Universal Underwriters Insurance v. Kneeland

Michigan Supreme Court
Lansing, Michigan 48909
____________________________________________________________________________________________
C hief Justice Justices
Maura D. Cor rigan Michael F. Cavanagh

Opinion
Elizabeth A. Weaver
Marilyn Kelly
Clifford W. Taylor
Robert P. Young, Jr.
Stephen J. Markman

____________________________________________________________________________________________________________________________

FILED JULY 3, 2001

UNIVERSAL UNDERWRITERS INSURANCE

COMPANY, as Subrogee of Betten

Toyota and BETTEN TOYOTA,

Plaintiffs-Appellees,

v No. 114900

NANCY KNEELAND,

Defendant-Appellant.

____________________________________

BEFORE THE ENTIRE BENCH

CORRIGAN, C.J.

We granted leave to determine whether a contractual

provision that assigned “all responsibility for damages” to

defendant while she rented a vehicle contravenes our no-fault

act, MCL 500.3101 et seq., and thereby voids the parties’

contract. We hold that the no-fault act does not prevent

contracting parties from voluntarily allocating liability for

collision damage to a rented vehicle. We thus affirm the

judgment of the Court of Appeals.

I. Underlying facts and procedural history

While repairing defendant’s vehicle, plaintiff Betten

Toyota loaned her a vehicle. Defendant and a Betten employee

signed a “courtesy car agreement” that stated:

2. Renter agrees to replace gasoline used.

3. Renter agrees to pay cash for rental charge.

4. Renter agrees to assume all responsibility

for damages while vehicle is in his possession.

5. Renter agrees not to sublet or loan the car

to anyone. [Emphasis added.]

While driving the rented vehicle, plaintiff was involved

in an accident. Total collision damages amounted to

$3,738.49. Betten Toyota absorbed $1,000 as a deductible;

plaintiff Universal Underwriters Insurance Company, Betten’s

insurer, paid the remainder.

Betten and Universal sought recovery from defendant, but

she refused to pay. Plaintiffs then commenced this action

alleging breach of the courtesy car agreement. Universal

seeks recovery as Betten’s subrogee of the $2,738.49 it paid

to repair the rented vehicle; Betten demands payment of the

$1,000 deductible.

Plaintiffs moved for summary disposition under MCR

2.116(C)(10), arguing that no genuine issue of material fact

existed regarding defendant’s contractual liability. The

district court instead granted summary disposition for

defendant under MCR 2.116(I)(2).1 It relied on an unpublished

Court of Appeals opinion to conclude that the no-fault act

does not allow contractual allocation of liability for

collision damages. Universal Underwriters Ins Co v Stout,

unpublished opinion per curiam, issued February 2, 1996

(Docket No. 171069). The circuit court affirmed.

The Court of Appeals reversed and remanded for entry of

a judgment in plaintiffs’ favor unless the district court

“determines that defendant has defenses that have not yet been

addressed, in which case the court shall conduct proceedings

consistent with” the Court of Appeals opinion. 235 Mich App

646, 662; 599 NW2d 519 (1999). It noted that while the no

fault act abrogated tort liability arising from the ownership,

maintenance, or use of a motor vehicle (except in certain

circumstances),2 it did not abolish contractual liability.

See Kinnunen v Bohlinger, 128 Mich App 635, 638; 341 NW2d 167

(1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors, Inc,

124 Mich App 510, 513; 335 NW2d 70 (1983).

1
The rule provides: “If it appears that the opposing

party, rather than the moving party, is entitled to judgment,

the court may render judgment in favor of the opposing party.”

2
MCL 500.3135(2).

3
The Court of Appeals distinguished this Court’s

peremptory order in Universal Underwriters Ins Co v Vallejo,

436 Mich 873; 461 NW2d 364 (1989). Vallejo held that the

defendant-renter was entitled to summary disposition on the

insurer’s claim for collision damages to a rented vehicle:

Although the trial court gave the plaintiff

insurer numerous opportunities to explain, with

specific factual allegations, how its conclusory

allegation of an express or implied contract of

bailment differentiated this case from any other

situation in which a permissive user of a car is

involved in a collision and therefore cannot return

the car to its owner in an undamaged condition, the

plaintiff repeatedly failed to do so. Under these

circumstances, the trial court correctly granted

the defendant’s motion for summary disposition. By

operation of the pertinent insurance statutes,

e.g., MCL 257.520(b)(2); MSA 9.2220(b)(2) and MCL

500.3009; MSA 24.13009, the defendant appears to

have been insured by the plaintiff against the very

loss at issue in this case, since a standard

automobile policy typically insures such a

permissive driver “against loss from the liability

imposed by law for damages arising out of the

ownership, maintenance or use of” a motor vehicle.

[Id.]

The Court of Appeals noted that, while the plaintiff in

Vallejo relied on a common-law bailment theory, plaintiff here

seeks recovery under the express terms of a written agreement.

The Court did not read Vallejo “as a blanket rejection of all

contract claims seeking to hold a permissive user responsible

for damage to a borrowed vehicle. Rather, we understand the

order as rejecting the insurer’s effort to convert a simple,

permissive-user, tort liability case into a contract case by

alleging an express or implied contract of bailment, without

providing specific factual allegations that would support such

a distinction.” Kneeland, supra at 659. The Court reasoned

that Vallejo suggested the possibility of a different result

where there is proof of an express contract.

II. Standard of Review

We review de novo a grant of summary disposition under

MCR 2.116(C)(10). Smith v Globe Life Ins Co, 460 Mich 446,

454; 597 NW2d 28 (1999). The issue under review is a question

of law, i.e., whether the no-fault act prevents contractual

assignment of liability for collision damages. We review

questions of law de novo. Cardinal Mooney High School v

Michigan High School Athletic Ass’n, 437 Mich 75, 80; 467 NW2d

21 (1991).

III. Contractual Interpretation

Before deciding whether the courtesy car agreement

contravenes public policy, we must determine what the contract

says. Absent an ambiguity or internal inconsistency,

contractual interpretation begins and ends with the actual

words of a written agreement. Henderson v State Farm Fire &

Casualty Co, 460 Mich 348, 354; 596 NW2d 190 (1999). A

contract is ambiguous if its provisions may reasonably be

understood in different ways. Farm Bureau Ins Co v Nikkel,

460 Mich 558, 566; 596 NW2d 915 (1999).

The fourth provision of the courtesy car agreement

states: “Renter agrees to assume all responsibility for

damages while vehicle is in his possession.” This language

clearly imposes liability on defendant. The contract is

unclear, however, regarding the extent of the shift of

liability. The provision refers to “damages,” but does not

explicate precisely the categories of damages that defendant

has agreed to pay.

The general term “damages” could refer to any harm caused

to a third party’s person or property, i.e., it could reach

damages for which no-fault insurance coverage is mandatory.

See, e.g., MCL 500.3107, 500.3121. A shift of liability to

that extent might contravene the no-fault act. Cf. State Farm

v Enterprise Leasing, 452 Mich 25, 36; 549 NW2d 345 (1996).3

Another reasonable interpretation of the contract is

available, however. Black’s Law Dictionary (6th ed) defines

“damages” as “[a] pecuniary compensation or indemnity, which

may be recovered in the courts by any person who has suffered

a loss, detriment, or injury, whether to his person, property,

or rights . . . .” The parties may reasonably have intended

3
We express no view regarding whether State Farm would

control the legality of the contract here. This agreement and

the one addressed in State Farm are arguably different in

scope and effect. We merely observe that an argument is

available that the parties’ agreement, if it reaches beyond

optional collision damages, is illegal.

to limit the meaning of the word “damages” to losses for which

a legal right of recovery is available.

An ambiguity arises also because the contract shifts

liability for damages “while [the] vehicle is in [defendant’s]

possession.” Damages to the vehicle itself are likely to

occur while the renter possesses the vehicle. But other types

of damages, including wage loss and medical expenses, often

arise after the rental period has ended. The contract does

not clearly shift liability for the latter kinds of damages.

We thus conclude that the words of the contract may

reasonably be understood in different ways. This ambiguity

requires us to assume that the parties knew the law and wished

to comply with it. See 3 Corbin, Contracts, § 546, pp 170

171:

[I]t is very commonly stated that when the

terms of agreement have two possible

interpretations, by one of which the agreement

would create a valid contract and by the other it

would be void or illegal, the former will be

preferred. This is an advisory rule of

interpretation, since it is believed that the

parties intend their agreement to be valid rather

than invalid, lawful rather than unlawful, and

honest and effective rather than fraudulent and

voidable.

See also Walsh v Schlecht, 429 US 401, 408; 97 S Ct 679; 50 L

Ed 2d 641 (1977) (“Since a general rule of construction

presumes the legality and enforceability of contracts, . . .

ambiguously worded contracts should not be interpreted to

render them illegal and unenforceable where the wording lends

itself to a logically acceptable construction that renders

them legal and enforceable”); Stillman v Goldfarb, 172 Mich

App 231, 239; 431 NW2d 247 (1988).

We follow these authorities and presume that the parties

intended to enter a valid, enforceable agreement and that the

contract thus does not shift liability for damages that may

not legally be reallocated.

IV. The dissent’s approach

The dissent first construes the contract against its

drafter and the drafter’s subrogee by extending the shift of

liability beyond collision damages. The dissent would then

invalidate the contract on the basis of its allegedly illegal

reach. We reject that analysis.

The dissent misapplies the rule requiring that

contractual ambiguities be construed against the drafter by

using the rule not to interpret the contract, but to

invalidate it. As discussed above, courts will presume that

a contract is legal if a reasonable interpretation supporting

the legality of the contract is available. The dissent

instead concludes that the parties meant to accomplish illegal

ends by their agreement.

Moreover, the dissent does not find an ambiguity

regarding whether defendant’s liability extends to collision

damages. As discussed above, the only ambiguity is whether

the contract shifted liability beyond collision damages. A

reasonable interpretation is not available--and even defendant

does not contend--that she did not agree to liability for

collision damages.

A proper application of the rule of construction against

the drafter would adopt the interpretation making defendant

liable to the least extent possible, i.e., for collision

damages only. Thus, regardless of whether one applies the

rule of construction against the drafter or the rule presuming

the legality of contracts, the same result is reached: the

contract shifts liability for collision damages only.

V. Is the assignment of collision damages void?

Having concluded that the contract shifts liability for

collision damages only, we now consider whether the no-fault

act prohibits the parties’ voluntary allocation of

responsibility. To decide this question, we must consider

relevant statutory provisions. Sun Valley Foods Co v Ward,

460 Mich 230, 236; 596 NW2d 119 (1999), articulated the proper

mode of interpretation:

The rules of statutory construction are well

established. The foremost rule, and our primary

task in construing a statute, is to discern and

give effect to the intent of the Legislature.

Murphy v Michigan Bell Telephone Co, 447 Mich 93,

98; 523 NW2d 310 (1994). See also Nation v W D E

Electric Co, 454 Mich 489, 494; 563 NW2d 233

(1997). This task begins by examining the language

of the statute itself. The words of a statute

provide “the most reliable evidence of its intent .

. . .” United States v Turkette, 452 US 576, 593;

101 S Ct 2524; 69 L Ed 2d 246 (1981). If the

language of the statute is unambiguous, the

Legislature must have intended the meaning clearly

expressed, and the statute must be enforced as

written. No further judicial construction is

required or permitted. Tryc v Michigan Veterans’

Facility, 451 Mich 129, 135; 545 NW2d 642 (1996).

Our no-fault act requires owners to carry certain

categories of insurance. Mandatory coverages include personal

injury protection and property protection benefits. MCL

500.3107; MCL 500.3121. Other types of coverage, however, are

not mandatory, but purely a matter of contract. Collision

coverage plainly falls into the latter category: our no-fault

scheme does not mandate it.

Additionally, § 3135 of our no-fault act, MCL 500.3135,

expressly abolishes tort liability arising from the ownership,

maintenance, or use of a motor vehicle (with some exceptions).

The statutory language does not reflect an intent to abolish

contractual liability for collision damages, an optional form

of insurance not required by the no-fault act. See Kinnunen,

supra at 639 (“Had the Legislature intended to abrogate

contractual liability as well, the words any ‘liability

arising out of the ownership, maintenance, or use of a motor

vehicle’ could easily have been substituted”); Ben Franklin

Ins, supra at 513 (“Nothing in the no-fault system relieves a

motor vehicle operator of liability which he may have incurred

in contract”).4

Further, the Court of Appeals correctly ruled that

Vallejo is distinguishable. The limited reasoning in that

peremptory order offers little guidance. It appears, however,

that the insurer in Vallejo was relying on a common-law

bailment theory. The order does not mention an express

written agreement.

Vallejo prevents a party from converting a possible tort

claim into a “contract” claim by simply alleging a bailment

and thereby subverting subsection 3135(2). Those concerns do

not arise where parties have expressly agreed in writing to

allocate their respective duties.

VI. Subrogation

Our grant order asked the parties to address “whether, if

defendant is held to be liable for damage to the automobile at

issue based on her contract with plaintiff Betten Toyota, her

liability is limited to the $1,000 deductible in Betten

Toyota’s insurance policy covering that automobile on the

ground that this was the extent of the damages suffered by

4
We emphasize that our holding is limited to contract

claims for collision damages. We offer no view regarding the

legality of a contract purporting to shift liability for other

categories of damages.

Betten Toyota.” 462 Mich 911 (2000). We hold that damages

are not limited to the amount of the deductible.

Betten incurred $3,738.49 in damages to its vehicle, but

had to pay only $1,000; Universal paid the balance. The plain

terms of Betten’s insurance policy grant Universal a right of

subrogation to Betten’s cause of action against defendant:

Subrogation—You and each insured must do all

in their power to preserve their rights to recover

from others. Once we have made a payment under

this policy, your or an insured’s rights to recover

from others become our rights.

Defendant has not articulated a reason why Universal may not

exercise its contractual right of subrogation.

Significantly, defendant did not challenge Universal’s

subrogee status below. In fact, her attorney implicitly

acknowledged Universal’s right of subrogation during

proceedings in the district court:

Mr. Arndt [defense counsel]: . . . I don’t

think either one of the parties made a distinction

between Universal’s claim or Betten’s claim.

Certainly Universal’s claim is derivative of their

subragor (sic) insured Betten. I guess it would be

our position that the case law and specifically

Universal versus Valajo [sic] addresses both not

only the insurer but the owners responsibility to

make sure that there is adequate protection and

insurance coverage on the vehicle. I think that

the case law that you’ve relied upon in determining

and adjudicating the issues of liability between

Universal and Kneeland are equally applicable to

Betten and Kneeland. That there would be no

distinction between the two claims, whether it was

insured or uninsured. [Emphasis added.]

Defendant has thus forfeited any claim that Universal has no

right of subrogation. Smith v Musgrove, 372 Mich 329, 337;

125 NW2d 869 (1964); Munson Medical Center v Auto Club Ins

Ass’n, 218 Mich App 375, 388; 554 NW2d 49 (1996).

VII. Conclusion

The no-fault act does not invalidate the parties’ written

agreement to assign liability for collision damages to

defendant. Universal has a right of subrogation under the

express terms of its insurance policy with Betten to seek

recovery of the amount it paid to repair the rented vehicle.

Accordingly, we affirm the judgment of the Court of Appeals.

TAYLOR , YOUNG , and MARKMAN , JJ., concurred with CORRIGAN , C.J.

S T A T E O F M I C H I G A N

SUPREME COURT

UNIVERSAL UNDERWRITERS INSURANCE

COMPANY, as Subrogee of Betten

Toyota and BETTEN TOYOTA,

Plaintiffs-Appellees,

v No. 114900

NANCY KNEELAND,

Defendant-Appellant.

___________________________________

CAVANAGH, J. (dissenting).

Because the majority opinion in this case is contrary to

well-established principles of contract law, I must dissent.

I would reverse the decision below and reinstate summary

disposition in favor of the defendant.

This case presents two questions: (1) whether a party may

contractually assume liability for damages to a borrowed

vehicle and (2) if liability can be contractually assumed,

whether the defendant assumed liability pursuant to a courtesy

car agreement. I would hold that liability can be

contractually shifted, but that the instant courtesy car

agreement cannot be enforced to impose liability on the

defendant.

The defendant borrowed a loaner car from Betten Toyota

while Betten was servicing her vehicle. Before taking

possession of the loaner car, the defendant was required to

sign a document entitled “Courtesy Car Agreement.” The text

of the agreement was as follows:

Courtesy Car Agreement

1. Rental fee ONLY $28.00 per day.

2. Renter agrees to replace gasoline used.

3. Renter agrees to pay cash for rental charge.

4. Renter agrees to assume all responsibility for

damages while vehicle is in his possession.

5. Renter agrees not to sublet or loan the car to

anyone.

The agreement was printed on Betten stationery.

The defendant was involved in an automobile accident for

which she bore no fault. Rather, two other vehicles collided

with each other, and the force of the impact pushed one of

those vehicles into the loaner car. The plaintiffs are

seeking to recover collision damages. Both plaintiffs assert

that the defendant is liable for the full amount of damages

sustained pursuant to clause 4 of the courtesy car agreement.

The defendant asserts that Betten Toyota formed a

bailment contract with her by loaning her a vehicle. She

further argues that, pursuant to the bailment contract, she

was shielded from liability because the no-fault act, MCL

500.3101 et seq., and financial responsibility act, MCL

257.520(g), require the owner of an automobile and the owner’s

insurer to provide coverage for permissive users.

According to the plaintiffs, this case sounds purely in

contract. While the no-fault act abrogated tort immunity, it

did not abrogate contractual liability. The plaintiffs thus

contend that the no-fault act would not bar their claims,

citing Kinnunen v Bollinger, 128 Mich App 635, 638; 341 NW2d

167 (1983); Nat’l Ben Franklin Ins Co v Bakhaus Contractors,

Inc, 124 Mich App 510, 513; 335 NW2d 70 (1983).

The broader question posed by this case is whether a

party may contractually assume liability for damages to a

borrowed vehicle even though Michigan’s no-fault law,

precedent, and common-law principles would normally place

liability on the lender absent any contractual agreement to

the contrary. If liability can be contractually assumed, then

we must also resolve whether the defendant assumed liability

pursuant to the courtesy car agreement.

The genesis of the arguments raised by the present

parties can be traced to this Court’s decision in Universal

Underwriters v Vallejo, 436 Mich 873 (1990). Vallejo was a

peremptory reversal, which, in its entirety, provided as

follows:

In lieu of granting leave to appeal, the

August 21, 1989, judgment of the Court of Appeals

is reversed [179 Mich App 637; 446 NW2d 510

(1989)], and the case is remanded to the Saginaw

Circuit Court for entry of judgment in favor of the

defendant. Although the trial court gave the

plaintiff insurer numerous opportunities to

explain, with specific factual allegations, how its

conclusory allegation of an express or implied

contract of bailment differentiated this case from

any other situation in which a permissive user of a

car is involved in a collision and therefore cannot

return the car to its owner in an undamaged

condition, the plaintiff repeatedly failed to do

so. Under these circumstances, the trial court

correctly granted the defendant's motion for

summary disposition. By operation of the pertinent

insurance statutes, e.g., MCL 257.520(b)(2); MSA

9.2220(b)(2) and MCL 500.3009; MSA 24.13009, the

defendant appears to have been insured by the

plaintiff against the very loss at issue in this

case, since a standard automobile policy typically

insures such a permissive driver “against loss from

the liability imposed by law for damages arising

out of the ownership, maintenance or use of” a

motor vehicle. Jurisdiction is not retained.

[Emphasis added.]

The defendant interprets Vallejo as holding that no

express or implied bailment action lies against a permissive

user of a loaner vehicle. In the defendant’s view, Vallejo

was not premised on the insurer’s failure to factually

establish a contractual relationship. Rather, Vallejo

specifically found the lack of an express agreement to be

inconsequential. The Court held that a bailment contract

could not supersede the insurer’s statutory duty to supply

insurance to permissive drivers.

The plaintiffs, on the other hand, argue that Vallejo is

inapposite. They assert that, where the action against the

defendant is purely for breach of contract and is not a tort

action arising out of rights implicit in a bailment

relationship, Vallejo and the no-fault act do not bar

plaintiffs’ claims. Instead, the plaintiffs urge us to

interpret Vallejo as determining only whether a bailment could

give rise to liability. While Vallejo recognized that any

tort liability arising out of a bailment would be barred

pursuant to the no-fault act, the plaintiffs posit that it did

not foreclose the possibility that a defendant could be held

liable if the parties agreed to rights and responsibilities

extending beyond the bailment situation. The plaintiffs

recognize Vallejo as accepting that a bailment relationship

alone would not shift liability to the defendant, but they

argue that Vallejo actually held only that the plaintiff

failed to prove the existence of any rights beyond those that

would exist in a bailment situation.

The Court of Appeals noted that the no-fault act bars

tort liability but not contractual liability, and held that

the defendant could be bound by her agreement to assume all

responsibility for damages while the vehicle was in her

possession. 235 Mich App 658-659. It then distinguished

Vallejo from this case on the ground that Vallejo did not

involve an express contract. Further, the Court expressly

stated that Vallejo was not intended to shield permissive

users from liability expressly assumed by contract. The Court

wrote:

[I]n any permissive user case, except the

unusual one in which a bailment is expressly

disavowed, it can be alleged that there is an

implied or express contract of bailment, and

therefore, an enforceable contractual duty. The

Supreme Court declined to recognize such broad
based contractual liability in these circumstances.

The Court’s express reference to the insurer’s

failure to support with factual allegations its

efforts to differentiate the case from any other

permissive-user situation implies that if the

insurer had successfully demonstrated the existence

of an express contractual assumption of

responsibility for damage to the vehicle, the

defendant might not have been granted summary

disposition. Thus, Vallejo did not say that the

existence of an express contract would not

differentiate the case from any other permissive
user situation. Rather, it suggested that the

potential different result did exist, but that the

plaintiff insurer had failed to provide proof

sufficient to support a different result. [235 Mich

App 659-660 (emphasis in original).]

After determining that Vallejo was not intended to bar all

contract claims brought against permissive users, the Court of

Appeals concluded that plaintiffs could assert a contract

claim against the defendant because of her express assumption

of liability. Therefore, the Court reversed the circuit

court’s affirmance of summary disposition for the defendant.

III

I agree with the Court of Appeals that Vallejo should not

be read as “a blanket rejection of all contract claims seeking

to hold a permissive user responsible for damage to a borrowed

vehicle.” 235 Mich App 659. While Vallejo limited the extent

to which liability can be shifted to a permissive driver of a

loaned automobile, it did so under circumstances where the

insurer had failed to assert a factual basis for its contract

claim. The Court’s order recognized the general rule that a

bailee must return property to his bailor in an undamaged

condition. However, Vallejo then recognized that Michigan’s

pertinent insurance statutes, MCL 257.520(b)(2) and MCL

500.3009, modify the general rule. Through those statutes,

the Legislature chose to offset the costs and problems

associated with automobile collisions by requiring that

automobile owners carry insurance. Vallejo recognized that

standard automobile policies contain language covering use by

permissive drivers, and held that the plaintiff insurer had

failed to prove that liability had somehow been shifted back

to the defendant.

I interpret Vallejo as holding that the lender, rather

than the permissive user, must pay for collision damages under

the lender’s insurance policy unless: (1) it is proven that

the policy does not extend to permissive drivers, or (2) the

lender or insurer carries his burden of differentiating his

case from the usual situation where a permissive user of a car

is involved in a collision. The plaintiffs’ own brief

categorizes its claim as “squarely one for breach of

contract.” Thus, this is not a case where the insurer refused

to pay on the grounds that the driver was not covered by the

terms of the policy between the insured and the dealer.

Instead, the complaint alleged that the contract between

Betten and Kneeland shifted liability to Kneeland. When she

refused to pay, she allegedly breached the courtesy car

agreement. Therefore, this case hinges on the second Vallejo

inquiry. Pursuant to Vallejo, the plaintiffs must prove that

the courtesy car agreement differentiates this case from the

usual situation where a permissive user of a car is involved

in a collision.

The plaintiffs claim that this case can be distinguished

from Vallejo because the instant defendant assumed all

responsibility for damages. While I agree with the plaintiffs

that Vallejo does not automatically bar recovery in cases

where the lender proves that the permissive driver has assumed

liability pursuant to a valid contract, I do not agree that

liability was shifted in the present case.

The majority acknowledges the potential shift of tort

liability that could occur were this Court to hold that the

contract is unambiguous as the plaintiffs suggest. Because of

the potential problem, the majority offers another “reasonable

interpretation of the contract.” Slip op at 6. In the

majority’s words, “[t]he parties may reasonably have intended

to limit the meaning of the word ‘damages’ to losses for which

a legal right of recovery is available.” Slip op at 7.

I agree with the majority that the courtesy car agreement

in this case is ambiguous, and may be interpreted in a fashion

that would avoid illegality. However, I disagree strongly

with the majority’s decision to construct a decision favorable

to the plaintiffs, rather than construing the contract against

the drafter, as we are bound to do. See, e.g., Vanguard Ins

Co v Clarke, 438 Mich 463, 471-472; 475 NW2d 48 (1991); Raska

v Farm Bureau Mut Ins Co, 412 Mich 355, 361-362; 314 NW2d 440

(1982). See also 2 Restatement Contracts, 2d, § 206, p 105

(“In choosing among the reasonable meanings of a promise or

agreement or a term thereof, that meaning is generally

preferred which operates against the party who supplies the

words”); 11 Williston, Contracts, § 32.12, p 471 (since the

language is within the control of the drafter, it is a

generally accepted principle that any ambiguity in that

language will be interpreted against the drafter); 5 Corbin,

Contracts, § 24.27, pp 282-283; 17A Am Jur 2d Contracts, §

348, pp 360-361 (It is fundamental that doubtful language in

a contract should be interpreted most strongly against the

party who has selected the language).

Two opposing interpretations of the courtesy car

agreement are offered. In the plaintiffs’ view, by signing

the courtesy car agreement, the defendant agreed to be an

insurer against damages to the automobile. The defendant

contends that she read the agreement as meaning only that she

would be responsible for her own negligence, and that she

assumed that the car was insured by the dealership. Here, the

drafter was Betten. Construing the agreement against Betten

is proper because, as the drafter, Betten had the opportunity

of drafting the language in a manner that avoided any

ambiguity or dispute. Thus, I would resolve the courtesy car

agreement in the defendant’s favor, in accordance with well

established contract principles.

The document was a one-page form contract to which no

insurer was a party and that never mentioned insurance. The

dealership never informed the defendant that she needed to

obtain her own insurance, nor did it inform the defendant that

she would be liable for damages caused by the negligence of

others. The courtesy car agreement also did not mention

collision damages. It is not unreasonable for defendant to

have assumed that she would be covered by a standard

automobile policy between the dealer and its insurer. In this

respect, the present case is similar to Vallejo. While

Vallejo left open the possibility that contractual liability

could be shifted to a permissive user, Vallejo also recognized

that the burden was upon the plaintiff insurer to prove that

liability had been so shifted. Here, the plaintiffs point

only to overbroad language that in no way mentions insurance

obligations. Thus, I would conclude that the plaintiff failed

to bear its burden of proving that collision damages were

validly shifted.

Contrary to the majority’s assertion, my approach is not

a method of invalidating the contract. It is, instead, a

recognition that, when choosing between valid constructions of

an ambiguous contract, we must choose the construction that

goes against the drafter of the ambiguous language. Here, the

construction offered by the defendant would not invalidate the

courtesy car agreement; rather, it would limit the scope of

the agreement.

The majority chooses to construe the contract in a manner

that would be favorable to the plaintiffs who drafted the

ambiguous contract. I cannot join the majority’s decision to

find in favor of the plaintiffs when the agreement signed by

the defendant contained a provision that must be interpreted

as ambiguous or void against public policy.

I would hold that the defendant is not liable under the

courtesy car agreement. The plaintiffs have failed to carry

their burden of establishing that a valid contract existed and

of differentiating this case from the usual situation where a

permissive user of a car is involved in a collision.

Therefore, I would reverse and reinstate summary disposition

in favor of the defendant.

WEAVER and KELLY , JJ., concurred with CAVANAGH , J.

Universal Underwriters Insurance v. Kneeland

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