Michigan Coverage Decisions, Issue 157

Ruzak v. USAA Ins. Agency, Inc.

Unpublished. Decided December 1, 2011 Michigan Court of Appeals Docket No. 288053.

The plaintiff and her husband had insured vehicles with the defendant for over 40 years, and in the various states in which they resided over those years. After the plaintiff and her husband moved to Michigan, they renewed their auto coverage. The renewal policy contained different provisions than their prior policy, mainly to comply with the Michigan No-Fault Act, however, the renewal policy also contained a new exclusion which reduced the policy limits from $500,000 to $20,000 per person/$40,000 per accident for bodily injury to an insured person. The plaintiff, who was an insured person in the policy, was seriously injured in an auto accident. When the defendant denied coverage for the damages that exceeded $20,000, the plaintiff filed suit, claiming that she should have been notified of the changed coverage.

The trial court ruled in favor of the plaintiff, finding the limitation of coverage for injuries to insured persons was “repugnant.” The Court of Appeals reversed that decision, but ordered that the trial court consider whether the Renewal Rule applied, which requires an insurer to provide notice when a policy is renewed but with material changes to the coverage. The trial court again ruled in favor of the plaintiff, and the Court of Appeals affirmed. The Michigan Supreme Court, however, remanded the case to the Court of Appeals for consideration of whether the Renewal Rule is applicable when a policy is changed because an insured has moved to another state. The Court of Appeals held that it is not. The insurer was not required to notify the plaintiff of material changes to the policy because she could not have had a reasonable belief that the policy would not change when she moved to another state. The Court determined that, due to the highly regulated insurance industry, and the differing public policy concerns in the various states, an insured should recognize that an auto policy will change if the insured’s residence changes.

[su_box title=”Kallas & Henk Note”] Even though this decisions rests on the well-established principle that an insured is obligated to read and understand policy provisions, there was a dissent, which suggested that the average insured is not sophisticated enough to understand that different states may have different requirements for auto policies. [/su_box]

 

Mopkins v National Indem. Co.

Unpublished. Decided December 13, 2011 Michigan Court of Appeals Docket No. 299621.

The plaintiff filed suit to recover uninsured motorist benefits from his employer’s auto insurer 4 years after the motor vehicle accident giving rise to his injuries. The auto policy, however, required that all actions seeking such benefits had to be filed within 3 years of the accident. The plaintiff argued that the insurer should be estopped from relying on the contract, and he should still get paid UM benefits despite the 3-year contractual limitation period, because the insurer did not give him a copy of the policy and did not otherwise inform him that there was a shortened time period for bringing a lawsuit. The trial court granted summary disposition to the insurer, enforcing the policy as written, and the Court of Appeals affirmed.

The Court held that, for equitable estoppel to apply, the insurer had to make some representation or take some action which would make it reasonable for the plaintiff to believe that the policy terms were different than as written. The fact that the insurer did not produce a copy of the policy when requested was an insufficient basis to impose liability on the insurer different from the plain terms of the policy.

[su_box title=”Kallas & Henk Note”] The Court was not sympathetic to the plaintiff, who took no action for more than 3 years after requesting a copy of the policy, and who should have attended to his own interests in a more diligent manner. [/su_box]

 

Hegyi v. Auto Club Ins. Group

Unpublished. Decided December 15, 2011 Michigan Court of Appeals Docket No. 298539.

The plaintiff was injured in an auto accident and settled with the at-fault driver for the driver’s policy limits. The settlement was concluded with a release. The plaintiff then filed suit against defendant for underinsured motorist benefits. The plaintiff’s policy had been amended, however, to include an endorsement which provided that the insurer was not liable for underinsured motorist benefits if the plaintiff settled a claim without the insurer’s consent. The insurer denied liability under the policy and the plaintiff filed suit, claiming that he had not received the endorsement and, even if he did, the endorsement was ambiguous and should not be enforced.

The trial court granted summary disposition for the insurer, and the Court of Appeals affirmed. First, the insurer provided evidence that it had in fact mailed the policy with the disputed endorsement to the plaintiff. Under the “mailbox rule,” by providing such evidence, the Court was to presume that the plaintiff received the mailing, unless the plaintiff could provide documentary evidence that he had not received it. The only evidence the plaintiff provided was his own affidavit, which the Court held was insufficient. The Court also found that the endorsement was not ambiguous, and clearly required the insurer’s consent before the plaintiff could settle a claim.

[su_box title=”Kallas & Henk Note”] The Court also held that an independent showing of prejudice to the insurer was not required, finding that the release of a potentially liable tortfeasor is automatically prejudicial because the insurer loses its subrogation rights against that tortfeasor as a result of the settlement. [/su_box]

 

Williams v Home-Owners Ins Co

Unpublished. Decided December 20, 2011 Michigan Court of Appeals Docket No. 301158.

This case involved a dispute as to the amount of coverage for mold infestation in the plaintiffs’ basement. The home owners policy at issue contained an endorsement which provided coverage for mold damage up to policy limits. The policy also contained a provision which limited payments to $5,000.00 for damages caused from the overflow of a sump pump or by the back-up of sewers or drains. The mold damage occurred when the plaintiffs’ sump pump failed due to a power outage during a large storm event, causing flooding in the plaintiffs’ basement. The plaintiff argued, among other things, that the sump pump failed because of the power outage and consequently, the water damage resulted from the storm event as opposed to the sump pump failure. The trial court disagreed and the Court of Appeals affirmed.

The Court first noted that the policy was not ambiguous. While the mold endorsement stated that the insurer was liable up to policy limits for mold-related damage to the house, the policy limited that exposure to $5,000.00 if the cause of the mold damage was the overflow of a sump pump. The mold damage to the plaintiffs’ house resulted from such a cause and the policy therefore limited the plaintiffs’ recovery to $5,000.00. The fact that the sump pump failed due to a weather-related cause was not a basis for avoiding the plain terms of the policy.

[su_box title=”Kallas & Henk Note”] The policy clearly provided that coverage was limited in certain circumstances, and the plaintiffs acknowledged that those circumstances occurred. The possibility that the plaintiffs’ damage also may have arisen from another cause does not affect the limitations written into the policy. [/su_box]

 

Lucio v. Great Lakes Cas. Ins. Co.

Unpublished. Decided December 29, 2011 Michigan Court of Appeals Docket No. 299786.

The plaintiff was a student, attending school away from home and residing with another person, when he was injured in an auto accident while driving a car owned by the person with whom he was residing. This litigation involved a dispute as to which insurer was the first in priority to pay personal protection insurance benefits. The trial court ruled that because the plaintiff’s step-father had essentially banned him from the house, and that the person with whom he was residing claimed the plaintiff as a dependent on her income tax returns, the plaintiff was not domiciled with his mother and step-father. The Court of Appeals disagreed and reversed the trial court’s decision.

The Court considered several factors related to the competing living arrangements to conclude that the plaintiff’s domicile remained with his mother and step-father. The plaintiff’s driver’s license was issued with that address, the plaintiff maintained his mother and step-father’s address as his own and used that address when registering for school and in applying for employment. Most of the plaintiff’s possessions were at his mother and step-father’s house, and a room was maintained there for him, and he occasionally stayed in that room. He did not have a formal relationship with the person with whom he was residing during the school year, unlike the family ties he had with at least his mother, and the plaintiff stayed at his mother and step-father’s house while recovering from the injuries suffered in the accident. The plaintiff also testified that he intended to continue residing in his mother and step-father’s house after he completed school, which was the factor most important to the Court. As a result of these factors, the Court held that the plaintiff was domiciled with his mother and step-father.

[su_box title=”Kallas & Henk Note”] The actions of the plaintiff’s step-father, in trying to ban the plaintiff from his house, and that of the person with whom the plaintiff was residing, in adding him as a dependent for her tax purposes, did not change the analysis for the Court in that the critical factor for determining domicile is the subjective intent of the insured, which was clearly demonstrated through his testimony and the objective facts of his living arrangement. [/su_box]

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