Michigan Coverage Decisions, Issue 152

Ile v Foremost Insurance Company

Published. Michigan Supreme Court, Docket No. 143627. July 14, 2011.

Plaintiff decedent was killed while riding his motorcycle. He had obtained insurance coverage on the motorcycle from foremost. The coverage included a combined uninsured/underinsured motorist coverage which purported to have limits of $20,000/$40,000, the mandatory minimum automobile liability limits in Michigan.

The other vehicle involved did have insurance coverage in the mandatory minimum amount. Because of the available coverage, the uninsured motorist coverage did not apply. Foremost also denied any right to recovery under the underinsured motorist coverage because it’s policy language specifically provided that it did not apply unless the limits under the foremost policy were greater than the limits covering the other motor vehicle involved in the accident. Because the limits on both policies were $20,000, Foremost applied this language to deny any right to benefits.

The trial court, relying on cases outside of Michigan, held that plaintiff could recover because the underinsured motorist coverage under these circumstances was illusory – it could never provide benefits because its limits were the same as the mandatory minimum. The Court of Appeals affirmed finding that the coverage was illusory and that the plaintiff could recover the policy limits ($20,000) under the foremost policy in addition to the $20,000 recovered under the liability policy covering the other motor vehicle.

[su_box title=”Kallas & Henk Note”] In our view, both the trial court and Court of Appeals ignored Michigan law to reach their conclusions. Further, neither opinion explains how, if this is an illusory contract, it is enforceable against one of the parties. One would presumably conclude that if a contract is illusory, there is no contract. In this circumstance, it might be held to be inequitable for Foremost to retain any insurance premium that could be attributable to the underinsured motorist coverage, but this would be a different remedy.

The Supreme Court has granted leave to appeal in this case and we would predict that they will reverse this decision as it is not consistent with Michigan law and public policy. [/su_box]


Lapham v Jacobs Technology

Unpublished, Court of Appeals No. 295482, Decided July 19, 2011.

Jacobs Technology sought coverage from Indiana Insurance Company for a workplace related bodily injury. Indiana provided a defense under reservation of rights. Indiana also ultimately settled the bodily injury case. In this action, Jacobs sought reimbursement for costs incurred to retain separate counsel to represent its interests. Jacobs claimed that the attorneys retained by Indiana were not independent and therefore Indiana should reimburse them for their defense costs.

The trial court granted summary disposition to Indiana. The Court of Appeals affirmed finding no evidence that counsel retained and paid by Indiana to represent Jacobs did anything contrary to the interests of Jacobs. Further, the Court held that because Indiana both paid for defense counsel and ultimately paid the settlement, Jacobs had no greater rights to reimbursement.

[su_box title=”Kallas & Henk Note”] This case indirectly addresses the issue of whether the insured has the right to select its own counsel (and for which the insurer must pay) where the insurer has issued a reservation of rights letter reserving its right to later deny coverage. In Michigan, there are no reported cases which directly hold that the policy language which states that the insurer has the right and duty to defend, means that the insurer also may choose the attorneys. In this decision, the court relied on a federal court decision from the Eastern District of Michigan which specifically holds that an insured has no right to select the attorneys, even when a reservation of rights letter has been issued. The case also holds that the attorneys retained by the insurance company must be “truly independent”, but that there is no real discussion of what “independent” means in this context. [/su_box]


Thomas v Victoria General

Unpublished. Court of Appeals Docket No. 298243, Decided July 21, 2011.

Plaintiff was injured while driving a vehicle that he owned. His mother, procured the automobile liability policy on the vehicle from defendant insurer. In the application for insurance, she represented that she was the owner of the vehicle. Plaintiff sought 1 st party no-fault benefits under the policy. Defendant insurer moved for summary disposition on the basis that the policy was voided as a result of the misrepresentation in the application for insurance.

The trial court granted summary disposition in favor of the insurer finding that both plaintiff and plaintiff’s mother had misrepresented the ownership of the vehicle in the application. The Court of Appeals affirmed on the basis that there was no genuine issue of material fact with regard to the misrepresentation and that, under Michigan law, Defendant was entitled to void the policy.

[su_box title=”Kallas & Henk Note”] The outcome of this case turned on the fact that the plaintiff also misrepresented the status of the vehicle in the application. The outcome would have been different if a person who had not been part of the misrepresentation had been injured. The court also found that the misrepresentation was material, but there is no analysis in the opinion as to why it was material in this case. [/su_box]

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