Looking Good Lawns, LLC v. Secura Ins. Co.
Unpublished. Decided January 10, 2012 Michigan Court of Appeals Docket No. 301805.
The plaintiff, a lawn care company, erroneously applied an herbicide to the lawns of its customers, resulting in damages to those lawns. As a result of the misapplication of the herbicide, the plaintiff had to replace the damaged lawns. The plaintiff then sought coverage under its general liability policy for the costs it incurred. The insurer denied coverage on the basis that the business risks exclusions in the policy eliminated coverage. The plaintiff filed suit, claiming that an endorsement in the policy, which stated that a pollution exclusion did not apply if the plaintiff’s operations met applicable government standards, also rendered the business risks exclusions ineffective.
The trial court granted summary disposition for the insurer, and the Court of Appeals affirmed. The Court held that the business risks exclusions excluded coverage for damages to the property on which the plaintiff performed any work, and that the damaged lawns were in fact the property on which the plaintiff had performed its work. The Court also noted that the endorsement upon which the plaintiff relied was unambiguous in stating that it only limited the application of the policy’s pollution exclusion, and as a result the endorsement had no affect on the business risks exclusions.[su_box title=”Kallas & Henk Note”] There have been many instances in which the Court’s decision is based on the plain terms of the policy language as written, and this decision is consistent with that well-established principle of law. [/su_box]
Evangelical Presbyterian Church v. American Fidelity Assurance Co.
Unpublished. Decided January 12, 2012 Michigan Court of Appeals Docket No. 299625.
The plaintiff applied for health insurance coverage through an agent who generally reviewed available coverages from different insurers for the plaintiff and then recommended different plans. In this capacity, the agent recommended the defendant to the plaintiff. To apply for coverage with the defendant, the plaintiff had to complete a disclosure form which was to include the health information of its employees. The plaintiff failed to make this disclosure for two of its employees, and when these employees made a claim, the defendant denied coverage. The plaintiff sued the defendant for failing to pay the claim, and also alleged that the defendant was liable for representations that the agent had made.
The Court of Appeals affirmed summary disposition in favor of the defendant. The Court found that the agent was not the defendant’s agent, but was an independent, mainly because the agent placed insurance with different insurance companies and assisted the plaintiff in preparing its insurance application. As an independent agent, the insurer was not liable for the agent’s conduct. The Court also held that the defendant properly denied coverage on the basis that the plaintiff did not fully disclose required medical information. While the plaintiff argued that the policy did not set forth that it was supposed to provide complete and truthful information, the Court found that the disclosure signed on behalf of the plaintiff did contain this requirement. The disclosure provided that it was to be considered incorporated as part of the policy and, even though it was not attached to the policy itself, the Court held that the disclosure requirement had to be enforced as written.[su_box title=”Kallas & Henk Note”] While the decision involves health insurance claims, the reasoning of the Court on these issues can apply to other insurance coverages as well. The result supports the premise that an insurer will not be liable for the conduct of an insured’s agent, and the terms set forth in the documents submitted by an insured when applying for coverage, such as an application, are to be enforced. [/su_box]
Ibrahimovic v. Medmarc Cas. Ins. Co.
Unpublished. Decided January 19, 2012 Michigan Court of Appeals Docket No. 298469.
The plaintiff filed a legal malpractice lawsuit against two lawyers who represented him in separate personal injury actions, alleging that one of the attorneys had mis-handled his case, and the other should be vicariously liable as his partner. The attorneys were sharing the same office at the time, but they claimed that they were not partners. The defendant-attorney’s malpractice carrier denied coverage for that claim on the basis of an exclusion which eliminated coverage for vicarious liability arising out of joint ventures or partnerships. The plaintiff then filed this action for a declaration that the carrier had a duty to defend and indemnify in the underlying malpractice case.
The trial court held, and the Court of Appeals affirmed, that, while the policy excluded damages that were based on vicarious liability, the plaintiff also raised allegations of direct negligence against both attorneys. Because there was arguable coverage for at least part of the plaintiff’s claim the insurer had to defend the underlying lawsuit. The trial court also held, however, that the insurer did not timely raise the partnership exclusion in a timely manner and was estopped from relying on that exclusion, a decision which the Court of Appeals reversed, explaining that the failure to enforce the exclusion as written would result in an expansion of the risk that the insurer agreed to assume.[su_box title=”Kallas & Henk Note”] Even though the facts in the underlying action were complicated, this decision sets forth two basic principles. One is that an insurer must defend if there are any claims that arguably fall within the coverage provisions of a policy and the other is that an insurer will not be forced to assume liability that is clearly excluded or not covered in a policy. [/su_box]
Beddingfield v. Vaughn
Unpublished. Decided January 19, 2012 Michigan Court of Appeals Docket No. 300471.
The plaintiff was injured as a passenger in an auto accident by an uninsured motorist. The driver of the vehicle in which the plaintiff was riding had uninsured motorist coverage through Farm Bureau up to a policy limit of $500,000, but that there was no coverage if the injured person had other available coverage. The plaintiff had her own policy for UM coverage through State Farm up to a limit of $100,000, which stated that the coverage was excess. Farm Bureau argued that the plaintiff was not entitled to recover under its policy because she had her own UM coverage. The plaintiff and State Farm argued that the policy plainly provided that its UM coverage was excess over other coverage and was not triggered until all other insurance was exhausted. The trial court agreed with the plaintiff and the Court of Appeals affirmed.
The Court reviewed the policy language and held that the terms of the State Farm policy evidenced an intent that the UM benefits were excess over other available insurance, and this meant that the policy was not effective until all other available insurance was exhausted. As a result, the benefits under her State Farm policy were not available to her until all other insurance coverage was exhausted, and she was entitled to UM benefits under the Farm Bureau policy up to its limit of coverage.[su_box title=”Kallas & Henk Note”] The State Farm policy did not contain a typical Other Insurance clause, but instead specifically identified its coverage as excess over other insurance. If the two policies had contained the same clause, providing that coverage could not be provided if there was other available coverage, the Court most likely would have prorated based on the respective limits in the policies. [/su_box]
Hicks v. Auto Club Group Ins. Co.
Unpublished. Decided January 24, 2012 Michigan Court of Appeals Docket No. 295391.
This case arises out of a fire loss that the plaintiffs suffered, and a fraudulent property damage claim they submitted to the insurer for coverage. The plaintiff-wife asserted that she did not know that the claim filed by her husband included items of property which were not damaged in the fire. She claimed an entitlement to the entire loss, even though it was fraudulent. The trial court found the plaintiff-wife had not participated in her husband’s fraud, and was an innocent co-insured. The Court of Appeals initially reversed that decision, however, the Supreme Court reversed the Court of Appeals (see Michigan Coverage Reporter, volume 155). The basis for the reversal was that the Court of Appeals did not give enough deference to the trial court, which heard the testimony of the witnesses and was in a better position to judge credibility.
On remand, the Court of Appeals held that the plaintiff-wife was an innocent co-insured and was entitled to the entire amount of proceeds for the fire loss (on the basis that the plaintiff-wife was the only owner of the real property on which the fire occurred, and there was no evidence that her husband had any interest in that property or the personal property claimed to be damaged.) The Court also held that the trial court failed to properly calculate the amount of the loss. The policy provided for the smaller of policy limits, replacement cost or actual cash value if the property was not replaced. The replacement cost, as inflated by the plaintiff-husband, exceeded policy limits. While the plaintiff did not replace the damaged property, the insurer could not rely on the policy provision limiting payment to actual cash value because, by statute, the insurer had to pay policy limits in that the replacement cost exceeded those limits.[su_box title=”Kallas & Henk Note”] While this decision resulted in a relatively small reduction of the trial court’s judgment for the plaintiff-wife, the insurer is now under an order to pay for property that all parties acknowledge was fraudulently inflated in value, or was not damaged in the fire. [/su_box]