MSC 149036 AUTO-OWNERS INSURANCE CO V ALL STAR LAWN SPECIALISTS PLUS INC Opinion on Application - Reverse CoA 11/25/2014

AUTO-OWNERS INSURANCE CO v ALL STAR LAWN SPECIALISTS PLUS, INC
Docket No. 149036. Decided November 25, 2014.
Joseph M. Derry initially brought an action in the Macomb Circuit Court against All Star
Lawn Specialists Plus, Inc., and Jeffery A. Harrison (a coowner of All Star), seeking damages for
injuries sustained while working on a lawn maintenance crew run by Harrison when a leaf
vacuum machine that Derry was using to load leaves into a truck owned by All Star fell over,
causing part of the machine to strike him. Derry claimed that Harrison had negligently failed to
secure the machine to the truck. Derry also filed an action in the Macomb Circuit Court against
Auto-Owners Insurance Company, seeking no-fault benefits under a commercial automobile
insurance policy issued by Auto-Owners to All Star that insured the truck. Auto-Owners then
brought the present action in the Macomb Circuit Court against All Star, Harrison, and Derry,
seeking a declaratory judgment to determine the parties’ rights and obligations under the
automobile policy and two other policies issued by Auto-Owners to All Star, a commercial
general liability policy and a workers’ compensation policy. The court, John C. Foster, J.,
denied Auto-Owners’ motion for summary disposition and granted summary disposition in favor
of Derry, holding that Derry was an independent contractor at the time of his injury and that he
was not an employee within the meaning of any of the insurance contracts. The court held that
Derry was not entitled to coverage under the Worker’s Disability Compensation Act (WDCA),
MCL 418.101 et seq., and, therefore, not entitled to coverage under the workers’ compensation
policy, that the general liability policy provided coverage for Derry’s negligence claim against
All Star and Harrison, and that the automobile policy provided coverage for Derry’s claim
against Auto-Owners for no-fault benefits. Auto-Owners appealed. The Court of Appeals,
J ANSEN, P.J., and S AWYER and S ERVITTO, JJ., affirmed in part, reversed in part, and remanded
the case to the circuit court, concluding that when determining employee status under the WDCA
for purposes of this case, MCL 418.161(1)(l) and (n) had to be read together as separate and
necessary qualifications. Because Derry was an employee within the meaning of subdivision (l),
it was necessary to determine whether he was also an employee under subdivision (n), which sets
forth three criteria for determining whether a person performing services for an employer
qualifies as an independent contractor rather than an employee. Amerisure Ins Cos v Time Auto
Transp, Inc, 196 Mich App 569 (1992), held that if a person meets any of the three statutory
criteria in MCL 418.161(1)(n), that person is an independent contractor and not an employee.
The panel was required under MCR 7.215(J) to follow Amerisure. Had it not been obligated to
do so, the panel would have reached a different interpretation of the statute and held that all three
criteria must be met in order to determine that a person is an independent contractor. 301 Mich
App 515 (2013). The Court of Appeals convened a special panel to resolve the conflict between
Michigan Supreme Court
Lansing, Michigan
Syllabus Chief Justice:
Robert P. Young, Jr.
Justices:
Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
This syllabus constitutes no part of the opinion of the Court but has been
prepared by the Reporter of Decisions for the convenience of the reader.
Reporter of Decisions:
Corbin R. Davis

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this case and Amerisure and vacated part I, the second paragraph of part II, and the second
paragraph of part III of its prior opinion in this case. 301 Mich App 801 (2013). After
consideration by the special panel, the Court of Appeals, K. F. KELLY, P.J., and C AVANAGH ,
O’C ONNELL, and S TEPHENS , JJ. (BORRELLO, FORT HOOD , and M. J. KELLY, JJ., dissenting),
overruled Amerisure, holding that all three criteria must be satisfied for an individual to be
divested of employee status under subdivision (n), and that the trial court erred by entering
summary disposition in favor of Derry. Because Derry met only two of the three criteria in MCL
418.161(1)(n), he remained an employee at the time of his injury and his exclusive remedy was
under the WDCA. 303 Mich App 288 (2013). Derry sought leave to appeal.
In an opinion per curiam signed by Chief Justice YOUNG and Justices M ARKMAN, KELLY,
ZAHRA, M C C ORMACK, and VIVIANO , the Supreme Court, in lieu of granting leave to appeal and
without hearing oral argument, held:
Under MCL 418.161(1)(n), as used in the WDCA, the word “employee” means every
person performing service in the course of the trade, business, profession, or occupation of an
employer at the time of the injury, if the person in relation to this service does not maintain a
separate business, does not hold himself or herself out to and render service to the public, and is
not an employer subject to the WDCA. The Court of Appeals properly interpreted this statute in
Amerisure. Each criterion of MCL 418.161(1)(n) must be satisfied for an individual to be
considered an employee; conversely, failure to satisfy any one of the three criteria will exclude
an individual from employee status. By requiring that all three statutory criteria be met for an
individual to be divested of employee status, the special panel majority’s interpretation ignored
the word “not” contained in each criterion.
Reversed and remanded to the Macomb Circuit Court for further proceedings.
Justice C AVANAGH would have granted leave to appeal.
©2014 State of Michigan

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FILED NOVEMBER 25, 2014
S T A T E O F M I C H I G A N
SUPREME COURT
AUTO-OWNERS INSURANCE
COMPANY,
Plaintiff-Appellee,
v No. 149036
ALL STAR LAWN SPECIALISTS PLUS,
INC., and JEFFERY A. HARRISON,
Defendants,
and
JOSEPH M. DERRY,
Defendant-Appellant.
BEFORE THE ENTIRE BENCH
PER CURIAM.
In this case, we are called upon to interpret the definition of “employee” as found
in MCL 418.161(1)(n), prior to being amended in 2011, which is a provision in the
Worker’s Disability Compensation Act (WDCA), MCL 418.101 et seq. By a special
panel convened to hear this case under MCR 7.215(J), the Court of Appeals rejected that
Michigan Supreme Court
Lansing, Michigan
Opinion Chief Justice:
Robert P. Young, Jr.
Justices:
Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano

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2
Court’s previous interpretation of this definition in Amerisure Ins Cos v Time Auto
Transp, Inc. 1 Because we believe the term “employee” as defined in the WDCA was
properly interpreted in Amerisure, we reverse the Court of Appeals.
While working on a fall clean-up job for defendant All Star Specialists Plus, Inc.,
defendant Joseph Derry was loading leaves into a truck using a leaf vacuum machine
when the machine tipped over, injuring him. At the time, All Star had three insurance
policies issued by Auto-Owners Insurance Company: (1) a commercial general liability
policy, (2) a commercial automobile insurance (no-fault) policy, and (3) a commercial
workers’ compensation policy. The general liability policy excludes from coverage
“[a]ny obligation of the insured under a workers[’] compensation . . . law,” and the no-
fault policy excludes coverage for “any expenses that would be payable under any
workers[’] compensation law . . . .”
Derry brought a negligence suit against All Star and one of its owners, Jeffery
Harrison, for his injuries and sued Auto-Owners for no-fault benefits. Plaintiff Auto-
Owners later filed the present declaratory judgment action, seeking a determination that
Derry was an employee of All Star and, thus, that the only insurance coverage available
was under the workers’ compensation policy. Plaintiff Auto-Owners moved for summary
disposition pursuant to MCR 2.116(C)(10). Derry contended that because he was an
independent contractor, the general liability policy and no-fault policy applied to his
negligence and no-fault claims, respectively. The trial court concluded that because it
was uncontroverted that Derry held himself out to the public to perform the same services
1 Amerisure Ins Cos v Time Auto Transp, Inc, 196 Mich App 569; 493 NW2d 482 (1992).

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as the work he performed for All Star, Derry was an independent contractor at the time of
his injury and not an employee, and that Derry was therefore entitled to coverage under
Auto-Owners’ general liability and no-fault policies. The court denied Auto-Owners’
motion for summary disposition and granted summary disposition in favor of Derry.
Auto-Owners appealed in the Court of Appeals, and the panel affirmed in part and
reversed in part in a published opinion. 2 The panel affirmed the trial court’s conclusion
that Derry was an independent contractor for purposes of the WDCA. However, the
panel only reached this conclusion because it was bound under MCR 7.215(J)(1) to
follow the Court of Appeals’ prior decision in Amerisure, which held that each criterion
of MCL 418.161(1)(n) must be satisfied for an individual to be an employee, and
otherwise would have held that Derry was an employee. The panel called for a special
panel to resolve the conflict.
A special panel was convened, 3 and in a published 4-3 decision, the majority
reversed the trial court’s order granting summary disposition in favor of Derry and, thus,
its determination that Derry was an independent contractor. 4 The special panel majority
overruled Amerisure and held “that all three of the statutory criteria in
MCL 418.161(1)(n) must be met before an individual is divested of ‘employee’ status.”5
2 Auto-Owners Ins Co v All Star Lawn Specialists Plus, Inc, 301 Mich App 515; 838
NW2d 166 (2013).
3 Auto-Owners Ins Co v All Star Lawn Specialists Plus, Inc, 301 Mich App 801 (2013).
4 Auto-Owners Ins Co v All Star Lawn Specialists Plus, Inc, 303 Mich App 288; 845
NW2d 744 (2013).
5 Id. at 301 (emphasis added).

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The majority concluded that because Derry only met two of the three criteria, Derry
remained an employee at the time of his injury. 6 The majority concluded that only the
workers’ compensation policy provided coverage and that the trial court had erred by
entering summary disposition in favor of Derry. 7
Derry sought leave to appeal in this Court, specifically seeking reversal of the
special panel majority’s ruling that he was an employee under MCL 418.161(1)(n).
The workers’ compensation policy at issue provides insurance for certain bodily
injuries when benefits are required by the WDCA. 8 The issue before this Court is the
proper interpretation of the definition of “employee” in § 161 of the WDCA, specifically
subsection (1)(n), prior to being amended in 2011. 9 That subsection provided:
6 Id.
7 Id.
8 As this Court summarized in Hoste v Shanty Creek Mgt, Inc, 459 Mich 561, 570; 592
NW2d 360 (1999):
Michigan’s Worker’s Disability Compensation Act requires that
employers provide compensation to employees for injuries suffered in the
course of the employee’s employment, regardless of who is at fault.
MCL 418.301 . . . . In return for this almost automatic liability, employees
are limited in the amount of compensation they may collect, and, except in
limited circumstances, may not bring a tort action against the employer.
See MCL 418.131 . . . . The statute also defines who is an “employee” in
§ 161, and by doing so determines which individuals have essentially
traded the right to bring a tort action for the right to benefits.
9 Subsection (1)(n) must also be read along with subsection (1)(l), but the interpretation
of that subsection’s language is not at issue. See id. at 573 (holding that “once an
association with a private employer is found under § 161(1)(b) [a prior version of
§ 161(1)(l)], the characteristics of that association must meet the criteria found in
§ 161(1)(d) [a prior version of § 161(1)(n)]”).

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(1) As used in this act, “employee” means:
* * *
(n) Every person performing service in the course of the trade,
business, profession, or occupation of an employer at the time of the injury,
if the person in relation to this service does not maintain a separate
business, does not hold himself or herself out to and render service to the
public, and is not an employer subject to this act. [Emphasis added.]
The Court of Appeals correctly interpreted this provision in its decision in Amerisure,
stating, “By so employing the word ‘not,’ the Legislature intended that once one of these
three provisions occurs, the individual is not an employee. Thus, each provision must be
satisfied for an individual to be an employee.”10 Therefore, the three criteria that must be
met for a person “performing service in the course of the trade, business, profession, or
occupation of an employer at the time of the injury” to be considered an employee are
that a person, “in relation to this service”: (1) does not maintain a separate business, (2)
does not hold himself or herself out to and render service to the public, and (3) is not an
employer subject to this act. As a result, if a person, in relation to the service in question,
maintains a separate business or holds himself or herself out to and renders service to the
public or is an employer subject to this act (i.e., if the person fails to satisfy any one of
the three criteria), then that person is excluded from employee status.
By requiring that all three statutory criteria be met for an employee to be divested
of employee status, the special panel majority’s interpretation ignored the word “not”
contained in each criterion. This interpretation contravenes the principle of statutory
interpretation that “[c]ourts must give effect to every word, phrase, and clause in a statute
10 Amerisure Ins Cos, 196 Mich App at 574.

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and avoid an interpretation that renders nugatory or surplusage any part of a statute.”11
We instead agree with dissenting Judge B ORRELLO , who correctly concluded that
Amerisure was properly decided. Contrary to the majority’s assertions, the Amerisure
interpretation does not ignore the word “and” in MCL 418.161(1)(n); it takes into
consideration both the word “and” connecting the three criteria and the word “not” within
each criterion. Each criterion of MCL 418.161(1)(n) must be satisfied for an individual
to be considered an employee; conversely, failure to satisfy any one of the three criteria
will exclude an individual from employee status.
When overruling Amerisure, the special panel majority expressly adopted the
reasoning of the prior panel, 12 which relied in part on a paraphrase of MCL 418.161(1)(n)
in Chief Justice T AYLOR ’s lead opinion in Reed v Yackell.13 However, to the extent that
the special panel relied on this paraphrase by adopting the reasoning of the original panel,
their reliance was misplaced. Chief Justice T AYLOR attempted to paraphrase the
cumbersome language of MCL 418.161(1)(n) as follows:
[MCL 418.161(1)(n)] provides that every person performing a
service in the course of an employer’s trade, business, profession, or
occupation is an employee of that employer. However, the statute
continues by excluding from this group any such person who: (1) maintains
his or her own business in relation to the service he or she provides the
employer, (2) holds himself or herself out to the public to render the same
service that he or she performed for the employer, and (3) is himself or
11 People v Couzens, 480 Mich 240, 249; 747 NW2d 849 (2008).
12 Auto-Owners Ins Co, 303 Mich App at 291, 296-299.
13 Reed v Yackell, 473 Mich 520; 703 NW2d 1 (2005).

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herself an employer subject to the WDCA. [Reed, 473 Mich at 535
(opinion by T AYLOR , C.J.).]
Chief Justice TAYLOR thus sought to replace the confusing negative definition of an
employee created by MCL 418.161(1)(n) with a positive definition of people who are
excluded from the statutory class of employees by operation of the statute. This
statement may not, however, be interpreted as an indication that this Court believed all
three criteria of MCL 418.161(1)(n) must be met for a person to be excluded from
employee status.
As an initial consideration, Reed was a plurality opinion and does not constitute
binding precedent of this Court. 14 Therefore, even if Chief Justice T AYLOR ’s paraphrase
indicated that he had favored the special panel majority’s interpretation of
MCL 418.161(1)(n), the statement could not be taken as guidance from this Court
because the lead opinion only represented the views of three justices.
Chief Justice TAYLOR’s paraphrase in Reed was also dictum and, again, is not
binding precedent. 15 The differences between the statutory language and the paraphrase
had no impact on the decision in Reed because the question before this Court was the
meaning of the statutory phrase “this service.” 16 Reed never addressed whether a person
14 Frankenmuth Mut Ins Co v Masters, 460 Mich 105, 115 n 7; 595 NW2d 832 (1999)
(explaining that “plurality opinions are not binding precedent because they did not garner
a majority of the Court”).
15 People v Peltola, 489 Mich 174, 190 n 32; 803 NW2d 140 (2011) (“Obiter dicta are
not binding precedent. Instead, they are statements that are unnecessary to determine the
case at hand and, thus, lack the force of an adjudication.”) (quotation marks and citation
omitted).
16 Reed, 473 Mich at 535-538.

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is excluded from employee status if he or she fails to meet only one criterion in MCL
418.161(1)(n).
Lastly, to the extent that the plurality in Reed did contemplate this question, it
demonstrated no intention of changing Amerisure’s settled interpretation. To the
contrary, it was undisputed throughout Reed that the plaintiff was not an employer under
the WDCA. 17 Under the interpretation of MCL 418.161(1)(n) adopted by the original
panel and special panel majority in this matter, this in itself would have been sufficient to
conclude that the plaintiff retained his status as an “employee.” This Court in Reed,
however, found it necessary to explore whether the other two statutory criteria were also
satisfied before making this determination, as Amerisure requires. Reed was thus
considered and decided in a manner fully consistent with Amerisure’s interpretation of
MCL 418.161(1)(n), and it is readily apparent that the plurality did not intend to disrupt
that interpretation.
17 See Reed, 473 Mich at 536 (the plaintiff argued that he was an independent contractor
only because “he maintained a separate business and held himself out to the public as a
day laborer”); see also Reed v Yackell, 469 Mich 960 (2003) (remanding to the trial court
to make factual findings only with regard to these arguments, but not regarding whether
the plaintiff was an employer under the WDCA).

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9
Because the special panel majority of the Court of Appeals incorrectly interpreted
MCL 418.161(1)(n), we reverse that decision and remand this matter to the Macomb
Circuit Court for further proceedings consistent with this opinion and the Court of
Appeals’ July 9, 2013 opinion.
Robert P. Young, Jr.
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
C AVANAGH , J. I would have granted leave to appeal.

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