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144771, 144792 - Michigan Insurance Co v Nat'l Liability & Fire Ins Co

Michigan Insurance Company,
   Kenneth S. Dombrowski
(Appeal from Ct of Appeals)
(Oakland – Bowman, L.)
National Liability & Fire Insurance Company
James G. Gross
Michigan Insurance Company,
National Liability & Fire Insurance Company,


​At issue in this case is the scope of a commercial no-fault auto insurance policy issued by National Liability & Fire Insurance Company to Quality AFC Home, Inc., a corporation which ran an adult foster care facility in Pontiac, and whether a homeless man who lived there could be deemed the corporation’s “ward” and hence a “family member” for purposes of insurance coverage.

Michigan’s no-fault statute provides for coverage of pedestrians injured by motor vehicles. Under MCL 500.3115(1), a person suffering accident bodily injury while not an occupant of a motor vehicle “shall claim personal protection insurance benefits … in the following order”: first, from the insurer of the vehicle owner, and then, from the driver’s insurer. But MCL 500.3114(1) provides for an exception: the statute states that “a personal protection insurance policy . . . applies to accidental bodily injury to the person named in the policy, the person’s spouse, and a relative of either domiciled in the same household, if the injury arises from a motor vehicle accident.”

Quality AFC had a van, insured by National Liability, that the home used to transport foster care residents. The National Liability policy covered the named insured and his or her “family members,” defined as “a person related to you by blood, marriage, or adoption who is a resident of your household, including a ward or foster child.”

Lawrence S. Stubbe, a homeless man with drug and alcohol abuse problems, stayed at one of two houses run by Quality AFC. This adult foster care facility was licensed by the state to provide adult foster care to mentally challenged or developmentally disabled people. Unlike some residents, Stubbe did not have a guardian or conservator, and was deemed to be a “high functioning” resident who could come and go as he pleased, although he was expected to follow the facility’s “house rules” and had signed an agreement to do so.

On December 27, 2008, Stubbe was badly injured when he was hit by a car as he was walking in Pontiac; the vehicle was insured by Michigan Insurance Company. On January 19, 2009, Stubbe applied for no-fault benefits to Michigan Insurance, which paid his medical bills; those bills eventually amounted to about $850,000. On October 9, 2009, Michigan Insurance sued National Liability, seeking reimbursement. Michigan Insurance argued that National Liability’s policy covering Quality AFC had priority over Michigan Insurance’s policy to the owner of the motor vehicle that hit Stubbe. Stubbe was a “ward” of Quality AFC, and hence was covered by the National Liability policy, Michigan Insurance contended. Michigan Insurance argued that Stubbe – who, in addition to his substance abuse, had been hospitalized several times for psychiatric problems and suffered from auditory hallucinations – needed the kind of help Quality AFC provided and hence could be considered its “ward.” National Liability countered that – even if a corporation can have a “ward” – the evidence showed that Stubbe led an independent life and was not under Quality AFC’s control.

But the circuit court held that Stubbe was a “ward” of the foster care facility, and that Michigan Insurance was entitled to judgment in its favor on the priority issue. The judge cited United States Fidelity & Guarantee Co v Citizens Ins Co, 241 Mich App 83 (2000), a Court of Appeals case involving a similar dispute by no-fault insurers over who had priority. The injured pedestrian, who had Down’s syndrome, resided at a state-licensed adult foster care facility; he was hurt when he walked out into a road and was hit by a car insured by Citizens. USF&G insured the foster care facility, and that policy covered any “family member,” defined as “a person related to you by blood, marriage or adoption who is a resident of your household, including a ward or foster child.” In a 2-1 decision, the majority of the USF&G court decided that the resident of the foster care facility was a “ward” of the facility, and hence covered under the “family member” provision of the policy. In Stubbe’s case, the circuit court judge found that he was a “ward” of the foster care facility because the facility provided him with care, meals, transportation, objectives and rules, and disciplined Stubbe when he violated those rules.

National Liability appealed, and in an unpublished per curiam opinion, the Court of Appeals reversed and remanded the case to the circuit court. The panel acknowledged that the primary dispute in the case was whether Stubbe was a “ward” of the foster care home for purposes of National Liability’s policy. The panel noted that MCL 500.3114(1) provides for a PIP policy to cover “the person named in the policy, the person’s spouse, and a relative of either domiciled in the same household,” but, said the panel, “[t]his language is not determinative in this instance, as nothing precludes an insurer, such as National, from extending PIP benefits to a broader range of individuals.” Relying on USF&G v Citizens Insurance, the panel stated that a corporation is capable of having a “ward,” and that, if Stubbe was in fact Quality AFC’s “ward,” National Liability would be liable for his PIP benefits. But the panel said it could not determine as a matter of law, without more facts, whether Stubbe was Quality AFC’s “ward”: “In this case, whether Stubbe had the status of a ward with Quality comprised a genuine issue of material fact. Because a trial court is precluded from determining facts or assessing credibility on motions for summary disposition … there existed a genuine issue of material fact making the grant of summary disposition improper.”

Both Michigan Insurance and National Liability appealed. In an order dated September 21, 2012, the Supreme Court ordered the case to be scheduled for “oral argument on whether to grant the applications or take other action.” The Court directed the parties to address “(1) whether the resident of the foster care facility injured as a pedestrian in this case can be deemed a ‘family member’ under the definition provided in the policy issued to the facility in this case; (2) if the resident was such a ‘family member,’ whether the policy coverage extended thereby established a priority for the payment of PIP benefits higher than the priority established by MCL 500.3115(1); and (3) whether the decision in United States Fidelity & Guaranty Co v Citizens Ins Co, 241 Mich App 83 (2000), was correctly decided.”