Michigan Coverage Decisions, Issue 135

Morrison v. Secura Ins.

Published. Decided December 29, 2009 Michigan Court of Appeals Docket No. 286936.

Plaintiffs were seriously injured when a Cavalier driven by Warfield struck their motorcycle. The insurance policy at issue was purchased by Warfield’s mother, Fisher. The policy listed Fisher as the named insured, but both Warfield and Fisher were listed as drivers of the vehicles, including the Cavalier. Warfield was the only person who drove the Cavalier. Fisher prepaid the premiums for an entire year. At the time she did so, she was the owner and registrant of the Cavalier. Fisher and Warfield both lived in the same residence. Prior to the accident, Fisher transferred title to the Cavalier to Warfield who applied for a new title and registered the Cavalier in her name. Defendant argued that Fisher did not have an insurable interest in the Cavalier at the time of the accident, and so the insurance policy was void. The trial court granted summary disposition for plaintiffs, finding that Fisher had an insurable interest in the vehicle because she “certainly has an insurable interest in protecting her daughter from financial ruin.”

The Court of Appeals agreed with the trial court’s result because of several other facts in the case. The Court noted that Fisher had an insurable interest at the time she purchased the policy and paid the entire year’s premiums. The Court also noted that the actual risk never changed and was fully known because Warfield was always the only driver of the Cavalier. The Court noted that the purpose behind the insurable interest requirement was not present because they could not imagine how Fisher could possibly be tempted by the transfer of ownership to commit any illegal or unethical act in order to collect proceeds from the insurance company. Additionally, the Court noted that the conveyance was an intrafamily transfer and public policy favoring family units is strong. The dissent held that there is no legal precedent for finding an insurable interest on the basis that Fisher was concerned with saving her daughter from financial ruin that might result from liability for the auto accident.

[su_box title=”Kallas & Henk Note”] The majority opinion in this case stretches the law on insurable interest. This appears to be a results oriented decision. The majority created a new distinction between renewal of policies and existing policies. The rule that they have created is that if there was an insurable interest at the time the policy was issued, that interest remains, irrespective of subsequent changes in ownership of the property. [/su_box]


Enos v. Allied Property & Cas. Ins. Co.

Unpublished. Decided January 5, 2010 Michigan Court of Appeals Docket No. 285420.

Plaintiff was injured when a car driven by McMullin slid into his snowmobile which was lawfully operating on the side of the road. McMullin’s policy had a $20,000 limit for bodily injury liability. Plaintiff had $1,000,000 in UIM coverage through a business auto policy with defendant. Defendant denied plaintiff coverage because plaintiff was not operating an “owned vehicle” at the time of the accident. The trial court held that plaintiff was not entitled to UIM coverage.

The Court of Appeals affirmed. The Court held that the unambiguous policy language provides that UIM coverage applies only to those “autos” described in Item Three of the Declarations. Because the snowmobile was absent from Item Three, UIM coverage does not apply to the snowmobile. The Court also noted that the snowmobile does not fall within the policy definition of an “auto”. The policy definition of “auto” does not include “mobile equipment.” The policy defined “mobile equipment” as including snowmobiles. The Court also held that the owned vehicle exclusion in the UIM endorsement precluded coverage for the snowmobile accident. The owned vehicle exclusion provided that this insurance does not apply to bodily injury sustained by you while occupying any vehicle owned by you which is not a covered “auto”. The snowmobile was a vehicle owned by plaintiff and was not listed as a covered auto on the Declarations page.

[su_box title=”Kallas & Henk Note”] The decision this case was dictated by the language of the UIM coverage form. In Michigan, because this coverage is not mandatory, an insurance carrier is free to include any limitations in coverage it deems appropriate. [/su_box]


General Star National Ins. Co. v. Boudreau

Unpublished. Decided January 14, 2010 Michigan Court of Appeals Docket No. 287456.

On three separate applications for Real Estate Errors and Omissions Insurance, Defendant Boudreau answered true to question three which stated “applicant has not been disciplined by any state licensing board or other regulatory agency as a result of appraisal activities within the past 5 years.” The trial court granted General Star’s motion for summary disposition, voiding the policy for material misrepresentation.

The Court of Appeals affirmed. Defendants argued that the trial court erred in granting plaintiff’s motion for summary disposition because question three was limited to activities conducted within the last 5 years as opposed to discipline received in the last 5 years. Defendants contended that in accordance with the last antecedent rule, the phrase “within the past 5 years” in question three modifies the noun phrase “appraisal activities” not the verb phrase “been disciplined.” Because plaintiff’s overall goal in asking the questions is to assess risk, the Court did not agree with defendants interpretation of the question. The Court also noted that all three policies contain a prior acts provision stating that the insurance does not apply “to any regular act, error, omission, or personal injury which occurred before” March 31, 2003. The Court held that question three was not ambiguous in context and the purpose was to determine if Boudreau had been disciplined in the past 5 years as a result of appraisal activities. The Court held that because it was disciplined on December 27, 2001, the representation that it had not be disciplined in the past 5 years was false. The Court noted that by the plain language of the application, if defendant answered false to any of the questions it would not be eligible for the policy and therefore, the policy could be voided by a false statement. Defendants also argued that plaintiff should be estopped from attempting to rely on Boudreau’s alleged misrepresentations in seeking rescission. The Court found defendants’ estoppel argument was unpersuasive because an insurer does not owe a duty to the insured to investigate or verify a policy applicant’s representations or to discover intentional material misrepresentations.

[su_box title=”Kallas & Henk Note”] This decision is based on the Court’s determination that the purpose of the question on the application was apparent, the representation was false and the false representation was material to acceptance of the risk. The cases in Michigan have been consistent in allowing rescission of insurance policies based on material misrepresentations in applications. [/su_box]


General Cas. Co. of Wisconsin v. TDC International Corp.

Unpublished. Decided February 2, 2010 Michigan Court of Appeals Docket No. 289180.

In the underlying action, the allegations of the complaint related to defendant’s use of names that were similar to the registered service mark of a competitor. The applicable policies provided coverage for “advertising injury” which was defined in pertinent part as injury arising out of the offense of infringing upon another’s trade dress in your advertisement. “The trade dress of another product is essentially its total image and overall appearance. It involves the total image of a product and may include features such as size, shape, color or color combinations, texture, graphics, or even particular sales techniques.” The trial court held that plaintiff did not have a duty to defend defendant in the underlying action.

The Court of Appeals affirmed. The Court noted that the underlying complaint involved the use of confusingly similar names, not an infringement of the underlying plaintiff’s trade dress.

[su_box title=”Kallas & Henk Note”] The outcome of this case is based on the fact that the underlying lawsuit against the insured limited its complaint to the fact that the name used by the insured was too similar to that of the underlying plaintiff. This panel of the Court of Appeals, held that this was the “crux of this underlying complaint” it is not what is commonly known as “trade dress” which involves the totality of the image and appearance of a product. Even though a product name can be part of “trade dress”, this panel felt that the name alone was not the trade dress of the product.  [/su_box]

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