Insurers frequently dispute the application of MCL 500.3114(3) (the employer-furnished vehicle exception) in cases involving commercial vehicles. In Miclea v Cherokee Ins Co (Docket No. 344694), the Michigan Court of Appeals clarified that an individual’s status as an independent contractor does not have any impact on whether the individual is an “employee” of another person or entity under § 3114(3). If the injured person is an “employee” within the meaning of the statute, the insurer of the employer-furnished vehicle is highest in priority to pay that person’s no-fault benefits, even if the employee is simultaneously an independent contractor.
Background on Miclea
Plaintiff Gavril Miclea was injured when he slipped and fell while attempting to put antifreeze in a semi-tractor. At the time of the incident, he was working as a truck driver under an independent-contractor agreement with Universal Am-Can, Ltd. Miclea owned the tractor, but Universal leased it from him. Miclea had personal no-fault coverage through Auto Club Insurance Association. Universal had a business automobile insurance policy through Cherokee Insurance Company.
After the incident, Miclea sought no-fault benefits from Auto Club, Cherokee, and the Michigan Assigned Claims Plan. None of the entities paid his claim, so Miclea sued all three, asking the court to determine which insurer was highest in priority to pay his benefits.
In the trial court, Auto Club and Cherokee both argued that they were entitled to summary disposition. Cherokee contended that Auto Club was first in priority because Miclea was injured while working as an independent contractor. Auto Club, on the other hand, argued that Cherokee was liable because Miclea owned the truck and was working for himself when he fell. According to Auto Club, it didn’t matter whether Miclea was an independent contractor.
Applying the economic-reality test, the trial court concluded that Miclea was working as an independent contractor, not as an employee, when he fell. So the trial court held that Auto Club was highest in priority to pay Miclea’s no-fault benefits. Auto Club appealed.
The Court of Appeals’ Ruling
The Court of Appeals reversed the trial court’s order in a 2-1 decision.
The majority first explained the framework governing its resolution of the appeal. As Miclea’s personal insurer, Auto Club was first in priority to pay his no-fault benefits unless one of the exceptions under MCL 500.3114 applied. The only exception that could apply was § 3114(3). Under that subsection, an insurer of a “vehicle owned or registered by [an] employer” is first in priority to pay no-fault benefits to an employee who is injured while occupying that vehicle. Because the no-fault act’s definition of “owner” encompasses an entity leasing a vehicle as well as an entity holding legal title to a vehicle, the Court of Appeals concluded that Miclea and Universal were both owners of the tractor at the time of the incident. The critical question, then, was whether Miclea qualified as an “employee” of either himself or Universal for purposes of § 3114(3).
Noting that the no-fault act does not define “employer” or “employee,” the Court held that the trial court correctly applied the economic-reality test to determine whether Miclea was an independent contractor or an employee of Universal. But the lower court erred when it failed to consider whether Miclea was an employee of himself. Under Celina Mut Ins Co v Lake States Ins Co, 452 Mich 84; 549 NW2d 834 (1996), Adanalic v Harco Nat Ins Co, 309 Mich App 173; 870 NW2d 731 (2015), and Besic v Citizens Ins Co of the Midwest, 290 Mich App 19; 800 NW2d 93 (2010), an independent contractor of one entity may simultaneously be an employee of another person or entity, including himself.
Applying this authority to the facts before it, the majority held that Miclea was an “employee” of himself at the time of the injury. Because he was an owner of the tractor at issue, the exception under § 3114(3) applied. And as the insurer of the “furnished vehicle,” Cherokee was highest in priority to pay Miclea’s no-fault benefits.
Judge Kirsten Frank Kelly authored a dissent. In her view, § 3114(3), Adanalic, Celina, and Besic together stand for the following rule: “[T]he injured person’s personal automobile insurer is responsible for PIP benefits if the person is an independent contractor alone, but the insurer of the vehicle involved is responsible if the person is self-employed and acting on behalf of his or her own self-employment” at the time of the injury. Miclea, slip op at 5 (K.F. Kelly, J., dissenting). Because Miclea was acting on behalf of Universal when he was injured, Judge Kelly would have affirmed the trial court’s holding that Miclea was not an employee for purposes of § 3113(3). Thus, she believed that Auto Club was first in priority to pay his no-fault benefits.
What does this mean going forward?
Before Miclea, there were no published opinions clearly addressing whether a person can simultaneously be an independent contractor and an employee for purposes of § 3114(3). Miclea demonstrates that the insurer of a commercial vehicle may be on the hook to pay no-fault benefits even if the injured claimant is an independent contractor of the insured. If the injured individual is an “employee” (even a self-employed employee) occupying an employer-furnished vehicle at the time of the injury, the insurer of the vehicle—not the individual’s personal automobile insurer—will be highest in priority.
Cherokee filed an application for leave to appeal in the Michigan Supreme Court. We will have to wait and see whether the Court will grant leave and, if so, whether it has a different opinion.
If you have questions about the application of MCL 500.3114 to self-employed independent contractors, please feel free to contact the author, Ali H. Harajli. More information about Collins Einhorn’s General and Automotive Liability Practice Group is available here.