Michigan Coverage Decisions, Issue 142

Albrecht v. State Farm Mut. Auto Ins. Co.

Unpublished. Decided June 22, 2010 Michigan Court of Appeals Docket No. 289042.

Plaintiff was attempting to load pigs onto a trailer that was connected to a pickup truck. The trailer’s loading ramp fell on plaintiff and broke her back and arm. Plaintiff had homeowners, automobile and hospitalization insurance through defendant. Plaintiff’s husband called State Farm agent, Gregg Hughes, and told him about the accident. Hughes sent plaintiff a claim form, but only for the hospitalization insurance. Plaintiff collected the maximum allowed under the hospitalization insurance. More than 13 months after her injury, plaintiff filed suit against defendant alleging that she should have also been covered under her no-fault insurance policy. Defendant filed a motion for summary disposition alleging that the case should be dismissed because the action was time barred under MCL 500.3145(1). The trial court granted defendant’s motion for summary disposition.

The Court of Appeals reversed and remanded. Plaintiff alleged that defendant’s agent breached his duties to plaintiff and, as a result, defendant should be estopped from asserting the statute of limitations. According to plaintiff, her husband told Hughes that the trailer had been attached to his pickup truck. However, Hughes stated that he was only told that the trailer door fell on her, but was never told that the trailer was attached to a motor vehicle insured by State Farm. As a result, he only submitted the claim as a health insurance claim. The Court, citing Johnson v. State Farm Mut Auto Ins Co., stated “[w]e do not believe it necessary for an insured to specifically inform the insurer of those portions of specific insurance policies under which the insured demands the payment of benefits.” The Court found that there was an issue of fact regarding whether Hughes’ actions served to negligently misinform plaintiff. The Court held that plaintiff’s noncompliance with the one-year statute of limitations may have been affected by defendant’s negligence, and if it were, defendant should be estopped from asserting the statute of limitations.

[su_box title=”Kallas & Henk Note”] There is no discussion of the status of the agent – independent or exclusive to State Farm, or the duties of the agent with regard to reporting claims. [/su_box]

 

Great Lakes Cas. Ins. Co. v. Auto-Owners Ins. Co.

Unpublished. Decided June 29, 2010 Michigan Court of Appeals Docket No. 290871.

Plaintiff and defendant are insurance companies that issued separate policies that covered Mr. Hewitt on the date of the accident. Plaintiff’s policy was issued to Mr. Hewitt’s estranged wife and defendant’s policy was issued to Mr. Hewitt’s parents. Plaintiff and defendant each agreed to pay $258,266.80 to settle Mr. Hewitt’s claim. Plaintiff subsequently discovered that Mrs. Hewitt made a material misrepresentation on her insurance application. Plaintiff filed this action claiming unjust enrichment and seeking to require defendant to pay it $258,266.80. The trial court granted defendant’s motion for summary disposition on the ground that Mr. Hewitt was an innocent third party and plaintiff could not now deny coverage.

The Court of Appeals affirmed. The Court noted that Mr. Hewitt was unaware of the material misrepresentations made by Mrs. Hewitt and therefore, was an innocent third party with respect to plaintiff’s policy. Under the innocent-third-party rule, an insurance company is prohibited from rescinding a policy where an innocent third party has made a claim. Plaintiff argued that the innocent third party rule was not applicable because there was a second, same-priority insurer involved. The Court found that there is no exception for same-priority insurers. The Court held that plaintiff was precluded from rescinding its payment against the claim because Mr. Hewitt is an innocent third party.

[su_box title=”Kallas & Henk Note”] This was an interesting and creative argument made by Great Lakes Casualty, although it did not persuade the Court to extend the innocent third party rule. [/su_box]

 

McNeel v. Farm Bureau General Ins. Co. of Michigan

Published. Decided June 29, 2010 Michigan Court of Appeals Docket No. 285008.

Defendant issued an insurance policy to McNeel covering three dwellings, including the Bundy farmhouse which was destroyed by arson on March 18, 2003. Defendant determined that the loss was not covered under the policy because “nobody had lived in the house as a domicile since November 2001.” The policy provided that defendant was not liable for losses occurring “[w]hile a described building . . . is vacant beyond a period of sixty consecutive days or is unoccupied beyond a period of six consecutive months.” Defendant moved for summary disposition for failure to file within one year of the date the claim was formally denied pursuant to MCL 500.2833(1)(q). The trial court denied defendant’s motion because there was a factual dispute as to when the formal denial occurred. At trial, defendant abandoned the issue, and the jury found that the farmhouse was not vacant at least 60 consecutive days prior to the loss and that it was occupied at least six consecutive months prior to the loss. The trial court held that plaintiff was entitled to 12% penalty interest, pursuant to Griswold, because the claim was not timely paid.

The Court of Appeals affirmed the jury verdict and found that the trial court properly denied defendant’s motion for summary disposition because the evidence created a question of fact as to when the formal denial occurred. The Court consulted dictionary definitions of “unoccupied” because it was not defined in the policy and found that “unoccupied” means not lived in. The policy separates the terms vacant and unoccupied into different clauses with distinct time requirements indicating that the two terms have different meanings. Defendant alleged that the contract required that someone be living in the house as a legal abode for six months before the loss. The Court held that the house must be unoccupied beyond six consecutive months before a loss for the exclusion to take effect. The Court noted that even a single day of occupancy will restart the counter on the six consecutive months. The Court also held that the trial court properly concluded that Griswold was retroactive and applicable. The dissent found that there was no question of fact as to when the formal denial occurred and found that plaintiffs’ claim was time-barred under MCL 500.2833(1)(q).

[su_box title=”Kallas & Henk Note”] This case shows the danger of failing to define terms contained in the insurance contract. [/su_box]

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