Call us at (248) 344-0013

The Michigan Court of Appeals Reverses Summary Disposition Regarding Priority of No-Fault Benefits When Employment Status Is In Dispute

By: Melissa Schoder

    In Marougi, et al v Auto Club Ins Co, an unpublished opinion of the Michigan Court of Appeals (Decided October 22, 2015), the Court of Appeals reversed the lower court’s decision granting summary disposition to Auto Club in an employment status dispute. 
    The plaintiff, Raad Marougi, was a truck driver who worked with a company called Express-1 Inc., whom Marougi also leased a truck from.  Marougi did not insure the leased truck but did have a valid insurance policy for one of his personal vehicles through the Defendant, Auto Club.  The truck that the plaintiff leased was, however, insured by Express-1 through Great West Casualty Company.  The Court of Appeals ruled that Express-1 was an owner of the truck pursuant to MCL 500.3101 as they held the legal title to the vehicle. As such their insurance policy for the truck was valid and the plaintiff was not barred from PIP benefits.
    As the plaintiff was not precluded from claiming PIP benefits, he would look to his own no-fault insurance carrier for coverage as highest priority. However, as the defendant pointed out, pursuant to MCL 500.3114(3) there is an exception to this general rule when the injury occurs while occupying a vehicle that is owned or registered by the individual’s employer. In which case, the injured individual would receive PIP benefits from the insurance carrier of the employer versus their own personal insurance carrier. Thus, the issue hinges on whether the plaintiff’s status at Express-1 was an employee, self-employed or an independent contractor. 
    As discussed by the Court, relying on Adanalic v Harco Nat’l Ins Co, 309 Mich App 173 (2015), an individual’s status as an employee for purposes of MCL 500.3114(3) is determined by the application of the “economic reality test”.  Continuing to explain that “By this test, factors to be considered include: (a) control of the workers’ duties (b) payment of wages (c) right to hire, fire and discipline, and (d) the performance of the duties as an integral part of the employer’s business towards the accomplishment of a common goal.”  The Court further stated that an independent contractor is not considered to be an employee under the Michigan No-Fault Act. 
    Evidence supporting the notion that the plaintiff was an employee includes the plaintiff’s own testimony during his deposition that he worked for Express-1, that Express-1 was his current employer, and that he leased his truck from his employer.  He received medical benefits and training from Express-1 to ensure that he complied with company standards.  The plaintiff had listed Express-1 as his employer on both his Great West and Auto Club applications for benefits and Great Lakes had paid for PIP benefits on his behalf.
    Conversely, the plaintiff received little to no supervision from Express-1, left alone to make deliveries after receiving the addresses directly from the dispatcher. The plaintiff had no supervisor at the company.  He received a 1099-Misc tax form from Express-1, listing his income as “nonemployee compensation” without any taxes withheld by Express-1 on his behalf. 
    The Court concluded that if the plaintiff was an employee of Express-1, or self-employed, then coverage would be proper through Great Lakes Casualty.  If he was an independent contractor, PIP coverage was proper through his personal insurance carrier Auto Club. 
Unfortunately, the Trial Court did not apply the economic reality test to this case or issue a decision on plaintiff’s employment status when granting Auto Clubs Motion for Summary Disposition.  Instead, the Trial Court held in an order that “it does not matter if plaintiff was an independent contractor or employee,” that the defendant was entitled to summary disposition regardless.  The Court of Appeals disagreed. 
The Court of Appeals ruled that the application of the economic reality test to the facts of the case fails to establish the plaintiff’s employment status as a matter of law. Ultimately, the Court found that a genuine issue of material fact existed concerning whether or not the plaintiff was an employee or an independent contractor of Express-1.  As such, The Court ruled that a judgment as a matter of law was improper and reversed the trial court’s decision remanding the case for further proceedings.