Michigan Coverage Decisions, Issue 140

Ruzak v. USAA Ins. Agency, Inc.

Unpublished. Decided April 27, 2010 Michigan Court of Appeals Docket No. 288053.

Plaintiff was injured when her husband drove into a tree. The Ruzaks had an auto policy with defendant with limits of $300,000 per person. They had obtained auto insurance through defendant since 1966, including when they lived in Wisconsin and Indiana. The Michigan policy issued in 1997 contained an a provision limiting coverage for bodily injury to a family member to $20,000 per person. The Indiana policy provided no coverage in the same situation and Wisconsin law did not allow such limitations for family members. A prior panel of the Court of Appeals held that the policy was unambiguous and noted that the renewal rule is an exception to the rule that unambiguous terms of an insurance contract must be enforced as written. The renewal rule provides that “[w]here a renewal policy is issued without calling the insured’s attention to a reduction in coverage, the insurer is bound to the greater coverage in the earlier policy.” The prior panel remanded to the trial court. The trial court held that plaintiff presented evidence that defendant had failed to notify her of the reduction in coverage she once enjoyed in Wisconsin.

The Court of Appeals held that if they were not bound by the prior panel, they would reverse the judgment of the trial court and remand for entry of judgment in favor of defendant. The prior panel directed the trial court to apply the renewal rule to all policies of insurance issued to the Ruzaks by defendant from 1966 forward. The Court found that the policy behind the renewal rule is not advanced by application of the rule under circumstances where an insured crossed state lines. The Court found that there was no factual dispute that defendant added the family member exclusion at some point after plaintiff left Wisconsin. The Court held that defendant provided no evidence of any effort to call attention to the change in coverage and actual notice is required. The concurrence disagreed with the majority’s position that the renewal rule should not apply and absent the law of the case doctrine, reversal would be appropriate.

[su_box title=”Kallas & Henk Note”] The “renewal rule” is simple in application in most instances, but where, as in this case, the insured moves from one state to another, it is hard to justify its application. [/su_box]


Ulrich v. Farm Bureau Ins.

Published. Decided April 29, 2010 Michigan Court of Appeals Docket No. 289467.

On December 16, 2005, the Michigan Office of Financial and Insurance Services (OFIS) issued an Order disapproving no-fault auto insurance forms that provide a contractual limitations period of less than 3 years for claims for uninsured motorist coverage. The court considered whether a one-year limitations period for uninsured motorist coverage claims is enforceable where the no-fault policy form predated the issuance of the December 16, 2005 OFIS Order, but the policy was renewed after December 16, 2005. Plaintiff’s policy renewed on September 11, 2006 and she was in an accident on September 19, 2006. On January 8, 2008, plaintiff moved to amend her complaint to include claims against defendant for uninsured motorist coverage. The trial court held that the no-fault policy was subject to the OFIS Order because it was reissued after the date of the Order.

The Court of Appeals held that the trial court erred in finding the one-year contractual limitations period unenforceable. The Court found that the policy predated the issuance of the Order and the Order provides an exception where the insurer “was legally using that policy or rider form in Michigan prior to the date of” the Order. The Order prohibits modification of the forms but does not prohibit renewal or re-issuance. The Court held that plaintiff’s claim for uninsured motorist coverage was barred by the policy’s one-year contractual limitation provision.

[su_box title=”Kallas & Henk Note”] Under the current (and now departing administration), the Insurance Commissioner has attempted to impose restrictions on insurers and insurance policies in ways that have not been enacted by legislation. [/su_box]


FH Martin Construction Co. v. Secura Ins. Holdings, Inc.

Unpublished. Decided May 11, 2010 Michigan Court of Appeals Docket No. 289747.

In the underlying case, Slater alleged that he was injured at a construction site where FH Martin was the general contractor and Cimarron was a subcontractor. Cimarron had placed and secured a ladder outside the building in order to facilitate operations on the roof. Neither FH Martin nor Cimarron removed the ladder. Slater fell while attempting to remove the ladder so that he could pour new sidewalks. The claims in the underlying case were premised on Cimarron’s placement of the ladder and failure to remove it. Cimarron was insured under a CGL policy issued by Secura. FH Martin sued Secura for declaratory relief. The trial court granted summary disposition to FH Martin and declared that Secura has a duty to defend and indemnify it.

The Court of Appeals affirmed. The Court held that there is no dispute that Cimarron and FH Martin entered into an agreement that required Cimarron to name FH Martin as an additional insured on Cimarron’s CGL policy with Secura. The CGL policy included an endorsement which limits FH Martin’s status as an insured to situations where it incurs liability arising out of Cimarron’s “ongoing operations” performed for FH Martin. The Court found that there is no dispute that at the time Slater fell, Cimarron had not yet completed the operations it was contractually obligated to perform. The Court held that the ladder was clearly placed as a part of its “ongoing operations” to complete performance under the contract. The Court held that FH Martin’s potential liability arose from Cimarron’s ongoing operations.

[su_box title=”Kallas & Henk Note”] This type of additional insured endorsement gives rise to many disputes over its application. [/su_box]

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