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STATE OF MICHIGAN
COURT OF APPEALS


ARLON ELSER and SHIRLEY ANN ELSER, Plaintiffs-Appellants,
V

UNPUBLISHED May 24, 2005

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.

No. 260351 Calhoun Circuit Court LC No. 04-001668-NF

Before: Murphy, P.J., and White and Smolenski, JJ. PER CURIAM. Plaintiffs appeal as of right an order granting summary disposition in favor of defendant. We reverse. This case is being decided without oral argument pursuant to MCR 7.214(E). On May 26, 2001, plaintiffs were injured in a collision with an uninsured motorist. Defendant paid $50,000 on Arlon Elser's claim for uninsured motorist benefits and $6,000 on Shirley Elser's claim. Plaintiffs, however, sought additional uninsured motorist benefits, and on May 12, 2004, they filed suit solely against defendant.1 Defendant moved for summary disposition pursuant to MCR 2.116(C)(8) and (10), arguing that plaintiffs failed to follow the procedures set forth in the insurance policy in that they failed to join the uninsured driver as a defendant. In the meantime, plaintiffs filed a separate action against the errant driver and obtained a default judgment in the amount of $160,000. Defendant first learned of this action only after the default judgment was entered. The trial court held that plaintiffs were contractually obligated to join the driver in the instant case and to act within the applicable limitations period. The trial court also held that even if the late-filed separate action were proper, it could not cure the initial failure to join the driver because plaintiffs failed in their contractual obligation to provide notice of this action to defendant.

1

Plaintiffs also included a count for declaratory relief with respect to PIP benefits. The parties stipulated to the dismissal of that count.

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We review a trial court's decision on a motion for summary disposition de novo. Auto Club Group Ins Co v Burchell, 249 Mich App 468, 479; 642 NW2d 406 (2002). The parties' policy included the following provisions for uninsured-motorist benefits: Two questions must be decided by agreement between the insured and us: 1.  Is the insured legally entitled to collect damages from the owner or driver of the uninsured motor vehicle; and 2.  If so, in what amount? If there is no agreement, then: *** 2.  If either party does not consent to arbitrate these questions . . . , the insured shall: a.  file a lawsuit in the proper court against the owner or driver of the uninsured motor vehicle and us, or if such owner or driver is unknown, against us; and b. upon filing, immediately give us copies of the summons and complaint filed by the insured in that action, and c.  secure a judgment in that action. The judgment must be the final result of an actual trial and an appeal, if an appeal is taken. 3. If the insured files suit against the owner or driver of the uninsured motor vehicle, we have the right to defend on the issues of the legal liability of and the damages owed by such owner or driver. We are not bound by any judgment against any person or organization obtained without our written consent. "Uninsured motorist benefit clauses are construed without reference to the no-fault act because such insurance is not required under the act." Twichel v MIC Gen Ins Corp, 469 Mich 524, 533; 676 NW2d 616 (2004)(citation omitted). Therefore, the insurance contract is enforced according to its terms. Id. at 534. The contract of insurance determines the circumstances under which benefits will be awarded. Rohlman v Hawkeye-Security Ins Co, 442 Mich 520, 525; 502 NW2d 310 (1993). It is certainly arguable, as maintained by plaintiffs, that the terms of the insurance policy do not clearly indicate that plaintiffs were required to sue the uninsured driver and defendant at the same time and in a single lawsuit. On the other hand, plaintiffs undoubtedly violated the policy's requirement that they immediately provide copies of the summons and complaint with respect to the action against the uninsured motorist, where there is no dispute that defendant was not made aware of the action against the motorist. One of the issues that presents itself in this -2-


case is that the action against the uninsured driver was filed outside the three-year statute of limitations and that defendant, if given notice of the suit, could have defended on behalf of the driver, raising the defense that the action was time-barred. Plaintiffs argue that the policy does not reference a three-year limitations period; defendant argues that such a period is implicit in the policy's language. We conclude that the three-year statutory limitations period for personal-injury actions applied for purposes of plaintiffs' suit against the driver. MCL 600.5805(10). Regardless of the fact that a default judgment was actually entered against the uninsured motorist, defendant could have stepped in, with proper notice, and successfully sought dismissal. The question then becomes whether the time-barred action against the driver, or the failure to timely sue the driver, resulted in the proper dismissal of plaintiffs' action in the case at bar. This issue must be analyzed in light of plaintiffs' argument that defendant suffered no prejudice, assuming policy violations on plaintiffs' part. In Koski v Allstate Ins Co, 456 Mich 439, 444; 572 NW2d 636 (1998), our Supreme Court stated that "it is a well-established principle that an insurer who seeks to cut off responsibility on the ground that its insured did not comply with a contract provision requiring notice immediately or within a reasonable time must establish actual prejudice to its position." Citing Wendel v Swanberg, 384 Mich 468; 185 NW2d 348 (1971); Weller v Cummins, 330 Mich 286; 47 NW2d 612 (1951); 1 Windt, Insurance Claims & Disputes (3d ed),

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