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Michigan Supreme Court Lansing, Michigan

Opinion
NANCY JANE DeFRAIN, Personal Representative of the ESTATE OF WILLIAM DeFRAIN, Plaintiff-Appellee, v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellant.

Chief Justice:

Justices:

Robert P. Young, Jr. Michael F. Cavanagh Marilyn Kelly Stephen J. Markman Diane M. Hathaway Mary Beth Kelly Brian K. Zahra

FILED MAY 30, 2012 STATE OF MICHIGAN SUPREME COURT

No. 142956

BEFORE THE ENTIRE BENCH ZAHRA, J. This case involves a policy for uninsured-motorist (UM) coverage issued by defendant, State Farm Mutual Automobile Insurance Company, containing a 30-day notice provision regarding hit-and-run motor vehicle claims. We hold that an

unambiguous notice-of-claim provision setting forth a specified period within which notice must be provided is enforceable without a showing that the failure to comply with the provision prejudiced the insurer. Therefore, State Farm properly denied the claim for

UM benefits sought in the instant case because it did not receive timely notice, a condition precedent to the policy's enforcement. This conclusion is consistent with our decisions in Jackson v State Farm Mutual Automobile Insurance Company1 and Rory v Continental Insurance Company,2 both of which the Court of Appeals was bound to follow. The Court of Appeals erred by disregarding this controlling authority in favor of an earlier decision, Koski v Allstate Insurance Company,3 wherein this Court held that a claimant's failure to comply with a notice-of-suit provision contained in a homeowner's insurance policy requiring notice immediately or within a reasonable time precluded an award of UM benefits only if the insurer established actual prejudice to its position. The Court of Appeals failed to recognize the critical ways in which Koski is distinguishable from the instant case. Accordingly, we reverse the judgment of the Court of Appeals and remand the case to the trial court for entry of summary disposition in favor of State Farm. I. FACTS AND PROCEDURAL HISTORY On May 31, 2008, a hit-and-run driver ran his vehicle into a pedestrian, William DeFrain (DeFrain), who sustained severe head injuries as a result of the collision. At the time, DeFrain maintained an insurance policy for UM coverage with State Farm. The policy required a claimant to notify State Farm of a claim for UM benefits and provide "all the details about the death, injury, treatment, and other information that [State Farm] may need as soon as reasonably possible after the injured insured is first examined or
1 2 3

Jackson v State Farm Mut Auto Ins Co, 472 Mich 942 (2005). Rory v Continental Ins Co, 473 Mich 457; 703 NW2d 23 (2005). Koski v Allstate Ins Co, 456 Mich 439, 444; 572 NW2d 636 (1998).

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treated for the injury."4 The policy also contained a provision pertaining specifically to hit-and-run accidents, requiring a claimant seeking UM benefits to report the accident "to the police within 24 hours and to [State Farm] within 30 days[.]" It is undisputed that State Farm did not receive notice that DeFrain had been the victim of a hit-and-run accident until August 25, 2008, which was after the 30-day notice period had lapsed. DeFrain filed a complaint seeking UM benefits on October 8, 2008. Tragically, DeFrain died from his injuries on November 11, 2008, at which time plaintiff Nancy DeFrain (plaintiff) became the personal representative of his estate. On March 30, 2009, plaintiff filed an amended complaint. State Farm moved for summary disposition on July 15, 2009, arguing that the failure to comply with the 30-day notice provision applicable to hit-and-run cases required dismissal of plaintiff's complaint. State Farm relied on this Court's order in Jackson, which had vacated the judgment of the Court of Appeals and reinstated the order of the trial court "for the reasons stated in the Court of Appeals dissent" in a case addressing a notice-of-claim provision virtually identical to the provision in the instant policy.5 Specifically, the Court of Appeals dissent in Jackson had concluded that the notice-of-claim provision was unambiguous and enforceable without a showing of prejudice to the insurer. Despite Jackson, plaintiff maintained that the notice-of-claim provision in the instant policy was ambiguous regarding when and from whom notice was required and was enforceable only upon a showing that the failure to comply with the provision
4 5

Emphasis altered. Jackson, 472 Mich 942.

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prejudiced State Farm. The trial court agreed with plaintiff. It denied State Farm's motion for summary disposition because it concluded that the 30-day notice provision contained an ambiguity and there was no evidence that the failure to comply with the provision prejudiced State Farm. State Farm filed an interlocutory application for leave to appeal in the Court of Appeals, as well as a motion for preemptory reversal, again relying on this Court's order in Jackson. The Court of Appeals granted the application and subsequently stayed further proceedings. The Court of Appeals issued an opinion affirming the trial court's order denying State Farm's motion for summary disposition.6 According to the panel, the 30-day notice provision did not preclude plaintiff's claim because there had been no showing that the failure to comply with the provision prejudiced State Farm.7 Although the panel

acknowledged that this Court had rejected the prejudice requirement by order in Jackson, it relied on an earlier opinion, Koski, wherein this Court held 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."8 Despite its recognition that "Jackson squarely stands in direct conflict with Koski,"9 the Court of Appeals stated, "We find that Jackson is of
6 7 8 9

DeFrain v State Farm Mut Auto Ins Co, 291 Mich App 713; 809 NW2d 601 (2011). Id. at 715-719. Koski, 456 Mich at 444 (emphasis added). DeFrain, 291 Mich App at 717.

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questionable and limited value because it did not address Koski, which apparently was not argued there, and which constitutes binding precedent that we are not free to disregard."10 It described Koski as "a fully developed and reasoned opinion on the subject of prejudice in the context of insurance law" and Jackson as "merely a cursory order."11 The panel also relied on the Court of Appeals' decision in Bradley v State Farm Mutual Automobile Insurance Company,12 which had applied the prejudice requirement from Koski to conclude that the plaintiff's failure to comply with an insurance policy's joinder provision did not preclude an award of UM benefits. Although acknowledging Rory and the axiom that unambiguous contract provisions must be enforced as written, the Bradley panel took the position that "Koski carved out a narrow prejudice requirement relative to all insurance contracts, and Rory did not overrule the Supreme Court's earlier ruling in Koski, which we find controlling."13 Relying on Bradley, the instant Court of Appeals panel stated, "Regardless of the order in Jackson, Koski demands that we affirm the trial court's order denying State Farm's motion for summary disposition."14 The panel did not address whether the trial court erred by finding the notice provision ambiguous and affirmed solely on the basis that State Farm had failed to
10 11 12 13 14

Id. at 718. Id. Bradley v State Farm Mut Auto Ins Co, 290 Mich App 156; 810 NW2d 386 (2010). Id. at 161. DeFrain, 291 Mich App at 719.

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show that it suffered prejudice because of the claimant's failure to provide timely notice.15 State Farm applied for leave to appeal in this Court, seeking reversal of the Court of Appeals' decision and a remand to the trial court for dismissal of plaintiff's claim with prejudice. We ordered oral argument on whether to grant the application or take other action and instructed the parties to "address whether this case is controlled by Jackson . . . and whether the 30-day notice requirement regarding hit-and-run accidents in [State Farm's] policy is enforceable without a showing of prejudice to [State Farm] due to the claimant's failure to comply with the provision."16 II. STANDARD OF REVIEW A trial court's decision on a motion for summary disposition is reviewed de novo.17 In reviewing the motion, we view the pleadings, affidavits, depositions,

admissions, and other admissible evidence in the light most favorable to the nonmoving party.18 In addition, the proper interpretation of contracts and the legal effect of

contractual provisions are questions of law subject to review de novo.19 We construe an insurance policy in the same manner as any other species of contract,20 giving its terms
15 16 17 18 19 20

Id. at 715-716. DeFrain v State Farm Mut Auto Ins Co, 490 Mich 870 (2011). Rory, 473 Mich at 464. Id. McDonald v Farm Bureau Ins Co, 480 Mich 191, 197; 747 NW2d 811 (2008).

Rory, 473 Mich at 461; Auto-Owners Ins Co v Churchman, 440 Mich 560, 566; 489 NW2d 431 (1992).

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their "ordinary and plain meaning if such would be apparent to a reader of the instrument."21 III. ANALYSIS The Court of Appeals' decision in this case necessitates clarification in the area of contract interpretation. The instant case requires us to interpret a policy for UM coverage issued by State Farm that includes a 30-day notice provision regarding hit-and-run motor vehicle claims.22 Because providing UM coverage is optional and not statutorily

mandated under the no-fault act, the policy language alone controls the circumstances entitling a claimant to an award of benefits.23 Having reviewed the language of the instant policy, as well as the relevant authority, we hold that an unambiguous notice-ofclaim provision setting forth a specified time within which notice must be provided is enforceable without a showing that the failure to comply with the provision prejudiced the insurer. In reading a prejudice requirement into the notice provision where none existed, the Court of Appeals disregarded controlling authority laid down by this Court and frustrated the parties' right to contract freely.
21 22

Wilkie v Auto-Owners Ins Co, 469 Mich 41, 47; 664 NW2d 776 (2003).

The policy also contains a more general provision requiring a claimant to notify State Farm of a claim for UM benefits and provide details concerning the incident "as soon as reasonably possible." The settled rule regarding statutory construction is that a specific statutory provision controls over a related but more general statutory provision. In re Haley, 476 Mich 180, 198; 720 NW2d 246 (2006). The same is true with regard to contract provisions. Because plaintiff is seeking benefits in connection with a hit-and-run accident, the specific provision pertaining to hit-and-run accidents that requires notice to State Farm within 30 days is controlling.
23

Rohlman v Hawkeye-Security Ins Co, 442 Mich 520, 525; 502 NW2d 310 (1993).

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A. JACKSON v STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY IS INDISTINGUISHABLE FROM THIS CASE We begin our analysis with Jackson, a case involving a policy for UM coverage containing a provision requiring a claimant to report a hit-and-run accident to State Farm within 30 days as a condition precedent to the receipt of benefits, which is virtually identical to the provision in the instant policy.24 As in this case, the parties in Jackson did not dispute the complainant's failure to provide timely notice. The Court of Appeals majority determined that the notice provision was unenforceable because it contained an ambiguity regarding who was responsible for providing the notice.25 Accordingly, the majority found it unnecessary to address whether the notice provision was enforceable if State Farm could not prove actual prejudice.26 Judge RICHARD ALLEN GRIFFIN dissented. Having first concluded that the notice provision contained no ambiguity, he rejected the argument that the notice provision was enforceable only if State Farm could prove actual prejudice.27 In his view, the plain and unambiguous terms of the contract precluded the claimant's request for UM benefits because she had failed to provide timely notice, a condition precedent to the contract's enforcement.28 Subsequently, this Court issued an

Jackson v State Farm Mut Auto Ins Co, unpublished opinion per curiam of the Court of Appeals, issued October 5, 2004 (Docket No. 246388). The policy in Jackson required a "person making [a] claim" under the UM coverage to "report a `hit-and-run' accident to the police within 24-hours and to us within 30 days." Id. at 2-3 (emphasis omitted).
25 26 27 28

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Id. at 4. Id. Id. at 1-4 (GRIFFIN, J., dissenting). Id. at 4.

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order vacating the judgment of the Court of Appeals and reinstating the order of the trial court "for the reasons stated in the Court of Appeals dissent."29 An order of this Court is binding precedent if it constitutes a final disposition of an application and contains a concise statement of the applicable facts and reasons for the decision.30 These requirements derive from article 6,

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