Case Title: RONALD SCHMALFELDT V NORTH POINTE INSURANCE CO

Citation: 

Docket Number: 122634

State: michigan

Court: Michigan Supreme Court

Date: 2003-11-04T00:00:00Z

Document:
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_______________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
Chief Justice 
Justices 
Maura D. Corrigan 
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED NOVEMBER 4, 2003 
RONALD SCHMALFELDT, 
Plaintiff-Appellant, 
v 
No. 122634 
NORTH POINTE INSURANCE COMPANY, 
Defendant-Appellee. 
PER CURIAM 
Plaintiff Ronald Schmalfeldt, injured in a fight at 
the Elite Bar in Watervliet, directly sued the bar=s 
insurer, North Pointe Insurance Company, to secure payment 
for $1,921 in dental bills. At issue is whether he can sue 
as a third-party beneficiary of the Elite Bar-North Pointe 
insurance policy. 
We affirm the judgment of the Court of 
Appeals, albeit on other grounds, and hold that he is not a 
third-party beneficiary of the contract. 
I. Background 
On August 24, 1997, Schmalfeldt was at the Elite Bar 
playing a game of pool with another bar patron. 
The game 
 
 
 
 
 
   
                                                 
     
led to an argument. 
Schmalfeldt tried to walk away, but 
was struck in the face by the other player, who then fled. 
Schmalfeldt needed extensive dental work to repair the 
damage to his mouth and incurred dental expenses totaling 
$1,921. 
He asked the owner of the Elite Bar to pay his 
dental expenses, but the owner refused. 
Schmalfeldt sought payment directly from North Pointe, 
which had issued a commercial liability insurance policy to 
the owner of the Elite Bar. He claimed a right to benefits 
under the medical payments provision of the policy. 
In 
this provision, North Pointe agreed to pay up to $5,000 for 
medical expenses for a Abodily injury@ caused by an 
Aaccident,@ provided the injury occurred on or next to the 
insured=s premises or because of the insured=s operations. 
Payments are made Aregardless of fault.@ 
North Pointe refused to pay benefits without a request 
from its insured to do so. 
When the bar owner told North 
Pointe that the bar did not want to invoke the medical 
benefits provision in this case, North Pointe denied 
Schmalfeldt=s request. 
Schmalfeldt responded by filing a lawsuit against 
North Pointe in the civil division of the Berrien County 
Trial Court, claiming to be a third-party beneficiary of 
the insurance contract.1  He moved for summary disposition 
1 Schmalfeldt did not sue his assailant because he 
could not identify that person. 
He also did not sue the 
Elite Bar, apparently conceding that it had not breached
any duty to him. 
2  
 
 
 
 
 
                                                 
 
 
     
on 
the 
theory 
that 
the 
medical 
benefits 
provision 
authorized him to sue North Pointe to enforce the terms of 
the contract. 
The court denied Schmalfeldt=s motion, 
finding that the medical benefits provision did not support 
Schmalfeldt=s claim that North Pointe undertook to do 
something directly for him. 
Thus, the court held that 
Schmalfeldt was not a third-party beneficiary of the 
insurance contract and granted summary disposition in North 
Pointe=s favor. 
Schmalfeldt successfully appealed within the civil 
division of the trial court,2 which held that the medical 
benefits provision Adirectly benefited@ people situated like 
plaintiff, who are members of the general public and 
patrons on the premises of the Elite Bar, and ordered 
summary disposition in Schmalfeldt=s favor. 
The Court of Appeals granted North Pointe=s application 
for leave to appeal and reversed.3
 It decided that 
Schmalfeldt was merely an incidental beneficiary and was 
not entitled to enforce the insurance contract. 
The Court 
of 
Appeals 
cited 
the 
statute 
governing 
third-party 
beneficiaries, MCL 600.1405, and examined Allstate Ins Co v 
2 Under Supreme Court Administrative Order Nos. 1996-5
and 1997-12, the Berrien County circuit, district, and
probate courts participated in a court consolidation 
demonstration project in which the above courts fully
merged into one consolidated trial court. 
Because of this 
project, Schmalfeldt appealed within the civil division of
the Berrien County Trial Court. See AO 1996-5 and 1997-12. 
3 252 Mich App 556; 652 NW2d 683 (2002). 
3  
 
 
 
 
 
 
 
 
 
 
 
 
                                                 
     
Keillor, 190 Mich App 499; 476 NW2d 453 (1991),4 for 
guidance in determining whether Schmalfeldt was a direct or 
incidental beneficiary of the medical payment provision. 
In its opinion, the Court of Appeals stated: 
While the medical payment provision at issue
in the instant case differs from the provision at
issue in Keillor and Hayes because the instant 
provision 
does 
not 
refer 
to 
liability, 
we 
nonetheless find Keillor and Hayes instructive. 
Indeed, like the provision in Keillor and Hayes,
the purpose of the provision in the instant case
is essentially to Ashield the insured@ from having
eventually to pay out-of-pocket expenses. 
We 
conclude that the contract at issue in the 
instant case benefits the insured and that 
plaintiff was merely an incidental beneficiary
who was not entitled to enforce the contract. 
[252 Mich App 563-564.] 
On the basis of its review of Keillor and Hayes, the Court 
of Appeals held that North Pointe=s insurance contract 
benefitted the insured, and that Schmalfeldt was merely an 
incidental beneficiary who was not entitled to enforce the 
contract. 
The Court of Appeals added that this conclusion 
was supported by case law from other jurisdictions. 
Schmalfeldt has sought leave to appeal in this Court. 
4 Reversed on other grounds sub nom Allstate Ins Co v 
Hayes, 442 Mich 56; 499 NW2d 743 (1993). 
4  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
II. Standard of Review 
We 
review 
de 
novo 
decisions 
regarding 
summary 
disposition motions. 
First Public Corp v Parfet, 468 Mich 
101, 104; 658 NW2d 477 (2003). 
This case involves the 
proper interpretation of a contract, which is a question of 
law that is also reviewed de novo. 
Archambo v Lawyers 
Title Ins Corp, 466 Mich 402, 408; 646 NW2d 170 (2002). 
III. Discussion 
In relevant part, the medical payments provision 
states: 
COVERAGE C. MEDICAL PAYMENTS 
1. Insuring Agreement. 
a. We will pay medical expenses as described
below for Abodily injury@ caused by an accident: 
(1) On premises you own or rent; 
(2) On ways next to premises you own or
rent; or 
(3) Because of your operations; 
provided that: 
(1) The accident takes place in the Acoverage
territory@ and during the policy period; 
(2) The expenses are incurred and reported
to us within one year of the date of the 
accident; and 
(3) 
The 
injured 
person 
submits 
to 
examination, at our expense, by physicians of our
choice as often as we reasonably require. 
b. We will make these payments regardless of
fault. 
These payments will not exceed the 
applicable limit of insurance. . . . 
5  
 
 
 
 
 
 
  
 
Michigan=s 
third-party 
beneficiary 
statute, 
MCL 
600.1405, states in pertinent part: 
Any person for whose benefit a promise is
made by way of contract, as hereinafter defined,
has the same right to enforce said promise that
he would have had if the said promise had been
made directly to him as the promisee. 
(1) A promise shall be construed to have
been made for the benefit of a person whenever
the promisor of said promise has undertaken to
give or to do or refrain from doing something
directly to or for said person. 
As we recently said in Brunsell v Zeeland, 467 Mich 293, 
296; 651 NW2d 388 (2002), Athe plain language of this 
statute 
reflects 
that 
not 
every 
person 
incidentally 
benefitted by a contractual promise has a right to sue for 
breach of that promise . . . .@
 Thus, only intended, not 
incidental, third-party beneficiaries may sue for a breach 
of a contractual promise in their favor. Id. 
A person is a third-party beneficiary of a contract 
only when that contract establishes that a promisor has 
undertaken a promise Adirectly@ to or for that person. 
MCL 
600.1405; Koenig v South Haven, 460 Mich 667, 677; 597 NW2d 
99 
(1999). 
By 
using 
the 
modifier 
Adirectly,@ 
the 
Legislature intended Ato assure that contracting parties are 
clearly 
aware 
that 
the 
scope 
of 
their 
contractual 
undertakings encompasses a third party, directly referred 
to in the contract, before the third party is able to 
enforce the contract.@ 
Id. An objective standard is to be 
used to determine, Afrom the form and meaning of the 
contract itself,@ Kammer Asphalt v East China Twp, 443 Mich 
6  
 
 
 
 
 
                                                 
176, 189; 504 NW2d 635 (1993) (citation omitted), whether 
the promisor undertook Ato give or to do or to refrain from 
doing something directly to or for@ the person claiming 
third-party beneficiary status, Brunsell, supra at 298. 
As Brunsell, Koenig, and Kammer Asphalt make clear, a 
court should look no further than the Aform and meaning@ of 
the contract itself to determine whether a party is an 
intended third-party beneficiary within the meaning of ' 
1405. 
Here, the Court of Appeals correctly began with the 
proposition that third-party beneficiary status is defined 
by ' 1405. 
But, without the benefit of our decision in 
Brunsell,e the Court then turned to case law for resolution 
of Athe issue of direct versus incidental beneficiaries in 
the context of a medical payment provision such as that at 
issue in the instant case.@ 252 Mich 562. 
The focus of the inquiry, however, should be whether 
North Pointe, by its agreement to cover medical expenses 
for bodily injuries caused by accidents, Ahad undertaken to 
give or to do or refrain from doing something directly to 
or for@ Schmalfeldt pursuant to the third-party beneficiary 
statute, MCL 600.1405(1). 
Thus, as Brunsell clarifies, we 
must turn to the contract itself to see whether it granted 
Schmalfeldt third-party beneficiary status. 
We affirm the decision of the Court of Appeals because 
the contract contains no promise to directly benefit 
e The Court of Appeals decided this case on August 23, 2002,
approximately one month before we issued our decision in
Brunsell on September 24, 2002. 
7  
 
 
 
 
 
 
 
 
Schmalfeldt within the meaning of ' 1405. 
Nothing in the 
insurance policy specifically designates Schmalfeldt, or 
the class of business patrons of the insured of which he 
was one, as an intended third-party beneficiary of the 
medical benefits provision. At best, the policy recognizes 
the possibility of some incidental benefit to members of 
the public at large, but such a class is too broad to 
qualify 
for 
third-party 
status 
under 
the 
statute. 
Brunsell, supra at 297; Koenig, supra at 680. 
Only 
intended 
beneficiaries, 
not 
incidental 
beneficiaries, may enforce a contract under ' 1405. Koenig, 
supra at 680. 
Here, the contract primarily benefits the 
contracting parties because it defines and limits the 
circumstances under which the policy will cover medical 
expenses without a determination of fault. This agreement 
is between the contracting parties, and Schmalfeldt is only 
an incidental beneficiary without a right to sue for 
contract benefits. 
For this reason, North Pointe is 
entitled to summary disposition. 
The Court of Appeals 
judgment 
in 
favor 
of 
defendant 
is 
affirmed. 
MCR 
7.302(G)(1). 
Maura D. Corrigan
Elizabeth A. Weaver 
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman 
 
 
 
 
 
 
 
 
 
 
_______________________________ 
 
 
 
 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
RONALD SCHMALFELDT, 
Plaintiff-Appellant, 
No. 122634 
NORTH POINTE INSURANCE COMPANY, 
Defendant-Appellee. 
KELLY, J. (dissenting). 
I would not dispose of this case by an opinion per 
curiam, but would grant leave to appeal to better analyze 
two issues: 
whether, given the ambiguity in the contract 
regarding the scope of individuals covered, the parties to 
the Elite Bar-North Pointe insurance policy intended a 
direct benefit to an identifiable class of persons. 
Also, 
when insurance contract language is ambiguous, should a 
reviewing court be free to look further than the "form and 
meaning" of the language to determine if a third party is 
contemplated? See, e.g., Klapp v United Ins Group Agency, 
468 Mich 459; 663 NW2d 447 (2003). 
Marilyn Kelly
Michael F. Cavanagh