Michigan Coverage Decisions, Issue 155

Walgreen Co. v. RDC Enterprises, LLC

Unpublished. Decided August 23, 2011 Michigan Court of Appeals Docket No. 293608.

An employee of a sub-contractor installing light fixtures at one of the plaintiff’s locations was injured in a fall from scaffolding designed by the plaintiff. The employee’s estate filed the underlying action against several parties, including Walgreen Co., claiming that the scaffolding was improperly designed. Walgreen filed this case claiming a right to indemnity from the defendants, and a declaration that it was an additional insured under a general liability policy issued to a contractor on the project who had contracted to install the light fixtures. The additional insured endorsement provided that coverage extended only to liability resulting from work that the insured performed for the person claiming to be an additional insured, and it contained an exclusion for liability arising out of professional services.

The trial court concluded that the plaintiff was not an additional insured because the injuries alleged in the underlying complaint resulted from negligent design of the scaffolding and not specifically from the installation of the light fixtures. The Court of Appeals held that this was not a proper conclusion because the application of the endorsement did not depend on whether the cause of the underlying injury resulted from the specific work being performed; it was sufficient if, at the time of injury, work was being performed by the named insured for the additional insured. The Court’s analysis continued with a consideration of the exclusions in the endorsement, one of which eliminated coverage for injuries arising out of the failure to perform architectural services. The Court held that the insurer did not have a duty to the plaintiff. The underlying complaint related directly to the failure to properly design the scaffolding, which is an architectural service. The exclusion applied even if a licensed architect was not involved in the design because the title or character of the person performing the service is not considered, only the specific act or omission which, in this circumstance, involved an architectural activity.

[su_box title=”Kallas & Henk Note”] This decision is notable in two respects; namely that it recognizes the long-standing principle that a proper review of coverage requires an analysis of both the basic insuring agreement and the exclusions, and that coverage will not depend on the person claiming coverage, but the conduct for which coverage is sought. [/su_box]

 

Starr v. Farm Bureau General Ins. Co. of Mich.

Unpublished. Decided September 20, 2011 Michigan Court of Appeals Docket No. 298136.

The plaintiff’s homeowners policy was set to expire and the defendant sent a renewal notice and an invoice for the renewal premium. The defendant sent two subsequent reminders for payment, but the plaintiff did not pay the premium. After the policy lapsed for non-payment, the defendant sent another notice confirming that the plaintiff had not paid the premium and that the policy lapsed as a result. Approximately 2 weeks later, the plaintiff’s house was damaged in a fire and she made a claim for the loss. When the defendant denied coverage, the plaintiff filed suit claiming that she did not receive a 10-day notice of cancellation provided in MCL 500.3020.

The trial court granted summary disposition for the defendant and the Court of Appeal affirmed. The policy did not need to be cancelled, and the notice requirement did not apply, because the policy had expired by its own terms when the plaintiff failed to pay the renewal premium as required.

[su_box title=”Kallas & Henk Note”] The Court was fairly explicit in stating that an insured should have to pay the premium in order to expect that the policy would stay in effect, especially since she not only failed to pay the premium, she apparently ignored three notices that her premium had not been paid. [/su_box]

 

Home-Owners Ins. Co. v. Chammas

Unpublished. Decided October 18, 2011 Michigan Court of Appeals Docket No. 299412.

This coverage dispute arose out of an incident in which the insured shot and injured the underlying plaintiff during an altercation at the insured’s convenience store. The insured claimed a right to defense and indemnification in the underlying action.

The trial court held that there was a question of fact as to whether the general liability policy at issue provided coverage, agreeing with the insured’s argument that he had not intended to injure the underlying plaintiff, but only intended to scare him when he fired two shots directly at him, and that the resulting injuries were an occurrence. The Court of Appeals reversed. The policy only applied to bodily injury arising from an occurrence, which was defined in the policy as an accident. The Court held that an accident does not arise when an insured creates a direct risk of harm, even if there is no specific intent to cause an injury.

[su_box title=”Kallas & Henk Note”] Even though the insured claimed that injuring the underlying plaintiff was accidental, it is hard to accept that intentionally firing a gun directly at somebody else is anything other than a specific intent to cause serious injury. [/su_box]

 

Mich. Municipal Risk Mgt. Authority v. Boos

Unpublished. Decided October 18, 2011 Michigan Court of Appeals Docket No. 299273.

The plaintiff issued a policy covering the county and its employees from liability arising out of bodily injury, but excluding coverage any person who admitted to, or who was proven to have committed, a criminal act. The defendant-employee pleaded guilty to sexually assaulting two of the victim-defendants, but did not face criminal charges for assaulting two of the other victim-defendants. The plaintiff filed this action on the basis that the criminal acts exclusion eliminated any coverage for liability arising out of his criminal conduct.

The trial court held that the policy clearly excluded coverage for liability arising out of the sexual assaults to which the defendant-employee pleaded guilty, but held that there was at least a question of coverage as to liability arising from the assaults for which he had not been charged. The Court of Appeals affirmed that the policy excluded coverage for the criminal acts to which the defendant-employee pleaded guilty. The Court also held that the trial should have found that the criminal acts exclusion applied to the sexual assaults to which he had not pleaded guilty. The defendant-employee had obviously committed a crime, and while he was not found guilty by a court, the policy terms did not require a criminal charge or conviction. In that there was no question that all of the victim-defendants had been assaulted, the exclusion applied.

[su_box title=”Kallas & Henk Note”] The Court also rejected the defendants argument that the criminal acts exclusion rendered the policy illusory. The defendants suggested that because they had raised civil rights violations, which can arise from criminal conduct, the policy would never provide coverage. The Court stated, however, that the policy clearly provided valuable coverage, just not for conduct arising from criminal activities.  [/su_box]

 

Hicks v. Auto Club Group Ins. Co.

Michigan Supreme Court Case no. 143034, Decided October 19, 2011.

The plaintiffs suffered a fire loss and made what appeared to be an inflated claim for the amount of property damaged in the fire. An investigation by the defendant and the state police confirmed that there was very little personal property lost in the fire. As a result, the defendant denied coverage for the entire loss on the basis that the plaintiffs had made material misrepresentations in their claim for coverage.

The trial court found that while the plaintiff-husband had made material misrepresentations as to the property loss, the plaintiff-wife had not, and that she was an innocent co-insured, entitled to coverage (the amount of coverage to which she was entitled according to the trial court was not specified.) The Court of Appeals in a 2-to-1 decision, reversed on the basis that the testimony of the plaintiff-wife (that she did not know the exact contents of the house that were lost or damaged in the fire) was not credible. The dissenting opinion stated that the majority did not give enough deference to the trial court, which actually heard the witnesses and was in a better position to judge credibility. The Michigan Supreme Court, rather than granting leave to appeal, issued an order reversing the Court of Appeals, and agreeing with the dissenting opinion, that the Court of Appeals majority had used an incorrect standard in reviewing the trial court’s decision.

[su_box title=”Kallas & Henk Note”] This decision does not specifically relate to a coverage issue, but shows the very different conclusions that judges can draw from the same factual situations. In addition, this decision is not necessarily the end of the dispute because the matter was remanded to the Court of Appeals for consideration of other issues that were not addressed in the initial because of the manner in which the Court of Appeals had disposed of the case. [/su_box]

 

Pugh v. Farmers Ins. Exch.

Published, Michigan Court of Appeals Order Dated October 19, 2011 Michigan Supreme Court Docket No. 143234.

The plaintiff was a passenger in an automobile while on her way to work and suffered damages that exceeded the amounts of available coverage. The defendant-driver’s auto policy included under-insured motorist coverage, but not if the vehicle was used to “carry persons or property for a charge.” The exclusion did not apply to a car pool situation, and the policy did not define what factors would constitute a car pool. The defendant-driver regularly drove the plaintiff and another colleague to their places of employment (they did not work for the same employers), and they typically shared the cost of gas. The defendant-insurer denied coverage on the basis that, by paying the defendant-driver for gas, the arrangement was not a car pool, but one in which the defendant-driver was driving the plaintiff for a charge.

The trial court disagreed, and so did the Court of Appeals. While the policy did not define a car pool, the Court held that it was an easily understood term that described exactly the arrangement that the plaintiff had with the defendant-driver. The arrangement was not one in which the defendant-driver was engaging in a business operation, but as a convenience to the parties, who only shared the expenses associated with the driving.

[su_box title=”Kallas & Henk Note”] This is a practical decision which recognizes that some arrangements are not always easy to define in general terms. [/su_box]

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