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Farm Bureau Insurance Co. v. TNT Equipment, Inc.

Court of Appeals of Michigan

June 20, 2019

FARM BUREAU INSURANCE COMPANY, Subrogee of JEFF FURNESS, FREDRIC WILSON, KENNY MALBURG'S LANDSCAPING, INC., and TIMOTHY DEMARAY, and PIONEER MUTUAL INSURANCE COMPANY, Subrogee of JAY D. FERGUSON, AMANDA FERGUSON, D & R HENNE FARMS, INC., and DOROTHY WALTON and LYNN WALTON, doing business as WALTON FARMS, and HASTINGS MUTUAL INSURANCE COMPANY, Subrogee of JAMES T. YOUNG, SHELLY YOUNG, MARVIN HILL, LOIS HILL, CLIFFORD C. KESSLER, and SHIRLEY KESSLER, Plaintiffs-Appellees,
v.
TNT EQUIPMENT, INC., Defendant, and EMPLOYERS MUTUAL CASUALTY COMPANY, Defendant-Appellant.

          Sanilac Circuit Court LC No. 16-036858-NZ

          Before: Murray, C.J., and Gadola and Tukel, JJ.

          GADOLA, J.

         Defendant, Employers Mutual Casualty Company (Employers), appeals as of right the order of the trial court dismissing without prejudice defendant, TNT Equipment, Inc. (TNT), and challenges the earlier orders of the trial court granting plaintiffs' motion for summary disposition, while denying Employers' motions for summary disposition and for reconsideration. We reverse the order of the trial court granting plaintiffs summary disposition, and remand to the trial court for entry of summary disposition in favor of Employers.

         I. FACTS

         This case arises from a fire that occurred at a storage facility owned by TNT in Sandusky, Michigan, on April 5, 2016. Plaintiffs are insurance companies. The parties do not dispute that plaintiffs' insureds owned farm equipment that was stored at the TNT facility at the time of the fire, and that plaintiffs, having paid claims to their insureds for the damaged farm equipment, are now subrogees of the rights of their insureds.

         At the time of the fire, Employers had issued to TNT a "Commercial Inland Marine" policy of insurance that was then in effect. Plaintiffs sought reimbursement from Employers for the amounts they had paid to their insureds for the damaged farm equipment, contending that plaintiffs' insureds were entitled to coverage under Employers' policy with TNT, and that plaintiffs were therefore entitled, as subrogees, to payment from Employers. Employers declined to pay plaintiffs. Employers explained that TNT had exercised an option under the policy directing Employers "to pay for their [TNT's] customer's deductibles and verifiable uninsured losses only." Employers determined that because TNT had opted out of any other coverage, it was not obligated to pay any other amounts for damages to the farm equipment belonging to plaintiffs' insureds.

         Plaintiffs, as subrogees of their insureds, initiated this lawsuit, alleging counts against TNT for breach of bailment contracts, breach of implied warranty, negligence, gross negligence, and warehouse liability. Plaintiffs also asserted claims against Employers, seeking first-party insurance benefits under Employers' policy with TNT, and alternatively, seeking benefits under the policy as third-party beneficiaries. The parties filed cross-motions for summary disposition under MCR 2.116(C)(8), (9), and (10), regarding whether plaintiffs had a right to enforce the policy and claim benefits from Employers directly under the insurance policy. The trial court concluded that plaintiffs' insureds were entitled to the status of "additional insureds" under the policy, and therefore were entitled to enforce the policy against Employers. The trial court then granted plaintiffs summary disposition under MCR 2.116(C)(10), while denying Employers summary disposition. The trial court thereafter denied Employers' motion for reconsideration.

         The trial court also entered an order dismissing TNT from the case without prejudice.[1]Employers now appeals to this Court from the trial court's final order dismissing TNT, challenging the earlier orders of the trial court granting plaintiffs summary disposition and denying Employers' motions for summary disposition and for reconsideration.

         II. DISCUSSION

         A. STANDARD OF REVIEW

         This Court reviews de novo a trial court's decision to grant or deny summary disposition. Johnson v Vanderkooi, 502 Mich. 751, 761; 918 N.W.2d 785 (2018). When reviewing an order granting summary disposition under MCR 2.116(C)(10), we consider all documentary evidence submitted by the parties in the light most favorable to the nonmoving party. Dawoud v State Farm Mut Auto Ins Co, 317 Mich.App. 517, 520; 895 N.W.2d 188 (2016). Summary disposition under MCR 2.116(C)(10) is warranted when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Id. We also review de novo issues involving the proper interpretation of statutes and contracts. Titan Ins Co v Hyten, 491 Mich. 547, 553; 817 N.W.2d 562 (2012). This Court reviews a trial court's decision to grant or deny a motion for reconsideration for an abuse of discretion. Sanders v McLaren-Macomb, 323 Mich.App. 254, 264; 916 N.W.2d 305 (2018). Atrial court abuses its discretion if it chooses an outcome outside the range of principled outcomes. Id.

         B. FIRST-PARTY INSURED

         Employers contends that the trial court erred in granting plaintiffs summary disposition because plaintiffs are not entitled to enforce the insurance policy between Employers and TNT. Employers first argues that plaintiffs' insureds were not insureds under the policy issued to TNT by Employers, and therefore lacked standing to pursue first-party benefits under the policy, and that plaintiffs, as subrogees of their insureds, likewise lack standing to seek first-party benefits under the policy. We agree.

         An insurance policy, like other contracts, is an agreement between parties; a court's task is to determine what the agreement is and then give effect to the intent of the parties. Waldan Gen Contractors, Inc v Michigan Mut Ins Co, 227 Mich.App. 683, 686; 577 N.W.2d 139 (1998). In doing so, we consider the contract as a whole and give meaning to all terms of the contract. Auto-Owners Ins Co v Churchman, 440 Mich. 560, 566; 489 N.W.2d 431 (1992). We give the policy language its ordinary and plain meaning, and where policy language is clear, we are bound by the language of the policy. Waldan, 227 Mich.App. at 686.

         An insurance policy is a contractual agreement between the insured and the insurer. West American Ins Co v Meridian Mut Ins Co, 230 Mich.App. 305, 310; 583 N.W.2d 548 (1998). Payment of benefits from one's own insurer generally is referred to as payment of first-party benefits. See Nickola v MIC Ins Co, 500 Mich. 115, 127; 894 N.W.2d 552 (2017) ("the insured by definition is a party to the insurance contract, not a third party.") This Court has suggested that a "first-party" insured is the insured under a policy, or an individual or entity directly entitled to benefits under the insured's insurance policy. See GriswoldProperties, LLC v Lexington Ins Co, 276 Mich.App. 551, 565; 741 N.W.2d 549 (2007).

         In this case, TNT purchased from Employers a policy of commercial inland marine insurance.[2] The parties do not dispute that plaintiffs' insureds were not parties to the policy between TNT and Employers, and that plaintiffs' insureds are not named insureds under that policy. There further is no dispute that the policy does not expressly grant anyone other than the named insured enforcement rights. Plaintiffs' insureds, therefore, had no express contractual rights under the policy and are not entitled to "first-party" benefits. The question, then, is whether plaintiffs' insureds, though not named insureds under the policy, are nonetheless entitled to seek to enforce the policy.

         C. ADDITIONAL INSURED

         Plaintiffs argue, and the trial court found, that plaintiffs' insureds were entitled to enforce the contract as "additional insureds" under TNT's policy with Employers. An "additional insured" is defined generally as "[s]omeone who is covered by an insurance policy but who is not the primary insured. An additional insured may, or may not, be specifically named in the policy." Black's Law Dictionary (1 ll ed). Plaintiffs in this case do not contend that the policy here designated plaintiffs' insureds as "additional insureds" under the policy, and point to no published Michigan authority[3] supporting their position that they qualify as additional insureds absent a provision in the policy designating them as such. ...


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