The Michigan Womyn’s Music Festival is produced by the We Want the Music Company. In 2008, the company owned 26 vehicles, including three utility vans, all insured by Michigan Insurance Company. According to the company’s president, the vans were used to transport performers, staff, volunteers, and equipment, but were not intended to be a transport service for attendees at the festival. Instead, the company contracted with Great Lakes Motor Coach bus service to shuttle attendees from the Grand Rapids airport to the festival. In advertising this service, the company stated that it could not be responsible for transporting attendees who missed a scheduled shuttle time, and that those who missed the last scheduled shuttle would have to find their own transportation.
On August 4, 2008, Colorado resident Ann Drucker, her two young children, and Drucker’s domestic partner Carol Dineen flew to Grand Rapids for the festival, but missed their scheduled shuttle to the festival because of weather delays. They were rescheduled for the 4:00 p.m. shuttle the following day, but instead of waiting for the next bus, Drucker, Dineen, and a number of others got a ride on a We Want the Music Company utility van driven by a festival volunteer. The van happened to be at the airport, but was not sent there to pick up passengers. On the way to the festival, the driver lost control of the van and it rolled over. Drucker, her children, and Dineen were injured.
Drucker, who had an auto insurance policy in Colorado with State Farm, submitted a claim to State Farm on behalf of herself and her children; Dineen submitted a claim to her insurer, Farmers Insurance. After paying personal protection benefits to the claimants, State Farm and Farmers Insurance sued Michigan Insurance, seeking reimbursement for the benefits and “loss adjustment” expenses the two insurers incurred in handling the claims. State Farm and Farmers Insurance argued that Michigan Insurance was the insurer first in order of priority to provide personal protection insurance benefits to the claimants under MCL 500.3114(2). The two insurers also asked the court to rule that Michigan Insurance should pay any future claims by Drucker and Dineen.
Michigan Insurance asked the court to dismiss the case, arguing that State Farm and Farmers Insurance were responsible for paying benefits under the state’s no-fault insurance act, MCL 500.3101 et seq. Michigan Insurance contended that MCL 500.3114(2) did not apply because the utility van involved in the accident was not “a motor vehicle operated in the business of transporting passengers.” Michigan Insurance pointed out that the shuttle service the festival advertised was provided by Great Lakes Motor Coach, not by festival company vehicles, and that the vans the festival company owned were used mainly for festival production. State Farm and Farmers Insurance countered that the utility van was “a motor vehicle operated in the business of transporting passengers” at the time of the accident. The van was intended for business use, was fit to accommodate passengers, and was insured under a business automobile insurance policy, the two insurers noted; moreover, transporting attendees to the music festival grounds was a significant part of the festival function, they maintained.
The trial court ruled in favor of State Farm and Farmers Insurance, finding that Michigan Insurance should reimburse the other insurers for the benefits paid to the claimants and for the two insurers’ loss adjustment expenses. The critical question, the court said, was whether the van was being used in the business of transportation at the time of the accident. The judge did not find it controlling that the festival company had contracted with another company for transportation: “It’s not controlling that a contracted bus otherwise could have been used because the operator of the camp also made available the van itself … and it served the purpose of the camp program … That van was used to transport people to the camp and it served a, I’ll call it a business function, to get the people to the camp.”
But in an unpublished per curiam opinion, the Court of Appeals reversed and ruled in favor of Michigan Insurance.
“The primary issue on appeal,” the Court of Appeals noted, “is whether plaintiffs [Farmers and State Farm] or defendant [Michigan Insurance] is first in priority for payment of automobile insurance benefits under the no-fault insurance act.” In general, a person who suffers injury in an auto accident is covered by his or her own insurer, regardless of which vehicle the insured was occupying at the time, the appellate court explained. But the no-fault act makes an exception for drivers or passengers “of a motor vehicle operated in the business of transporting passengers,” the Court of Appeals noted, citing MCL 500.3114(2). In that situation, the act provides, the injured person must be covered by the motor vehicle’s insurer. This section of the no-fault act does not apply to certain vehicles, such as a school bus or taxicab. But, the Court of Appeals said, the parties did not dispute that none of those exceptions applied in this case.
The legislature did not define the term “a motor vehicle operated in the business of transporting passengers,” the appellate panel said, so past Court of Appeals panels adopted a “primary purpose/incidental nature inquiry” to determine whether a vehicle falls under section 3114(2). In earlier cases, the Court of Appeals had held that MCL 500.3114(2) did not apply in situations where carrying passengers for hire was not the “primary function” or “primary purpose” of operating the vehicle. Where transporting passengers is “incidental” to the vehicle’s primary purpose – as in one case, in which a day care provider drove children to school in her own car – the transportation is not “commercial” and is not covered by section 3144(2), the Court of Appeals explained.
In this case, “there is no dispute that the van’s primary use … was for business purposes,” the Court of Appeals stated. But that point did not settle the matter, the Court of Appeals said; the court also had to determine whether transporting festival visitors was “incidental to the vehicle’s primary business use.” The appellate panel noted that the festival company “used the vans to transport performers, staff, volunteers, and equipment on the festival grounds…. When [the festival company] took the vans off site, their use was primarily to take volunteers to greet and direct attendees at the airport, to handle luggage overflow from the shuttle buses, and to run errands in Grand Rapids.” Accordingly, it was “incidental” to the van’s use to transport visitors to the festival; it was “convenient for the volunteer to take the several attendees who were anxious to get to the festival,” but that was not the van’s “primary use,” the panel said.
Moreover, transporting visitors was only “an incidental or small part” of the festival company’s business, the Court of Appeals said. While the festival company did provide a shuttle service for an additional fee, “only about 16-17 percent” of festival visitors used this service, so “statistically, the shuttle service was not a significant part of [the festival company’s] business,” and in most years, the company either broke even or lost money on the shuttle service, the appellate court said. “In sum, we conclude that the trial court erred in finding that Michigan Insurance was the insurer of highest priority on the ground that the van involved in the accident was ‘a motor vehicle operated in the business of transporting passengers.’”
Farmers Insurance and State Farm appealed. In orders dated May 23, 2012, the Michigan Supreme Court granted leave to appeal, directing the parties to address “whether the ‘primary purpose/incidental nature’ test for determining whether a commercial vehicle is being used in the business of transporting passengers is consistent with the language of MCL 500.3114(2), and, if so, whether it was applied properly to the facts of this case.”