Michigan Coverage Decisions, Issue 146

Evanston Ins. Co. v. Johns

Unpublished. Decided December 7, 2010 Michigan Court of Appeals Docket No. 293742.

Johns had entered into a purchase agreement with Don Dover to sell property. Before any sale was consummated, Johns’ signature was forged on two quitclaim deeds that purported to transfer the property to Dover for $1.00. After learning the property had been sold to third parties, Johns’ attorney sent a letter to the title insurance agency, Blue Sky, on May 3, 2006 stating that his client is the owner of the property and requesting the opportunity to discuss a resolution. The letter also stated that additional action would be taken if there was no timely response. Evanston had issued three “professional liability, bodily injury and property damage liability” insurance policies to Blue Sky. Blue Sky did not forward the May 3, 2006 letter to Evanston. On March 7, 2008, Blue Sky sent Evanston notice of the lawsuit and Evanston denied the claim. Evanston regarded the 2006 letter as a claim that had not been timely reported and found that the letter provided Blue Sky with knowledge of the error or omission before the effective date of the 2007 policy. The trial court granted summary disposition to Evanston.

The Court of Appeals affirmed even though it found that the May 3, 2006 letter was not a claim. “Claim” is defined by the policy to mean”a written demand received by the Insured for compensation for Damages”. The Court found that the demand in the letter was not for compensation. The Court found that because of the ambiguities in the letter, it could not be considered a claim and Johns was not required to notify Evanston of the letter. The Court held, however, that the claim that was made in 2007 was properly denied because Blue Sky had knowledge of its act, error or omission before the effective date of the 2007 policy based on the May 3, 2006 letter. The terms of the policy eliminated coverage for incidents where the insured had knowledge of the act, error or omission prior to policy inception.

[su_box title=”Kallas & Henk Note”] The Court applied contract interpretation rules announced by the Supreme Court in Rory v Continental Ins. Co. [/su_box]

 

Allstate Ins. Co. v. Mian

Unpublished. Decided January 18, 2011 Michigan Court of Appeals Docket No. 294634.

Mian rented space from Century Tool and Die. Mian purchased a press because he thought he could use the vise attached to the press and that he would be able to sell the press for scrap. Eventually, he gave the press to Century Tool and Die. Sparks, an employee of Century Tool and Die, was injured. Mian had a homeowner’s insurance policy through plaintiff. The policy contained a business activities exclusion which excluded coverage for bodily injury “arising out of the past or present business activities of an insured person.” “Business” was defined in the policy as “any full or part-time activity of any kind engaged in for economic gain . . .” The trial court granted summary disposition in favor of defendant insureds.

The Court of Appeals affirmed. The Court noted that there is no evidence that Mian ever used the vise or the press. The Court also noted that while Mian hoped to profit off the press by selling it for scrap, that activity lacks the required degree of continuity as there is no evidence that Mian was engaged in the business of purchasing and reselling such equipment for profit. The Court also noted that even if the purchase of the press was a business activity, the injury did not arise out of this activity. The Court found that the act of giving the press to Century Tool and Die broke any causal link between economic motive for the purchase and injury sustained.

[su_box title=”Kallas & Henk Note”] This decision is questionable. This panel of the Court of Appeals elected to apply a very narrow definition of business activities. [/su_box]

 

Titian Ins. Co. v. Hyten

Published. Decided February 1, 2011 Michigan Court of Appeals Docket No. 291899.

On an insurance application submitted to Titan on August 24, 2007, Hyten represented that she possessed a valid driver’s license. In reality, her license had been suspended and was not restored until September 20, 2007. In February 2008, Hyten was involved in an auto accident in which the Holmes were injured. Based on the misrepresentation, Titan sought to reform the policy by reducing to the liability coverage to the statutory minimum. The trial court denied Titan this equitable remedy on the ground that Titan easily could have ascertained the misrepresentation.

The Court of Appeals affirmed. The Court found that because the misrepresentation was easily ascertainable by requesting a copy of Hyten’s license or obtaining her driving record, and because the implicated coverage benefits innocent third parties, Titan could not reform the policy to reduce the residual coverage to the statutory minimum. The Court also noted that once Hyten received her license, the prior innocent misrepresentation lost its effectiveness as a potential ground for contract cancellation. The Court held that Titan failed to demonstrate an equitable basis for rescission or reformation because no evidence refutes that Titan would have insured Hyten on September 20, 2007 and Hyten cured her unlicensed status approximately 5 months before the accident.

[su_box title=”Kallas & Henk Note”] The outcome of this case is fact specific. In our view, the Supreme Court should address and reverse the line of cases which burden insurers with investigating the accuracy of representations made in applications for insurance. [/su_box]

 

Auto Club Group Ins. Co. v. Smith

Unpublished. Decided January 25, 2011 Michigan Court of Appeals Docket No. 294697.

Smith operated a boat that collided with the Pools’ boat. The collision caused physical injuries and property damage to the Pools. The Pools brought suit against the Smiths alleging that Robert Smith was operating his boat while under the influence of alcohol or with an unlawful blood alcohol content. They also alleged that Cynthia Smith was liable by virtue of her co-ownership of the boat. The Smiths had a boatowners policy with Auto Club. Auto Club sought a declaration that it had no duty to defend or indemnify the Smiths based on the “intentional acts” and “criminal acts” exclusions. The trial court granted Auto Club summary disposition finding that Robert Smith had committed a criminal act – boating while under the influence of alcohol, and that the claims against Cynthia Smith were derivative.

The Court of Appeals affirmed. The Court found the intentional acts exclusion and the criminal acts exclusion unambiguous. The Court held that when Robert Smith pleaded nolo contendre to a criminal charge he voluntarily excluded himself from insurance coverage. The Court rejected the Pools’ argument that the criminal acts exclusion when used in a boating insurance policy rendered the contract against public policy or illusory. The Court noted that the criminal acts exclusion precludes coverage for bodily injury or property damage resulting from a criminal act regardless of who committed the act or who owned the boat.

[su_box title=”Kallas & Henk Note”] This decision is based on the specific language used in the policy and is in accord with prior Michigan decisions. [/su_box]

Comments are closed.