United States Bankruptcy Court, D. Kansas

In re: GMJ Global Logistics, Inc., et al., Debtor,

Christopher J. Redmond, Chapter 11 Trustee Of Debtor Sports Associated Transportation, Inc., Plaintiff,

v.

IGT, Inc., Defendant.

 

Case No. 12–20078

Adv. No. 12–06078

September 24, 2013

 

MEMORANDUM OPINION AND ORDER GRANTING DEFENDANT IGT’S MOTION FOR SUMMARY JUDGMENT

ROBERT D. BERGER, U.S. BANKRUPTCY JUDGE

*1 This matter comes before the Court on Defendant IGT’s Motion for Summary Judgment.FN1 After reviewing the pleadings and considering the oral arguments heard on August 7, 2013, the Court is prepared to rule.

 

FN1. Doc. 7.

 

Introduction

The Trustee sued Defendant to recover $87,339.49 that IGT owes Sports Associated Transportation (Debtor).FN2 IGT responded with its counterclaim against Debtor for $408,788.32 and requested that this Court set-off the debts pursuant to 11 U.S.C. § 553. IGT also asserted the doctrine of recoupment. IGT timely filed the Motion for Summary Judgment presently before this Court. For the reasons set forth below, the Motion is granted. Judgment shall be entered in favor of Defendant IGT.

 

FN2. Sports Associated Transportation is one of 11 debtors in this administratively consolidated case.

 

Findings of Fact

Defendant IGT manufactures and distributes gambling devices and related products. IGT’s manufacturing facility is located in Reno, Nevada. IGT’s business model requires the shipment of its products from its manufacturing facility to its customers and, in certain cases, those products are returned to IGT. To accomplish this task, IGT entered into a Confidential Transportation Agreement (Agreement) FN3 with Debtor in 2002. Pursuant to paragraph 2(b) of the Agreement, Debtor agreed to “promptly and efficiently receive, transport and deliver safely and with reasonable dispatch and without delay, the goods entrusted to it hereunder….” In addition to agreeing to transport IGT’s goods, Debtor also agreed “not to interline or use other motor carriers, or brokers, or to use ‘substituted services’ by rail for SHIPPER’S [IGT’s] goods without prior written agreement of SHIPPER.” FN4 Throughout the Agreement, Debtor was referred to as “CARRIER.” Under the Agreement, Debtor is the carrier and not a broker.

 

FN3. Doc. 7, Ex. A ¶ 2(b) at 2.

 

FN4. Doc. 7, Ex. A ¶ 2(e) at 2.

 

Despite this explicit agreement, Debtor in fact acted as a broker. Throughout the course of the contract, Debtor contracted with various carriers to transport IGT’s products.FN5 The carriers would then send their invoices to Debtor, who would add a broker’s fee and forward the invoices to IGT.

 

FN5. Debtor asserts that in some cases it did act as a carrier pursuant to the contract. Regardless, the shipments for which Debtor may have been the carrier are not at issue here.

 

A third key provision of the Agreement covered indemnification. The provision states:

 

CARRIER shall at all times indemnify, defend and hold harmless SHIPPER, its agents and employees against and from any and all settlements, losses, damages, costs, counsel fees and all other expenses relating to or arising from any and all claims of every nature or character (including, but without limitations, claims for bodily injury, death and damage to property, clean-up costs from commodity spills and damage to the environment) asserted against SHIPPER (a) by any agent or employee of CARRIER or (b) by any other person. The provisions of this paragraph shall survive cancellation, termination, or expiration of this Agreement.FN6

 

*2 By virtue of this provision, IGT seeks indemnification from Debtor.

 

FN6. Doc. 7, Ex. A ¶ 5 at 4.

 

Although Debtor operated as a broker instead of a carrier, the parties otherwise performed in accordance with the contract from 2002 until sometime in 2011. According to IGT, in the fall of 2011 various motor carriers (Carriers) contacted IGT seeking payment for freight charges that Debtor had failed to pay. Debtor had failed to pay these Carriers even though IGT had already paid Debtor. Once IGT learned that Debtor was not paying the Carriers, IGT stopped paying Debtor. Even though Debtor had stopped paying most of the carriers at this time, it still paid a few of them.FN7 The Trustee initiated this adversary proceeding to recover the $87,339.49 from the outstanding invoices that IGT did not pay.

 

FN7. It is not clear whether Debtor paid these Carriers; however, because IGT does not contest for purposes of this motion that Debtor did pay the Carriers, the Court will treat the claim as if Debtor is owed $87,339.49. If Debtor did not pay the Carriers, which seems likely based on the evidence, Debtor would only be entitled to the broker’s fee and not the entire amount of the invoice. By not contesting the amount of the debt, IGT is giving up a potentially legitimate claim against the estate.

 

As to the shipments for which Debtor did not pay the Carriers, those Carriers turned to IGT for payment. The Carriers’ claims against IGT totaled $693,743.92. IGT paid $408,788.32 to settle them. Because IGT had to pay the cost of these shipments twice, once to Debtor and once to the Carriers directly, IGT has a claim against the estate for $408,788.32 for breach of contract and for indemnification. IGT concedes that it owes the Debtor $87,339.49 and asks this Court to set off that amount against IGT’s claim.

 

Debtor does not dispute that it did not pay the above carrier charges even though IGT provided Debtor the funds to pay them. Instead, Debtor alleges that IGT had no obligation to pay the Carriers directly and therefore Debtor is not required to indemnify IGT.

 

Conclusions of Law

A. Summary Judgment Standard

Summary judgment is appropriate if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law.FN8 The moving party bears the initial burden of demonstrating, by reference to pleadings, depositions, answers to interrogatories, admissions, and affidavits, the absence of genuine issues of material fact.FN9 In making this determination, the Court draws all reasonable inferences in favor of the non-moving party.FN10 Once a properly supported summary judgment motion is filed, the opposing party “must respond with specific facts showing the existence of a genuine factual issue to be tried” and “may not rest on the allegations contained in his complaint.” FN11

 

FN8. Fed. R. Bankr.P. 7056; Fed.R.Civ.P. 56.

 

FN9. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986).

 

FN10. See Taylor v. Roswell Independent School Dist., 713 F.3d 25, 34 (10th Cir.2013) (quoting Witt v. Roadway Exp., 136 F.3d 1424, 1429 (10th Cir.1998) (citation omitted)).

 

FN11. Otteson v. U.S., 622 F.2d 516, 519 (10th Cir.1980) (citing Adickes v. S.H. Kress & Co., 398 U.S. 144, 157–59 (1970)).

 

*3 Defendant IGT moved for summary judgment. For the reasons set forth below, IGT has satisfied its burden as required by Fed.R.Civ.P. 56 and Fed. R. Bankr.P. 7056.

 

B. Debtor’s Claims Against IGT

Debtor asserts that IGT owes it $87,339.49 pursuant to the Agreement. This claim arises from IGT’s refusal to pay the invoices sent by Debtor to IGT. IGT does not contest for purposes of this motion that Debtor paid the invoiced charges directly to the Carriers. Because the Agreement required IGT to pay the Debtor, the Court finds that IGT owes Debtor $87,339.49.

 

C. IGT’s Claims Against Debtor

IGT asserts that it has a claim against the estate for $408,788.32. The issue is whether IGT was required to settle the claims with the Carriers or whether only the Debtor was liable to the Carriers and therefore the claim should be disallowed. Both parties agree that the majority view, as outlined in Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co.,FN12 generally places liability on the shipper in cases such as this one. However, Debtor argues that the facts here present an exception to the general rule, and therefore IGT has a legal defense that precludes IGT from being liable to the Carriers. Debtor claims that because IGT signed the non-recourse provision on at least some of the bills of lading, IGT is not entitled to claim the entire $408,788.32 against the estate. The Court finds that Illinios Steel Co. v. Baltimore & O.R. Co.FN13 precludes this defense and that IGT was liable to the Carriers. Summary judgment in favor of IGT is appropriate on this issue.

 

FN12. 513 F.3d 949 (9th Cir.2008).

 

FN13. 320 U.S. 508 (1944).

 

1. Shipping Contracts

Shipping contracts often involve two agreements that operate in tandem. These are the shipping agreement and the bill of lading. The shipping agreement governs the rights and obligations between a shipper and a carrier over the course of multiple transactions. The bill of lading, on the other hand, only controls the shipment of the goods described on its face. The bill of lading “is the basic transportation contract between the shipper-consignor and the carrier; its terms and conditions bind the shipper and all connecting carriers.” FN14 Although it is often the case that the shipper and carrier are the parties to both the shipping agreement and the bill of lading, when there is a third party broker involved, the coordination of these agreements is less clear. In this case, the dispute is between IGT and the Carriers, so the shipping agreement has only a minor role, which the Court will discuss in section C.3, infra.

 

FN14. Oak Harbor, 513 F.3d at 953 (quoting S. Pac. Transp. Co. v. Commercial Metals Co., 456 U.S. 336, 342 (1982)).

 

2. The Bill of Lading

The Trustee’s argument arises from two conflicting provisions within the bills of lading signed by IGT and the Carriers. These are the “prepaid” and “nonrecourse” FN15 provisions. A bill of lading marked “prepaid” signifies that the charges for transportation service rendered at the request of a consignor (shipper) will be paid by the consignor. All of the shipments from IGT to its customers were prepaid shipments. The alternative provision is a collect shipment. In a collect shipment, the consignee (the person receiving the shipment) is primarily liable for payment at the time of delivery. The default conditions of a standard bill of lading are summarized as follows:

 

*4 The bill of lading provides that the owner or consignee shall pay the freight and all other lawful charges upon the transported property and that the consignor remains liable to the carrier for all lawful charges. The bill of lading, however, also contains “nonrecourse” and “prepaid” provisions that, if marked by the parties, release the consignor and consignee from liability for the freight charges. If the nonrecourse clause is signed by the consignor and no provision is made for the payment of freight, delivery of the shipment to the consignee relieves the consignor of liability. Similarly, when the prepaid provision on the bill of lading has been marked and the consignee has already paid its bill to the consignor, the consignee is not liable to the carrier for payment of the freight charges.FN16

 

FN15. The “Straight Bill of Lading” signed by IGT (Doc. 10, Ex. 2) provides, “Subject to section 7 of the conditions, if this shipment is to be delivered to the consignee without recourse on the consignor, the consignor shall sign the following statement: The carrier shall not make delivery of this shipment without payment and other lawful charges.” IGT presented an alternative bill of lading with more favorable language for IGT. However, since IGT is unable to show that its bill of lading was actually used in any of the shipments, the Court will only look to the language from the bill of lading provided by Debtor. IGT would prevail regardless of which language was used.

 

FN16. C.A.R. Transp. Brokerage Co., Inc. v. Darden Restaurants, Inc., 213 F.3d 474, 478–79 (9th Cir.2000) (citations omitted).

 

Here, the shipment charges that IGT settled with the Carriers were for prepaid shipments. On some of these shipments, the nonrecourse provision was also signed by IGT. According to the Trustee, by signing the nonrecourse provision, IGT insulated itself from liability once the Carriers delivered the shipments. The issue is what happens when both the prepaid and nonrecourse provisions are checked on the same bill of lading. IGT argues that the nonrecourse provision only applies to collect shipments and that it would be “logically irrelevant” to uphold a signed nonrecourse provision in a prepaid shipment. However, both the Illinois Steel case and the fact that IGT signed the nonrecourse provision on prepaid bills of lading indicate that the two provisions should be read together.

 

In Illinois Steel, the Supreme Court considered the relationship between the prepaid and nonrecourse provisions on a bill of lading. In that case, the shipper prepaid the freight charges, but also signed the section 7 nonrecourse box. The carrier argued, just as IGT does here, that “liability was imposed [by the lower court] on the consignor only because the prepayment clause was so in conflict with the non-recourse clause as to nullify the latter and thus revive the obligation which, in the absence of that clause, rests on the consignor to pay all lawful charges” on the shipments.FN17

 

FN17. Illinois Steel, 320 U.S. at 513.

 

The Supreme Court disagreed and said, “[W]e must assume that both clauses were intended by the parties to have some effect, and hence, unless unavoidably in conflict, they must, so far as they reasonably may, be reconciled so that each will have some scope for operation.” FN18 To reconcile the two clauses, the Court held that the non-recourse provision only applied to the charges beyond those already agreed upon by the parties.

 

The words of [section] 7 of the conditions of the bill of lading are to the effect that if the consignor stipulates that the carrier shall not deliver “without requiring payment of such charges” and the carrier makes delivery, the consignor “shall not be liable for such charges.” In this context, “such charges” are the lawful charges which the consignor has not paid or stipulated to pay in advance.FN19

 

FN18. Id. at 513–14.

 

FN19. Id. at 514.

 

*5 Here, there are no additional charges; instead, the dispute is over the shipper’s liability for the charges that it had agreed to pay. If the cost of the shipments had exceeded the agreed upon amount, then the nonrecourse provision would apply and prevent the Carriers from seeking payment from IGT of additional charges. Since there were no such additional charges, the prepaid clause required IGT to pay the agreed amount.FN20

 

FN20. See also Jones Motor Co., Inc. v. Teledyne, Inc., 732 F.Supp. 490, 492 (D.Del.1990) (“In other words, the prepayment clause renders the shipper liable for the original transportation charges. The non-recourse clause operates to shield the shipper from liability for the additional charges but not for the original charges it agreed to prepay.”). But see Gaines Motor Lines, Inc. v. Klaussner Furniture Indus., Inc., 2011 WL 1230811, at * 1 (M.D.N.C.2011) (granting summary judgment in favor of shipper because non-recourse clause meant the carriers could only turn to the broker for payment).

 

3. The Shipping Agreement

The second issue is whether the Debtor’s role as broker renders the Illinois Steel analysis inapplicable to IGT. In Illinois Steel, the prepayment of the shipment occurred before the carrier delivered the shipment. Here, not only was the “prepayment” made by guarantee, but IGT as the consigner did not have a separate contract with the Carriers. Instead, the “shipping agreement” was between the Debtor and the Carriers. Although the law in this area is not settled, this Court finds that the correct analysis requires the shipper to remain liable.

 

To support their respective positions, the parties both cite Oak Harbor Freight Lines, Inc. v. Sears Roebuck & Co.FN21 In Oak Harbor, the Ninth Circuit considered whether the shipper, Sears, was liable to the carrier even though it did not have an express agreement with the carrier outside the prepaid bill of lading. As in the case sub judice, Sears entered into a contract with a broker. The broker then contracted with carriers to ship Sears’ products. Sears argued that when a bill of lading is marked prepaid, but no payment is actually made at the time of the shipment and the broker fails to pay, the carrier may pursue only the broker for breach of the shipping agreement.FN22 In other words, by using a broker, Sears argued that it was insulated from liability to the carrier. This argument did not prevail.

 

FN21. 513 F.3d 949 (9th Cir.2008).

 

FN22. Id. at 953. Sears paid the broker for freight charges within approximately five days after receipt of a bill from the broker.

 

In Oak Harbor, the Ninth Circuit Court held that “a shipper should bear the risk when it chooses to pay for freight charges through a broker rather than directly to the carrier.” FN23 The court reasoned, and this Court agrees, that this result best “comports with economic reality.” FN24 The court noted:

 

A freight forwarder provides a service. He sells his expertise and experience in booking and preparing cargo for shipment. He depends upon the fees paid by both shipper and carrier. He has few assets, and he books amounts of cargo far exceeding his net worth. Carriers must expect payment will come from the shipper, although it may pass through the forwarder’s hands.FN25

 

FN23. Id. at 959 (citing Hawkspere Shipping Co. Ltd. v. Intamex, S.A., 330 F.3d 225, 237–38 (4th Cir.2003); Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 489–90 (5th Cir.1983); Nat’l Shipping Co. of Saudi Arabia v. Omni Lines, Inc., 106 F.3d 1544, 1546–47 (11th Cir.1997)).

 

FN24. 513 F.3d at 959 (quoting Strachan Shipping Co. v. Dresser Indus., Inc., 701 F.2d 483, 490 (5th Cir.1983)).

 

FN25. Id.

 

*6 Additionally, the Oak Harbor court noted that “the shipper, and not the carrier, is in the best position to avoid liability for double payment by dealing with a reputable freight forwarder, by contracting with the carrier to eliminate the shipper’s liability, or by simply paying the carrier directly.” FN26 This Court finds these arguments persuasive. Just because IGT checked the “prepaid” box on the bills of lading, IGT cannot escape liability simply by contracting with a broker.

 

FN26. Id.

 

Debtor argues that the nonrecourse provision in the bill of lading provides an exception to the general rules of liability outlined in Illinois Steel and Oak Harbor. In Oak Harbor, the court implied that the result would have been different had Sears signed the Section 7 box on the bills of lading. FN27 However, this is only dicta. This Court will not speculate as to what the Oak Harbor court might have found had the facts been different, especially in light of this Court’s interpretation of the Illinois Steel decision.

 

FN27. Id. at 960 (stating that “Sears generated the bills of lading and failed to protect itself with a ‘nonrecourse’ designation.”).

 

Because the statements in Oak Harbor are dicta, this Court does not find an exception to the rule that the shipper remains liable, even though it contracted through a broker and signed the nonrecourse clause. Moreover, the Agreement between IGT and Debtor listed Debtor as the carrier. Debtor breached the Agreement by acting as a broker. Debtor is estopped from now claiming that IGT’s claim should fail because it contracted through a broker. IGT was correct when it paid the Carriers.

 

D. Set–Off

IGT argues that the claim by Debtor should be set off against the larger claim by IGT. The Court agrees. Section 553 of the Bankruptcy Code provides:

 

Except as otherwise provided in this section and in sections 362 and 363 of this title, this title does not affect any right of a creditor to offset a mutual debt owing by such creditor to the debtor that arose before the commencement of the case under this title against a claim of such creditor against the debtor that arose before the commencement of the case….

 

Based on the Court’s findings, the claims by Debtor against IGT and the claims by IGT against Debtor arose before the commencement of the case and were mutual debts preserved and subject to setoff under § 553. Therefore, IGT is entitled to set off the claims by Debtor against IGT’s claims. IGT’s allowed claim against the estate is the difference between $408,788.32 and $87,339.49, or $321,448.83. Post-setoff, IGT has no liability to the estate. Since the issue of setoff is resolved in IGT’s favor, the Court does not address IGT’s other argument under the doctrine of recoupment.

 

E. Conclusion

For the reasons stated above, the Defendant’s Motion for Summary Judgment is GRANTED. A separate order of judgment shall be entered in favor of Defendant.

Court of Appeals of Michigan.

Tyronne MEYERS, Plaintiff–Appellee,

v.

TRANSPORTATION SERVICES, INC., and Zurich American Insurance Company, Defendants/Cross–Defendants–Appellees/Cross–Appellees,

and

Titan Insurance Company, D efendant/Cross-Defendant-Appellant/Cross-Appellee,

and

Farmers Insurance Company, Defendant/Cross–Plaintiff–Appellee/Cross–Appellant.

Tyronne Meyers, Plaintiff–Appellee,

v.

Transportation Services, Inc., and Zurich American Insurance Company, Defendants/Cross–Defendants–Appellees,

and

Titan Insurance Company, Defendant–Appellant,

and

Farmers Insurance Company, Defendant/Cross–Plaintiff–Appellee.

 

Docket Nos. 300043, 303405.

Sept. 24, 2013.

 

Wayne Circuit Court; LC No. 09–000755–NF.

 

Before: BECKERING, P.J., and JANSEN and M.J. KELLY, JJ.

 

PER CURIAM.

*1 These consolidated appeals arise from plaintiff’s claim for personal protection insurance (PIP) benefits following a truck-pedestrian collision that occurred on January 11, 2008. In Docket No. 300043, defendant Titan Insurance Company (Titan) appeals by leave granted the circuit court’s denial of its motion for summary disposition, and defendant Farmers Insurance Company (Farmers) FN1 cross-appeals the circuit court’s order denying its motion for summary disposition. In Docket No. 303405, Titan appeals by leave granted the circuit court’s grant of partial summary disposition in favor of Farmers with respect to Farmers’s cross-claim. In Docket No. 300043, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion. In Docket No. 303405, we vacate and remand for further proceedings consistent with this opinion.

 

FN1. On December 16, 2009, the parties filed a stipulation agreeing that all references to “Farmers Insurance Company” should be amended to read “Farmers Insurance Exchange.” Nevertheless, the parties continued to refer to the entity as “Farmers Insurance Company” in various pleadings and documents. Because we refer to the entity simply as “Farmers” throughout this opinion, the entity’s precise name is not at issue.

 

I

On January 7, 2008, plaintiff applied to purchase a Titan no-fault insurance policy through independent agent Robert Abbo of the Insurance Max Agency in Detroit. The insurance application form signed by plaintiff contained the following question: “Does the applicant’s household have any unlicensed drivers or any drivers with a suspended or revoked driver’s license?” Plaintiff checked “No.” Plaintiff’s Titan insurance policy, Policy No. 01–PA–3199736, was issued that same day.

 

On January 11, 2008, at about 10:00 p.m., plaintiff was walking on southbound I–75 in Wayne County when he was hit by a semi truck owned by Transportation Services, Inc. (TSI). TSI is a self-insured trucking company and its excess insurance carrier is Zurich American Insurance Company (Zurich). According to the driver of the truck, plaintiff “jumped from the shoulder into his path.” Plaintiff sustained severe head trauma, multiple broken bones, and numerous other serious, internal injuries.

 

At some point, Titan requested a copy of plaintiff’s driving record from the Michigan Secretary of State. The Secretary of State’s report, generated on January 17, 2008, indicated that plaintiff’s driver license had been suspended “indefinite[ly]” as of September 12, 2007, for failure to pay a driver responsibility fee. The Secretary of State’s report went on to state: “License Not Valid Until Reinstatement Fee Paid[.]” Titan employee Beverly Barrows opined in her affidavit that plaintiff had made a “material” misrepresentation in his insurance application by indicating that his driver license was not suspended or revoked. Barrows initially averred that Titan had relied on the representations in plaintiff’s application and would not have issued Policy No. 01–PA–3199736 if it had known that plaintiff’s driver license was suspended.

 

On February 1, 2008, Titan sent a letter to plaintiff “rescinding any and all coverage” with respect to Policy No. 01–PA–3199736. The letter went on to provide:

 

It has been discovered that material information was misrepresented on the application. Michigan Department of State Records reveals [sic] that your driver’s license was suspended/revolked [sic] on the date of the original application. State of Michigan Law ( [MCL] 500.2103(1)(b)) indicates that any person with an [sic] suspended or revolked [sic] driver’s license is ineligible for automobile insurance.

 

*2 Plaintiff requested PIP benefits from Titan, TSI, and Zurich. Titan denied plaintiff’s claim for PIP benefits on the grounds that plaintiff had made a material misrepresentation in his insurance application and that Policy No. 01–PA–3199736 had been rescinded. TSI and Zurich denied plaintiff’s claim for PIP benefits on the grounds that Titan was higher in priority and that plaintiff’s injuries may have been intentionally caused. On January 9, 2009, plaintiff sued TSI, Zurich, and Titan in the Wayne Circuit Court, claiming that all three entities were in breach of contract as a result of their failure to pay PIP benefits.

 

On April 8, 2009, Titan moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that it no longer had a contract with plaintiff and was consequently not obligated to pay plaintiff’s claim. Titan contended that plaintiff had made a material misrepresentation in his insurance application and it had therefore rescinded plaintiff’s policy.

 

Plaintiff responded on May 22, 2009, arguing that there were several questions of material fact that precluded summary disposition. On June 1, 2009, TSI and Zurich filed a joint response to Titan’s motion. TSI and Zurich contended that plaintiff had not made a material misrepresentation in his insurance application and that Titan had not been entitled to rescind plaintiff’s policy. They pointed out that it was independent agent Robert Abbo, and not plaintiff, who actually completed the application. TSI and Zurich also suggested that Titan would have issued Policy No. 01–PA–3199736 even if plaintiff had not provided any information concerning his driving record. According to TSI and Zurich, it is not Titan’s usual practice to consider an applicant’s driving record before issuing a no-fault insurance policy. As such, TSI and Zurich contended that Titan could not demonstrate that it had actually relied on the representations in plaintiff’s application. Lastly, TSI and Zurich asserted that Titan had continued to accept plaintiff’s premium payments even after it discovered that plaintiff’s driver license was suspended. TSI and Zurich acknowledged that Titan had refunded these payments to plaintiff, but argued that Titan had nonetheless reinstated plaintiff’s policy on February 5, 2008.

 

In reply, Titan acknowledged that it had mistakenly accepted a premium payment from plaintiff following the cancellation of Policy No. 01–PA–3199736, and that a new declaration page was inadvertently generated indicating that plaintiff’s policy had been reinstated. However, in a second affidavit, Barrows averred that the new declaration page had been created in error, had been destroyed, and had never been mailed to plaintiff. Barrows further averred that plaintiff’s policy “was never reinstated” and that the late-accepted payment from plaintiff had been fully refunded.

 

During the pendency of the proceedings, plaintiff filed an application with the Michigan Assigned Claims Facility, which assigned plaintiff’s claim to Farmers on January 22, 2009. In a letter dated April 20, 2009, Farmers denied plaintiff’s claim for PIP benefits on the ground that “the bodily injuries sustained appear to [have] be[en] caused by an intentional act.”

 

*3 On September 28, 2009, plaintiff moved to amend his complaint to add Farmers as a defendant. The circuit court granted plaintiff’s motion to amend and plaintiff filed a first amended complaint naming Farmers as an additional defendant.

 

On January 14, 2010, Farmers filed a cross-complaint, alleging that any PIP benefits payable to plaintiff were the responsibility of Titan, TSI, or Zurich. Farmers asserted that Titan, Zurich, and TSI (as a self-insurer) were all higher in priority than the Assigned Claims Facility. Among other things, Farmers sought reimbursement for any benefits that it had already paid to plaintiff, together with costs and attorney fees.

 

On March 18, 2010, Titan filed a renewed motion for summary disposition under MCR 2.116(C)(10), again arguing that it had been entitled to rescind plaintiff’s policy on the basis of a material misrepresentation in plaintiff’s application. Titan also asserted that, pursuant to MCL 500.2103(1)(b), plaintiff was not “[e]ligible” for no-fault automobile insurance when he applied on January 7, 2008, because his license was suspended at that time. Titan pointed out that it had rescinded plaintiff’s policy on February 1, 2009, less than 55 days after its issuance, in conformity with MCL 500.3220(b). Titan reiterated its position that, because plaintiff’s policy was properly rescinded, it did not have an enforceable contract with plaintiff and was not responsible for paying the claimed PIP benefits.

 

Titan attached a letter from the Michigan Department of State, dated November 6, 2009, explaining that plaintiff had actually failed to pay two different driver responsibility fees. The letter explained that an earlier suspension of plaintiff’s driver license had been resolved, but that plaintiff’s license was again suspended on September 12, 2007, “for failure to pay a different driver responsibility fee….” The letter confirmed that, as of the date of plaintiff’s insurance application on January 7, 2008, “[plaintiff’s] driver license was suspended due to the 9/12/2007 indefinite suspension which has never been cleared.”

 

TSI and Zurich then moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that Titan was higher in priority and that, assuming plaintiff was entitled to any PIP benefits at all, those benefits were the sole responsibility of Titan.FN2 TSI and Zurich again claimed that plaintiff had not made a material misrepresentation in his insurance application on January 7, 2008. TSI and Zurich again asserted that Titan does not rely on an applicant’s representations concerning his or her driving record when deciding whether to issue a no-fault insurance policy. TSI and Zurich also contended that Titan should be equitably estopped from rescinding plaintiff’s policy in light of the fact that Titan continued to accept plaintiff’s premium payments and “never bothered to run [plaintiff’s driving record] until after it received notice of [plaintiff’s] involvement in the [collision].”

 

FN2. Farmers concurred in the motion filed by TSI and Zurich. According to TSI and Zurich, the question whether “[plaintiff’s] actions … were intentional, thus excluding his eligibility for no-fault benefits pursuant to MCL 500.3105(1) and (4),” was an “issue[ ] to be raised at a later date.”

 

*4 TSI and Zurich attached the transcribed deposition of Sonia Simmons, a Titan claims representative. Simmons testified that the Secretary of State’s report showing that plaintiff’s driver license was suspended on January 7, 2008, was the “sole basis” for which Titan had cancelled plaintiff’s policy. Simmons further testified that Titan relies on driving record reports generated by the Michigan Department of State and does not generally attempt to independently confirm the accuracy of such reports. Citing MCL 500.3220, Simmons confirmed that Titan would not have checked plaintiff’s driving record at all if the collision had occurred more than 55 days after the policy was issued. TSI and Zurich also attached the transcribed deposition of Beverly Barrows. Barrows testified that she never attempted to independently verify whether plaintiff had a valid driver license and that, if plaintiff had not been involved in the collision, Titan would never have checked his driving record. When asked, “Are there situations where Titan will issue an insurance policy to someone who has a suspended license, maybe as an excluded driver or something along those lines,” Barrows responded, “Yes.”

 

Farmers moved for summary disposition on April 16, 2010, arguing that it was beyond genuine factual dispute that Titan was plaintiff’s no-fault insurer at the time of the collision on January 11, 2008, that Titan was therefore highest in the order of priority, and that Titan was exclusively responsible for the PIP benefits, if any, that were payable to plaintiff.

 

On April 30, 2010, plaintiff moved for summary disposition arguing that he had properly claimed PIP benefits through the Assigned Claims Facility given the coverage dispute among carriers. Plaintiff contended that there was no genuine issue of material fact and that Farmers was required to pay his claimed PIP benefits as a matter of law. According to plaintiff, Farmers had initially paid approximately $4,000 or $5,000 in benefits, but had then stopped paying altogether. Plaintiff asserted that Farmers had “no reasonable basis to cease paying PIP benefits” and argued that he was entitled to interest on the unpaid, overdue benefits. Plaintiff also contended that he was entitled to costs and attorney fees from Farmers as a result of its unreasonable denial of benefits.

 

At oral argument on May 7, 2010, plaintiff’s counsel asserted that “[a]t the time that [plaintiff] signed up for insurance with Titan, he thought he had a valid license.” Counsel argued that plaintiff had only discovered later, sometime after submitting his application, that his driver license was suspended. Counsel pointed to a letter that plaintiff had received from the Michigan Department of State in July 2007. That letter confirmed that an earlier license suspension had been cleared, and stated that plaintiff should carry the letter with him while driving as evidence that his license was restored. According to plaintiff’s counsel, plaintiff relied on this letter and believed that he had a valid driver license as of January 7, 2008.

 

*5 However, counsel for Titan pointed out that plaintiff had subsequently failed to pay a second driver responsibility fee, and that his license was again suspended on September 12, 2007. Thus, regardless whether plaintiff knew or not, it was beyond factual dispute that his driver license was in suspended status at the time he applied for no-fault insurance on January 7, 2008.

 

Following the attorneys’ arguments, the circuit court made the following remarks from the bench:

 

Now with regard to the motion of Titan, [plaintiff] didn’t make an intentional misrepresentation.

 

At any rate notwithstanding the representation that was made regarding licensure …, it wasn’t material. The deposition testimony supports the fact that the policy would have been issued … no matter.

 

Further, the presence or absence of the licensure didn’t make a difference here because the plaintiff wasn’t injured while driving. He was injured as a pedestrian. As a result Zurich is out, Titan is his priority insurer. That leaves us with the initial question I asked to Farmers. [F]inding that Titan is the priority carrier, does Farmers walk out the door? I don’t think so. I think Farmers stays in on the question of whether or not the plaintiff can recover penalty interest and possibly attorney fees once we have the trial and the circumstances are gone into as to the basis for the failure to pay. The reasonableness of the conduct would be reserved for the trial itself.

 

The question of eligibility, that will be resolved by the jury and if in fact he was not eligible for the reasons initially asserted by Farmers then no one will be responsible including Titan. [B]ut that is something for the jury to determine … and there will be a box on the verdict form for the jury to make a finding as to that point[.]

 

Assuming that he was eligible and this was not an intentional attempted suicide, whatever, then they can make the call as to whether or not under the circumstances Farmers should have paid….

 

On June 21, 2010, the circuit court entered an order denying Titan’s motion for summary disposition, granting summary disposition in favor of TSI and Zurich, and dismissing with prejudice all claims and cross-claims against TSI and Zurich. On July 26, 2010, the circuit court entered a second order denying Farmers’s motion for summary disposition, determining that Farmers was responsible for paying any no-fault benefits incurred through May 7, 2010, ruling that “any misrepresentation on the insurance application for Titan automobile insurance that might have occurred was not material,” and concluding that Titan was the insurance carrier of highest priority for no-fault benefits incurred after May 7, 2010. Titan moved for reconsideration of both orders, but the motions were denied.

 

On September 7, 2010, Titan filed an application for leave to appeal the circuit court’s order of July 26, 2010. This Court initially denied Titan’s application for leave to appeal,FN3 but subsequently granted Titan’s application on reconsideration.FN4 Farmers filed its claim of cross-appeal on July 22, 2011.

 

FN3. Meyers v. Transportation Services, Inc, unpublished order of the Court of Appeals, entered February 24, 2011 (Docket No. 300043).

 

FN4. Meyers v. Transportation Services, Inc, unpublished order of the Court of Appeals, entered July 1, 2011 (Docket No. 300043).

 

*6 On December 22, 2010, Farmers moved for summary disposition with respect to its cross-claim against Titan pursuant to MCR 2.116(C)(10). Farmers requested that the circuit court enter an order declaring that it was entitled to reimbursement from Titan for any and all claims ultimately deemed payable by Farmers. Farmers argued that, as a carrier assigned by the Assigned Claims Facility, it was entitled to reimbursement from Titan for all PIP benefits and other costs paid to plaintiff, including interest and attorney fees.

 

On February 18, 2011, the circuit court entered an order granting in part and denying in part Farmers’s motion for summary disposition with respect to its cross-claim against Titan. The court ruled that Farmers “is entitled to reimbursement of reasonable expenses related to Plaintiff’s PIP claim, if and when it pays such expenses for said claim, from Titan Insurance Company.” The court also ruled, however, that Farmers “is not entitled to reimbursement of any expenses deemed unreasonable, including but not limited to interest penalties pursuant to MCL 500.3142, or attorney fees pursuant to MCL 500.3148, or both.” The court determined that there remained an issue of fact concerning whether plaintiff was entitled to interest and attorney fees.

 

On March 15, 2011, the circuit court entered an order granting a stay of proceedings pending appeal. On April 5, 2011, Titan filed an application for leave to appeal the circuit court’s order of February 18, 2011. This Court granted Titan’s application for leave on December 1, 2011, and consolidated the matter with Titan’s appeal that was already pending in Docket No. 300043. FN5

 

FN5. Meyers v. Transportation Services, Inc, unpublished order of the Court of Appeals, entered December 1, 2011 (Docket No. 303405).

 

II

We review de novo the circuit court’s decision to grant or deny a motion for summary disposition. Spiek v. Dep’t of Transportation, 456 Mich. 331, 337; 572 NW2d 201 (1998). “Summary disposition is proper under MCR 2.116(C)(10) if the affidavits and other documentary evidence show that there is no genuine issue concerning any material fact and that the moving party is entitled to judgment as a matter of law.” Kennedy v. Great Atlantic & Pacific Tea Co, 274 Mich.App 710, 712; 737 NW2d 179 (2007). “A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ.” West v. Gen Motors Corp, 469 Mich. 177, 183; 665 NW2d 468 (2003).

 

III

This case is replete with triable issues of fact that must first be addressed in the circuit court. We fully acknowledge that “an insurer may rescind an insurance policy and declare it void ab initio where such policy was procured through the insured’s intentional misrepresentation of a material fact in the application for insurance.” Auto–Owners Ins Co v. Comm’r of Ins, 141 Mich.App 776, 780; 369 NW2d 896 (1985). However, the central issues in these consolidated appeals are controlled by our Supreme Court’s recent decision in Titan Ins Co v. Hyten, 491 Mich. 547; 817 NW2d 562 (2012). As the decision in Hyten makes clear, the fact that Titan did not timely investigate the representations in plaintiff’s insurance application, and the fact that Titan did not attempt to independently verify whether plaintiff was a licensed driver, have no bearing on Titan’s ultimate entitlement to rescind plaintiff’s insurance policy on the basis of fraudulent misrepresentation. Instead, the real question is whether plaintiff did, indeed, make a material misrepresentation when he indicated on his insurance application that he had a valid driver license (or, alternatively, if independent agent Abbo completed the application, whether plaintiff made a material misrepresentation when he signed it). Specifically, in order to support its rescission of plaintiff’s no-fault policy, Titan will have to prove that (1) plaintiff made a material misrepresentation, (2) the representation was false, (3) plaintiff knew the representation was false when he made it or made it recklessly without knowledge of its truth, (4) plaintiff made the representation with the intent that it would be acted on by Titan, (5) Titan acted in reliance on the representation, and (6) Titan thereby suffered injury. Hyten, 491 Mich. at 571–572.

 

*7 As noted, genuine issues of material fact remain with respect to these questions. However, if Titan can ultimately prove these elements, it will be able to establish that plaintiff’s insurance policy was properly rescinded. In such a case, Titan will not be responsible for paying any PIP benefits to plaintiff. See id. at 572. It does not matter that Titan could have ascertained the alleged fraud by conducting its own investigation. Id.

 

Of course, plaintiff claims that at the time he completed his insurance application on January 7, 2008, he could not have made any intentional misrepresentations because he did not know that his driver license was suspended. He also claims that even if he made a false representation on his insurance application, it was not material and Titan did not actually rely on the representation to issue the policy of insurance. However, there is substantial countervailing evidence pertaining to these issues. In other words, these matters also present genuine issues of material fact that require development in the circuit court. Whether a misrepresentation was material and whether it was relied on are generally questions of fact for the jury. See Bergen v. Baker, 264 Mich.App 376, 388–389; 691 NW2d 770 (2004).

 

Lastly, there certainly remains a genuine issue of material fact concerning whether plaintiff’s injuries were self-inflicted. We note that, if the jury ultimately concludes that plaintiff’s injuries were caused intentionally, plaintiff will not be entitled to PIP benefits from any insurer, and each of the defendants will be entitled to judgment as a matter of law.

 

In Docket No. 300043, we affirm the circuit court’s order denying Titan’s motion for summary disposition, affirm the circuit court’s order denying Farmers’s motion for summary disposition, and reverse the circuit court’s order dismissing TSI and Zurich. We also reverse the circuit court’s conclusions that Farmers was responsible for paying any no-fault benefits incurred through May 7, 2010, that Titan was the insurance carrier of highest priority with respect to no-fault benefits incurred after May 7, 2010, and that any misrepresentation on plaintiff’s insurance application “was not material.”

 

IV

In Docket No. 303405, we vacate the circuit court’s ruling on Farmers’s motion for summary disposition with regard to its cross-claim against Titan. Quite simply, it would be premature to address whether Farmers is entitled to reimbursement from Titan. This issue cannot be resolved until after it is determined whether Titan was entitled to rescind plaintiff’s policy of insurance in the first place. If the elements of actionable fraud are ultimately proven, and Titan is consequently entitled to judgment in this regard, Titan will not be responsible for reimbursing Farmers. Any remaining question concerning plaintiff’s entitlement to costs, interest, and attorney fees will depend on the resolution of the main issues in this case.

 

*8 In Docket No. 300043, we affirm in part, reverse in part, and remand for further proceedings consistent with this opinion. In Docket No. 303405, we vacate and remand for further proceedings consistent with this opinion. We do not retain jurisdiction. No taxable costs pursuant to MCR 7.219, no party having prevailed in full.