Michigan Coverage Decisions, Issue 191

The Cincinnati Insurance Company v. V.K. Vemulapalli

Unpublished. Decided November 17, 2015, Michigan Court of Appeals Docket No. 322840, leave denied June 28, 2016, Supreme Court Docket No. 152910

The defendant insured’s building suffered a property loss in 1998. The insured submitted a claim to the insurance carrier for the damage in September 1998 and the insurer responded in October 1998 advising the insured what materials constituted satisfactory proof of loss. In 2005, the matter went to arbitration with an award of $579,407.76. The insurer paid the arbitration award within 60 days of the entry of judgment. Thereafter, the insured requested penalty interest under the Uniform Trade Practices Act (UTPA) which the trial court denied.

The Court of Appeals upheld the trial court’s refusal to award interest under the UTPA. It found that the October 1998 letter was sufficient to notify the insured in writing of what materials constituted a satisfactory proof of loss. The Court of Appeals further found that the insured did not provide the insurer with satisfactory information until the arbitration award was entered in May 2005. Plaintiff complied by paying that judgment within 60 days relieving it of any statutory penalty interest.

Kallas & Henk Note
The Court strictly enforced the time for computation of penalty interest which does not begin to run until a satisfactory proof of claim is received by an insurer.  

 

Susan Bailey v. Great Lakes Mutual Ins. Co.

Unpublished. Decided November 17, 2015, Michigan Court of Appeals Docket No. 321655, leave denied June 28, 2016, Supreme Court Docket No. 152878

The Plaintiff insured had a rental policy issued by the Defendant insurance carrier . The insured had executed a separate occupancy statement in which certain notice requirements had to be complied with by the insured. A claim occurred for water damage to the unoccupied property. The insured failed to comply with the requirements and the carrier denied the claim. The trial court denied summary disposition to the insurance carrier, finding that the statement of occupancy was not part of the policy.

The Court of Appeals affirmed that the occupancy statement was not part of the policy and upheld the lower court denial of summary disposition. The Court declined to find that the statement was a condition precedent and the policy itself contained no such occupancy requirement which would change the scope of coverage. Based on the evidence presented, the Court declined to independently enforce the occupancy statement.

Kallas & Henk Note
While the carrier may have intended the occupancy statement to function as a condition precedent, because there was not incorporation of the statement into the policy itself, the Court declined to enforce it. Had the occupancy statement  been incorporated into the policy, based on recent case law, it is likely that the Court would have enforced the provision.  

 

Farm Bureau Mutual Ins. v. Michelle and James Wagner, et. al.

Unpublished. Decided November 17, 2015, Michigan Court of Appeals Docket No. 322738

An auto accident occurred when the driver was working as a pizza delivery driver and the other party involved was injured. The insurer for the delivery driver’s policy contained an exclusion eliminating coverage for liability arising out of the operation of a vehicle while being used to carry property or passengers for a fee. The trial court granted summary disposition in favor of the insurance carrier finding that the provision was not ambiguous.

The Court of Appeals affirmed the trial court decision, rejecting the arguments of reasonable expectations, ambiguity and application of the Motor Carrier Act to require that coverage be afforded under the policy.

Kallas & Henk Note
The Court relied upon the prior decision in Amerisure v. Graff Chevrolet, 257 Mich App 585(2003), which addressed a similar provision contained in a rental contract  and determined that such provision was unambiguous and eliminated coverage in an identical circumstance where the renter was delivering pizzas. Since both the policy and the rental agreement are contracts, the Court enforced the exclusionary language.  

 

Auto-Owners Ins. Co. v. William and Cally Morse, et. al.

Unpublished. Decided November 19, 2015, Michigan Court of Appeals Docket No. 322635

The Plaintiff sought declaratory relief regarding the question of whether it owed first-party no-fault benefits to Defendants. Defendants were injured while passengers is a rental van on vacation in Hawaii and sought first-party no-fault benefits from Plaintiff. The defendants did not have a no-fault policy issued to them, but sought to claim coverage under a commercial business policy issued to their son’s corporation, on which they were listed as drivers. The insurer denied coverage based on a no-fault exclusion for injuries sustained outside the state of Michigan. The trial court denied the carrier’s motion, finding that the policy must be reformed to make the defendants named insureds due to the lack of insurable interest by the policy’s named insured and the policy impermissibly shifted that statutory burden for payment of PIP benefits and require payment of PIP benefits on behalf of the defendants.

On interlocutory appeal, the Court of Appeals reversed the decision of the trial court, denying the insurance carrier’s motion for summary disposition, determining that the named insured corporation did have an insurable interest in the policy at issue, the policy did afford coverage in certain circumstances in compliance with the Michigan no-fault act and the policy did not impermissibly shift the responsibility for payment of no-fault benefits, therefore the trial court erred in its original ruling that PIP benefits were owed. The Court remanded the matter for further proceedings consistent with its ruling.

Kallas & Henk Note
The Court refused to require the payment of first-party benefits for an out-of state accident which did not fall within the policy terms. This decision is consistent with the intent and purpose of the no-fault act and the policy terms which complied with the intent and purpose of the no-fault act.  

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