Court Opinion

ID: 9404491
Source: CourtListenerOpinion
Date Created: 2023-06-23 05:07:15.606503+00
Date Added: 2024-06-11T17:20:14.593853
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                revision until final publication in the Michigan Appeals Reports.

                        STATE OF MICHIGAN

                           COURT OF APPEALS

FRANKENMUTH MUTUAL INSURANCE                                     FOR PUBLICATION
COMPANY,                                                         June 22, 2023
                                                                 9:15 a.m.
             Plaintiff-Appellee,

and

GEORGE CIALDELLA,

             Intervening Plaintiff-Appellee,

v                                                                No. 361259
                                                                 Oakland Circuit Court
SENTRY CASUALTY COMPANY, SENTRY                                  LC No. 2020-185275-CK
INSURANCE, SENTRY SELECT INSURANCE
COMPANY, SENTRY LIFE INSURANCE
COMPANY, ACE AMERICAN INSURANCE
COMPANY, ACE CAPITAL TITLE
REINSURANCE COMPANY, ACE FIRE
UNDERWRITERS INSURANCE COMPANY, and
ACE LIFE INSURANCE COMPANY,

             Defendants,

and

ACE PROPERTY AND CASUALTY INSURANCE
COMPANY,

             Defendant-Appellant.

Before: GLEICHER, C.J., and HOOD and MALDONADO, JJ.

GLEICHER, C.J.

                                               -1-
        Trucking plays a critical role in the economy of our state and nation. Maintaining a steady
flow of goods and products is essential to economic growth. Launched 50 years ago, the
International Registration Plan (IRP) simplified the licensing and registration barriers that once
encumbered interstate truck travel. Under the program, which Michigan joined in 1985, a
commercial vehicle pays full registration and licensing fees in its home jurisdiction, and
apportioned registration fees in other jurisdictions based on the distances the truck or fleet travels
on those jurisdictions’ roads. An apportioned plate and cab card are the only credentials a trucker
needs to drive through a member jurisdiction.

        This case presents a novel question regarding the IRP’s proportional registration system:
whether a truck primarily registered outside of Michigan with an apportioned registration
including Michigan must carry Michigan no-fault insurance. We hold that proportional
registration, standing alone, does not compel the purchase of Michigan no-fault insurance. We
reverse the trial court’s contrary decision and remand for further proceedings.

                                    I. BACKGROUND FACTS

         This insurance dispute involves events and people in three states: Michigan, Indiana, and
Illinois. George Cialdella is a Michigan resident and a named insured on a personal Michigan no-
fault automobile insurance policy issued by plaintiff Frankenmuth Mutual Insurance Company. In
December 2019, Cialdella worked as a truck driver for CHI Logistics, Inc. The parties dispute
whether Cialdella was a CHI employee or an independent contractor, but his employment status
does not affect our analysis.

         CHI is based in Illinois and operates an interstate trucking business. CHI owned or leased
the truck at issue from another Illinois trucking company, KZ, Inc.1 KZ registered the truck in
Illinois and proportionally registered the truck in 48 of the United States, including Michigan. No
evidence supported that the truck had ever been driven in Michigan.

         In December 2019, a supervisor at CHI asked Cialdella to take the truck from Chicago,
Illinois, to Indiana for refueling. As Cialdella alighted from the truck’s cab in Indiana, a step gave
way. Cialdella fell and sustained severe injuries.

       Frankenmuth paid Cialdella’s personal protection insurance (PIP) benefits, which totaled
over $500,000. It brought this action seeking a declaratory judgment that CHI’s insurance carrier,
defendant ACE Property and Casualty Insurance Company, was highest in priority to pay
Cialdella’s PIP benefits under MCL 500.3114(2) and (3).2 ACE moved for summary disposition
under MCR 2.116(C)(8) and (10), arguing that it was not liable for PIP benefits under Michigan’s
no-fault act because the truck was registered in Illinois, the accident occurred in Indiana, and the

1
    Whether CHI leased or owned the truck is also irrelevant.
2
  Subsection 3114(2) applies to an “operator or a passenger of a motor vehicle operated in the
business of transporting passengers,” and clearly does not apply here. Subsection 3114(3) applies
to “[a]n employee . . . who suffers accidental bodily injury while an occupant of a motor vehicle
owned or registered by the employer[.]”

                                                 -2-
truck was never operated in Michigan for more than 30 days in a calendar year. ACE argued that
the truck was not required to be registered in Michigan under MCL 500.3101(1) or MCL
500.3102(1), and thus Michigan’s no-fault act did not apply.

        Frankenmuth asked the court to deny ACE’s motion and to grant judgment in its favor
under MCR 2.116(I)(2), contending that because the truck was proportionally registered in Illinois
under the IRP, it was fully registered in every jurisdiction where CHI does business, including
Michigan. In Frankenmuth’s estimation, the proportional registration combined with Cialdella’s
status as a CHI employee meant that ACE was a higher priority insurer under MCL 500.3114(3),
entitling it to judgment in its favor.

        The trial court determined that because there was no factual dispute regarding the
ownership of the truck, the sole question presented was whether registration under the IRP was
sufficient to deem the truck registered in Michigan for purposes of Michigan’s no-fault act. The
court agreed with Frankenmuth that the IRP registration sufficed to regard the truck as registered
in Michigan and that ACE was the highest priority insurer under MCL 500.3114(3). ACE now
appeals.

                                         II. ANALYSIS

        We review the denial of summary disposition and issues of statutory interpretation de novo,
without deference to the trial court. Jesperson v Auto Club Ins Ass’n, 499 Mich 29, 34; 878 NW2d
799 (2016). MCR 2.116(C)(10) provides that summary disposition is appropriate when “[e]xcept
as to the amount of damages, there is no genuine issue as to any material fact, and the moving
party is entitled to judgment or partial judgment as a matter of law.”

    A. THE PROPORTIONALLY REGISTERED TRUCK WAS NOT REQUIRED TO BE
                        REGISTERED IN MICHIGAN

        Michigan’s no-fault act, MCL 500.3101 et seq., requires Michigan drivers to maintain no-
fault automobile insurance. At the time of Cialdella’s accident, MCL 500.3101(1) provided that
“the owner or registrant of a motor vehicle required to be registered in this state shall maintain
security for payment of benefits under [PIP] and property protection insurance as required under
this chapter, and residual liability insurance.” (Emphasis added.) Even nonresident owners or
registrants of motor vehicles not registered in Michigan must maintain security for the payment of
no-fault benefits if the motor vehicle is “operated in this state for an aggregate of more than 30
days in any calendar year.” MCL 500.3102(1).

       The truck involved in Cialdella’s fall was never operated in Michigan, so MCL
500.3102(1) does not apply. If CHI or KZ were obligated to purchase no-fault insurance for the
vehicle, that obligation necessarily flowed from MCL 500.3101(1), which mandates no-fault
coverage for vehicles that are “required to be registered” in this state.

       The Michigan Vehicle Code, MCL 257.1 et seq., states a general rule requiring the
Michigan registration of all motor vehicles driven our state’s roads, followed by two relevant
exceptions:

                                                -3-
       Every motor vehicle, recreational vehicle, trailer, semitrailer, and pole trailer, when
       driven or moved on a street or highway, is subject to the registration and certificate
       of title provisions of this act except the following:

       (a) A vehicle driven or moved on a street or highway in conformance with the
       provisions of this act relating to manufacturers, transporters, dealers, or
       nonresidents. [MCL 257.216(1) (emphasis added).]

CHI and KZ are “transporters” and “nonresidents.” But that does not end the analysis, because as
“transporters,” an additional registration requirement is in play.

        We start with “nonresidents.” Usually, a “nonresident” vehicle owner whose car is licensed
and registered in another state need not obtain a Michigan registration – think tourists and other
visitors. MCL 257.243(1) explains this concept as follows:

       A nonresident owner, except as otherwise provided in this section, owning any
       foreign vehicle of a type otherwise subject to registration under this act may operate
       or permit the operation of the vehicle within this state without registering the
       vehicle in, or paying any fees to, this state if the vehicle at all times when operated
       in this state is duly registered in, and displays upon it a valid registration certificate
       and registration plate or plates issued for the vehicle in the place of residence of the
       owner.

        “Transporters” pose a different problem. “A nonresident owner of a foreign vehicle
operated within this state for the transportation of persons or property for compensation” must
“register the vehicle and pay the same fees for its registration as is required with reference to like
vehicles owned by residents of this state.” MCL 257.243(2). In other words, the statute binds
nonresident transporters to the same registration requirements as resident transporters.

       Enter the IRP.

       MCL 257.243(2), the statute requiring that commercial vehicles traveling through our state
obtain Michigan registration, was enacted in 1949. See 1949 PA 300. The IRP was adopted in
1985. The Legislature paved the way for the adoption of the IRP by creating an organization called
the Highway Reciprocity Board, and empowering the board to enter into reciprocal registration
agreements with other states. MCL 3.161 et seq. Foreshadowing the IRP, MCL 3.166 provided:

       A compact, agreement or arrangement entered into under the authority of this act,
       may contain provisions authorizing the registration or licensing in another
       jurisdiction of vehicles located in or operated from a domicile in the other
       jurisdiction, which vehicles otherwise would be required to be registered or

                                                  -4-
       licensed in this state; and in such event the exemptions and privileges extended by
       the compact, agreement or arrangement shall apply to such vehicles.[3]

With the adoption of the IRP, trucking companies operating in Michigan are no longer required to
register their trucks here in addition to their home jurisdictions, as long as the trucks are
proportionally registered in Michigan.

         This Court has described the IRP as “an apportioned registration plan” between 48 states
and most Canadian provinces. Behnke, Inc v State, 278 Mich App 114, 116; 748 NW2d 253
(2008). “Because interstate carriers must register in each jurisdiction in which they operate, the
IRP permits them to register their trucks annually in one ‘base’ jurisdiction and to obtain
credentials to operate in other IRP jurisdictions.” Id. at 117. As we explained in Behnke, an IRP-
registered interstate carrier “pays a full annual registration fee to its base jurisdiction, which, in
turn, transmits a percentage of that registration fee to the various IRP jurisdictions in which the
carrier operates, apportioned according to the mileage driven by the carrier during the preceding
year in each jurisdiction.” Id. The plan’s primary benefit is that it allows commercial trucks to
obtain licensing and registration in one state or province, and to travel freely in the others without
undertaking the financial and bureaucratic efforts for full licensure in reciprocal jurisdictions.

         A brief review of Behnke’s facts contributes to a fuller understanding of the IRP. The
plaintiffs in Behnke were Michigan-based trucking companies that registered their trucks in
Michigan, but registered their trailers in other states, particularly Maine. Id. at 115. The Michigan
State Police issued the plaintiffs civil infraction citations for failing to register the trailers in
Michigan. The plaintiffs sued, seeking a declaration that they were not required to register their
trailers in Michigan because the trailers were proportionally registered in other states under the
IRP. Id. at 116. This Court agreed, holding that a section of the IRP specifically authorized
interstate carriers to register their trailers in any IRP member jurisdiction under that jurisdiction’s
registration laws. Id. at 120. We concluded, “Michigan must grant full and free reciprocity to
trailers properly registered in any member jurisdiction under § 404 [of the IRP].” Id. at 121.

         CHI and KZ are nonresident owners of proportionally registered vehicles, and like the
trailers in Behnke, their tractors may travel freely in Michigan without additional registration. CHI
acknowledges that some trucks in its Illinois-based fleet operate in Michigan “for the
transportation of . . . property for compensation[.]” According to ACE, KZ fulfilled Michigan’s
registration requirement for its entire fleet by obtaining proportional registration of its trucks,
including the truck that caused Cialdella’s injuries. But by doing so, Frankenmuth retorts, CHI
and KZ automatically became subject to our state’s no-fault insurance mandate.

         The truck involved in Cialdella’s injury does not fall within MCL 257.243(2)’s mandatory
registration requirement because it was never operated in Michigan. Perhaps recognizing this
reality, Frankenmuth makes no effort to argue that either CHI or KZ were “required” to register
that truck in Michigan. Instead, Frankenmuth maintains, the truck was registered in Michigan
through the IRP. Therefore, Frankenmuth reasons, even though that truck’s tires had never graced

3
  Executive Order 2007-15 abolished the Highway Reciprocity Board and transferred its powers
to the Department of State, effective July 15, 2007.

                                                 -5-
a Michigan roadway, its owner was required to purchase Michigan no-fault coverage for the
vehicle. We find no support for this argument in logic or the law.

        We begin with the law. No Michigan cases specifically mention the IRP other than Behnke.
But we find compelling support for our holding in Parks v DAIIE, 426 Mich 191; 393 NW2d 833
(1986). Like this case, Parks was a priority dispute regarding PIP coverage. The injured party,
Wayne Parks, worked for Roadway Express, a Delaware corporation based in Ohio. He suffered
a hernia while lifting a box of brass fittings while inside a Roadway trailer. The trailer was
registered in Tennessee and “several states other than Michigan,” while the tractor was registered
in Michigan. Id. at 196. The trailer had been operated in Michigan for only three days at the time
of the accident. Parks sought to recover no-fault benefits from Roadway, or his personal no-fault
insurer (DAIIE), or the assigned claims facility. Id. at 197.

        The parties agreed that the trailer in which Parks was injured was a “motor vehicle” under
the no-fault act, and that it was appropriate to “look to the registration of the trailer to determine
which insurer is liable.” Id. at 198 (emphasis omitted). The Supreme Court first considered MCL
500.3101(1), which provides that the owners or registrants of motor vehicles “required to be
registered in this state” must carry PIP insurance. Next, the Court scrutinized MCL 500.3102(1),
which requires no-fault coverage of a vehicle operated in Michigan for an aggregate of more than
30 days per calendar year. Parks, 426 Mich at 199. The Supreme Court concluded that the trailer
in which Parks was injured did not fall within either statute. Id. The Court’s reasoning guides our
decision in the case before us.

        The Court observed that MCL 500.3101(1) “applies only to owners or registrants of
vehicles ‘required to be registered in this state.’ ” Parks, 426 Mich at 199. That provision did not
apply, because the trailer was registered in Tennessee, and “[u]nder a compact entered into by the
State of Michigan and the State of Tennessee,” the trailer was not required to be registered in
Michigan. Id. at 200. The Court elaborated: “The Legislature created the Highway Reciprocity
Board and has authorized it to enter into reciprocal compacts with other states regarding the
operation of trailers engaged in interstate commerce. MCL 3.161 et seq. . . .” Parks, 426 Mich at
199-200. In a footnote, the Court specifically acknowledged that MCL 257.216 would require
registration in Michigan, but for the reciprocal agreement. Parks, 426 Mich at 200 n 2. But
because the trailer was not required to be registered in Michigan, it “was not subject to the
mandatory security requirement in § 3101(1).” Parks, 426 Mich at 200.

        Like the truck involved in Cialdella’s accident, the trailer in Parks was registered in another
state through a “reciprocal agreement” governing registrations. That registration permitted the
truck to be driven in Michigan without separately registering here. Although Parks does not
specifically mention the IRP (which Michigan adopted several years after Parks’ accident), we
glean from that case that a reciprocal, proportional registration that includes Michigan does not
subject a truck used in Michigan to MCL 500.3102(1), Michigan’s mandatory no-fault coverage

                                                 -6-
statute. Distilled to its essence, the holding in Parks is that the owner of a vehicle that is not
required to be registered in Michigan is not required to purchase no-fault coverage.4

       This result makes sense. The purpose of reciprocal registration under the IRP is to relieve
trucking companies of the burden of complying with 48 different state registration requirements.
Section 105 of the IRP stated at the time of Cialdella’s accident and continues to state:

       The fundamental principle of the Plan is to promote and encourage the fullest
       possible use of the highway system by authorizing apportioned registration of
       Fleets of Apportionable Vehicles and the recognition by each Member Jurisdiction
       of the registration of Vehicles apportioned by other Member Jurisdictions, thus
       contributing to the economic and social development and growth of the Member
       Jurisdictions. [International Registration Plan, Amended January 1, 2019, available
       at          <          https://cdn.ymaws.com/www.irponline.org/resource/resmgr/
       jurisdiction_info_2/the_plan_1_1_19.pdf> (accessed May 25, 2023).5]

Freedom of truck movement through the states and Canada enhances economic growth for all of
the cooperating jurisdictions. Mandating no-fault insurance coverage for all trucks proportionally
registered in Michigan under the IRP – including those that have never actually traveled in
Michigan – undermines the purpose of the plan.

        A recent opinion of our Supreme Court illustrates the continuing relevance of Parks.
Turner by Sakowski v Farmers Ins Exch, 507 Mich 858; 953 NW2d 204 (2021), began as a
consolidated appeal in this Court involving two priority disputes. Turner by Sakowski v Farmers
Ins Exch, 327 Mich App 481; 934 NW2d 81 (2019). In one of the cases, the involved vehicle was
registered in Maryland and owned by a non-Michigan corporation referred to in the opinion as
Enterprise. Id. at 486-487. In the other case, the vehicle was registered in Pennsylvania and owned
by Enterprise. Id. at 490. Neither vehicle had been operated in Michigan for more than 30 days
when the plaintiff passengers were injured. Id. at 487, 490. This Court determined that because
Enterprise was the self-insured owner and registrant of the vehicles, it was the highest priority
insurer. Id. at 507. We specifically rejected Enterprise’s argument that the priority provisions of
the no-fault act did not apply because the vehicle was not “required to be registered in this state,”
and therefore exempt from the mandatory no-fault rule. Id. at 502-507.

       The Supreme Court reversed, explaining that:

              Here, as in Parks, it is undisputed that the vehicles at issue owned by the
       Enterprise appellants which the injured individuals were occupying at the time of

4
  That said, we acknowledge that if the vehicle is operated in Michigan “for an aggregate of more
than 30 days in any calendar year,” MCL 500.3102(2) would require that the owner purchase no-
fault insurance coverage.
5
   See also International Registration Plan, Amended January 1, 2021, available at <
https://cdn.ymaws.com/www.irponline.org/resource/resmgr/jurisdiction_info_2/Plan_1_1_21.pdf
> (accessed May 25, 2023).

                                                -7-
       the respective accidents were (1) out-of-state vehicles, (2) not required to be
       registered in this state, and (3) not subject to the security provisions of the no-fault
       act because they had not been operated in this state for more than 30 days within
       the calendar year. See MCL 500.3101(1); MCL 500.3102(1). [Turner, 507 Mich
       at 859.]

Although the no-fault priority statutes do “not expressly condition an insurer’s priority for no-fault
benefits upon the vehicle's being required to be registered in Michigan or otherwise being subject
to the security provisions of the no-fault act because it has been operated within the state for more
than 30 days within the calendar year,” the Supreme Court declared that “such a condition is
implicit . . . when the no-fault act is read as a whole.” Id. The Court summarized that “because
the[] self-insured Enterprise appellants . . . were not required under either MCL 500.3101(1) or
MCL 500.3102(1) to obtain no-fault insurance the vehicles at issue, the Enterprise appellants could
not have constituted the ‘insurer of the owner or registrant of the vehicle occupied’ ” under the
relevant priority statute. Turner, 507 Mich at 860.

        The truck involved in Cialdella’s accident was not required to have been registered in
Michigan, as Frankenmuth implicitly concedes. The “reciprocal registration” discussed in Parks
is indistinguishable from the proportional registration involved here. Because neither form of
registration constitutes “required” registration under Michigan law, Parks and Turner compel the
conclusion that neither KZ nor CHI were not statutorily obligated to purchase no-fault coverage
for the truck.

        B. THE ACE INSURANCE POLICY DID NOT INCLUDE NO-FAULT INSURANCE

        Frankenmuth argues that the ACE policy actually includes first-party no-fault coverage
and therefore ACE stands first in priority for Cialdella’s PIP coverage. We rejected a virtually
identical argument in Besic v Citizens Ins Co, 290 Mich App 19; 800 NW2d 93 (2010).

       The relevant portion of the ACE policy provides:

               b. Out-of-state Coverage Extensions

               While a covered “auto” is away from the state where it is licensed, we will:

                (1) Increase the Limit of Insurance for Covered Autos Liability Coverage
       to meet the limit specified by a compulsory or financial responsibility law of the
       jurisdiction where the covered “auto” is being used. This extension does not apply
       to the limit or limits specified by any law governing “motor carriers” of passengers
       or property.

                (2) Provide the minimum amounts and types of other coverages, such as no-
       fault, required of out-of-state vehicles by the jurisdiction where the covered “auto”
       is being used.

       We will not pay anyone more than once for the same elements of “loss” because of
       these extensions. [Emphasis added.]

                                                 -8-
        This language echoes the language we construed in Besic, 290 Mich App at 28. In that
case we held that the plain language “out-of-state coverage extension” did not provide Michigan
no-fault coverage “because at the time of the accident Besic undisputedly was using the covered
‘auto’ in Ohio, a state that does not have a no-fault liability scheme.” Id. at 28-29.

       Here, the truck was being used in Indiana at the time of Cialdella’s accident. Indiana does
not require no-fault coverage, and as discussed above, neither KZ nor CHI were required to
purchase no-fault coverage for the truck.

                                          C. PRIORITY

        Under MCL 500.3114(1), a person seeking no-fault benefits must generally look first to
his or her own insurer for PIP coverage, unless one of the exceptions in MCL 500.3114(2), (3), or
(5) applies. Farmers Ins Exch v Farm Bureau Gen Ins Co of Mich, 272 Mich App 106, 111; 724
NW2d 485 (2006). The only potentially relevant exception here is MCL 500.3114(3), which
addresses the priority of coverage for injuries sustained while an occupant of a vehicle owned or
registered by an employer. That exception is inapplicable, however, because even if we assume
that Cialdella was employed by CHI, the ACE policy does not include Michigan no-fault benefits.
The ACE policy does not, therefore, fall within any order of priority. See Titan Ins Co v American
Country Ins Co, 312 Mich App 291, 300; 876 NW2d 853 (2015) (“[W]e discern a general rule that
when an exception to subsection (1) should apply but insurance is not available, the general rule
of subsection (1) applies.”).

                                         D. SUMMARY

        A nonresident transporter may primarily register a truck outside of Michigan with an
apportioned registration including Michigan under the IRP and avoid separate registration
requirements in this state. If that truck is operated in Michigan “for an aggregate of more than 30
days in any calendar year,” the nonresident owner will be required by MCL 500.3102(1) to secure
no-fault automobile insurance. If it is not operated in Michigan, or operated for less than 30 days,
no-fault insurance is not required. As the truck in this case was registered in Illinois and was not
driven in Michigan, neither CHI nor KZ was required to secure no-fault insurance for the vehicle.
The trial court erred in placing other insurance purchased by CHI and KZ into the order of priority
to provide no-fault coverage for Cialdella’s injuries.

        We reverse and remand for proceedings consistent with this opinion. We do not retain
jurisdiction.

                                                             /s/ Elizabeth L. Gleicher
                                                             /s/ Noah P. Hood
                                                             /s/ Allie Greenleaf Maldonado

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