Michigan Coverage Decisions, Issue 134

State Farm Fire & Cas. Co. v. Lequia

Unpublished. Decided December 15, 2009 Michigan Court of Appeals Docket No. 286139.

The Department of Human Services placed a child, age two and a half, in a foster home. While in the foster home, the child wandered into the adjacent river and drowned. The child’s estate sued the foster parents, who sought coverage from their homeowners insurance company, State Farm. State Farm filed a motion for summary disposition on the ground that the policy’s household exclusion barred coverage. The trial court granted summary disposition in favor of State Farm.

The Court of Appeals affirmed. The homeowners policy excluded liability coverage for bodily injury to any “insured”. “Insured” was defined in the policy to include residents of the named insureds’ household. Because “resident” was not defined by the policy, the Court of Appeals applied the plain and ordinary meaning, “a person living in a particular place as a member of a household”, and found that the child was an insured within the meaning of the policy.

[su_box title=”Kallas & Henk Note”] This panel overcame the natural tendency to sympathize in this tragic case to properly apply the contract language.  [/su_box]


Howard v. Farm Bureau Ins.

Unpublished. Decided December 22, 2009 Michigan Court of Appeals Docket No. 289407.

On November 17, 2006, plaintiff obtained a homeowners policy from defendant. On December 2, 2006, plaintiff’s house caught fire. The fire was started by a space heater which plaintiff was using to heat the house because the furnace did not work. Defendant’s investigation of the incident revealed that plaintiff’s house had a fire in May of 2006, when the house was insured with Nationwide. After paying the claim, Nationwide cancelled plaintiff’s policy. However, the application signed by plaintiff to obtain defendant’s policy indicated the furnace was new in 2004, was serviced in 2006, and was serviced annually. The application also indicated that Nationwide did not cancel plaintiff’s policy and that there had been no homeowners claims in the last 3 years. The Farm Bureau policy contained a clause denying coverage for loss caused by fire if the insured “intentionally concealed or misrepresented any material fact or circumstance”, “engaged in fraudulent conduct”, or “made false statements”, related to the insurance. Defendant denied plaintiff’s claim and Plaintiff sued alleging defendant wrongfully rescinded the policy and improperly denied his claim. Defendant moved for summary disposition arguing that plaintiff’s claim was barred because he made material misrepresentations on the application and accepted rescission when he cashed the check refunding his premiums. The trial court agreed with Defendant.

The Court of Appeals affirmed. The Court noted that there was no dispute that the statements on the application were material misrepresentations and it did not matter that plaintiff did not type the information on the application because of the declaration he signed stating “the foregoing statements are true.” The Court also held that the reason the check was returned to plaintiff was listed as “return of premium due to rescinding policy effective 11/17/06″ and that plaintiff cashing the check unconditionally served as his acceptance of those terms.

[su_box title=”Kallas & Henk Note”] This decision is consistent with the prior case law voiding coverage for false statements in the application for insurance. [/su_box]


Jones v. Wolverine Mutual Ins. Co.

Unpublished. Decided December 22, 2009 Michigan Court of Appeals Docket No. 288301.

Plaintiff was injured when his vehicle was rear-ended by a semi-truck owned by Towles Transport and driven by Swackhamer. Plaintiff’s policy with defendant included uninsured/underinsured motorist coverage (UIM). Swackhamer identified American States as his insurer. Plaintiff obtained a default judgment against Swackhamer and filed a garnishment against American States. American States responded that it never insured Swackhamer. As a result, Plaintiff sued defendant for UIM benefits. Defendant moved for summary disposition arguing that Towles had a million-dollar policy with Northland Insurance covering Swackhamer and the truck, and benefits would be payable only if the other vehicle or driver lacked insurance. Plaintiff argued that “when” defendant learned about the Northland policy was critical because if defendant knew of the existence of the policy and did not inform its insured, it should not be allowed to benefit from such concealment. The trial court held that there was no dispute that the truck was insured by a policy at the time of the accident and therefore, the UIM provision did not apply.

The Court of Appeals affirmed. The Court noted that under Michigan law, “the duty to determine if the tortfeasor is insured [is on] the insured. It is not the insurance agency that has that responsibility.” The Court held that defendant had no duty to direct plaintiff to Towles.

[su_box title=”Kallas & Henk Note”] The Court relied on Morley v Automobile Club, 458 Mich 459; 581 NW2d 237 (1998) previously addressing this same issue. [/su_box]


Hall v. Allstate Ins. Co.

Unpublished. Decided December 22, 2009 Michigan Court of Appeals Docket No. 288345.

On December 19, 2002, Plaintiff purchased a Mercedes and insured it under a policy issued by defendant Allstate. On December 24, 2002, plaintiff reported the vehicle stolen. Bailey, an agent in defendant’s Special Investigations Unit, conducted an investigation to determine whether the claim was valid or fraudulent. Allstate ultimately denied the claim. Bailey sent a denial letter to plaintiff in care of his attorney which was captioned “personal and confidential to be opened and read by the addressee only.” The letter stated that the claim was being denied because the policy excludes coverage for “loss caused intentionally by or at the direction of an insured person.” Plaintiff filed suit against Allstate alleging breach of contract, declaratory relief, intentional infliction of emotional distress, violation of the Michigan Consumer Protection Act (MCPA), and violation of MCL 500.2006. Allstate filed for summary disposition on all counts except for plaintiff’s breach of contract and declaratory relief claims. The trial court granted Allstate’s motion. The breach of contract claim went to trial and the jury concluded that the loss was not caused intentionally by or with the consent or knowledge of plaintiff. Plaintiff appealed the trial court’s dismissal of his non-contract claims.

The Court of Appeals affirmed. The Court found that there was no evidence of extreme and outrageous conduct by defendant and affirmed the trial court’s grant of summary disposition on plaintiff’s intentional infliction of emotional injury claim. The Court noted that the letter was not sent or published to any person other than plaintiff and his attorney and there was no evidence of harassment or an attempt to besmirch plaintiff’s reputation. Plaintiff alleged that the trial court improperly granted summary disposition as to his claim that Allstate violated the Michigan Consumer Protection Act by failing to make any payments without legal justification. The Court of Appeals held that the Legislature eliminated the ability to bring an MCPA claim against an insurance company.

[su_box title=”Kallas & Henk Note”] This is consistent with prior Michigan case law precluding extra-contractual causes of action for denial of insurance benefits. [/su_box]

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