Michigan Coverage Decisions, Issue 159

Pearson v Flood Professionals, Inc.

Unpublished. Decided January 24, 2012 Michigan Court of Appeals Docket No. 298359.

The plaintiff incurred damages due to a water leak that caused the furnace of her vacation home to stop working. She submitted several proofs of loss, each of which the defendant-insurer rejected as insufficient, claiming that the amount of the alleged loss was inaccurate and lacked supporting documentation. The insurer eventually denied the claim on the basis that the plaintiff was not timely in submitting her proof of loss.

The trial court granted summary disposition for the defendant-insurer, but the opinion does not state the basis for that decision. The Court of Appeals reversed in a 2-1 decision, stating that the issue of whether an insured has submitted a satisfactory proof of loss is generally a fact issue for a jury to decide, particularly when the insurer has not specified the reasons for rejecting a proof of loss.

[su_box title=”Kallas & Henk Note”] The majority apparently did not believe that the insurer’s statement as to the accuracy and completeness of the plaintiff’s proof of loss was detailed enough to inform the insured. Even if the insurer had been more specific, it is likely that the same result would have been reached because the plaintiff was asserting that she at least substantially complied with her obligation to provide a satisfactory proof, which the dissent determined would be a fact question for a jury to decide. [/su_box]


Travier v. Auto Club Group Ins. Co.

Unpublished. Decided February 23, 2012 Michigan Court of Appeals Docket No. 301122.

The defendant-insurer issued a homeowners policy to the plaintiff which covered accidental loss from casualties, such as fire. The plaintiff’s house was destroyed in an arson, and the plaintiff demanded coverage for the loss. The insurer did not respond to that demand, and the plaintiff filed suit for breach of contract and bad faith. While the insurer filed an answer to the complaint, it did not defend against the allegations and eventually paid the claim in full, and penalty interest under MCL 500.2006, approximately one year after the fire.

The plaintiff asserted that the defendant breached the contract by not paying her claim within 30 days, and that she was entitled to attorney fees, even though no statute, court rule, or policy provision permitted such a recovery. The trial court denied the plaintiff’s request and the Court of Appeals affirmed. The Court noted that a minority of states recognize a right to recover attorney fees when an insurer does not timely adjust a claim, but Michigan is not one of those states.

[su_box title=”Kallas & Henk Note”] The Court followed established precedent in this state that attorney fees cannot be recovered in a breach of contract action, even if the breach is premised on bad faith. [/su_box]


Frankenmuth Mut. Ins. Co. v. Mitch Harris Bldg. Co., Inc.

Unpublished. Decided January 31, 2012 Michigan Court of Appeals Docket No. 300481.

The underlying plaintiff filed suit against the defendant for damages arising out of construction defects, and the defendant requested defense and indemnity in that action from the plaintiff-insurer which had issued a commercial general liability policy to the defendant. The insurer denied coverage, and filed this declaratory action, on the basis that the allegations in the underlying complaint did not satisfy the insuring agreement requirement that liability must arise from an occurrence, which was defined in the policy as an accident, before there was any obligation to defend or indemnify.

The only claims at issue in the underlying action were for silent fraud and intentional misrepresentation, however, the trial court held that coverage was possible by looking beyond the allegations of the complaint, even though the claims required intentional or reckless conduct. The Court of Appeals reversed, stating that intentional conduct, by definition, cannot be accidental. Without an accident, there was no occurrence triggering coverage.

[su_box title=”Kallas & Henk Note”] The trial court’s reasoning for denying summary disposition to the insurer was not detailed in the opinion, but that court may have had an issue with whether the defendant actually intended an injury. The Court of Appeals clearly held, though, that fraud will not be considered as accidental. [/su_box]


Home-Owners Ins. Co. v. Leikert

Unpublished. Decided January 26, 2012 Michigan Court of Appeals Docket No. 302571.

The defendant-wife was a passenger on a motorcycle driven by her husband. She was severely injured in an accident resulting from her husband’s inability to avoid stopped traffic. She sued her husband for negligence and obtained an $800,000 default judgment. The insurer of the motorcycle (Progressive) paid policy limits, and the wife sought coverage for the remaining judgment balance under other policies they had, including an auto policy issued by Auto Club, and an umbrella policy the plaintiff had issued to the defendants. The plaintiff denied that the umbrella policy applied to the motorcycle accident because the Progressive policy was not scheduled as an underlying policy, and both the umbrella and the Auto Club policy (which was scheduled) contained a provision stating that coverage was not available for personal injuries to the husband or a relative, such as his wife.

The trial court agreed, and granted summary disposition for the plaintiff. On appeal, the defendants argued that the umbrella policy applied to any claim not fully covered by underlying insurance based on the language of the insuring agreement. The defendants failed to note, however, that the umbrella policy also excluded coverage for personal injury to an insured or a relative, like the Auto Club policy. The Court of Appeals held that the umbrella policy only applied to cover liability in excess of an underlying policy identified in the umbrella, none of which provided coverage.

[su_box title=”Kallas & Henk Note”] An umbrella policy, like any other insurance policy, is to be interpreted according to its plain terms, and by rejecting the defendants’ arguments, the Court upheld the plain sense meaning of those terms. [/su_box]


Brainerd v. Home-Owners Ins. Co.

Unpublished. Decided February 23, 2012 Michigan Court of Appeals Docket No. 301675.

The plaintiff’s decedent died in an auto accident in which three vehicles were involved, and several other persons were seriously injured. The at-fault driver had a liability policy with limits of $500,000 per occurrence. After distribution of policy limits to all persons injured in the accident, the plaintiff-estate received $230,000 from that policy. The plaintiff then claimed under-insured motorist benefits under the policy issued by the defendant to the driver of the vehicle in which the plaintiff’s decedent was a passenger. That policy provided UIM benefits, but only in excess of all limits of insurance available to the owner of the under-insured vehicle, up to a limit of $500,000. The defendant denied liability for the UIM benefits because there was no excess from which UIM benefits could be paid.

The plaintiff filed suit, but the trial court granted summary disposition to the defendant. The UIM coverage only applied to the amount by which the UIM benefits exceeded the limits of insurance paid by the under-insured driver’s policy. Because the UIM coverage and the underlying policy had the same limits, the defendant was correct in denying coverage. The Court of Appeals affirmed the trial court, finding that the policy terms were not ambiguous and provided that UIM benefits were available only to the extent that the underlying policy limits were less than the UIM coverage.

[su_box title=”Kallas & Henk Note”] This same issue was addressed by the Supreme Court in Wilkie v Auto Owner Ins. Co., 469 Mich 41, 49-51 (2003), and the Court of Appeals followed this long-standing precedent.  [/su_box]

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