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Farmers Insurance Exchange v. AAA of Michigan6/3/2003
FOR PUBLICATION
This case involves a priority dispute under Michigan's no-fault act, MCL 500.3101 et seq., between two insurance companies concerning payment of no-fault benefits related to injuries that two children sustained while passengers in an automobile driven by their day care provider. The district court granted summary disposition in favor of plaintiff and later entered a judgment for plaintiff in the amount of $18,811.96. Defendant filed in circuit court a claim of appeal from the district court judgment, but the circuit court denied defendant's appeal and affirmed the district court's decision. Defendant now appeals by leave granted. The only issue on appeal is whether plaintiff or defendant is first in priority for payment of automobile insurance benefits in light of § 3114(2) of the no-fault act, MCL 500.3114(2). We hold that the applicability of § 3114(2) depends on a primary purpose/incidental nature inquiry with respect to whether a motor vehicle is operated in the business of transporting passengers. Because we conclude that § 3114(2) does not apply under the circumstances in the present case, we reverse the lower courts' orders and remand for entry of judgment in favor of defendant.
I. Facts and Procedural Background
In May of 1999, plaintiff Farmers Insurance Exchange filed in district court a complaint for declaratory relief, seeking an order that defendant AAA of Michigan had first priority to pay no-fault benefits related to a May 14, 1998, automobile accident. The two minor daughters of plaintiff's insured suffered injuries while passengers in a vehicle driven by their day care provider and insured by defendant. Plaintiff paid the children's claim for personal injury protection (PIP) benefits, but sought reimbursement from defendant on the basis that pursuant to § 3114(2) of the no-fault act, MCL 500.3114(2), defendant had first priority to pay these benefits. According to plaintiff, at the time the accident occurred, the vehicle that the day care provider used to transport the children in the operation of a for profit day care center was "a motor vehicle operated in the business of transporting passengers to and from day care/school," and thus, pursuant to § 3114(2), defendant was responsible for providing PIP benefits. Plaintiff also claimed that defendant had denied plaintiff's requests for reimbursement.
In its answer to the complaint, defendant left plaintiff to its proofs concerning priority under § 3114(2) and denied that it had refused plaintiff's request for reimbursement. Subsequently, the parties filed cross-motions for summary disposition. Each party argued that the other party occupied the no-fault insurance position of first priority under MCL 500.3114 and provided reasonable arguments concerning the applicability of the statute in this case. However, having heard argument on the motions, the district court granted plaintiff's motion for summary disposition and denied defendant's motion for summary disposition; the order stated that defendant was in first priority to pay no-fault PIP benefits. Thereafter, pursuant to the parties' stipulation, the court entered a judgment for plaintiff in the amount of $18,811.96. Defendant filed a claim of appeal of the district court's judgment in the circuit court, but after briefing and oral argument, the circuit court denied defendant relief from the district court's judgment. Thereafter, defendant sought leave to appeal in this Court, which this Court granted.
II. Standard of Review
Resolution of the issue before us requires interpretation and application of § 3114(2) of the no-fault act, which are questions of law that this Court reviews de novo. Proudfoot v St
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