this act.

* * *

(3) Except as otherwise provided in subsection (4), if a certification filed under

subsection (1) or (2) applies to accidental bodily injury or property damage, the

insurer and its insureds with respect to that injury or damage have the rights and

immunities under this act for personal and property protection insureds, and

claimants have the rights and benefits of personal and property protection

insurance claimants, including the right to receive benefits from the electing

insurer as if it were an insurer of personal and property protection insurance

applicable to the accidental bodily injury or property damage.

(4) If an insurer of an out-of-state resident is required to provide benefits under

subsections (1) to (3) to that out-of-state resident for accidental bodily injury for

an accident in which the out-of-state resident was not an occupant of a motor

vehicle registered in this state, the insurer is only liable for the amount of ultimate

loss sustained up to $500,000.00. Benefits under this subsection are not

recoverable to the extent that benefits covering the same loss are available from

other sources, regardless of the nature or number of benefit sources available and

regardless of the nature or form of the benefits.

It is undisputed that Geico has, in fact, paid $500,000 in benefits to plaintiff. There is no

indication in the record that Geico seeks to recoup any part of this amount from plaintiff.

Plaintiff filed suit in March 2016, seeking a declaration regarding whether defendant

Automobile Club Insurance Company (ACIA), who insured plaintiff’s father, Geico, or both

companies were responsible for paying benefits to plaintiff pursuant to the no-fault act, MCL

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500.3101 et seq.2 Her theory against ACIA was that she was entitled to benefits under her

father’s policy because she was domiciled with him at the time of the accident. With respect to

Geico, plaintiff quoted, but did not cite, the language of MCL 500.3163(1) in her complaint. In

contravention of the plain language of MCL 500.3163(4), she requested a declaration that

Geico’s liability was not limited to $500,000.

The focus of discovery was on residency. The depositions taken in this matter were done

so under an agreement that residency was the only issue to be delved into. The parties planned

to resolve this question, and then participate in additional discovery if required. ACIA sought

summary disposition pursuant to MCR 2.116(C)(10) on the basis that plaintiff was not domiciled

with her father. Geico sought summary disposition pursuant to MCR 2.116(C)(10) on the basis

that Waller and plaintiff both resided in Michigan, and thus, plaintiff could not be entitled to

benefits under MCL 500.3163. In response to ACIA, plaintiff argued that she did reside with her

father. In response to Geico, plaintiff argued that under the equitable “mend-the-hold” doctrine,

which we discuss later in this opinion, Geico was estopped from taking a different position in the

present suit than it had in its February 22, 2016 correspondence. And while her logic was not

exactly clear, plaintiff went on to argue that by taking the position that it had no liability under

MCL 500.3163, Geico was also estopped from limiting its liability to $500,000.

ACIA and Geico also filed responses to each other’s motions. Specifically, ACIA

contended that pursuant to MCL 500.3012 and this Court’s decision in Farm Bureau Ins Co v

Allstate Ins Co, 233 Mich App 38; 592 NW2d 395 (1998), the policy Geico issued to Waller

should be reformed into one providing Michigan no-fault benefits, and that if so reformed, Geico

would be responsible for plaintiff’s entire loss. In response, Geico continued to argue that MCL

500.3163 was inapplicable. Geico also pointed out that even if the statute applied, it had paid

plaintiff $500,000, and thus, satisfied any obligation under the statute. In response to ACIA’s

discussion of MCL 500.3012, Geico argued that the statute was inapplicable on the facts

presented in this suit.

The trial court dispensed with oral argument and issued a 34-page opinion and order.

The trial court concluded that (1) plaintiff and Waller were domiciled in Michigan, (2) plaintiff

was not domiciled with her father at the time of the accident, and (3) factual disputes remained

with regard to the application of the mend-the-hold doctrine and MCL 500.3012. Because

plaintiff was not domiciled with her father, the court granted summary disposition in favor of

ACIA. But because factual disputes remained with regard to plaintiff’s claims against Geico, the

trial court denied Geico’s motion. Geico sought leave to appeal in this Court, and this Court

granted leave, limited to “the issues raised in the application and supporting brief.” Hahn v

Geico Indem Co, unpublished order of the Court of Appeals, entered May 17, 2017 (Docket No.

336538).3

2

Plaintiff later amended the complaint to add a claim for the nonpayment of no-fault benefits

against both insurers.

3

While the application and supporting brief raised four separate contentions of error, Geico has

now abandoned two of these issues: (1) that the trial court erred when it found that plaintiff and

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I. MCL 500.3012

Geico first argues that the trial court erred in determining that genuine issues of material

fact existed concerning the potential applicability of MCL 500.3012. We disagree.

“This Court reviews the grant or denial of summary disposition de novo to determine if

the moving party is entitled to judgment as a matter of law. In making this determination, the

Court reviews the entire record to determine whether defendant was entitled to summary

disposition.” Maiden v Rozwood, 461 Mich 109, 118; 597 NW2d 817 (1999).

A motion under MCR 2.116(C)(10) tests the factual sufficiency of the

complaint. In evaluating a motion for summary disposition brought under this

subsection, a trial court considers affidavits, pleadings, depositions, admissions,

and other evidence submitted by the parties, MCR 2.116(G)(5), in the light most

favorable to the party opposing the motion. Where the proffered evidence fails to

establish a genuine issue regarding any material fact, the moving party is entitled

to judgment as a matter of law. [Id. at 120.]

The proper interpretation of a statute is a question of law reviewed de novo on appeal. In

re Complaint of Rovas Against SBC Mich, 482 Mich 90, 102; 754 NW2d 259 (2008).

This Court addressed MCL 500.3012 in Farm Bureau Ins Co, 233 Mich App at 38. In

that case, similar to the present case, the plaintiff sought a declaration regarding which of two

insurers was responsible for the payment of no-fault benefits. Id. at 39. This Court first

concluded that the trial court did not clearly err when it determined that “Allstate’s insured was a

resident of Michigan who was domiciled with the accident victim, also a Michigan resident, and

that the accident victim was a resident relative of Allstate’s insured, MCL 500.3114 . . . .” Id. at

40. Because the insured was not a nonresident of Michigan, MCL 500.3163 was not applicable.

Id. at 40-41.

This Court then went on to explain that there was “no reasonable basis in the record to

conclude that Allstate violated Michigan law in issuing an Indiana insurance policy to [Allstate’s

insured] because there is no evidence from which one may reasonably determine that Allstate

should have known that she was a Michigan resident.” Id. at 41. This Court recognized the

existence of MCL 500.3012, and explained that “the basic purpose of [MCL 500.]3012 is to treat

an insurance policy that an insurer issues purporting to be a Michigan policy that complies with

Michigan law as such even if the written terms of the policy are inconsistent with Michigan

law.” Farm Bureau, 233 Mich App at 41. This Court further explained, “the Indiana insurance

policy issued by Allstate in this case was not issued ‘in violation of’ the no-fault act because

Waller were domiciled in Michigan, and (2) that the trial court erred when it found that there

exists a factual question regarding whether plaintiff was a “spouse” under the terms of its policy.

While plaintiff continues to argue for the affirmance of the trial court’s decisions in this regard,

we need not reach them, because Geico no longer challenges those points.

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Allstate neither purported to issue a policy that complied with Michigan’s no-fault act nor knew

that it was dealing with a Michigan resident.” Id. at 42.

In the present matter, the trial court found that a factual question existed regarding

whether reformation was appropriate under MCL 500.3012. The trial court reached this

conclusion on the basis of factual questions arising from the record evidence regarding whether

Geico should have known that Waller was a Michigan resident. We agree with the trial court’s

determination. Farm Bureau Ins Co indicates that if an insurer knows, or has reason to know,

that the individual seeking insurance is a Michigan resident, but the insurer nonetheless issues a

policy that does not provide Michigan no-fault coverage, MCL 500.3012 may be invoked to

reform the policy to one providing Michigan no-fault coverage. See Farm Bureau Ins Co, 233

Mich App at 41 (finding no basis to invoke the statute under the factual circumstances of that

case because “there is no evidence from which one may reasonably determine that Allstate

should have known that [its insured] was a Michigan resident.”). See also id. at 43 n 2 (“We

emphasize that a case in which an insurer is aware that it is dealing with a Michigan resident and

nevertheless issues an out-of-state automobile insurance policy that does not comply with

Michigan’s no-fault act would be a far different circumstance.”).

There is record evidence indicating that Geico knew, or at a minimum, had reason to

know, that Waller was a Michigan resident when he obtained the policy. Waller’s address is

listed as a Michigan address on the face of the policy. Waller also had a Michigan driver’s

license. Further, the declarations page noted that the vehicles would be garaged in North

Carolina, but at a military base. This Court has found that an individual’s temporary military

address has little or no effect on one’s place of domicile for purposes of the no-fault act.

Salinger v Hertz Corp, 211 Mich App 163, 166-167; 535 NW2d 204 (1995). See also id. at 166

(“Because military personnel often do not have a choice of where they are stationed, there is a

presumption in favor of retaining domicile in one’s home state.”). Under the circumstances, we

agree with the trial court that genuine issues of material fact existed with regard to whether

Geico knew, or should have known, that Waller was a Michigan resident who required a

Michigan no-fault policy. Under Farm Bureau Ins Co, this is enough to trigger the potential

applicability of MCL 500.3012.

Summary disposition with regard to this aspect of the suit is also inappropriate for an

entirely different reason. It is generally premature to grant summary disposition when discovery

on a disputed issue has not been completed. Oliver v Smith, 269 Mich App 560, 567; 715 NW2d

314 (2006). “However, summary disposition may nevertheless be appropriate if further

discovery does not stand a reasonable chance of uncovering factual support for the opposing

party’s position.” Id. (quotation marks and citation omitted). Here, the parties conducted

discovery under an agreement to limit the subject matter of depositions to the residency

questions that have now been resolved. Once these questions were resolved, the parties planned

to conduct additional discovery, taking additional depositions, on any remaining issues. As it

pertains to MCL 500.3012, while residency is a relevant concern, the primary question is Geico’s

knowledge at the time Waller obtained the policy. Discovery into this particular issue would not

appear to have even begun. And given the facts that have been discovered, we certainly cannot

conclude that further discovery stands no reasonable chance of uncovering further relevant facts.

Thus, it would have been premature for the trial court to grant summary disposition in Geico’s

favor once MCL 500.3012 became a part of this suit.

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Geico tries to avoid this result by arguing that Farm Bureau Ins Co need not be followed,

and that its construction of MCL 500.3012 is flawed and not congruent with the text of the

statute. Geico also raises what are best categorized as practical or public policy concerns if the

decision is followed. There are a few issues with Geico even raising these questions in this

appeal. First, these arguments were not made in the trial court, and thus, are not preserved.

Polkton Charter Twp v Pellegrom, 265 Mich App 88, 95; 693 NW2d 170 (2005). We could

decline to consider the arguments for this reason. Tingley v Kortz, 262 Mich App 583, 588; 688

NW2d 291 (2004). However, this Court may, in its discretion, address “a legal issue not raised

by the parties.” Id. These unpreserved issues present legal questions, and as such, may be

addressed by this Court.

But there is a second, and more serious hurdle: Geico’s application for leave did not raise

these arguments. Rather, Geico’s application only further explained the position Geico took in

the trial court: that the present matter does not present the sort of circumstances warranting

application of MCL 500.3012 under the holding of Farm Bureau Ins Co. This Court’s order

granting leave limited the appeal to “the issues raised in the application and supporting brief.”

Hahn v Geico Indem Co, unpublished order of the Court of Appeals, entered May 17, 2017

(Docket No. 336538). Geico’s attempt to challenge whether Farm Bureau Ins Co should be

followed, whether the decision is correct, or whether following it would present practical or

public policy concerns are questions not properly before this Court.

In any event, were these questions properly before us, we would reach the same

conclusion. Geico recognizes that we are bound by Farm Bureau Ins Co because it is a

published decision of this Court issued after November 1, 1990. MCR 7.215(C)(2) and (J)(1).

But Geico contends that the relevant holding of the case is mere obiter dictum that this Court

need not follow. Geico is incorrect. “Statements concerning a principle of law not essential to

determination of the case are obiter dictum and lack the force of an adjudication.” Gallagher v

Keefe, 232 Mich App 363, 373; 591 NW2d 297 (1998) (brackets, quotation marks, and citation

omitted). The discussion of MCL 500.3012 in Farm Bureau Ins Co was clearly essential to a

proper determination of the case. The discussion of the topic dispelled one potential avenue for

requiring an insurer to provide personal protection insurance (PIP) benefits. Indeed, that very

discussion was the topic of the dissent in that case, which would have reached the opposite result

based on the dissenting judge’s analysis of the issue. Id. at 47-51 (GRIFFIN, J., dissenting).

Further, “an issue that is intentionally addressed and decided is not dictum if the issue is germane

to the controversy in the case, even if the issue was not necessarily decisive of the controversy in

the case.” Griswold Props, LLC v Lexington Ins Co, 276 Mich App 551, 563; 741 NW2d 549

(2007). Even if the relevant holding of Farm Bureau Ins Co is not seen as dispositive, there can

be no dispute that the issue was intentionally addressed, and that the issue was germane to the

controversy. Thus, the Farm Bureau Ins Co Court’s holding with respect to MCL 500.3012 is

not obiter dictum. We therefore decline Geico’s invitation to not follow binding precedent of

this Court with respect to MCL 500.3012.

II. MCL 500.3163 AND THE “MEND-THE-HOLD” DOCTRINE

Geico next contends that the trial court erred when it found that factual questions

remained regarding the application of the mend-the-hold doctrine, which plaintiff cited in the

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trial court to rebut Geico’s contention that it could not be liable under MCL 500.3163. We

agree.

The relevant statute, MCL 500.3163, is applicable when there is an accident “occurring in

this state arising from the ownership, operation, maintenance, or use of a motor vehicle as a

motor vehicle by an out-of-state resident . . . .” MCL 500.3163(1). The statute requires insurers

who are “authorized to transact automobile liability insurance and personal property protection

insurance in” Michigan to “file and maintain a written certification that,” if such an accident

occurs, an out-of-state resident who is insured by the insurer is subject to the provisions of

Michigan’s no-fault act. MCL 500.3163(1). As this Court has explained, MCL 500.3163

“subjects the out-of-state insurer to the entire Michigan personal and property insurance system

when any accidental bodily injury arising from an out-of-state insured’s ownership or use of a

motor vehicle occurs[]” in Michigan. Tevis v Amex Assurance Co, 283 Mich App 76, 84; 770

NW2d 16 (2009).4 However, the insurer’s ultimate liability under the statute is capped; under

the statute, the insurer “is only liable for the amount of ultimate loss sustained up to

$500,000.00.” MCL 500.3163(4). Defendant initially believed that the statute applied, likely

based on the fact that it insured Waller, who owned a home in North Carolina, and was married

to plaintiff, who lived with him in North Carolina.

But as it turns out, through discovery and under the trial court’s unchallenged decision on

the question, it has been determined that both plaintiff and Waller were, in fact, domiciled in the

state of Michigan. Thus, Geico had no duty to pay any benefits under the statute. See Farm

Bureau Ins Co, 233 Mich App at 40-41 (because the insured was a “resident of Michigan

domiciled in this state,” she was not a nonresident, and thus, MCL 500.3163 “has no application

. . . .”); Tienda v Integon Nat’l Ins Co, 300 Mich App 605, 613; 834 NW2d 908 (2013) (where

the insured is not a non-resident of Michigan, § 3163 will not apply and will not be used to

impose responsibility for the payment of no-fault benefits by an out-of-state insurer).

Regardless, Geico has paid plaintiff $500,000 in benefits, thus even if the statute applied, Geico

met its obligation, and plaintiff would be entitled to nothing more in this suit.

Nonetheless, plaintiff contended in the trial court that Geico was responsible for

unlimited damages, even though her basis for Geico’s liability was MCL 500.3163. Plaintiff

relied on the mend-the-hold doctrine. The doctrine is essentially an equitable theory of estoppel

designed to prevent a party from changing positions after litigation has commenced. “ ‘Where a

party gives a reason for his conduct and decision touching anything involved in a controversy, he

cannot, after litigation has begun, change his ground, and put his conduct upon another and a

different consideration. He is not permitted thus to mend his hold. He is estopped from doing it

by a settled principle of law.’ ” CE Tackels, Inc v Fantin, 341 Mich 119, 124; 67 NW2d 71

(1954), quoting Railway Co v McCarthy, 96 US 258, 267, 268; 24 L Ed 693; 6 Otto 258 (1877).

In the insurance context, Michigan courts will estop an insurer from asserting a defense to an

4

Thus, and while not ultimately relevant to this appeal, it does not matter if the injured party is a

Michigan resident or an out-of-state resident; the question is whether the insured is an out-of-

state resident. Tevis, 283 Mich App at 84-85.

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action in certain circumstances. As the Michigan Supreme Court stated over 90 years ago in

Smith v Grange Mut Fire Ins Co of Mich, 234 Mich 119, 122-123; 208 NW 145 (1926):

This court has many times held, and it must be accepted as the settled law of this

state, that, when a loss under an insurance policy has occurred and payment

refused for reasons stated, good faith requires that the company shall fully apprise

the insured of all the defenses it intends to rely upon, and its failure to do so is, in

legal effect, a waiver, and estops it from maintaining any defenses to an action on

the policy other than those of which it has thus given notice.

See also South Macomb Disposal Auth v American Ins Co (On Remand), 225 Mich App 635,

695; 572 NW2d 686 (1997), quoting Lee v Evergreen Regency Coop & Mgt Systems, Inc, 151

Mich App 281, 285; 390 NW2d 183 (1986) (“This Court has stated that, generally, ‘once an

insurance company has denied coverage to an insured and stated its defenses, the company has

waived or is estopped from raising new defenses.’ ”). The “doctrine may not be used to broaden

policy coverage to protect an insured against risks not included in the policy or expressly

excluded from the policy. This restriction is based on the rule that the insurer should not be

required, through waiver and estoppel, to cover a loss for which no premium was charged.”

South Macomb Disposal Auth, 225 Mich App at 695-696.

Plaintiff has no basis to invoke the rule in this case. First and foremost, what plaintiff is

attempting to do is to have the trial court, under the guise of an equitable remedy, ignore the

plain language of MCL 500.3163(4). To do so would be wholly improper. “[I]f courts are free

to cast aside a plain statute in the name of equity, even in such a tragic case as this, then

immeasurable damage will be caused to the separation of powers mandated by our Constitution.”

Trentadue v Buckler Lawn Sprinkler, 479 Mich 378, 406-407; 738 NW2d 664 (2007). “Statutes

lose their meaning if an aggrieved party need only convince a willing judge to rewrite the statute

under the name of equity. Significantly, such unrestrained use of equity also undermines

consistency and predictability for plaintiffs and defendants alike.” Id. at 407 (quotation marks

and citation omitted). It would be entirely improper to use an equitable doctrine to ignore the

plain language of MCL 500.3163(4), which limits Geico’s exposure to $500,000.

Even setting that problem aside, the circumstances of this case do not warrant application

of the doctrine. Geico informed plaintiff that she was entitled to up to $500,000 in benefits

under MCL 500.3163. While Geico later repudiated that position in this suit, Geico nonetheless

paid plaintiff exactly what it said it would. Plaintiff has received exactly what Geico represented

it would give her. She has suffered no prejudice due to Geico’s actions, and cannot be said to

have relied on Geico’s representation to her detriment. Rather, what plaintiff is attempting to do

is to use the doctrine to create additional liability that Geico never once suggested it would

assume, and which is clearly not created by the applicable statute. MCL 500.3163(4). This, she

cannot do. South Macomb Disposal Auth, 225 Mich at 695-696. And in any event, it appears

that the reason Geico later argued that MCL 500.3163 did not apply at all was because it gained

new information regarding Waller’s residency during discovery. Therefore, the trial court erred

by holding that there was any sort of factual dispute remaining regarding whether the mend-the-

hold doctrine applied in this case.

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Affirmed in part, reversed in part, and remanded for further proceedings consistent with

this opinion. We do not retain jurisdiction.

/s/ David H. Sawyer

/s/ Mark J. Cavanagh

/s/ Karen M. Fort Hood

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