Michigan Coverage Decisions, Issue 133

Sherrod v. American Physicians Capital, Inc.

Unpublished. Decided November 10, 2009 Michigan Court of Appeals Docket No. 287784.

Plaintiff alleged that defendants, plaintiffs’ medical malpractice insurer, breached the contract when it satisfied a judgment against plaintiff Sherrod without his consent. The policy provided that the company shall not settle any claim by payment of damages without the named insured’s written consent unless the trial court has rendered a final judgment or other disposition of the claim and the company, in its sole discretion, decides that all feasible remedies by appeal or other legal proceedings shall not be pursued. Defendant insurer decided not to pursue post-judgment or appellate remedies. Plaintiff alleged that defendant had an obligation to pursue a post-trial motion that had been filed on plaintiffs’ behalf and all appellate remedies. The trial court granted defendants’ motion for summary disposition.

The Court of Appeals held that in light of the clear language that the decision to pursue remedies by appeal or other legal proceedings was in the “sole discretion” of defendants, summary disposition was properly granted with respect to the breach of contract claim.

[su_box title=”Kallas & Henk Note”] The Court found that entry of Judgment was a “Final Judgment” and that the contract did not require any post judgment action for the consent to settle provision to no longer apply. [/su_box]


Marshall v. Farm Bureau Gen. Ins. Co. of Michigan

Unpublished. Decided November 17, 2009 Michigan Court of Appeals Docket No. 289602.

Plaintiff was injured in an auto accident involving an underinsured motorist. Although he timely claimed his first-party benefits, he did not separately notify defendant of his underinsured motorist claim until more than one year after the accident. Defendant denied his request on the basis of a policy provision which provides that any person seeking uninsured motorist coverage must present written notice of the claim for uninsured motorist coverage within one year after the accident occurs. Plaintiff sued after defendant denied his request for benefits. The trial court granted plaintiff’s motion for summary disposition.

The Court of Appeals held that the trial court erred in not enforcing the unambiguous language of the contract. The Court noted that by the express terms of the policy, had plaintiff complied with the notice provision in the contract, the one-year limit on commencing suit would not have applied. The Court found that the trial court’s conclusion that compliance with the policy was impossible and the contract was illusory was erroneous. There was no showing that plaintiff was unable to provide satisfactory notice within one year. Application for leave to appeal was denied. 486 Mich. 910 (2010).

[su_box title=”Kallas & Henk Note”] This case stands for the proposition that an insured must provide separate notice for any claim for uninsured/underinsured motorists benefits even if the company has notice of the injuries and accident because of a PIP claim. [/su_box]


Farmers Ins. Exchange v. Henderson

Unpublished. Decided November 17, 2009 Michigan Court of Appeals Docket No. 284683.

Edward Carter, a pedestrian, was struck by an uninsured vehicle and suffered serious injuries. Edward did not own a vehicle and purportedly did not reside with an individual having a no-fault insurance policy. Farmers was assigned to handle the claim through the Michigan Assigned Claims facility. Farmers alleged that Edward’s sister was covered under a policy of insurance with Auto Club and that Edward resided with her at the time of the accident. The trial court held that Edward resided part-time with his sister and therefore, her insurance company was responsible for the claim based on dual domiciles.

The Court of Appeals found that there were inconsistencies in the affidavits and deposition testimony from Edward and his relatives about where Edward resided at the time of the accident. The Court held that because of the inconsistencies in the affidavits and deposition testimony, the trial court improperly granted summary disposition. The Court also noted that the trial court erred in finding that Edward’s part-time residence with his sister was sufficient to establish dual domiciles because a person can have only one domicile. The case was remanded to the trial court to resolve the factual disparity regarding Edward’s domicile. Application for leave to appeal was denied. 485 Mich. 1130 (2010).

[su_box title=”Kallas & Henk Note”] The finding that a person can have only one domicile for insurance purposes is consistent with prior case law. This is another example of the difficulties presented in cases involving transients who have no clear domicile. [/su_box]


Amerisure Mut. Ins. Co. v. Hall Steel Co.

Unpublished. Decided December 10, 2009 Michigan Court of Appeals Docket No. 286677.

In the underlying action, Hall Steel filed suit to collect monies allegedly owed by Cleveland Die for steel supplied pursuant to a purchase order. Cleveland Die filed a Counter-Claim alleging that the steel was the incorrect grade and resulted in defective parts, leading to a recall. An Arbitration Award found that Hall Steel was responsible for failure to ship the proper steel. Cleveland Die manufactured windshield wiper brackets with the allegedly defective steel and sold them to Valeo. Valeo alleged that the brackets failed because they were manufactured with nonconforming material. Plaintiff filed this action and Hall Steel filed a Counter-Claim for a declaration on the insurance policy as to Amerisure’s duty to defend and indemnify. The trial court granted summary disposition to plaintiff, finding that plaintiff had no duty to defend or indemnify Hall Steel because there was no “occurrence” as defined in the policy and exclusions (m) and (n) negated coverage.

The Court of Appeals reversed and remanded. The Amerisure policy defined “occurrence” as an “accident”. The Court found that Hall Steel’s supplying of defective steel was precisely the “happening by chance” or something “not anticipated, and not naturally to be expected” that fits the very definition of accident found in Hawkeye-Security Ins Co. v. Vector Constr. Co. Therefore, the Court held that there was an “occurrence” under the policy terms. The Court found that exclusion (m) did not apply because the defective wiper brackets were not “impaired property”. The Court also found exclusion (m) inapplicable because the brackets were physically injured at the time of their manufacture. The Court found exclusion (n), the “sistership” exclusion, inapplicable because the defective brackets were not impaired property; the brackets were not Hall Steel’s product; and a third party, not the insured, initiated the product recall. The Court found that because Hall Steel’s claim constituted an “occurrence” under the policy not negated by any exclusion, plaintiff was required to defend and indemnify Hall Steel.

[su_box title=”Kallas & Henk Note”] Application for Leave to Appeal was considered with the Supreme Court ordering oral argument and additional briefing on the question of whether providing the wrong grade of steel is an “occurrence”. [/su_box]

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