Case Name: CITIZENS INSURANCE COMPANY OF AMERICA v. FEDERATED MUTUAL INSURANCE COMPANY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1993-04-19
Citations: 199 Mich. App. 345
Docket Number: Docket No. 133540
Parties: CITIZENS INSURANCE COMPANY OF AMERICA v FEDERATED MUTUAL INSURANCE COMPANY
Judges: Before: Griffin, P.J., and Neff and Corrigan, JJ
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 199
Pages: 345–358

Head Matter:
CITIZENS INSURANCE COMPANY OF AMERICA v FEDERATED MUTUAL INSURANCE COMPANY
Docket No. 133540.
Submitted October 7, 1992, at Grand Rapids.
Decided April 19, 1993, at 9:10 a.m.
Leave to appeal sought.
Citizens Insurance Company of America brought an action in the Kent Circuit Court against Federated Mutual Insurance Company, seeking a declaration of their respective liability for benefits paid as a result of an automobile accident. Albert Ulrich, who was insured under a policy issued by Citizens that contained an excess insurance provision with respect to use of an unowned vehicle, was involved in an accident that resulted in injury to the driver of the other vehicle and the death of a passenger in that vehicle. At the time of the accident, Ulrich was driving a loaned vehicle insured under a garage policy issued by Federated that contained an escape clause that provided that coverage was available only if there was no other available coverage. While each insurer denied liability on the basis of the provisions in the respective policies, they agreed to pay settlements with the driver of the other vehicle and the estate of the passenger, with Citizens paying the $5,000 settlement with the driver and each insurer paying $30,500 to the estate. The court, Dennis B. Leiber, J., held that the escape clause in Federated’s policy was unenforceable, that Federated’s escape clause and Citizens’ excess insurance clause were in conflict, and that Federated’s liability was limited to the coverage required by statute, resulting in a total liability for Federated of $25,000. Federated appealed, and Citizens cross appealed.
The Court of Appeals held:
1. The escape clause in Federated’s policy is void because it violates the requirement of the financial responsibility act that coverage be provided for permissive users. This situation differs from that found in State Farm Mutual Automobile Ins Co v Snappy Car Rental, Inc, 196 Mich App 143 (1992), and, thus, is not controlled by the holding in that case.
References
Am Jur 2d, Automobile Insurance §§ 218, 220.
See ALR Index under Automobile Insurance; Garages and Service Stations.
2. It is clear that Federated intended that its liability under its policy be limited in these circumstances to the personal protection coverage mandated by statute: $20,000 for each person and $40,000 for each accident. Accordingly, the trial court properly apportioned the respective liability.
Affirmed.
Neff, J., dissenting, stated that the escape clause in Federated’s policy is similar to the provision found valid in State Farm Mutual Automobile Ins Co v Snappy Car Rental, Inc, 196 Mich App 143 (1992), which is controlling precedent pursuant to Administrative Order No. 1992-8, 441 Mich lii. However, because of the conflict with the provision in Citizens’ policy, liability must be prorated in accordance with the respective coverages.
Insurance — Automobiles — Permissive Users — Public Policy.
A clause in an insurance policy covering automobiles loaned by a garage to its customers that seeks to deny coverage where there is any other available insurance is void as a matter of public policy because it contravenes the provision of the financial responsibility act mandating coverage of permissive users (MCL 257.520[b][2]; MSA 9.2220[b][2]).
Bremer, Wade, Nelson, Mabbitt & Lohr (by Phillip J. Nelson and James H. Lohr), for the plaintiff.
Law Offices of Rusch & Prine (by Andrew W. Prine), for the defendant.
Before: Griffin, P.J., and Neff and Corrigan, JJ

Opinion:
Griffin, P.J.
Like our dissenting colleague, we are troubled by the decision in State Farm Mutual Automobile Ins Co v Snappy Car Rental, Inc, 196 Mich App 143; 492 NW2d 500 (1992). Unlike our colleague, however, we do not believe that Snappy controls the outcome of this appeal. Rather, we believe that the escape clause in defendant's policy is void because it violates the requirement of the financial responsibility act, MCL 257.501 et seq.; MSA 9.2201 et seq., that coverage be provided for permissive users. Tahash v Flint Dodge Co, 115 Mich App 471, 476; 321 NW2d 698 (1982).
In our view, the case at bar is distinguishable from Snappy. The operative distinction is that in Snappy, supra at 149-150, it was the permissive user, not the insurer, who made the election that resulted in the prioritization of coverage:
We resolve this case in accordance with State Farm [Mutual Automobile Ins Co] v Auto-Owners [Ins Co], [173 Mich App 51, 54; 433 NW2d 323 (1988)], rejecting the argument that an automobile insurance policy may not contain an exclusion not specifically authorized by the Legislature. Although defendant is not permitted to contract away its statutory obligation to provide residual liability insurance as the owner of a vehicle, or its statutory obligation to provide insurance coverage for permissive users, neither the no-fault act nor the financial responsibility act specifically require [sic] that an owner provide primary residual liability insurance for permissive users. Rather, as in State Farm v Auto-Owners, supra, the coverage requirements may be met by the policies of more than one insurer. Id., 54-55.
In this case, we read the clause in defendant's policy not as an attempt to limit the residual liability insurance or first-party benefits, because defendant is obligated to provide coverage consistent with the no-fault act and the financial responsibility act. Rather, we read the clause only as an attempt to establish the priority of coverage as contracted for by Ms. Davis. We therefore hold that the provision of defendant's rental agreement in question is not void as violative of the no-fault act. [Emphasis added.]
In the present case, defendant has through its own policy provisions attempted to exclude from coverage a class of permissive users who have their own coverage in excess of the legal financial responsibility requirements. For the reasons stated in Tahash, defendant's attempt to dictate the coverage issue in this fashion is void because it contravenes MCL 257.520(b)(2); MSA 9.2220(b)(2), which mandates coverage of permissive users. We agree with the dissent that defendant is liable only up to the $20,000/$40,000 requirement of the statute. Accordingly, we affirm the decision of the circuit court.
Affirmed.
Corrigan, J., concurred.