Michigan Coverage Decisions, Issue 137

Empire Fire & Marine Ins. Co. v. Lynch

Unpublished. Decided March 9, 2010 Michigan Court of Appeals Docket No. 289695.

Michael Lynch, father of Christopher Lynch, formerly operated Heights Auto Sales. Plaintiff issued garage liability and umbrella policies to Michael Lynch. On July 21, 2005, Christopher Lynch was operating an automobile owned by Heights Auto Sales when he collided with a vehicle driven by Dawood. At the time of the accident, Christopher was on duty at his part-time job and was returning from delivering a pizza with the pizzeria’s sign on the vehicle. The vehicle had dealer plates. Dawood filed suit against Christopher and Heights Auto Sales. Plaintiff alleged that there was no coverage because Christopher was not driving the vehicle in the garage operations of Heights Auto Sales. The trial court granted summary disposition to defendants on the grounds that Christopher was driving the car with his father’s permission, and that he was also operating in a manner incidental to the business of the dealership by showing the car as an advertisement for the business.

The Court of Appeals reversed and remanded. The policy provided coverage for all sums an insured legally must pay as damages because of bodily injury caused by an accident and resulting from “garage operations” involving the ownership, maintenance or use of covered autos. “Garage operations” was defined in part as including the ownership, maintenance or use of autos and all operations necessary or incidental to a garage business. The Court held that a car being used in the pizza delivery business and displaying the pizzeria’s advertising (while advertising its relationship to a dealership only by way of displaying dealer plates), is not a car being used for purposes incidental to the dealership business.

[su_box title=”Kallas & Henk Note”] The reversal of the trial court in this case was predictable. It seems apparent that the trial court was looking for a reason to find against the insurer. [/su_box]


Dillard v. Farm Bureau Ins. Co.

Unpublished. Decided March 11, 2010 Michigan Court of Appeals Docket No. 288134.

Farm Bureau denied plaintiff’s claim under a homeowners policy for damages resulting from vandalism and theft. Farm Bureau’s denial was based on its determination that plaintiff had a guilty connection to the incident and materially misrepresented the facts and circumstances of the loss. Plaintiff submitted to a polygraph examination and the examiner concluded that plaintiff was being truthful. Plaintiff moved to admit the polygraph evidence. The trial court granted plaintiff’s motion to admit testimony regarding the results of the polygraph examination, and a jury found in favor of plaintiff.

The Court of Appeals reversed holding that it was bound by Supreme Court precedent in People v. Barbara, which established that polygraph test evidence is inadmissible during both criminal and civil trials.

[su_box title=”Kallas & Henk Note”] The results of polygraph examinations remained inadmissible in Michigan in both criminal and civil proceedings. In this case, the court also held that the improper admission of the evidence was grounds for reversal.  [/su_box]


Berkeypile v. Westfield Ins. Co.

Published. Decided March 12, 2010 Michigan Supreme Court Docket No. 137353.

The Supreme Court held that the Court of Appeals erred by not considering a paragraph of the policy’s uninsured motorist coverage which provides that “[i]f there is other applicable insurance available under one or more policies or provisions of coverage . . .[t]he maximum recovery under all coverage forms or policies combined may equal but not exceed the highest applicable limit for any one vehicle under any coverage form or policy providing coverage on either a primary or excess basis.” The Court stated that this provision limits the insured’s maximum recovery to the highest policy limit of any single policy available. The highest policy limit of any single policy available was $300,000. The Court held that plaintiff was not entitled to additional recovery under the Westfield policy’s uninsured motorist coverage because plaintiff recovered $332,500 in settlement from the underinsured drivers, an amount higher than the highest policy limit of any single policy available. Motion for Reconsideration was denied. 486 Mich. 905 (2010).

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior decisions holding that non-mandatory coverages can be limited and a court must enforce the limitations. Because uninsured motorist coverage is not mandatory in Michigan, there are no restrictions on limitations to that coverage. [/su_box]


Progressive Michigan Ins. Co. v. Smith

Published. Decided March 16, 2010 Michigan Court of Appeals Docket No. 287505.

Appellants were injured in an auto accident when a truck driven by Smith struck their vehicle. Smith did not have a driver’s license because he had too many points on his record. His friend Harris obtained insurance for the vehicle with Progressive and Smith paid for it. A form signed by Harris lists Smith as an excluded driver. The declaration page of the policy and the certificate of insurance also list Smith as an excluded driver. Progressive filed a motion for summary disposition on the basis of the named driver exclusion. Appellants argued that Progressive failed to use the required statutory language for exclusion of a named driver. The trial court determined that the excluded driver provision was valid under the statute.

The Court of Appeals reversed and remanded. MCL 500.3009(2) provides that a named driver exclusion “shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance: Warning – when a named excluded person operates a vehicle all liability coverage is void – no one is insured. Owners of the vehicle and others legally responsible for the acts of the named excluded person remain fully personally liable.” The warning on the declaration page of plaintiff’s policy is identical to the statutory provision. However, in the warning on the face of the policy and the certificate of insurance the last word is “responsible” instead of “liable”. The Court of Appeals held that strict compliance with the statute is required. The Court found that because the warning notice does not appear, as required, on the certificate of insurance, the named driver exclusion “shall not be valid.” The dissent found that Progressive complied with the mandate of MCL 500.3009(2) where the warning notice substituted one word for its synonym.

[su_box title=”Kallas & Henk Note”] There are competing policy arguments to a literal enforcement of mandatory language. As the concurring opinion in this case states: “ the result in this case is no doubt unfortunate”. Because this is a published decision, insurers are now on notice that, in Michigan, any deviation from statutory language will result in a finding of invalidity. [/su_box]

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