Michigan Coverage Decisions, Issue 147

Anton v National Union

Published. Decided February 11, 2011. United States Court of Appeals No. 09-2461.

Plaintiff Peter Anton was an executive employee by General Motors. He was driving a company owned vehicle and was involved in an accident with an underinsured driver. His wife, Catherine, was injured in the accident. They made claim for underinsured motorist benefits under the policy issued by National Union to General Motors. Coverage was denied on the basis that the policy issued by National Union to General Motors did not provide underinsured motorist benefits in Michigan.

The federal district court granted National Union summary judgment on the basis that there was no endorsement providing underinsured benefits in Michigan (as opposed to other states where the coverage is mandatory). The Sixth Circuit Court of Appeals affirmed the finding that the policy provisions were unambiguous and no coverage was provided in Michigan. The plaintiffs argued that the various forms and endorsements and declarations relating to coverages throughout the country could be interpreted to provide coverage in Michigan. The Court rejected these arguments as a “nonsensical reading of the policy”.

[su_box title=”Kallas & Henk Note”] The plaintiffs in this case attempted to rely on the complexity that naturally goes along with a policy which provides coverage for a multinational company in different jurisdictions. The Court cut through the clutter of the 538 page policy. [/su_box]

 

Fricke v Farm Bureau Mutual Insurance

Unpublished. Decided February 15, 2011, Michigan Court of Appeals.

Thomas Fricke lost control of his vehicle and drove into a pond. Abigail Fricke, his wife, drowned. Her estate made a claim against Fricke’s automobile insurer, Farm Bureau for policy limits in the amount of $500,000. Farm Bureau took the position that, because there was an exclusion that limited policy limits to the minimum required by the jurisdiction in the event of a claim by a family member, it’s exposure was limited to $20,000 (the mandatory minimum limit in Michigan).

The estate initiated this action for declaratory relief in circuit court. The trial judge in circuit court granted summary disposition to Farm Bureau. The Court of Appeals affirmed the finding that the exclusion was clear and unambiguous and limited any recovery under the policy to $20,000.

[su_box title=”Kallas & Henk Note”] Significantly, the Court of Appeals decision rejected arguments made by the estate (1) that the fact that the limitation was contained in an exclusion rather than the insuring agreement made it ambiguous and unenforceable and (2) that the limitation of this type contravenes public policy. [/su_box]

 

Badger Mutual v Ross Enterprises Inc.

Unpublished. Decided March 3, 2011. Michigan Court of Appeals Docket number 294489.

Badger Mutual provided both general liability and liquor liability coverage to Ross Enterprises, a gentleman’s club. This action was initiated by Badger Mutual for a declaration by the court that it had no coverage for negligence allegations against Ross Enterprises in an underlying bodily injury lawsuit. In that lawsuit, the plaintiff alleged both a dram shop claim arising out of the unlawful service of alcohol to an intoxicated person and a separate negligence claim for providing the intoxicated person with car keys prior to the incident. The trial court held that Badger Mutual had to defend and indemnify Ross Enterprises for the general negligence count.

The Court of Appeals reversed finding that an exclusion in the policy eliminates coverage for the general negligence count. That exclusion provided that Badger Mutual would not provide coverage for a loss for which any insured might be held liable by reason of the furnishing of alcoholic beverages to a person under the influence of alcohol. The exclusion also provided that the company would not pay for such a loss even if other causes or events contributed to or aggravated the loss. The court held that this concurrent causes exclusion clearly applied to eliminate coverage.

[su_box title=”Kallas & Henk Note”] The concurrent causes exclusion in badger Mutual’s policy is unusual for a general liability policy. One can conclude that this exclusion was specifically designed for underwriting liquor liability risks. This exclusion prevents the company from having to pay its higher general liability limits in cases involving liquor liability. As is typical, the liquor liability limits were considerably lower than the general liability limits. [/su_box]

 

Defrain v State Farm Mutual

Published. Decided September 21, 2011. Michigan Supreme Court No. 142956.

Plaintiff sought uninsured motorist benefits from State Farm. State Farm denied coverage on the basis that plaintiff violated a policy requirement to report any accident involving a hit-and-run vehicle within 30 days. The trial court denied State Farm’s summary disposition on the basis of the policy condition.

The Court of Appeals affirmed finding that binding Supreme Court precedent provides that State Farm must show that it was prejudiced by the late notice in order to deny coverage. In the trial court and the Court of Appeals, State Farm argued that no prejudice was required in order to rely on the condition contained in the policy. In affirming the trial court, the Court of Appeals relied on Koski v Allstate, a 1998 Supreme Court decision which, in the Court of Appeals interpretation, requires an insurer to show prejudice before denying coverage for violation of a notice provision.

[su_box title=”Kallas & Henk Note”] This panel of the Court of Appeals are all well-known for their plaintiff orientation. In our view, they took significant liberties in avoiding later Supreme Court decisions in Jackson v State Farm (2005) and Rory v Continental Insurance (2005) which would suggest that the current state of the law is that no prejudice need be shown unless the policy language provides for it. The Supreme Court has agreed to hold oral argument on whether to accept an application for leave to appeal in this case and we suspect that, given the current makeup of the court, this decision will be reversed. [/su_box]

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