Case Name: PERRY v. SIED
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 2000-04-25
Citations: 461 Mich. 680
Docket Number: Docket No. 112898
Parties: PERRY v SIED
Judges: Cavanagh, Kelly, and Markman, JJ., concurred with Taylor, J.
Reporter: Michigan Reports
Volume: 461
Pages: 680–702

Head Matter:
PERRY v SIED
Docket No. 112898.
Argued October 12, 1999
(Calendar No. 12).
Decided April 25, 2000.
Sarah Perry brought an action in the Wayne Circuit Court against Auto Club Insurance Association for damages resulting from injuries suffered in an automobile accident involving Michael P. Sied, the defendant’s insured, while traveling in Ontario, Canada. Both drivers are Michigan residents. The insurer entered a power of attorney and undertaking (pad) with the Canadian government, agreeing to application of Ontario coverage limits under certain circumstances. The plaintiff sought a declaration that the insurance coverage applicable was $200,000 in Canadian funds, not the $20,000 limit stated in insured’s policy. The trial court, Brian K. Zahra, X, initially declined to rule on the coverage issue. The parties eventually entered into a settlement agreement under which they submitted the question of plaintiff’s total damages to an arbitration panel, but agreed that they would resubmit the coverage issue to the trial court in the event the arbitrators awarded plaintiff more than $20,000. After the arbitration panel awarded the plaintiff $95,000, she renewed her motion for a declaratory ruling on the coverage issue. The trial court granted the motion, reasoning that under ACIA v Lozanis, 215 Mich App 415 (1996), Ontario’s minimum coverage requirement applied. The Court of Appeals, White, P.J., and Hood and Gage, JX, affirmed in an unpublished memorandum opinion (Docket No. 199915). Acia appeals.
In an opinion by Justice Taylor, joined by Justices Cavanagh, Kelly, and Markman, the Supreme Court held:
A review of the entire pad shows that it contemplates an action in a Canadian court. Thus, the defendant is not obligated to the higher Canadian liability limits under the pad because the lawsuit was not filed in Canada.
Reversed and remanded.
Justice Corrigan, joined by Chief Justice Weaver, dissenting, stated that the defendant insurer waived its policy limits and agreed to provide the greater residual liability coverage. Thus, it should be required to provide up to $200,000 in Canadian funds residual liability coverage for bodily injuries sustained in the Ontario accident.
Michigan law governs construction of the insurance contract to determine the amount of residual liability coverage afforded because the insurer contracted with its insured in Michigan, and the underlying accident involved Michigan residents. However, the insurer explicitly waived the $20,000 limit stated in the policy and agreed to provide up to $200,000 in Canadian funds in residual liability coverage. The plain language of the pau precludes the insurer from raising “any” defense to “any claim, action, or proceeding” under its automobile insurance contract that it could not assert if it had entered into the contract in accordance with the law of the province in which the action “may be instituted.” The clear language of the pau dictates that it applies not only to actions actually brought in an Ontario court, but to actions that could have been brought in an Ontario court.
By entering into the pau, the insurer effectively submitted to Ontario law in this case. It expressly waived its policy limits and agreed to application of the Ontario coverage limits under the pau. The pau applies because this action could have been instituted in Ontario and the insurer’s assertion of its policy limits constitutes a defense. Therefore, the insurer should be required to provide coverage of $200,000 in Canadian funds.
Justice Young took no part in the decision of this case.
Bernstein & Bernstein, P.C. (by Michael J. Butler), for plaintiff-appellee.
Robert J. Dotson-, Garan, Lucow, Miller & Seward, PC., of counsel (by Daniel S. Saylor), for intervening defendant-appellant.

Opinion:
Taylor, J.
The issue in this case is whether a power of attorney and undertaking (PAU) intervening defendant Auto Club Insurance Association filed with the Canadian government applies to plaintiffs Michigan lawsuit. If the pau applies, defendant's potential liability would be $200,000 in Canadian funds rather than the insurance policy limit of $20,000 U.S. funds. We hold that defendant's expanded obligations under the pau are limited to lawsuits filed in Canada and therefore the pau does not apply to this lawsuit. We therefore reverse the judgment of the Court of Appeals and remand for further proceedings.
I. UNDERLYING FACTS AND PROCEDURAL HISTORY
This case arises from an automobile accident involving two Michigan residents who were traveling in Windsor, Ontario, Canada. Defendant's insured rear-ended plaintiff's vehicle. Plaintiff commenced this lawsuit in Wayne County against defendant's insured, alleging that she suffered a serious impairment of bodily function and permanent serious disfigurement. The policy that defendant's insured purchased limits defendant's liability for bodily injury to each injured person to $20,000, with its maximum liability for each occurrence limited to $40,000. However, defendant has filed a PAU with the Canadian government, wherein it agreed in part that it would:
[n]ot . set up any defence to any claim, action, or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to
(1) the limit or limits of liability provided in the contract; but
(2) in any event an amount not less than the limit or limits fixed as the minimum[ ] for which a contract of motor-vehicle liability insurance may be entered into in such Province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum limit or limits as may be fixed by the Province or Territory.
Plaintiff moved for a declaratory ruling that the pau applied, making the applicable insurance coverage $200,000 in Canadian funds rather than the $20,000 limit stated in the insurance policy. Plaintiff argued that defendant, contrary to the PAU, was setting up a defense of limit of liability less than the $200,000 minimum coverage prescribed by Canadian law. Defendant intervened as a real party in interest to contest plaintiffs request.
The parties eventually entered into a settlement agreement under which they submitted the question of plaintiff's total damages to an arbitration panel and plaintiff released her claims against defendant's insured in exchange for $20,000. Thé parties agreed that they would resubmit the coverage issue to the trial court in the event the arbitrators awarded plaintiff more than $20,000. Plaintiff further agreed that she would not seek recovery from defendant's insured.
The arbitration panel awarded plaintiff $95,000. Plaintiff then renewed her motion for a declaratory ruling on the coverage issue. The trial court held that pursuant to ACIA v Lozanis, 215 Mich App 415; 546 NW2d 648 (1996), Ontario's $200,000 minimum coverage requirement applied to this case.
Defendant appealed, and the Court of Appeals affirmed in an unpublished decision stating in pertinent part:
We agree that Lozanis, supra, is controlling. In Lozanis, the claimant was injured by an unidentified motorist in Ontario. Id., pp 416-417. The claimant's uninsured motorist policy with acia had $20,000 limits. Although the claimant filed suit in Ontario, that suit was enjoined. Id., p 417. This Court concluded that ACIA had agreed in the pau filed with the Canadian government not to assert policy limits below $200,000 against an insured injured in Ontario. Id., pp 419-420. Acia was therefore subjected to Canadian law, and the fact that acia had filed suit in Macomb County was not dis-positive, since it had agreed to provide coverage for its insureds traveling in Canada. Id., p 420. The Court concluded that the pau did not require that the action be filed in Canada. Id.
Following Lozanis, we conclude that here, too, the fact that the action was filed in Wayne County is not dispositive. The accident occurred in Ontario, and acia agreed in the pau to provide coverage up to the Ontario limits. Although the claimant in Lozanis filed suit in Ontario, that suit was enjoined and was not the basis for this Court's decision applying the Ontario limits. Neither Lozanis nor the instant case involved an Ontario judgment. We find Lozanis to be controlling authority for the application of the Ontario limits in this case.[ ]
Defendant appealed and we granted its application for leave to appeal.
H. OTHER COURT HOLDINGS
There is no dispute that the higher Canadian limits would apply if plaintiff had filed her lawsuit in Ontario. However, she filed her lawsuit in Michigan. Hence, the real issue is whether the pau applies when a lawsuit is filed in Michigan that could have been filed in Canada.
Three sister state courts have addressed the issue whether a pau applies when a lawsuit is filed, not in Canada, but in one of our states.
In Mindell v Travelers Indemnity Co, 46 AD2d 263; 361 NYS2d 777 (1974), a passenger was injured in a one-car accident in Ontario. A lawsuit was filed in New York. The plaintiff argued that the insurance company which had filed a pau with Ontario was liable, not for the policy limits of $10,000 but the higher Ontario limit. After examining the pau the court stated:
It is clear from the language and context of the foregoing undertaking . . . that the provision quoted refers only to a claim, action or proceeding prosecuted in a Canadian Province or Territory, and that the insurer's agreement not to set up certain defenses . . . extended only to such actions. It was in no respect an agreement to forego those defenses— and to assume an increased liability—-in the present New York action. [Id. at 266.]
This decision by New York's intermediate appellate court was unanimously affirmed by New York's highest appellate court.
In Fiste v Atlantic Mut Ins Co, 94 Ohio App 3d 165; 640 NE2d 551 (1994), an Ohio resident was injured by a Canadian citizen in a car accident while driving in Ontario. The plaintiff did not receive enough from the tortfeasor's insurer to cover his damages and subsequently sued his own insurance company in Ohio for additional payment. Auto Club Insurance Company paid the plaintiff the $5,000 due under its policy. The plaintiff argued that the insurance company which had a pau with Ontario was responsible for an additional amount under Canadian law. The court rejected plaintiff's claim, stating:
Auto Club's execution of this power of attorney and undertaking by which it agreed to abide by Canadian law is not decisive of the issues herein, since that document applies only to causes of action arising in Canada and litigated in Canadian courts. The power of attorney and undertaking does not purport to require Auto Club to be bound by Canadian law with respect to actions against Auto Club by Ohio residents arising out of a contract of insurance executed in Ohio. [Id. at 168-169.]
In Motorists Mut Ins Co v Howard, 110 Ohio App 3d 709, 713-714; 675 NE2d 51 (1996), the Ohio Court of Appeals, without citation to or apparent knowledge of Mindell, or O'Shei, reached a contrary result involving a PAU stating:
[I]t is not necessary for [the insured] to file an action in Canada to enforce the power of attorney agreement. This agreement does not state as a condition precedent to enforcement that an individual must institute an action in Canada, and, indeed, the plain language states that an action may be instituted in Canada.[ ]
As previously indicated, our Court of Appeals also addressed a defendant's PAU in Lozanis. In Lozanis, a Michigan resident was injured while driving in Ontario. Because the driver of the truck that hit Mr. Lozanis' vehicle was never identified, Lozanis sought uninsured motorist benefits for his injuries. Lozanis filed a lawsuit in Ontario seeking $200,000 in Canadian funds, rather than the $20,000 in U.S. funds provided for in his insurance policy for uninsured motorist coverage. The acia sued Lozanis in Michigan and obtained an injunction forbidding him from continuing his Ontario lawsuit on the basis that the insurance policy required claims to be arbitrated. The circuit court did however hold that the pau applied so that $200,000 in benefits was available. The acia appealed, and the Court of Appeals considered whether the pau precluded the defendant from asserting uninsured motorist policy limits of lower than $200,000 in Canadian funds in an action by its insured arising from an Ontario accident. The Court rejected the defendant's argument that the forum of the action determines whether the pau applies, reasoning that the defendant submitted to Ontario law by agreeing to the pau, and its execution of that document negated its contention that it did not intend to provide insurance coverage for its insureds who traveled in Canada.
m. ANALYSIS OF THE PAU
The pau has an introductory paragraph and then has four undertakings labeled A, B, c and D. A review of the entire document shows that the pau contemplates an action in a Canadian court.
The introductory paragraph requires the acia to appoint an official to receive service of process on its behalf, and requires it to promise to appear in a Canadian court in any claim filed there. Clearly this paragraph envisions a Canadian lawsuit.
In the first undertaking, the ACIA agrees to appear in any action against it or its insured in any province or territory in which such an action has been instituted. This paragraph also contemplates a lawsuit in Canada.
In the second undertaking the acia agrees to cause notice or process to be served upon the insured upon receipt from any of the Canadian superintendents of insurance and Canadian registers of motor vehicles mentioned in the introductory paragraph of the pau. Once again, this paragraph contemplates a Canadian lawsuit.
In the third undertaking, the acia agrees
[n]ot to set up any defence to any claim, action, or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceeding may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to . . [Emphasis added.]
The dissent focuses on the word may in this paragraph and argues that "may" implies permission, and thus that the acia has waived certain defenses in cases that "may" have been brought in a Canadian court. We cannot agree. Such an interpretation ignores the impetus of the whole of the PAU contrary to the well-established principle that contracts are to be construed in their entirety. We believe the use of the word "may" in context reflects the disjunctive nature of the previous phrase in the pau. Hence use of "may" in this context implies that the pau applies in whatever province or territory the suit is brought, not that the ACIA waives defenses in any forum in which suit could be brought. This is consistent with the last portion of the cited language wherein the acia promises to satisfy any judgment issued by a Canadian court on the claim. This language certainly suggests a Canadian lawsuit.
The fourth undertaking relates to insurance cards and does not shed light on the issue at hand.
After review of the entire pau, we are satisfied that the acia's additional obligations only apply when a lawsuit is filed in Canada.
As to Lozanis, we find that the Court of Appeals reached the right result, but that it did not properly analyze the pau. We believe the right result was reached because Lozanis did institute a lawsuit in Canada making the pau applicable. The Canadian lawsuit was, however, enjoined at the acia's request and the matter was resolved in a state court. Thus, the state court lawsuit, was a substitute for the Canadian lawsuit and the pau did apply. Indeed, any other resolution would have allowed the ACIA to avoid its obligations under the pau. However, we disagree with the Lozanis Court to the extent that it suggested that the forum of the lawsuit did not affect whether the pau applied.
Finally, we note that Canadian courts also understand paus to apply on the basis of where an action is litigated. In Potts v Gluckstein, 8 OR3d 556, 558 (Ont Ct App, 1992), a plaintiff from British Columbia was injured by an Ontario defendant and brought suit in Ontario. The Ontario court, discussing the reciprocal insurance scheme, which "is based upon a Power of Attorney and Undertaking," stated:
In the event of an accident, the insurer agrees to be bound by the law of the province or territory where the action is brought and not the province where the policy is issued. The insurer also accepts liability to the limits prescribed in its policy or, at least, to the minimum limits established in the province or territory where the action is brought. [Emphasis added.]
Later in its opinion, the court noted its earlier decision in MacDonald v Proctor, 19 OR2d 745 (Ont Ct App, 1977), in which it stated that the effect of the pau was to commit the insurer
to . . . observe Ontario rules to a certain extent, where its insured is involved in Ontario proceedings, [but that the PAU did not convert] the Manitoba policy [involved in MacDonald] [into] one that is "made in Ontario." [Emphasis added.]
The Ontario courts have turned to this formulation repeatedly.
Similarly, courts in other provinces have suggested that by issuing a pau, the insurer agrees to be bound by the laws of the forum, not any possible forum. For example, in Court v Alberta Motor Ass'n Ins Co, 47 ACWS3d 610 (BC Sup Ct, 1994), an Alberta plaintiff sued an Alberta defendant in a British Columbia court for an accident that occurred in British Columbia. The court applied British Columbia law, stating:
[I]n any action in British Columbia against [the insurer] arising out of an automobile accident in British Columbia, [the insurer] is precluded from setting up any defence to the claim, including a defence to the limit of liability, that might not be set up if the policy were one issued in British Columbia.
The British Columbia court required that the action be in British Columbia for that province's law to apply.
Also instructive is the British Columbia Court of Appeals decision in Marchand v Alberta Motor Ass'n Ins Co, 47 ACWS3d 714 (BC Ct App, 1994). There, two parties from Alberta had an accident in British Columbia. An insurance company challenged the Brit ish Columbia action, saying the plaintiff only chose that forum because the defendant insurer executed a pau with the British Columbia government. By suing in British Columbia, then, the plaintiff could take advantage of liability mínimums higher than those in both parties' home jurisdiction of Alberta. Ultimately, the court allowed the action because the accident occurred in British Columbia, but the defendant's argument, which the court acknowledged, rests on the fact that had the suit been brought in Alberta, the provisions of the pau would have been ineffective despite that the accident occurred in British Columbia. That is because the PAU only requires insurers not to raise defenses that would not be allowed under the law where the suit is brought.
IV. CONCLUSION
We conclude that defendant is not obligated to the higher Canadian liability limits under the pau because the lawsuit was not filed in Canada. We therefore reverse the judgment of the Court of Appeals. We remand to allow the trial court to consider plaintiff's alternative argument under MCL 500.3131(1); MSA 24.13131(1).
Cavanagh, Kelly, and Markman, JJ., concurred with Taylor, J.
CANADA NON-RESIDENT INTER-PROVINCE MOTOR-VEHICLE LIABILITY INSURANCE CARD
POWER OF ATTORNEY AND UNDERTAKING
As a requisite to do business in Ontario and other Canadian provinces insurance companies must execute paus. The entire pau is reproduced as an appendix hereto. The pau is essentially a contract acia has with the government of Ontario. The proper construction and interpretation of this contract is a question of law we review de novo. Morley v Automobile Club of Michigan, 458 Mich 459, 465; 581 NW2d 237 (1998).
MCL 500.3135(1); MSA 24.13135(1).
The minimum is $200,000 in Canadian funds.
The trial court indicated that it believed Lozanis was "poorly reasoned," but that it was nevertheless duty bound to follow it.
Unpublished memorandum opinion, issued July 31, 1998 (Docket No. 199915).
459 Mich 989 (1999).
The issue was also considered in an unpublished federal district court opinion. In O'Shei v Maryland Casualty Co, 1986 WL 1616 (WD NY, 1986), a bicyclist was .killed by an uninsured motorist in Ontario. A lawsuit was filed in New York against Maryland Casualty. The plaintiff argued the insurance company was obligated to pay Ontario minimum limits for uninsured motorist coverage because the insurance company had filed a pau with the Canadian government. The federal court examined the pau and held that the insurance company had only obligated itself to satisfy final judgments rendered against it by Canadian courts and that the pau did not indicate any agreement to satisfy judgments entered against it by courts outside Canada. Id. at 8, n 3.
Order affirmed without opinion, 38 NY2d 815; 345 NE2d 584 (1975).
We note that this paragraph was nonbinding dicta because the court had already decided that Canadian law applied pursuant to a provision in the insurance policy before it discussed the pau. In Ohio, as in Michigan, observations by way of obiter dicta are not binding. Ecker v Cincinnati, 52 Ohio App 422, 425; 3 NE2d 814 (1936); Roberts v Auto-Owners Ins Co, 422 Mich 594, 596; 374 NW2d 905 (1985).
See 3 Corbin, Contracts, § 549, pp 183-186 (contracts are to be interpreted and their legal effects determined as a whole).
Ontario's highest court.
See Wardon v MacDonald, 55 OR2d 182 (Ont Dist Ct, 1986); Healy v Interboro Mut Indemnity Ins Co, 1999 Ont C A LEXIS 187 (Ont Ct App, 1999) ("a participating insurer agrees to be bound by the law concerning compulsory automobile insurance coverage of the province where the action against it is brought"'). (Emphasis added.)
See also Kent, No-fault benefits in British Columbia: Must out-of-province auto insurers pay the same as ICBC?, 13 Can J Ins L 39, 43 (1995) ("It will be recalled that both [a statutory provision] and the pau apply only if the lawsuit is brought in B.C.").