Michigan Coverage Decisions, Issue 145

McGrath v. Allstate Ins. Co.

Published. Decided November 2, 2010 Michigan Court of Appeals Docket No. 289210.

In 1992, Mary McGrath bought a home in Gaylord and insured it with Allstate. In 2003, she moved to an apartment in Farmington Hills because her health deteriorated. Her daughter notified Allstate that the insurance bills should be sent to the Farmington Hills address. Mary left the majority of her belongings at the Gaylord house and family members occasionally visited the house. In May of 2006, Mary’s son discovered that the property had suffered water damage. Allstate determined that the water damage was caused by a frozen pipe that had ruptured. Allstate denied coverage. Plaintiff filed a complaint against Allstate for breach of contract. Allstate asserted that, contrary to the policy, Mary did not reside at the property at the time of the loss, and failed to notify Allstate of the change in title, occupancy, or use of the property. The trial court denied Allstate’s motion for summary disposition. A jury ordered Allstate to pay $100,000.

The Court of Appeals reversed the denial of Allstate’s motion for summary disposition and vacated the judgment on the jury verdict. The Court held that there is no coverage because at the time of the loss the house was not a “dwelling” as defined by the policy. The policy states that Allstate will “cover sudden and accidental direct physical loss” of covered property, which includes “[y]our dwelling”. “Dwelling” is defined as “a one, two, three, or four family building structure . . .where you reside and which is principally used as a private residence.” The Court agreed with Allstate that the phrase “where you reside” is a statement of coverage that requires that the insured live at the premises at the time of the loss. The policy also provides that the insured must inform Allstate of any changes in title, use or occupancy of the residence premises. The Court held that the act of notifying Allstate that the billing address had changed was insufficient as a matter of law to put Allstate on notice that she no longer lived full-time at the Gaylord property. The Court held that the failure to notify Allstate about the change in occupancy violated the contract and constituted another basis on which the trial court should have granted summary disposition.

[su_box title=”Kallas & Henk Note”] The outcome may have been different if the home had been used or visited more frequently. [/su_box]


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

Unpublished. Decided November 4, 2010 Michigan Court of Appeals Docket No. 292568.

A trailblazer driven by Mediati collided with another vehicle driven by Jamali. Mediati had borrowed the vehicle with permission from Mohammed Saad. The trailblazer was owned by Mohammed’s parents, Fouad and Hasna Saad, and was insured by Pioneer. Jamali brought a negligence action against the owners of the trailblazer and Mediati. Pioneer defended the owners of the vehicle, but did not defend Mediati. Mediati was insured under a State Farm policy issued to her parents and State Farm defended her in the underlying action. Pioneer filed a declaratory action seeking a declaration that it had no liability to defend or indemnify Mediati or the Saads. Jamali’s negligence action was settled and Pioneer’s declaratory action was subsequently dismissed with prejudice by stipulation of the parties. State Farm then filed an action against Pioneer seeking reimbursement of the costs and fees incurred in defending Mediati. The trial court granted summary disposition in favor of State Farm.

The Court of Appeals reversed and remanded for entry of judgment in favor of Pioneer. The Court held that the action is barred by the dismissal of Pioneer’s prior declaratory action. The Court held that the only means by which State Farm could pursue recovery from Pioneer was as subrogee of Mediati. Mediati did not assert a compulsory counterclaim for the costs of her defense during Pioneer’s declaratory action and the dismissal of the declaratory action foreclosed her right to pursue the costs of her defense in a subsequent or collateral action.

[su_box title=”Kallas & Henk Note”] As is evident from this case, the decision to dismiss a declaratory action with or without prejudice can have significant consequences. We wonder whether the result of this case would be the same if State Farm had sued under an unjust environment theory. [/su_box]


Aastad v. Edwards, et. al

Unpublished. Decided November 18, 2010 Michigan Court of Appeals Docket No. 293101.

On June 29, 2005, plaintiff was injured when Edwards struck her vehicle with an SUV owned by Sanders. AAA insured the SUV with a per person limit of $50,000. Plaintiff had an auto policy with Auto-Owners that included underinsured motorist coverage. Plaintiff filed suit against Edwards and Sanders, and subsequently, all parties accepted the case evaluation award of $50,000. The court entered a final judgment reflecting that award on January 27, 2009. On March 3, 2009, plaintiff filed a motion to amend her complaint to add Auto-Owners as a defendant because her damages were in excess of $50,000, and Auto-Owners refused to pay underinsured motorist benefits. The trial court granted plaintiff’s motion to amend the complaint. Auto-Owners filed a motion for summary disposition alleging that plaintiff’s claims fall outside the limitations period and the motion to amend the complaint does not relate back to the original filing date of the action. The trial court granted Auto-Owners’ motion for summary disposition.

The Court of Appeals affirmed. The Court held that the addition of a party to the complaint does not relate back to the original complaint, and because plaintiff did not file a claim against Auto-Owners within the 3 year statutory deadline, her claim is barred. Plaintiff argued that Auto-Owners should be equitably estopped from relying on the statute of limitations defense because Auto-Owners induced her to believe that it would not enforce the limitations period provision. The Court held that the contract language was clear and unambiguous and Auto-Owners clearly advised plaintiff when the limitations period would expire. Because plaintiff failed to file a claim within that time, summary disposition was appropriate. Application for leave to appeal was denied.

[su_box title=”Kallas & Henk Note”] The Court found that mere communications regarding the claim after expiration of the limitations period could not satisfy the requirements for an equitable estoppel. [/su_box]


Long v. Pioneer State Mut. Ins. Co.

Unpublished. Decided November 30, 2010 Michigan Court of Appeals Docket No. 293556.

Plaintiffs Maloney and Long were injured when their vehicle collided with Lowry’s vehicle. Auto-Owners insured Lowry’s vehicle and the policy had a single bodily injury limit of $100,000. Maloney had a policy with Pioneer which included an underinsured motorist endorsement with limits of $100,000 per person and $300,000 per occurrence. Pioneer filed a motion for summary disposition arguing that under the terms of its policy it had no responsibility to pay any UM benefits to plaintiffs. The trial court denied summary disposition to Pioneer. Plaintiffs settled with Lowry for $100,000, the full amount of Lowry’s policy, and agreed to share the amount equally.

The Court of Appeals affirmed. Pioneer alleged that Lowry’s vehicle does not qualify as “underinsured”. The Pioneer policy defines “underinsured motor vehicle” as a vehicle to which a bodily injury liability policy applies but its limit for bodily injury liability is less than the limit of liability for this coverage. Pioneer argued the policies are equal because they both provide $100,000 per person. The Court held that coverage under the Pioneer policy exceeded that available under the Auto-Owners policy because the Pioneer policy afforded each plaintiff $100,000 in UM coverage, totaling $200,000, while the Auto-Owners policy allowed them to jointly recover no more than $100,000. Pioneer also argued that any UM coverage must be reduced by the $100,000 settlement and therefore, it owed no UM benefits. Pioneer relied on the Limit of Liability provision in the policy which limits liability to the extent of all sums paid by the underinsured driver. The Court rejected Pioneer’s interpretation of the UM limitation of liability provision because the language clearly and unambiguously demands a reduction in the limits of UM liability “for each person” making a claim for UM benefits. The Court held that given that each plaintiff has received $50,000 from Auto-Owners, Pioneer was entitled to deduct $50,000 from the $100,000 in UM benefits available to each claimant.

[su_box title=”Kallas & Henk Note”] This case was decided based on the specific language contained in the Pioneer Policy. There are many different forms in use for underinsured motorists coverage and different language could dictate a different result. [/su_box]

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