Michigan Coverage Decisions, Issue 189

Adam v. Bell et.al.

Published. Decided August 11, 2015, Michigan Court of Appeals Docket No. 319778

The plaintiff filed a First-Party No-Fault (PIP) claim against State Farm and settled on October 15, 2012, with a release of all claims through that date. On January 16, 2013, the plaintiff filed a Third-Party claim against the at fault driver and a claim against State Farm for uninsured motorist benefits (UM). State Farm argued that the plaintiff’s claim for UM was barred by the doctrine of res judicata; that the plaintiff should have included that claim in her prior PIP suit, and therefore it is barred. The trial court agreed.

The Court of Appeals reversed the trial court’s decision and found that the prior PIP lawsuit did not act to bar the subsequent UM claim. While both lawsuits arose out of the same motor vehicle accident and involved the same parties; the two claims have significant differences, including that the necessary facts to pursue a PIP claim are available within a short time after an accident but that is not the case with a UM claim. The Court of Appeals held that, “applying res judicata to essentially require mandatory joinder of a mere potential UM claim with a PIP claim would be inconsistent with the very divergent statutory treatment of these two very different types of claims.

Kallas & Henk Note
A plaintiff cannot be forced to assert a UM claim at the same time they file a PIP claim and the litigation of one will not preclude Plaintiff from filing the other.  

 

Secura Insurance v. Hughes et. al.

Unpublished. Decided August 13, 2015, Michigan Court of Appeals Docket No. 320943, Leave Denied February 2, 2016 Supreme Court Docket No. 152345

This declaratory judgment action was filed regarding a commercial auto policy issued to Land Escape Outdoor Maintenance (LEOM), through an indepdenent insurance agent. Each winter, LEOM removed liability coverage from some vehicles and placed only comprehensive coverage for storage during the off season. In 2010, LEOM’s office manager sent an email to its insurance agent requesting a certain dump truck be put in storage. The carrier processed the change and sent a “General Change Endorsement” that it was changing the dump truck to liability coverage only, assigning $0 limit to liability, uninsured, underinsured, property damage, and med pay but listed a $1000 deductible for comprehensive coverage.

After the winter, LEOM’s president read the General Change Endorsement and determined that liability coverage had been maintained on the dump truck and began operating it again. The dump truck was involved in a motor vehicle accident with defendants, with a lawsuit filed against LEOM for the their injuries. Plaintiff provided a defense to LEOM under a reservation of rights that there was no liability coverage for the dump truck. The trial court granted summary disposition to plaintiff, finding that under the clear and unambiguous policy language, there was no liability coverage for the dump truck.

The Court of Appeals affirmed, but on other grounds. The Court recognized that the policy documents were inconsistent and irreconcilable as to whether there was liability coverage on the dump truck and found the policy was ambiguous. However, extrinsic evidence of the email asking the dump truck be placed in storage and LEOM’s understanding of what coverage was provided when a vehicle was in storage was admissible to determine that there was no genuine issue of material fact that the dump truck only had comprehensive coverage. LEOM also did not have coverage for this accident under their umbrella policy because there was no primary coverage for this dump truck under the commercial automobile policy.

Kallas & Henk Note
Even though the policy was ambiguous, the ambiguity did not result in a automatic determination of coverage under the contra-insurer rule.  The Court of Appeals analysis correctly recognized that extrinsic evidence could be used to determine the true intent of the parties based upon extrinsic evidence.

 

Land Escape Outdoor Maintenance, LLC v. Insurance Advisors, Inc.

Unpublished. Decided August 13, 2015 Michigan Court of Appeals Docket No. 321859,Leave Denied February 2, 2016 Supreme Court Docket No. 152345

This matter stems from the above, Secura Insurance v. Hughes (Docket No. 320943). Plaintiff procured a commercial automobile insurance policy with Secura through Defendant, an independent insurance agent. Plaintiff sued for fraudulent and negligent misrepresentation with respect to a change endorsement that was issued by Secura. During discovery, plaintiff alleged that certain representations about insurance coverage were made in the procurement of the policy by Plaintiff, including when liability coverage was available to plaintiff while the vehicles only had comprehensive coverage.

The trial court dismissed plaintiff’s complaint against defendant, but failed to allow an amendment to the complaint for misrepresentation about coverage. The Court of Appeals affirmed the finding dismissing the complaint but reversed allowing the plaintiff to amend its complaint. The Court of Appeals found that the circuit court properly dismissed LEOM’s claims based on the statement in the General Change Endorsement that liability insurance had been added for the vehicle. However, during discovery, LEOM presented evidence that an IA representative had misrepresented the scope of coverage available under comprehensive coverage, leading LEOM to believe that liability coverage would be available in certain situations. The circuit court should have permitted LEOM to amend its complaint to raise such a claim.

Kallas & Henk Note
An insurance agent can face potential liability for representations made to insureds about the applicability of coverages as the presumption that an insured has read the policy only applies against the insurance carrier and even if the insured admits to reading a policy, it only amounts to comparative negligence in a claim against the agent.  

 

Farm Bureau General Insurance Company of Michigan v. Hare et. al.

Unpublished. Decided August 20, 2015 Michigan Court of Appeals Docket Nos. 320710, 320771.

Plaintiff insured the six defendants for uninsured/underinsured motorist (UIM) benefits for the limits of $100,000 per person and $300,000 per occurrence. All six insureds were all involved in a motor vehicle accident where five were severely injured and the sixth died. Defendants’ policy provided that “an insured” had to receive consent before settlement with the tortfeasor if UIM benefits were sought. The at fault driver had policy limits of $250,000 per person and $500,000 per occurrence. The estate of the deceased and one of the other injured persons settled their claims against the at fault driver for the full policy limits, without carrier approval. The trial court ruled in favor of Farm Bureau, finding that under the setoff provision, no payment was owed.

The Court of Appeals upheld summary disposition on the basis that the insurer did not owe UIM benefits because it was entitled to a setoff for the at-fault tortfeasor’s limits, which exceeded the policy limits. It did not matter that only two of the six insureds recovered, rather the insurer’s UIM coverage was subject to reduction by “any amounts paid or payable for the same bodily injury.” Because the at fault tortfeasor’s policy limits were greater than the plaintiff’s UIM limits a complete setoff occurred.

Additionally, since two of the insureds settled their claim against the tortfeasor without the consent of the insurer, all the insureds’ claims for uninsured/underinsured motorist benefits were precluded. It did not matter that the other four insureds did not settle their claim because the policy language specifically stated that UIM coverage is void if “an insured” settles their claim without the insurer’s consent. The unambiguous policy language barred all claims for UIM benefits, not just the insured who settled their claim without consent.

Kallas & Henk Note
This case reinforces established precedent that UIM benefits are offset by the insurance limits of the at fault tortfeasor, regardless of what amount the insured actually received.  It further supports a long line of case law that an insurance policy is to be read according to its plain and unambiguous terms.  

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