Michigan Coverage Decisions, Issue 15

Farm Bureau Mutual Insurance Company of Michigan v Knipple

Unpublished. Decided May 12, 2000. Michigan Court of Appeals Docket Number 216444.

Plaintiff auto carrier filed a declaratory action for a ruling that it owed no benefits for underinsured motorist coverage. Defendants filed a counterclaim for breach of contract for failure to pay underinsured motorist benefits, bad faith, violation of RICO statutes and for intentional infliction of emotional distress.

Defendant insured was injured in an automobile accident. Defendant sued the tortfeasor driver, a tavern where the tortfeasor had been drinking and another individual. Defendant’s attorney notified plaintiff of the pendency of the action and made a claim for underinsured motorist coverage asserting that the combined coverages of the defendants were insufficient to compensate defendant for injuries sustained in the accident. The policy provided, as a condition of recovery of underinsured motorist benefits, that defendant not settle without written permission of plaintiff or accept less than the policy limits of any responsible parties. Notwithstanding these provisions, the insured settled its lawsuit against the tortfeasor driver for his policy limits and settled with the other two defendants for less than their policy limits without obtaining permission of plaintiff.

Plaintiff filed a motion for summary disposition. The Trial Court denied plaintiff’s motion for summary disposition on the basis that defendant had raised sufficient questions of fact to preclude summary disposition on both plaintiff’s complaint and defendant’s counter complaint.

The Court of Appeals reversed finding that the provisions of the underinsured motorist coverage were clear and unambiguous in requiring written permission of the carrier to settle and precluding settlement for less than the policy limits of any responsible parties. The Court also held that plaintiff insurer was entitled to summary disposition on the counter complaint because there were no facts to support these claims and Michigan law does not recognize either a bad faith action for refusal to pay an insurance claim or an action for intentional infliction of emotional distress for failure to pay insurance benefits.

[su_box title=”Kallas & Henk Note”] This decision is consistent with a series of recent decisions from the Court of Appeals upholding limitations contained in both uninsured and underinsured motorist coverages. Because these coverages are not mandated by law, the parties are free to agree to any terms and limitations in the insurance contract.  [/su_box]

 

Safeco Insurance Company of America v Necker

Unpublished. Decided May 12, 2000. Michigan Court of Appeals Docket Number 212180.

Plaintiff homeowner’s carrier brought this declaratory action for a ruling that it had no duty to defend or indemnify its insured for a claim brought by a minor that she was raped by the insured. Plaintiff moved for summary disposition in the Trial Court asserting that the incident was not an “occurrence”. Plaintiff also asserted that the Intentional Acts Exclusion applied and that there was no coverage because the underlying plaintiff had not suffered a bodily injury as defined in the policy.

The Trial Court granted summary disposition finding that there was no “occurrence” and that the Intentional Acts Exclusion precluded coverage but held that the underlying plaintiff had sustained a bodily injury as defined in the policy. Defendant insured appealed and plaintiff filed a cross appeal on the ruling that the underlying plaintiff had sustained a bodily injury.

The Court of Appeals affirmed judgment in favor of the insurer finding that sexual intercourse (even if consensual) is not an accident and therefore not an “occurrence”. The Court also held that the Intentional Acts Exclusion precluded coverage because, as a matter of public policy in Michigan, sex with a minor is deemed to infer an intent to injure. The Court of Appeals declined to address the question of bodily injury.

[su_box title=”Kallas & Henk Note”] Recent Supreme Court decisions interpreting the “occurrence” requirement of most insurance policies have resulted in a series of decisions from the Court of Appeals (including this decision) which have found no coverage where the actions of the insured are not truly accidental. These decisions have also eliminated prior confusion from circumstances where the actions of the insured were intentional but the consequences unintentional. The Michigan Supreme Court has now made clear that where intentional acts are committed which cause harm, there is no coverage even if the harm is greater than what was intended or expected. This decision also follows a line of cases in Michigan which hold, as a matter of law, that intent to harm is inferred where an adult engages in sexual acts with a minor.  [/su_box]

 

Wert v Citizens Insurance Company

Published. Decided May 26, 2000. Michigan Court of Appeals Docket Number 212066.

Plaintiff was injured while riding his motorcycle. The driver of the automobile involved in the accident was uninsured. Plaintiff had uninsured motorist coverage in the amount of $20,000 for the motorcycle. He also had another vehicle with uninsured motorist coverage in the amount of $100,000 with defendant insurer. Plaintiff received the full policy limits from the insurer of the motorcycle. Defendant denied coverage on the basis of an “other owned vehicle” exclusion which eliminated coverage where the insured was occupying any motor vehicle owned by the insured and not insured under that particular policy.

Plaintiff brought suit for a declaration that defendant insurer was obligated to pay under the underinsured motorist coverage. The Trial Court held in favor of plaintiff and entered judgment against defendant.

Defendant insurer appealed and the Court of Appeals, by a 2 to 1 majority, affirmed the Trial Court finding that defendant’s policy was ambiguous and plaintiff was entitled to coverage. The Court’s reasoning was that because defendant’s policy defined an uninsured motor vehicle to exclude motorcycles, that it was reasonable to interpret the policy’s use of the phrase “motor vehicle” contained in the “other owned vehicle” exclusion to not include motorcycles.

[su_box title=”Kallas & Henk Note”] The reasoning of the majority in this case is dubious. The Michigan Supreme Court has specifically held that the term “motor vehicle” includes motorcycles. The majority in this case used torturous reasoning to reach its conclusions. The dissent is much better reasoned. If an application for leave to appeal is made to the Supreme Court and they accept this case, we would anticipate a reversal of this decision.  [/su_box]

 

Rahrig d/b/a Heritage Manor Inn v Lamse and Michigan Millers Mutual Insurance Company

Unpublished. Decided June 9, 2000. Michigan Court of Appeals Docket Number 215551.

Plaintiff constructed a gazebo on their property. The gazebo was a separate structure from the main building. Defendant insured the main building. The gazebo was destroyed by fire and defendant denied coverage for the reason that the gazebo was not part of the insured structure.

Plaintiff filed suit and the Trial Court granted summary disposition in favor of plaintiff. The Trial Court found that the insurance coverage was ambiguous and that the gazebo could be considered an addition to the insured structure and, therefore, covered under the terms of policy. The Court of Appeals reversed finding that because the gazebo was a separate structure, it could not be considered an addition to the insured structure.

[su_box title=”Kallas & Henk Note”] The Court also rejected any contention that the gazebo was covered property because it was “newly constructed”. The policy did provide for coverage for newly constructed property within thirty days of the commencement of construction. Because the gazebo was constructed two years before the fire, the Court rejected plaintiff’s contention that, with each newly issued policy renewal, the gazebo should be considered newly constructed property because it was not listed as the insured structure. The Court held that the policy unambiguously provided that coverage could be extended to newly constructed structures for only thirty days following the commencement of construction. [/su_box]

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