Michigan Coverage Decisions, Issue 13

Radenbaugh v Farm Bureau General Insurance Company

Published. Decided March 3, 2000. Michigan Court of Appeals Docket Number 212080.

Plaintiff filed this breach of contract action for failure to defend and indemnify in an underlying lawsuit. Farm Bureau issued a commercial general liability policy to Plaintiff. Plaintiff was sued in the underlying action for, among other things, negligence in providing defective building plans. It was alleged that these plans caused a dwelling to be defectively constructed which caused consequential damage to the interior of the structure.
The Trial Court granted summary disposition to Plaintiff finding that the allegations of the amended complaint could arguably include covered claims. The Court of Appeals affirmed, finding that while claims of breach of warranty and defective construction are not normally covered, in this case, where the allegations in the complaint included claims of consequential property damage resulting from the negligence of the insured, the insurer had a duty to defend. The Court affirmed the Trial Court order reimbursing the insured for attorney fees and for the amount paid in settlement of the underlying action. The Court rejected Defendant’s argument that there could not be an occurrence because the principal claim was for defective workmanship finding that the consequential damage caused by the negligence was an occurrence. The Court also held that the “business risks” exclusion did not apply because the damages were not solely to the insured’s product.

[su_box title=”Kallas & Henk Note”] The decision in this case points out the danger in failing to defend an insured while reserving rights under a policy. While the decision does not specifically address the issue, it is clear from the recital of facts that the damages awarded probably were not for a covered claim. Because the insurer failed to defend, however, this was never addressed in the underlying action. A judgment was entered in the underlying action against the insured with the judge being the trier of fact. Even in this circumstance, the underlying judgment does not appear to specify whether the covered portion of the claim (consequential damage to property) was a part of the judgment. Because, however, this claim was in the complaint, the Court of Appeals held that the insurer was required to pay both defense costs and the amount of the settlement entered into after judgment. [/su_box]


SAFECO Insurance Company v Ditonto et al

Unpublished. Decided March 3, 2000. Michigan Court of Appeals Docket Number 211029.

In this declaratory action, Plaintiff sought a ruling that it had no duty to defend or indemnify its insureds under a homeowner’s policy where the allegation against the insureds were “physical, emotional and sexual abuse” by two of three insured members of the household. The Trial Court granted summary disposition to Plaintiff insurer and the Court of Appeals affirmed.
The Court rejected the insured’s claim that a “day care exclusion” did not apply because the definition of day care center in the policy did not apply to the services provided by the insureds. The Court held that the insureds had failed to present adequate evidence in support of their factual assertions with regard to this definition. Additionally, the Court held that the Intentional Acts Exclusion contained in the policy applied to exclude coverage to all insureds.

[su_box title=”Kallas & Henk Note”] This decision is consistent with many prior Michigan appellate decisions which find that allegations of sexual abuse are not covered under homeowner’s policies. It is interesting to note that the decision makes no reference to the “occurrence” requirement of most policies. It is possible that the insured in this case did not raise this issue because of the direct applicability of the “day care exclusion”. [/su_box]


Nabozny v Burkhardt

Published. Decided March 7, 2000. Michigan Supreme Court Docket Number 113876.

In this garnishment action, Plaintiff was injured as a result of an altercation with Pioneer State Mutual’s insured. The insured, Kevin Burkhardt, tripped the Plaintiff which resulted in a broken ankle. Plaintiff took a judgment against Burkhardt and then issued a garnishment against Pioneer State in this action. The Trial Court agreed with Plaintiff that Pioneer State had breached its duty to defend and indemnify Burkhardt and the Court of Appeals affirmed.
In this decision, the Supreme Court reversed both the Court of Appeals and the Trial Court and held that there was no coverage because there was no “occurrence”. The Court rejected Plaintiff’s argument that because Burkhardt did not intend to cause the specific harm to Plaintiff (broken ankle ), the incident was accidental and constituted an occurrence. In finding that there was no accident and therefore no “occurrence” as defined in the policy, the Court adopted the following language from a prior opinion: “Where a direct risk of harm is intentionally created, and property damage or personal injury results, there is no liability coverage even if the specific result was unintended. It is irrelevant that the character of the harm that actually results is different from the character of the harm intended by the insured.”

[su_box title=”Kallas & Henk Note”] This decision by the Supreme Court reverses the curious Court of Appeals decision reported and discussed in Michigan Coverage Decisions, Issue 2, February 1999. This opinion should finally put to rest all claims that an insured is entitled to coverage where the insured engages in an activity reasonably likely to result in injury or harm merely because the harm caused was not the harm intended. This decision is consistent with the recent Supreme Court decision, Frankenmuth Mutual vs. Masters, 460 Mich 105 (1999).  [/su_box]


Ramsden v Auto-Owners Insurance Company

Unpublished. Decided March 21, 2000. Michigan Court of Appeals Docket Number 215246.

Plaintiff brought this first party action for damages sustained to Plaintiff’s commercial building. Defendant issued a property insurance policy which covered for “collapse of a building or any part of a building”. Plaintiff’s roof had sagging areas and leaks. Defendant inspected the damage and found several broken rafters. Defendant agreed to cover the damage to the rafters but not to replace the sagging roof.

The Court of Appeals in this decision affirmed the Trial Court’s finding that the damage to the roof was not caused by “collapse”. While the term “collapse” was not defined in the policy, the Trial Court looked at the dictionary definition and held that the common definition of the term required either a sudden or complete cave in. The Court of Appeals also rejected Plaintiff’s argument that “collapse” as defined in the Defendant’s policy included the possibility of the future collapse because of the condition of the property.

[su_box title=”Kallas & Henk Note”] While this decision does reference the use of a dictionary definition to define a term in an insurance policy, the Michigan Supreme Court has cautioned in the other decisions that conflicting dictionary definitions do not necessarily, create ambiguities in the policy. [/su_box]

Comments are closed.