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County of Ingham v. Michigan County Road Commission Self-Insurance Pool

Court of Appeals of Michigan

October 10, 2017

COUNTY OF INGHAM, COUNTY OF JACKSON, and COUNTY OF CALHOUN, Plaintiffs-Appellants,
v.
MICHIGAN COUNTY ROAD COMMISSION SELF-INSURANCE POOL, Defendant-Appellee.

         Ingham Circuit Court LC No. 15-000432-NZ

          Before: Talbot, C.J., and O'Connell and O'Brien, JJ.

          O'CONNELL, J.

         Plaintiffs, Ingham County, Jackson County, and Calhoun County (collectively, "the counties"), appeal as of right the trial court's order granting summary disposition in favor of defendant, Michigan County Road Commission Self-Insurance Pool ("Pool"), under MCR 2.116(I)(2) (opposing party, rather than moving party, entitled to judgment). Because we agree with the counties that they are successors in interest to their respective counties' former road commissions, we reverse and remand.

         I. FACTUAL AND PROCEDURAL BACKGROUND

         A Declaration of Trust created the Pool in April 1984. The Pool's bylaws limit membership to county road commissions located in the State of Michigan and require each member to sign an inter-local agreement. The appointed road commissions for Ingham County, Jackson County, and Calhoun County joined the Pool soon after its formation.

         Members of the Pool made annual premium contributions to cover the payment of claims and the Pool's operating and administrative expenses. The Pool's bylaws and the inter-local agreements permitted the refund of surplus funds more than one year after payment of a member's premium contribution. The counties alleged that the Pool had a longstanding practice of refunding excess contributions to members out of unused reserves in proportion to premiums paid, typically calculated and refunded several years later.

         In February 2012, the Legislature amended MCL 224.6 to permit transfer of "the powers, duties and functions that are otherwise provided by law for an appointed board of county road commissioners . . . to the county board of commissioners by resolution as allowed under section 11 of 1851 PA 156, MCL 46.11." 2012 PA 14. At the same time, the Legislature amended MCL 46.11 to give a county board of commissioners the authority to pass a resolution dissolving an appointed road commission and transferring its "powers, duties, and functions" to the county board of commissioners. 2012 PA 15. Pursuant to these amendments, the Boards of Commissioners of Ingham County, Jackson County, and Calhoun County adopted resolutions to dissolve their county road commissions and take over their roles.

         Ingham County adopted the dissolution resolution on April 24, 2012, effective June 1, 2012. About two weeks before adopting the resolution, Ingham County paid its contribution to the Pool for the fiscal year beginning April 1, 2012, apparently with the understanding that the Pool intended to amend its rules to permit the county successors to the dissolved road commissions to participate in the Pool. Ingham County maintained that it only learned later in May that the Pool would not allow the county to remain a member of the Pool. On May 31, 2012, the Ingham County road commission signed two agreements, one to withdraw from the Pool and one to cancel insurance through the Pool, effective June 1, 2012.

         Calhoun County signed a similar withdrawal agreement, effective November 1, 2012. It appears that Jackson County did not sign a withdrawal agreement.

         At Ingham County's request, the Pool agreed to refund the unused pro-rata portion of the former road commission's annual contribution for the 2012-2013 fiscal year. The Pool declined, however, to refund surplus equity flowing from prior year contributions because of the road commission's withdrawal from membership.

         The counties brought a four-count complaint. The counties alleged that they were eligible for ten years' worth of refunds because the Pool was still refunding contributions from 2002 premiums. The Pool refused to issue these refunds to the counties. Consequently, the counties maintained, the Pool's refusal reflected unconstitutional lending under Const 1963, art 9, § 18, extortion, conversion, and breach of contract. The Pool denied the counties' allegations and disputed their claims.

         The counties filed a partial motion for summary disposition as to liability under MCR 2.116(C)(9) and (10). The Pool filed a cross-motion for summary disposition under MCR 2.116(I)(2). The trial court granted summary disposition under MCR ...


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