Michigan Coverage Decisions, Issue 139

State Farm Fire & Cas. Co. v. Malec

Unpublished. Decided April 20, 2010 Michigan Court of Appeals Docket No. 289929.

Defendant Balogh was insured under a homeowner’s policy issued to his parents by plaintiff. Balogh and the decedent, who had been laid off by Blondo, received permission from Blondo to take steel joists from the Blondo Roofing storage yard. They decided to use a crane truck in the storage yard to move the steel joists. Either the decedent or Balogh took a battery from another truck to start the crane truck. While Balogh was operating the crane, it touched a live utility wire and the decedent was electrocuted to death. The trial court granted summary disposition in favor of plaintiff based on the motor vehicle exclusion.

The Court of Appeals affirmed. The homeowner’s policy excluded coverage for bodily injury arising out of the ownership, maintenance, use, loading or unloading of a motor vehicle owned or operated by or rented or loaned to any insured. The policy defined “motor vehicle” as “a motorized land vehicle designed for travel on public roads or subject to motor vehicle registration. A motorized land vehicle in dead storage on an insured location is not a motor vehicle.” The Court noted that the crane was attached to the truck and was designed to travel on roads. The Court found that the crane truck constituted a “motor vehicle” for purposes of the homeowner’s policy. The Court held that the motor vehicle exclusion applied and coverage for Balogh’s negligent operation of the crane was excluded.

[su_box title=”Kallas & Henk Note”] Easy call based on the policy language.  [/su_box]


Westport Ins. Corp. v. Al Bourdeau Ins. Services

Unpublished. Decided April 15, 2010 Michigan Court of Appeals Docket No. 287920.

On September 19, 2006, Theriault was awarded damages of $1.5 million against Bourdeau. Bourdeau provided plaintiff, its professional liability insurer, with written notice of the negligence judgment on December 1, 2006 and sought indemnification for the judgment. Plaintiff denied coverage under its claims-made policy based on Bourdeau’s breach of reporting and notice requirements in the policy. Plaintiff stated that coverage was denied because Bourdeau did not report the claim until almost one year after the policy expired, which was not as soon as reasonably possible, and that plaintiff was prejudiced as a result. Plaintiff sought a declaration that coverage was precluded because of Bourdeau’s late notice. The trial court held that Bourdeau’s December 1, 2006 claim was validly made under the December 14, 2005-December 14, 2006 policy, and that plaintiff failed to present evidence of actual prejudice caused by the late notice.

The Court of Appeals reversed and remanded for entry of summary disposition in favor of plaintiff. The Court noted that the insuring agreement applies to “‘potential claims’ and ‘claims’ first made against an insured during the ‘policy period’ arising out of a ‘wrongful act’ taking place on or after the ‘retroactive date’ . . .” The policy also excludes prior claims when they are based on acts occurring before the effective date of the policy that are known by the insured. The Court found there was no genuine issue of material fact that Bourdeau knew of the claim before the effective date of the 2005-2006 policy because it received notice in May of 2005 of Theriault’s negligence case. The Court held that the trial court erred in determining that it was required to show prejudice in order to use Bourdeau’s late notice of the claim to deny coverage. The Court noted that reasonable minds could not differ in finding that Bourdeau violated the notice requirement by waiting until after entry of the $1.5 million judgment to provide notice. The Court held that under Schubiner v. New England Ins. Co., it was not necessary for plaintiff to demonstrate prejudice.

[su_box title=”Kallas & Henk Note”] It is clear that the trial court did not understand the nature of a claims made policy. [/su_box]


Matheney v. Homesite Ins. Co. of the Midwest

Unpublished. Decided April 15, 2010 Michigan Court of Appeals Docket No. 289599.

Plaintiff purchased a homeowner’s policy from defendant. The homeowner’s policy covered only owner-occupied residences. However, the house was used as a rental property. On November 26, 2007, the district court ordered the eviction of plaintiff’s tenant. The next day, defendant sent a Notice of Termination of Insurance to plaintiff, informing plaintiff that his insurance was being cancelled because the insured dwelling was no longer an owner occupied secondary residence. The notice indicated that coverage would be cancelled on December 16, 2007. On November 30, 2007, a fire rendered the house uninhabitable. Defendant denied the claim stating that there was no coverage because “the insured property was not the residence premises as defined by the policy”. The policy included a fraud provision which stated that the entire policy will be void if an insured has intentionally concealed or misrepresented any material fact. The trial court granted defendant’s motion for summary disposition stating that the property was not owner occupied and if defendant had known the house was used as a rental, the application would have been rejected and the policy would never have been issued.

The Court of Appeals affirmed. The Court held that all coverage was voided and defendant was entitled to rescind the policy when it learned that the owner-occupied status of the home had been materially misrepresented. The Court held that even if the policy was considered in effect, there was no coverage because under the policy the insured must have resided in the home for it to be covered. The Court also held that the notice of cancellation cannot be relied on by plaintiff to provide coverage where none existed under the policy.

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior Michigan case law on misrepresentation and rescission.  [/su_box]


Auto Club Group Ins. Co. v. Wooten

Unpublished. Decided April 27, 2010 Michigan Court of Appeals Docket No. 289159.

Evans and his mother co-owned a house insured by plaintiff. Wooten was at the Evanses’ house helping install cabinets when Evans showed Wooten a used handgun he had purchased from a crack cocaine addict. Evans had been convicted of a felony in the past and was not allowed to possess firearms. The gun discharged and struck Wooten. Evans pled guilty to felon in possession of a firearm. The homeowner’s policy excluded coverage for bodily injury resulting from a criminal act or omission committed by anyone. Plaintiff sought a declaratory judgment that it had no duty to defend or indemnify in the underlying action. The trial court held that this was an occurrence triggering coverage under the policy and the criminal act exclusion did not apply because the injury was “too tenuously connected to the possession of the firearm to say that the bodily injury suffered by Mr. Wooten resulted from the possession of the firearm.”

The Court of Appeals affirmed. The Court noted that the policy language clearly requires that the injury must result from the criminal act and plaintiff did not make any attempt to refute the trial court’s conclusion that there was no causative link between possessing the weapon and the injury. Plaintiff alleged that Evans carelessly handled the gun. The Court noted that there was no evidence that Evans ever touched the trigger or pointed the gun at Wooten. The Court also noted that the police report inferred that Evans was not pointing the gun at Wooten because there was a ricochet mark on the counter. The Court held that Evans’s conduct did not amount to being careless as a matter of law.

[su_box title=”Kallas & Henk Note”] The outcome of this decision may be the result of the insured’s concession that the injury did not result from the felony in possession crime. On appeal, the insurer argued that the injury resulted from crimes that Evans was not charged with. The Court of Appeals does not decide whether the felony in possession conviction eliminated coverage.  [/su_box]

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