Michigan Coverage Decisions, Issue 151

Auto Club v Ramos

Unpublished. Decided June 30, 2100. Court of Appeals Docket No. 297397.

Plaintiff Auto Club initiated this declaratory action asking the court to find that it did not provide coverage under a homeowners policy to Ricardo. Ricardo was being sued by his niece, Ramos, for an alleged sexual assault during a massage.

In the trial court, Auto Club took the position that there was no coverage because there was no “occurrence” and sexual molestation and criminal acts exclusions eliminate coverage. The trial judge denied summary disposition finding that there was a question of fact on the intent of Ricardo and what actually happened. The trial court never addressed the exclusions.

The Court of Appeals reversed finding that under both versions of the facts, there was no “accident” and consequently no “occurrence”. Like the trial court, the Court of Appeals did not address the exclusions.

[su_box title=”Kallas & Henk Note”] While the Court of Appeals based its decision on the fact that there was no accidental conduct and that the conduct of Ricardo was intentional (and therefore not an occurrence), it is clear that both the trial court and the Court of Appeals could have found in favor of Auto Club based on the criminal acts and sexual molestation exclusions. [/su_box]


Hollenbeck v Farm Bureau

Unpublished. Decided June 30, 2011. Court of Appeals Docket No. 297900.

Edwin Hollenbeck was seriously injured while a passenger in a truck driven by his son Devin Hollenbeck. Farm Bureau insured the vehicle. The policy has liability limits of $100,000 per person in $300,000 per occurrence. The policy also had an exclusion which reduced the limits to the statutory minimum mandatory amount ($20,000) for bodily injuries to the insurer or insurance family member. Hollenbeck brought suit seeking to obtain the full policy limits of $100,000.

The trial court agreed with Farm Bureau that the exclusion was unambiguous and held that Hollenbeck could only recover $20,000. The Court of Appeals affirmed rejecting plaintiff’s arguments that the policy was ambiguous (because of different policy limits applying under different circumstances) and that the limitation pertaining to family members was violative of public policy.

[su_box title=”Kallas & Henk Note”] The Court of Appeals properly relied on prior published decisions upholding policy provisions limiting and reducing available limits for claims involving family members. It could also hardly be said that public policy is violated when a recovery is made in the amount that the legislature has said is adequate under law. [/su_box]


Essa v Pioneer State Mutual

Unpublished. Decided July 5, 2011. Court of Appeals Docket No. 297493.

Plaintiff’s property sustained a severe water damage. Defendant insurer issued a property insurance policy to plaintiff. Defendant investigated the loss and took a sworn statement from Plaintiff regarding the loss. Plaintiff, however, failed to file a sworn proof of loss as required under the terms of the insurance policy. Defendant moved for summary disposition in the trial court on the basis that Plaintiff failed to fulfill one of the conditions of coverage – that being to file the sworn proof of loss within 60 days of the loss.

The trial court granted summary disposition. On appeal, plaintiff argued that there was substantial compliance, that defendant insurer had the necessary information and finally that defendant waived any defect in the filing of the proof of loss. The Court of Appeals rejected each of these arguments finding the proof of loss requirement is mandatory. Further, the court rejected the waiver argument finding that a mere failure to act cannot constitute “a voluntary relinquishment of a known right”.

[su_box title=”Kallas & Henk Note”] Unlike some jurisdictions, the Michigan courts have been consistent in enforcing the proof of loss requirement and the deadline. The cases that have excused strict conformance with the requirement are all based on the acts of the insurer causing the failure to comply. [/su_box]


Federal-Mogul v Continental Casualty

Decided July 8, 2011. U.S. Court of Appeals No. 10-1290.

The plaintiff is the trust handling asbestos cases against Federal-Mogul. Continental Casualty issued an umbrella policy to Federal-Mogul. The umbrella policy specifically listed a Travelers primary policy as the underlying coverage. Travelers exhausted its limits and Federal-Mogul brought this action to compel Continental to undertake its defense costs.

The issue in the case is whether the defense obligation arises because of the exhaustion of the Travelers policy or if the defense obligation is only triggered after exhaustion of any insurance that would cover defense costs. Federal-Mogul, at the time of the litigation, had 2 other insurance carriers that were obligated to pay the defense costs.

The District Court granted summary judgment in favor of Continental finding that the plain terms of the policy provides that as long as there is any insurance that provides defense on a primary basis, the umbrella policy is not implicated. The Court of Appeals agreed with the District Court finding that the Continental policy language was unambiguous and that the plaintiff’s position would render much of the policy language meaningless.

[su_box title=”Kallas & Henk Note”] The court properly analyzed the umbrella policy noting that, unlike access policies, umbrella policies may provide for defense where there is no coverage under applicable primary policies. In this case, however, the issue was not whether Continental could, in any circumstance, be obligated for defense costs but rather whether, in this circumstance, it was obligated for defense costs. [/su_box]

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