Michigan Coverage Decisions, Issue 184

Hempel v. Nsumba, et al

Unpublished. Decided November 25, 2014, Michigan Court of Appeals Docket No. 316483.

Farm Bureau issued an automobile insurance policy to plaintiff that included an underinsured motorist coverage endorsement. The endorsement contained the following language: “for your covered auto, this endorsement modifies insurance provided under [the uninsured motorist coverage portion of the policy]. . . .Coverage is extended for an underinsured automobile by this endorsement.” The “covered autos” under the policy were a Cadillac Deville and a Ford Pickup. Plaintiff was involved in an accident while driving a Volvo taxi cab. Plaintiff filed suit against Farm Bureau seeking underinsured motorist benefits. Farm Bureau filed a motion for summary disposition arguing that it was not required to pay underinsured motorist benefits because plaintiff was not driving a “covered auto” at the time of the accident.

The trial court denied Farm Bureau’s motion for summary disposition finding that the language of the underinsured motorist coverage endorsement extended coverage not to the covered autos under the policy, but to the insured. The Court of Appeals reversed and remanded for entry of summary disposition in favor of Farm Bureau finding that the endorsement expressly states that it is “for your covered auto” and because plaintiff was driving an automobile that was not a “covered auto” under the policy, he was not entitled to underinsured motorist coverage.

Kallas & Henk Note
The trial court found that the language stating “For your covered auto” was arguably not even part of the actual endorsement because it was contained in a header. The Court of Appeals, however, applied the long standing rule that courts must give effect to every word, phrase and clause in a contract and avoid an interpretation that would render any part of the contract nugatory.

 

Hankins v. Fremont Ins. Co.

Unpublished. Decided December 4, 2014, Michigan Court of Appeals Docket No. 317358.

The plaintiff alleged that his home had significant water damage after a pipe in his basement burst. The plaintiff did not notify his insurance company, Fremont, of the claim for over five months. During that time, plaintiff had extensive repairs and remodeling done at the house. The workman hired by plaintiff disposed of all physical evidence of the damage and the repairs. The policy required plaintiff to give “prompt notice” when there has been a loss to covered property. Based on the untimely notice, the insurance carrier denied the claim.

The trial court denied Fremont’s motion for summary disposition. The Court of Appeals reversed and
remanded for judgment in favor of the insurance company finding that plaintiff failed to give prompt notice of his claim which caused significant prejudice in that plaintiff’s actions effectively prevented defendant from conducting its own investigation of the incident and the resulting damage.

Kallas & Henk Note
The Court correctly relied on the analysis in Tenneco Inc v Amerisure Mut Ins Co, 281 Mich App 429(2008) in finding that the purpose of notice provisions requiring prompt notice of claim is to allow the insurer to make a timely investigation in order to properly evaluate claims and defend against fraudulent or excessive claims.

 

Western World Ins. Co. v. Hoey, et al

Published. Decided December 8, 2014, United States Court of Appeals, Sixth Circuit Docket No. 13-2388, 773 F.3d 755 (6th Cir. 2014).

Hoey hired Armbruster to run the hay wagon at his farmer’s market for eight weekends. Armbruster was injured when an accident with the wagon crushed her spine. Armbruster sued Hoey in Michigan state court for negligence. Western World, Hoey’s commercial general liability insurer, agreed to defend Hoey but reserved the right to deny coverage. All parties then sought a declaratory judgment regarding whether Western World had a duty to defend Hoey and indemnify him if Armbruster won her negligence suit. The central question in the declaratory judgment action was whether Armbruster was an “employee” under the policy. The policy states that coverage does not apply to bodily injury to an “employee”, “temporary worker”, or “independent contractor”. The policy does not specifically define “employee”.

The district court applied Michigan’s economic reality test to determine that Armbruster was an employee and found that the policy excluded Armbruster’s injury from coverage. The Sixth Circuit noted that the district court’s use of the economic-reality test could potentially have been in tension with the Michigan Supreme Court’s repeated instruction that undefined terms in an insurance policy should be interpreted in accordance with their commonly used meaning. However, the Sixth Circuit affirmed, finding that Armbruster was an employee under either the economic reality test or the common understanding of the word “employee”.

Kallas & Henk Note
The Sixth Circuit’s decision is consistent with the purpose of a commercial general liability policy – which is to provide coverage for injuries that occur to the general public and consistent with the purpose of worker’s compensation insurance – which is to provide coverage for injuries that occur to employees during the course of their employment.  

 

Bahri v. IDS Property Casualty Ins. Co.

Published. Decided December 9, 2014, Michigan Court of Appeals Docket No. 316869, 308 Mich. App. 420 (2014).

Defendant issued a no-fault auto policy to plaintiff on October 12, 2011. Plaintiff was involved in an auto accident on October 20, 2011. Plaintiff sought PIP and uninsured motorist benefits from defendant. The policy contained a general fraud exclusion excluding coverage for any insured who made fraudulent statements or engaged in fraudulent conduct in connection with any accident or loss for which coverage is sought. In order to substantiate her claim for replacement services, plaintiff presented a statement indicating that services were provided by Rita Radwan from October 1, 2011 to February 29, 2012. Because the accident occurred on October 20, 2011, on its face, the document is false. Additionally, surveillance evidence depicted plaintiff performing activities inconsistent with her claimed limitations.

Defendant filed a motion for summary disposition arguing that pursuant to the terms of the policy, PIP benefits and uninsured motorist benefits were precluded because of plaintiff’s fraudulent representations. It also argued that because intervening plaintiffs (doctors who treated plaintiff) stood in the shoes of plaintiff, they were not entitled to receive payment for providing PIP benefits. The trial court granted summary disposition for defendant. The Court of Appeals affirmed finding that there is no genuine issue of material fact regarding plaintiff’s fraud and her inability to recover benefits under the policy.

Kallas & Henk Note
The Court followed the established requirements in its determination that fraud occurred in this circumstance and its application that the unambiguous fraud exclusion should be enforced.  The Michigan Supreme Court recently denied the application for leave to appeal. See 498 Mich. 879 (2015).

Comments are closed.