Case Title: UNIVERSAL UNDERWRITERS INS V NANCY KNEELAND

Citation: 

Docket Number: 114900

State: michigan

Court: Michigan Supreme Court

Date: 2001-07-03T00:00:00Z

Document:
____________________________________________________________________________________________ 
____________________________________________________________________________________________________________________________ 
____________________________________ 
Michigan Supreme Court 
Lansing, Michigan 48909 
C hief 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 JULY 3, 2001  
UNIVERSAL UNDERWRITERS INSURANCE  
COMPANY, as Subrogee of Betten 
Toyota and BETTEN TOYOTA,  
Plaintiffs-Appellees,  
v  
No. 114900  
NANCY KNEELAND,  
Defendant-Appellant.  
BEFORE THE ENTIRE BENCH  
CORRIGAN, C.J.  
We granted leave to determine whether a contractual  
provision that assigned “all responsibility for damages” to  
defendant while she rented a vehicle contravenes our no-fault  
act, MCL 500.3101 et seq., and thereby voids the parties’  
contract.  We hold that the no-fault act does not prevent  
 
contracting parties from voluntarily allocating liability for  
collision damage to a rented vehicle.  We thus affirm the  
judgment of the Court of Appeals.  
I. Underlying facts and procedural history  
While repairing defendant’s vehicle, plaintiff Betten  
Toyota loaned her a vehicle.  Defendant and a Betten employee  
signed a “courtesy car agreement” that stated:  
2. Renter agrees to replace gasoline used.  
3. Renter agrees to pay cash for rental charge.  
4. Renter agrees to assume all responsibility  
for damages while vehicle is in his possession.  
5. Renter agrees not to sublet or loan the car 
to anyone. [Emphasis added.]  
While driving the rented vehicle, plaintiff was involved  
in an accident. 
Total collision damages amounted to  
$3,738.49.  Betten Toyota absorbed $1,000 as a deductible;  
plaintiff Universal Underwriters Insurance Company, Betten’s  
insurer, paid the remainder.  
Betten and Universal sought recovery from defendant, but  
she refused to pay.  Plaintiffs then commenced this action  
alleging breach of the courtesy car agreement.  Universal  
seeks recovery as Betten’s subrogee of the $2,738.49 it paid  
to repair the rented vehicle; Betten demands payment of the  
$1,000 deductible.  
Plaintiffs moved for summary disposition under MCR  
2  
 
 
2.116(C)(10), arguing that no genuine issue of material fact  
existed regarding defendant’s contractual liability. The  
district court instead granted summary disposition for  
defendant under MCR 2.116(I)(2).1  It relied on an unpublished  
Court of Appeals opinion to conclude that the no-fault act  
does not allow contractual allocation of liability for  
collision damages.  Universal Underwriters Ins Co v Stout,  
unpublished opinion per curiam, issued February 2, 1996  
(Docket No. 171069). The circuit court affirmed.  
The Court of Appeals reversed and remanded for entry of  
a judgment in plaintiffs’ favor unless the district court  
“determines that defendant has defenses that have not yet been  
addressed, in which case the court shall conduct proceedings  
consistent with” the Court of Appeals opinion. 235 Mich App  
646, 662; 599 NW2d 519 (1999).  It noted that while the no­
fault 
act 
abrogated 
tort liability arising from the ownership,  
maintenance, or use of a motor vehicle (except in certain  
circumstances),2 it did not abolish contractual liability.  
See Kinnunen v Bohlinger, 128 Mich App 635, 638; 341 NW2d 167  
(1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors, Inc,  
124 Mich App 510, 513; 335 NW2d 70 (1983).  
1The rule provides: “If it appears that the opposing 
party, rather than the moving party, is entitled to judgment, 
the court may render judgment in favor of the opposing party.”  
2MCL 500.3135(2).  
3 
The 
Court 
of 
Appeals 
distinguished 
this 
Court’s  
peremptory order in Universal Underwriters Ins Co v Vallejo,  
436 Mich 873; 461 NW2d 364 (1989).  Vallejo held that the  
defendant-renter was entitled to summary disposition on the  
insurer’s claim for collision damages to a rented vehicle:  
Although the trial court gave the plaintiff 
insurer numerous opportunities to explain, with 
specific factual allegations, how its conclusory 
allegation of an express or implied contract of 
bailment differentiated this case from any other 
situation in which a permissive user of a car is 
involved in a collision and therefore cannot return  
the car to its owner in an undamaged condition, the 
plaintiff repeatedly failed to do so. Under these  
circumstances, the trial court correctly granted 
the defendant’s motion for summary disposition.  By 
operation of the pertinent insurance statutes, 
e.g., MCL 257.520(b)(2); MSA 9.2220(b)(2) and MCL 
500.3009; MSA 24.13009, the defendant appears to 
have been insured by the plaintiff against the very 
loss at issue in this case, since a standard 
automobile 
policy 
typically 
insures 
such 
a  
permissive driver “against loss from the liability 
imposed by law for damages arising out of the 
ownership, maintenance or use of” a motor vehicle. 
[Id.]  
The Court of Appeals noted that, while the plaintiff in  
Vallejo 
relied 
on 
a 
common-law bailment theory, plaintiff here  
seeks recovery under the express terms of a written agreement.  
The Court did not read Vallejo “as a blanket rejection of all  
contract claims seeking to hold a permissive user responsible  
for damage to a borrowed vehicle. Rather, we understand the  
order as rejecting the insurer’s effort to convert a simple,  
permissive-user, tort liability case into a contract case by  
4  
 
  
alleging an express or implied contract of bailment, without  
providing 
specific 
factual 
allegations 
that 
would 
support 
such  
a distinction.” Kneeland, supra at 659. The Court reasoned  
that Vallejo suggested the possibility of a different result  
where there is proof of an express contract.  
II. Standard of Review  
We review de novo a grant of summary disposition under  
MCR 2.116(C)(10).  Smith v Globe Life Ins Co, 460 Mich 446,  
454; 597 NW2d 28 (1999).  The issue under review is a question  
of law, i.e., whether the no-fault act prevents contractual  
assignment of liability for collision damages.  We review  
questions of law de novo.  Cardinal Mooney High School v  
Michigan High School Athletic Ass’n, 437 Mich 75, 80; 467 NW2d  
21 (1991).  
III. Contractual Interpretation  
Before deciding whether the courtesy car agreement  
contravenes 
public 
policy, we must determine what the contract  
says.
 Absent an ambiguity or internal inconsistency,  
contractual interpretation begins and ends with the actual  
words of a written agreement. Henderson v State Farm Fire &  
Casualty Co, 460 Mich 348, 354; 596 NW2d 190 (1999). 
A  
contract is ambiguous if its provisions may reasonably be  
understood in different ways.  Farm Bureau Ins Co v Nikkel,  
460 Mich 558, 566; 596 NW2d 915 (1999).  
5  
  
The fourth provision of the courtesy car agreement  
states: “Renter agrees to assume all responsibility for  
damages while vehicle is in his possession.”  This language  
clearly imposes liability on defendant. The contract is  
unclear, however, regarding the extent of the shift of  
liability. The provision refers to “damages,” but does not  
explicate precisely the categories of damages that defendant  
has agreed to pay.  
The general term “damages” could refer to any harm caused  
to a third party’s person or property, i.e., it could reach  
damages for which no-fault insurance coverage is mandatory.  
See, e.g., MCL 500.3107, 500.3121.  A shift of liability to  
that extent might contravene the no-fault act.  Cf. State Farm  
v Enterprise Leasing, 452 Mich 25, 36; 549 NW2d 345 (1996).3  
Another reasonable interpretation of the contract is  
available, however. Black’s Law Dictionary (6th ed) defines  
“damages” as “[a] pecuniary compensation or indemnity, which  
may be recovered in the courts by any person who has suffered  
a loss, detriment, or injury, whether to his person, property,  
or rights . . . .” The parties may reasonably have intended  
3We express no view regarding whether State Farm would  
control the legality of the contract here.  This agreement and 
the one addressed in State Farm are arguably different in 
scope and effect.  We merely observe that an argument is 
available that the parties’ agreement, if it reaches beyond 
optional collision damages, is illegal.  
6  
 
 
to limit the meaning of the word “damages” to losses for which  
a legal right of recovery is available.  
An ambiguity arises also because the contract shifts  
liability 
for 
damages “while [the] vehicle is in [defendant’s]  
possession.”
 Damages to the vehicle itself are likely to  
occur while the renter possesses the vehicle.  But other types  
of damages, including wage loss and medical expenses, often  
arise after the rental period has ended. The contract does  
not clearly shift liability for the latter kinds of damages.  
We thus conclude that the words of the contract may  
reasonably be understood in different ways.  This ambiguity  
requires us to assume that the parties knew the law and wished  
to comply with it.  See 3 Corbin, Contracts, § 546, pp 170­
171:  
[I]t is very commonly stated that when the 
terms 
of 
agreement 
have 
two 
possible 
interpretations, by one of which the agreement 
would create a valid contract and by the other it 
would be void or illegal, the former will be 
preferred.
 
This 
is 
an 
advisory 
rule 
of  
interpretation, since it is believed that the  
parties intend their agreement to be valid rather 
than invalid, lawful rather than unlawful, and 
honest and effective rather than fraudulent and  
voidable.  
See also Walsh v Schlecht, 429 US 401, 408; 97 S Ct 679; 50 L  
Ed 2d 641 (1977) (“Since a general rule of construction  
presumes the legality and enforceability of contracts, . . .  
ambiguously worded contracts should not be interpreted to  
7  
 
render them illegal and unenforceable where the wording lends  
itself to a logically acceptable construction that renders  
them legal and enforceable”); Stillman v Goldfarb, 172 Mich  
App 231, 239; 431 NW2d 247 (1988).  
We follow these authorities and presume that the parties  
intended to enter a valid, enforceable agreement and that the  
contract thus does not shift liability for damages that may  
not legally be reallocated.  
IV. The dissent’s approach  
The dissent first construes the contract against its  
drafter and the drafter’s subrogee by extending the shift of  
liability beyond collision damages.  The dissent would then  
invalidate the contract on the basis of its allegedly illegal  
reach. We reject that analysis.  
The 
dissent 
misapplies 
the 
rule 
requiring 
that  
contractual ambiguities be construed against the drafter by  
using the rule not to interpret the contract, but to  
invalidate it. As discussed above, courts will presume that  
a contract is legal if a reasonable interpretation supporting  
the legality of the contract is available.  The dissent  
instead 
concludes 
that the parties meant to accomplish illegal  
ends by their agreement.  
Moreover, the dissent does not find an ambiguity  
regarding whether defendant’s liability extends to collision  
8  
 
 
damages.  As discussed above, the only ambiguity is whether  
the contract shifted liability beyond collision damages.  A  
reasonable 
interpretation 
is 
not 
available-
-
-and 
even 
defendant  
does not contend-
-
-that she did not agree to liability for  
collision damages.  
A proper application of the rule of construction against  
the drafter would adopt the interpretation making defendant  
liable to the least extent possible, i.e., for collision  
damages only.  Thus, regardless of whether one applies the  
rule of construction against the drafter or the rule presuming  
the legality of contracts, the same result is reached: the  
contract shifts liability for collision damages only.  
V. Is the assignment of collision damages void?  
Having concluded that the contract shifts liability for  
collision damages only, we now consider whether the no-fault  
act 
prohibits 
the 
parties’ 
voluntary 
allocation 
of  
responsibility.  To decide this question, we must consider  
relevant statutory provisions.  Sun Valley Foods Co v Ward,  
460 Mich 230, 236; 596 NW2d 119 (1999), articulated the proper  
mode of interpretation:  
The rules of statutory construction are well 
established.  The foremost rule, and our primary 
task in construing a statute, is to discern and 
give effect to the intent of the Legislature. 
Murphy v Michigan Bell Telephone Co, 447 Mich 93,  
98; 523 NW2d 310 (1994).  See also Nation v W D E  
Electric Co, 454 Mich 489, 494; 563 NW2d 233 
(1997).  This task begins by examining the language  
9  
 
  
 
 
of the statute itself.  The words of a statute  
provide “the most reliable evidence of its intent . 
. . .” United States v Turkette, 452 US 576, 593; 
101 S Ct 2524; 69 L Ed 2d 246 (1981).  If the  
language of the statute is unambiguous, the  
Legislature must have intended the meaning clearly 
expressed, and the statute must be enforced as 
written.
 No further judicial construction is 
required or permitted.  Tryc v Michigan Veterans’  
Facility, 451 Mich 129, 135; 545 NW2d 642 (1996).  
Our no-fault act requires owners to carry certain  
categories 
of 
insurance. 
 
Mandatory 
coverages 
include 
personal  
injury protection and property protection benefits. 
MCL  
500.3107; MCL 500.3121.  Other types of coverage, however, are  
not mandatory, but purely a matter of contract.  Collision  
coverage plainly falls into the latter category: our no-fault  
scheme does not mandate it.  
Additionally, § 3135 of our no-fault act, MCL 500.3135,  
expressly 
abolishes 
tort 
liability 
arising 
from 
the 
ownership,  
maintenance, or use of a motor vehicle (with some exceptions).  
The statutory language does not reflect an intent to abolish  
contractual liability for collision damages, an optional form  
of insurance not required by the no-fault act. See Kinnunen,  
supra at 639 (“Had the Legislature intended to abrogate  
contractual liability as well, the words any ‘liability  
arising out of the ownership, maintenance, or use of a motor  
vehicle’ could easily have been substituted”); Ben Franklin  
Ins, supra at 513 (“Nothing in the no-fault system relieves a  
10  
motor vehicle operator of liability which he may have incurred  
in contract”).4  
Further, the Court of Appeals correctly ruled that  
Vallejo is distinguishable. 
The limited reasoning in that  
peremptory 
order 
offers little guidance.  It appears, however,  
that the insurer in Vallejo was relying on a common-law  
bailment theory.  The order does not mention an express  
written agreement.  
Vallejo prevents a party from converting a possible tort  
claim into a “contract” claim by simply alleging a bailment  
and thereby subverting subsection 3135(2).  Those concerns do  
not arise where parties have expressly agreed in writing to  
allocate their respective duties.  
VI. Subrogation  
Our grant order asked the parties to address “whether, if  
defendant is held to be liable for damage to the automobile at  
issue based on her contract with plaintiff Betten Toyota, her  
liability is limited to the $1,000 deductible in Betten  
Toyota’s insurance policy covering that automobile on the  
ground that this was the extent of the damages suffered by  
4We emphasize that our holding is limited to contract 
claims for collision damages. We offer no view regarding the 
legality of a contract purporting to shift liability for other 
categories of damages.  
11  
 
Betten Toyota.”  462 Mich 911 (2000). We hold that damages  
are not limited to the amount of the deductible.  
Betten incurred $3,738.49 in damages to its vehicle, but  
had to pay only $1,000; Universal paid the balance.  The plain  
terms of Betten’s insurance policy grant Universal a right of  
subrogation to Betten’s cause of action against defendant:  
Subrogation—You and each insured must do all 
in their power to preserve their rights to recover 
from others.  Once we have made a payment under  
this policy, your or an insured’s rights to recover  
from others become our rights.  
Defendant has not articulated a reason why Universal may not  
exercise its contractual right of subrogation.  
Significantly, defendant did not challenge Universal’s  
subrogee status below.  In fact, her attorney implicitly  
acknowledged 
Universal’s 
right 
of 
subrogation 
during  
proceedings in the district court:  
Mr. Arndt [defense counsel]: . . . I don’t  
think either one of the parties made a distinction  
between Universal’s claim or Betten’s claim.  
Certainly Universal’s claim is derivative of their 
subragor (sic) insured Betten.  I guess it would be 
our position that the case law and specifically 
Universal versus Valajo [sic] addresses both not 
only the insurer but the owners responsibility to 
make sure that there is adequate protection and 
insurance coverage on the vehicle.  I think that  
the case law that you’ve relied upon in determining 
and adjudicating the issues of liability between 
Universal and Kneeland are equally applicable to 
Betten and Kneeland.  That there would be no  
distinction between the two claims, whether it was  
insured or uninsured. [Emphasis added.]  
12  
 
 
 
Defendant has thus forfeited any claim that Universal has no  
right of subrogation.  Smith v Musgrove, 372 Mich 329, 337;  
125 NW2d 869 (1964); Munson Medical Center v Auto Club Ins  
Ass’n, 218 Mich App 375, 388; 554 NW2d 49 (1996).  
VII. Conclusion  
The 
no-fault 
act does not invalidate the parties’ written  
agreement to assign liability for collision damages to  
defendant.  Universal has a right of subrogation under the  
express terms of its insurance policy with Betten to seek  
recovery of the amount it paid to repair the rented vehicle.  
Accordingly, we affirm the judgment of the Court of Appeals.  
TAYLOR, 
YOUNG, 
and MARKMAN, 
JJ., concurred with CORRIGAN, C.J.  
13  
 
___________________________________ 
v 
S T A T E O F M I C H I G A N  
SUPREME COURT  
UNIVERSAL UNDERWRITERS INSURANCE  
COMPANY, as Subrogee of Betten 
Toyota and BETTEN TOYOTA,  
Plaintiffs-Appellees,  
No. 114900  
NANCY KNEELAND,  
Defendant-Appellant.  
CAVANAGH, J. (dissenting).  
Because the majority opinion in this case is contrary to  
well-established principles of contract law, I must dissent.  
I would reverse the decision below and reinstate summary  
disposition in favor of the defendant.  
This case presents two questions: (1) whether a party may  
contractually assume liability for damages to a borrowed  
vehicle and (2) if liability can be contractually assumed,  
whether 
the 
defendant assumed liability pursuant to a courtesy  
car agreement. 
I would hold that liability can be  
contractually shifted, but that the instant courtesy car  
 
 
agreement cannot be enforced to impose liability on the  
defendant.  
I  
The defendant borrowed a loaner car from Betten Toyota  
while Betten was servicing her vehicle.  Before taking  
possession of the loaner car, the defendant was required to  
sign a document entitled “Courtesy Car Agreement.” The text  
of the agreement was as follows:  
Courtesy Car Agreement  
1. Rental fee ONLY $28.00 per day.  
2. Renter agrees to replace gasoline used.  
3. Renter agrees to pay cash for rental charge.  
4. Renter agrees to assume all responsibility for 
damages while vehicle is in his possession.  
5. Renter agrees not to sublet or loan the car to 
anyone.  
The agreement was printed on Betten stationery.  
The defendant was involved in an automobile accident for  
which she bore no fault.  Rather, two other vehicles collided  
with each other, and the force of the impact pushed one of  
those vehicles into the loaner car.  
The plaintiffs are  
seeking to recover collision damages.  Both plaintiffs assert  
that the defendant is liable for the full amount of damages  
sustained pursuant to clause 4 of the courtesy car agreement.  
The defendant asserts that Betten Toyota formed a  
2  
 
bailment contract with her by loaning her a vehicle.  She  
further argues that, pursuant to the bailment contract, she  
was shielded from liability because the no-fault act, MCL  
500.3101 et seq., and financial responsibility act, MCL  
257.520(g), require the owner of an automobile and the owner’s  
insurer to provide coverage for permissive users.  
According to the plaintiffs, this case sounds purely in  
contract.  While the no-fault act abrogated tort immunity, it  
did not abrogate contractual liability. The plaintiffs thus  
contend that the no-fault act would not bar their claims,  
citing Kinnunen v Bollinger, 128 Mich App 635, 638; 341 NW2d  
167 (1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors,  
Inc, 124 Mich App 510, 513; 335 NW2d 70 (1983).  
The broader question posed by this case is whether a  
party may contractually assume liability for damages to a  
borrowed vehicle even though Michigan’s no-fault law,  
precedent, and common-law principles would normally place  
liability on the lender absent any contractual agreement to  
the contrary.  If liability can be contractually assumed, then  
we must also resolve whether the defendant assumed liability  
pursuant to the courtesy car agreement.  
The genesis of the arguments raised by the present  
parties can be traced to this Court’s decision in Universal  
Underwriters v Vallejo, 436 Mich 873 (1990). Vallejo was a  
3  
 
peremptory reversal, which, in its entirety, provided as  
follows:  
In lieu of granting leave to appeal, the 
August 21, 1989, judgment of the Court of Appeals 
is reversed [179 Mich App 637; 446 NW2d 510  
(1989)], and the case is remanded to the Saginaw 
Circuit Court for entry of judgment in favor of the 
defendant.
 Although the trial court gave the 
plaintiff 
insurer 
numerous 
opportunities 
to  
explain, with specific factual allegations, how its 
conclusory allegation of an express or implied 
contract of bailment differentiated this case from  
any other situation in which a permissive user of a  
car is involved in a collision and therefore cannot  
return the car to its owner in an undamaged 
condition, the plaintiff repeatedly failed to do 
so.  Under these circumstances, the trial court 
correctly granted the defendant's motion for  
summary disposition.  By operation of the pertinent 
insurance statutes, e.g., MCL 257.520(b)(2);  MSA  
9.2220(b)(2) and MCL 500.3009; MSA 24.13009, the  
defendant appears to have been insured by the  
plaintiff against the very loss at issue in this  
case, since a standard automobile policy typically 
insures such a permissive driver “against loss from 
the liability imposed by law for damages arising 
out of the ownership, maintenance or use of” a  
motor vehicle. 
Jurisdiction is not retained.  
[Emphasis added.]  
The defendant interprets Vallejo as holding that no  
express or implied bailment action lies against a permissive  
user of a loaner vehicle.  In the defendant’s view, Vallejo  
was not premised on the insurer’s failure to factually  
establish a contractual relationship. 
Rather, Vallejo  
specifically found the lack of an express agreement to be  
inconsequential.
 The Court held that a bailment contract  
could not supersede the insurer’s statutory duty to supply  
4  
 
 
 
insurance to permissive drivers.  
The plaintiffs, on the other hand, argue that Vallejo is  
inapposite.  They assert that, where the action against the  
defendant is purely for breach of contract and is not a tort  
action arising out of rights implicit in a bailment  
relationship, Vallejo and the no-fault act do not bar  
plaintiffs’ claims.  Instead, the plaintiffs urge us to  
interpret 
Vallejo 
as 
determining only whether a bailment could  
give rise to liability.  While Vallejo recognized that any  
tort liability arising out of a bailment would be barred  
pursuant to the no-fault act, the plaintiffs posit that it did  
not foreclose the possibility that a defendant could be held  
liable if the parties agreed to rights and responsibilities  
extending beyond the bailment situation.  The plaintiffs  
recognize Vallejo as accepting that a bailment relationship  
alone would not shift liability to the defendant, but they  
argue that Vallejo actually held only that the plaintiff  
failed to prove the existence of any rights beyond those that  
would exist in a bailment situation.  
II  
The Court of Appeals noted that the no-fault act bars  
tort liability but not contractual liability, and held that  
the defendant could be bound by her agreement to assume all  
responsibility for damages while the vehicle was in her  
5  
 
 
 
possession.
 235 Mich App 658-659. 
It then distinguished  
Vallejo from this case on the ground that Vallejo did not  
involve an express contract.  Further, the Court expressly  
stated that Vallejo was not intended to shield permissive  
users from liability expressly assumed by contract. The Court  
wrote:  
[I]n any permissive user case, except the 
unusual one in which a bailment is expressly 
disavowed, it can be alleged that there is an 
implied or express contract of bailment, and  
therefore, an enforceable contractual duty.  The  
Supreme Court declined to recognize such broad­
based contractual liability in these circumstances. 
The Court’s express reference to the insurer’s 
failure to support with factual allegations its 
efforts to differentiate the case from any other 
permissive-user situation implies that if the  
insurer had successfully demonstrated the existence 
of 
an 
express 
contractual 
assumption 
of  
responsibility for damage to the vehicle, the 
defendant might not have been granted summary 
disposition.  Thus, Vallejo did not say that the 
existence 
of an 
express 
contract 
would 
not  
differentiate the case from any other permissive­
user situation. 
Rather, it suggested that the 
potential different result did exist, but that the 
plaintiff insurer had failed to provide proof 
sufficient to support a different result. [235 Mich 
App 659-660 (emphasis in original).]  
After determining that Vallejo was not intended to bar all  
contract 
claims 
brought against permissive users, the Court of  
Appeals concluded that plaintiffs could assert a contract  
claim against the defendant because of her express assumption  
of liability.  Therefore, the Court reversed the circuit  
court’s affirmance of summary disposition for the defendant.  
6  
 
 
III  
I agree with the Court of Appeals that Vallejo should not  
be read as “a blanket rejection of all contract claims seeking  
to hold a permissive user responsible for damage to a borrowed  
vehicle.”  235 Mich App 659.  While Vallejo limited the extent  
to which liability can be shifted to a permissive driver of a  
loaned automobile, it did so under circumstances where the  
insurer had failed to assert a factual basis for its contract  
claim. The Court’s order recognized the general rule that a  
bailee must return property to his bailor in an undamaged  
condition. However, Vallejo then recognized that Michigan’s  
pertinent insurance statutes, MCL 257.520(b)(2) and MCL  
500.3009, modify the general rule.  Through those statutes,  
the Legislature chose to offset the costs and problems  
associated with automobile collisions by requiring that  
automobile owners carry insurance.  Vallejo recognized that  
standard automobile policies contain language covering use by  
permissive drivers, and held that the plaintiff insurer had  
failed to prove that liability had somehow been shifted back  
to the defendant.  
I interpret Vallejo as holding that the lender, rather  
than the permissive user, must pay for collision damages under  
the lender’s insurance policy unless: (1) it is proven that  
the policy does not extend to permissive drivers, or (2) the  
7  
 
 
 
lender or insurer carries his burden of differentiating his  
case from the usual situation where a permissive user of a car  
is involved in a collision.  The plaintiffs’ own brief  
categorizes its claim as “squarely one for breach of  
contract.”  Thus, this is not a case where the insurer refused  
to pay on the grounds that the driver was not covered by the  
terms of the policy between the insured and the dealer.  
Instead, the complaint alleged that the contract between  
Betten and Kneeland shifted liability to Kneeland. When she  
refused to pay, she allegedly breached the courtesy car  
agreement.  Therefore, this case hinges on the second Vallejo  
inquiry.  Pursuant to Vallejo, the plaintiffs must prove that  
the courtesy car agreement differentiates this case from the  
usual situation where a permissive user of a car is involved  
in a collision.  
The plaintiffs claim that this case can be distinguished  
from Vallejo because the instant defendant assumed all  
responsibility for damages.  While I agree with the plaintiffs  
that Vallejo does not automatically bar recovery in cases  
where the lender proves that the permissive driver has assumed  
liability pursuant to a valid contract, I do not agree that  
liability was shifted in the present case.  
The majority acknowledges the potential shift of tort  
liability that could occur were this Court to hold that the  
8  
 
 
 
contract is unambiguous as the plaintiffs suggest.  Because of  
the 
potential 
problem, 
the 
majority 
offers 
another 
“reasonable  
interpretation of the contract.”  Slip op at 6. 
In the  
majority’s words, “[t]he parties may reasonably have intended  
to limit the meaning of the word ‘damages’ to losses for which  
a legal right of recovery is available.” Slip op at 7.  
I agree with the majority that the courtesy car agreement  
in this case is ambiguous, and may be interpreted in a fashion  
that would avoid illegality.  However, I disagree strongly  
with 
the 
majority’s 
decision to construct a decision favorable  
to 
the 
plaintiffs, 
rather than construing the contract against  
the drafter, as we are bound to do.  See, e.g., Vanguard Ins  
Co v Clarke, 438 Mich 463, 471-472; 475 NW2d 48 (1991); Raska  
v Farm Bureau Mut Ins Co, 412 Mich 355, 361-362; 314 NW2d 440  
(1982). 
See also 2 Restatement Contracts, 2d, § 206, p 105  
(“In choosing among the reasonable meanings of a promise or  
agreement or a term thereof, that meaning is generally  
preferred which operates against the party who supplies the  
words”); 11 Williston, Contracts, § 32.12, p 471 (since the  
language is within the control of the drafter, it is a  
generally accepted principle that any ambiguity in that  
language will be interpreted against the drafter); 5 Corbin,  
Contracts, § 24.27, pp 282-283; 17A Am Jur 2d Contracts, §  
348, pp 360-361 (It is fundamental that doubtful language in  
9  
 
 
 
a contract should be interpreted most strongly against the  
party who has selected the language).  
Two opposing interpretations of the courtesy car  
agreement are offered.  In the plaintiffs’ view, by signing  
the courtesy car agreement, the defendant agreed to be an  
insurer against damages to the automobile.  
The defendant  
contends that she read the agreement as meaning only that she  
would be responsible for her own negligence, and that she  
assumed that the car was insured by the dealership.  Here, the  
drafter was Betten.  Construing the agreement against Betten  
is proper because, as the drafter, Betten had the opportunity  
of drafting the language in a manner that avoided any  
ambiguity or dispute.  Thus, I would resolve the courtesy car  
agreement in the defendant’s favor, in accordance with well­
established contract principles.  
The document was a one-page form contract to which no  
insurer was a party and that never mentioned insurance. The  
dealership never informed the defendant that she needed to  
obtain her own insurance, nor did it inform the defendant that  
she would be liable for damages caused by the negligence of  
others.  The courtesy car agreement also did not mention  
collision damages.  It is not unreasonable for defendant to  
have assumed that she would be covered by a standard  
automobile policy between the dealer and its insurer.  In this  
10  
respect, the present case is similar to Vallejo.
 While  
Vallejo left open the possibility that contractual liability  
could be shifted to a permissive user, Vallejo also recognized  
that the burden was upon the plaintiff insurer to prove that  
liability had been so shifted.  Here, the plaintiffs point  
only to overbroad language that in no way mentions insurance  
obligations.  Thus, I would conclude that the plaintiff failed  
to bear its burden of proving that collision damages were  
validly shifted.  
Contrary to the majority’s assertion, my approach is not  
a method of invalidating the contract.  It is, instead, a  
recognition 
that, 
when 
choosing 
between 
valid 
constructions 
of  
an ambiguous contract, we must choose the construction that  
goes against the drafter of the ambiguous language.  Here, the  
construction 
offered 
by the defendant would not invalidate the  
courtesy car agreement; rather, it would limit the scope of  
the agreement.  
IV  
The majority chooses to construe the contract in a manner  
that would be favorable to the plaintiffs who drafted the  
ambiguous contract.  I cannot join the majority’s decision to  
find in favor of the plaintiffs when the agreement signed by  
the defendant contained a provision that must be interpreted  
as ambiguous or void against public policy.  
11  
I would hold that the defendant is not liable under the  
courtesy car agreement. The plaintiffs have failed to carry  
their burden of establishing that a valid contract existed and  
of differentiating this case from the usual situation where a  
permissive user of a car is involved in a collision.  
Therefore, I would reverse and reinstate summary disposition  
in favor of the defendant.  
WEAVER and KELLY, JJ., concurred with CAVANAGH, J.  
12