Michigan Coverage Decisions, Issue 127

Demolition Contractors, Inc v. Westchester Surplus Lines Ins. Co.

Slip Copy. Decided April 3, 2009 United States District Court Western District of Michigan Southern Division Case No. 1:07-cv-112.

Plaintiff supplied gravel that was used as a subbase for asphalt roads in a subdivision. The gravel supplied by plaintiff caused the roadways to “pimple up” after they were paved, requiring remediation. Plaintiff paid $234,727.06 to have the roads removed and repaved. Plaintiff sought coverage from defendant for the cost of replacing the roads. The general liability policy issued by defendant contained a “voluntary payments” provision which provided that “no insured will, except at that insured’s own cost, voluntarily make a payment, assume any obligation or incur any expense, other than for first aid, without our consent.” The policy also contained a “no action clause” which provided that no person has a right to “sue use on this Coverage Part unless all of its terms have been fully complied with.” Defendant denied coverage on the grounds that plaintiff violated the voluntary payments provision and the no action clause.

The Court held that plaintiff did violate the restriction contained in the “voluntary payments” provision by making the repairs. Nonetheless, the Court held that defendant was estopped from denying coverage with respect to that portion of the claim that defendant admitted in writing (before plaintiff made the repairs) was covered under the policy. The Court held that defendant was obligated to pay plaintiff $75,000.00 which represents payment for the costs that defendant determined were covered under the policy minus plaintiff’s deductible.

[su_box title=”Kallas & Henk Note”] In understanding this decision, it is important to note that it resulted from a bench trial as opposed to a Motion for Summary Disposition. The court’s estoppel findings are based on her factual determination that the insured relied on the concession of partial coverage in its decision to voluntarily make the repairs. The opinion does not detail what facts lead the court to this determination. Most significant in the findings is the Court’s ruling that repairs made by an insured did violate the conditions section of the policy prohibiting voluntary payments. [/su_box]


Phillip v. State Farm Mut. Automobile Ins. Co.

Unpublished. Decided April 16, 2009 Michigan Court of Appeals Docket No. 282101.

Towana Phillip lived in an apartment in Dearborn Heights with four of her children, including Ti’Yanna. In June of 2004, Ti’Yanna traveled to Mississippi with her paternal grandmother, Bessie Dorsey, for the summer. Bessie had a no-fault insurance policy with State Farm. Towana’s apartment lease expired on June 30, 2004, at which time she planned to move into a house on Mettetal Street in Detroit which was owned by Maxwell Phillip, Towana’s father. The house was not habitable when her lease expired, so she moved into Maxwell’s house on Penrod Street in Detroit. On August 7, 2004, Bessie and Ti’Yanna were in an auto accident in Mississippi and Ti’Yanna suffered severe brain injuries. The trial court held that because Ti’Yanna and her mother, plaintiff, Towana, were domiciled with Maxwell on August 7, 2004, Farm Bureau, Maxwell’s no-fault insurer, was liable for Ti’Yanna’s personal injury protection benefits.

The Court of Appeals considered the relevant factors set forth by the Supreme Court in Workman v. DAIIE, 404 Mich. 477 (1979) in determining Ti’Yanna’s domicile. The Court also considered the factors set forth by the Court of Appeals in Williams v. State Farm Mut. Automobile Ins. Co., 202 Mich. App. 491 (1993). The Court found that there were arguably three places where Towana and Ti’Yanna could have been domiciled on August 7, 2004: the Dearborn Heights apartment, the Penrod Street house, and the Mettetal Street house. The Court held that they were not domiciled at the Dearborn Heights apartment because they had vacated the apartment and had no intention of returning. The Court found that they were also not domiciled at the Mettetal house because it was uninhabitable and they had never resided there. The Court held that, by default, the house on Penrod Street, which is where Towana intended to reside until the Mettetal Street house was habitable, was the domicile of Towana and Ti’Yanna on the date of the accident.

[su_box title=”Kallas & Henk Note”] The place of residence for purposes of insurance continues to vex the courts where people are constantly moving, residing for short periods in a location and/or are in very temporary living arrangements. In this case, it appears the Court of Appeals reached the only reasonable conclusion on domicile. [/su_box]


Legal Services Plan of Eastern Michigan v. Citizens Ins. Co. of America

Unpublished. Decided April 30, 2009 Michigan Court of Appeals Docket No. 278110.

Citizens issued an insurance policy to plaintiff providing coverage for plaintiff’s business premises from September 6, 2002 to September 6, 2003. In June of 2003, the City of Flint began a construction project which involved replacing the sidewalk and planting trees near plaintiff’s building. Abbott Construction performed the construction work and Wade-Trim oversaw the project. Plaintiff’s basement ran under the sidewalk and was occupied by commercial tenants. Abbott employees did not put down any type of waterproofing material to cover the opened sidewalk before leaving for the 4th of July weekend. It rained very hard over the weekend and on July 7, 2003, a large amount of water was discovered in plaintiff’s basement. An engineer with Wade-Trim testified that a major storm deposited a large amount of rain in a short period of time and because the curb was removed, water was able to spill off into an open area where there was no curb or sidewalk. The water flowed through a hole (an old coal chute) in the wall of plaintiff’s basement which had become unsealed during the construction. The trial court held that exclusions in the Citizens policy precluded coverage for the damage to plaintiff’s building caused by water and construction activity.

The Court of Appeals found that the trial court did not err in granting summary disposition to Citizens because the policy specifically and unambiguously excludes damage caused directly or indirectly by surface water. Although “surface water” was not defined in the policy, the Court found that under Michigan case law, “surface waters” are “waters on the surface of the ground, usually created by rain or snow, which are of a casual or vagrant character, following no definite course and having no substantial or permanent existence.” The Court held that when the rainwater fell on the street and began to pool and flow, it became “surface water” and did not cease to be surface water when it flowed into plaintiff’s basement through an opening in the wall. The Court also held that construction activity is an excluded cause of loss. The policy provides that Citizens is not required to pay for damage caused by “acts or decisions, including the failure to act or decide, or any person, group, organization, or governmental body.” The Court held that because construction activity constitutes “ac ts”, any damage caused by that activity is not covered.

[su_box title=”Kallas & Henk Note”] The courts ruling with respect to damage from a surface water is consistent with prior court decisions. The decision with regard to construction activities off the site resulted from the policy language only. The Court of Appeals decision does not cite any prior cases interpreting that provision. [/su_box]


Progressive Michigan Ins. Co. v. Rozafa Transport, Inc.

Unpublished. Decided June 9, 2009 Michigan Court of Appeals Docket Nos. 283000, 283395.

This action arose from an accident which occurred when William Neill and James Borelli were removing components from a truck owned by Rozafa Transport and driven by its employee, Rrogomi. While the truck was being unloaded, a 800 pound piece of equipment (piece D) fell from the truck and struck Neill, causing his death. Before piece D fell, Borelli had used a forklift to remove two other pieces of equipment.  The circumstances that caused piece D to fall were disputed. Progressive insured Rozafa Transport. Progressive filed this declaratory action against Rozafa and Rrogomi seeking a declaration that it had no duty to defend or indemnify them in the underlying wrongful death action. The trial court granted Progressive’s motion for summary disposition, holding that coverage was negated pursuant to an exclusion for “bodily injury . . .resulting from or caused by the movement of property by a mechanical device, other than a hand truck , not attached to an insured auto.”

The Court of Appeals found that Progressive’s policy provides coverage for “bodily injury…for which an insured becomes legally responsible because of an accident arising out of the ownership, maintenance or use of an insured auto.” The wrongful death complaint alleged that Neill’s death was caused by Rrogomi’s negligent conduct in operating and unloading Rozafa Transport’s truck, which was an insured vehicle under the Progressive policy. Further, the evidence showed that Neill was killed when he was struck by a large piece of equipment that fell from Rozafa’s truck. The Court held that these allegations and evidence were sufficient to show that coverage under the Progressive policy was possible on the basis that Neill’s death arose out of the use of an insured automobile. The Court held that trial court erred in granting Progressive summary disposition on the basis of the exclusion for “bodily injury . . .resulting from or caused by the movement of property by a mechanical device, other than a hand truck , not attached to an insured auto.” The Court held that the evidence reveals a genuine issue of material fact whether Neill’s death resulted from or was caused by the movement of property by the forklift.

[su_box title=”Kallas & Henk Note”] In finding that the trial court improperly granted summary disposition, the Court of Appeals relied on a dispute in the facts on the exact mechanics of the accident. Presumably, if the facts ultimately show that the injury resulted from the use of the forklift, judgment will be entered in favor of the insurer. [/su_box]

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