Michigan Coverage Decisions, Issue 160

Titan Ins. Co. v Auto-Owners Ins. Co.

Unpublished. Decided March 13, 2012 Michigan Court of Appeals Docket No. 302191.

The plaintiff issued an auto policy to the defendant-wife based on an application she submitted through her agent. The agent, however, did not give the defendant-wife the complete application, and her husband was not listed as a driver on any of the insured vehicles. A short time after the policy issued, the husband caused a fatal accident. The plaintiff denied coverage on the basis that, even though the defendant-wife had disclosed she was married, she had not disclosed her husband as a driver. The plaintiff argued that if it had known the husband was to be listed as a driver on the policy, it would have charged a little more than $50.00 more in premiums for the policy, and, because of this material misrepresentation, the policy should be reformed to $20,000/$40,000.

The trial court ruled against the plaintiff, and the Court of Appeals affirmed, noting that a representation or omission is material if the false or omitted information would substantially increase the insurer’s risk. The Court held that the approximately $50.00 premium increase was sufficient to find that the omission was material, however, the Court also held that the omission could have been easily ascertained by the insurer because the defendant-wife had clearly disclosed that she was married. Because it should have been apparent to the plaintiff that another driver would be operating insured vehicles, it was not able to deny coverage.

[su_box title=”Kallas & Henk Note”] One interesting aspect of this decision is the Court’s ruling that the nominal increase in premium was substantial enough to find that the defendant-wife’s omission was material, and demonstrates that relatively small underwriting decisions can have a significant impact on coverage. This case has been reversed and remanded by the Supreme Court based on the decision of the Supreme Court, Titan v Hyten 491 Mich 547,817 NW2d 562 (2012). In the Hyten case, the Court reversed prior decisions which held that insurers could not rescind or reform based on misrepresentation, if the insurer through investigation, could discover the actual state of affairs. [/su_box]


Kammers v. Pioneer State Mut. Ins. Co.

Unpublished. Decided April 19, 2012 Michigan Court of Appeals Docket No. 303726.

This case involved a priority dispute between Pioneer and State Farm. Pioneer insured the vehicle of the at-fault driver, and State Farm insured the vehicle in which the underlying plaintiff was injured. The at-fault driver was not identified as an insured person in the Pioneer policy, which provided up to $300,000 in coverage for an insured or family member, but by way of an exclusion the policy reduced the policy limits to $20,000 if any other person claimed coverage. For reasons that are not set forth in the opinion, the trial court held that Pioneer could not rely on the exclusion to reduce coverage to the statutory minimum. The Court of Appeals reversed.

The Court held that while an insurer may not completely exclude owner liability coverage, even if a non-owner is driving the vehicle, an insurer may reduce the limit of liability, provided that the reduction is not below the statutory minimum. Because the Pioneer policy did not completely exclude coverage, or reduce available limits below the requirements of the No-Fault Act, the provision was enforceable.

[su_box title=”Kallas & Henk Note”] The policy satisfied the requirements of the No-Fault Act, and there was no basis for not enforcing that policy as written. [/su_box]


Westfield Ins. Co. v. Ken’s Service

Published. Decided March 8, 2012 Michigan Court of Appeals Docket No. 300941.

The defendant was a tow truck driver and was outside the truck operating the control levers of the winch on that vehicle in order to remove an auto from a roadside ditch when he was struck by another vehicle. The insurer of the vehicle who caused the injury paid policy limits, and the defendant sought under-insured motorist benefits from the plaintiff, who was the insurer of the tow truck. That policy provided coverage to an insured while occupying a covered vehicle. For purposes of this UIM coverage, an insured had to be injured while in, on, or getting in, on, out or off a covered auto. The plaintiff argued that the defendant was not occupying the tow truck at the time he was injured and not entitled to UIM benefits.

The trial court found that the defendant’s injuries were not incidental to being a driver or passenger of the tow truck, and granted summary disposition for the plaintiff. The Court of Appeals affirmed on the basis that the defendant had been outside of the vehicle for several minutes before the accident. The Court held that his physical contact with the vehicle was not sufficient to suggest that he was occupying the tow truck.

[su_box title=”Kallas & Henk Note”] The majority relied on prior cases interpreting the No-Fault Act’s requirement that an injured person must be an occupant of a covered vehicle before no-fault benefits are paid. The dissenting opinion relied on unpublished decisions of the Court of Appeals to conclude that the defendant’s physical contact was sufficient to trigger UIM benefits. Even though this decision was published, it is likely that the issue of whether an injured person is occupying a vehicle will continue to be disputed. [/su_box]


Johnson v. Memberselect Ins. Co.

Unpublished. Decided April 24, 2012 Michigan Court of Appeals Docket No. 302469.

The plaintiff was a tenant in an apartment which was damaged in a fire. The plaintiff had maintained renter’s insurance, and immediately after the loss, he submitted a claim for coverage. The insurer promptly notified him timely of his obligation to submit a sworn statement in proof of the loss within 60 days of the fire, and the insurer also hired an adjuster to assist the plaintiff with the inventory of damaged items. The adjuster advised the plaintiff that almost no property could be salvaged. They prepared an inventory, and the adjuster told the plaintiff that he would notify the insurer of the damaged items. Neither the plaintiff nor the adjuster sent an inventory to the defendant, and a proof of loss was not otherwise submitted until more than 60 days after the fire. The plaintiff also appeared at an examination under oath, but did not produce documents as requested to support the loss, claiming that he did not have any such records. When the defendant refused to pay the claim, the plaintiff filed suit for breach of contract and bad faith.

The trial court granted summary disposition to the defendant, and the Court of Appeals affirmed. While an insurer may not deny a property loss claim if the insured substantially complies with its obligation to properly report a loss, the plaintiff had not provided any timely evidence from which the defendant could determine the amount of loss to pay or whether the plaintiff’s claim was excessive. The Court also held that the plaintiff did not substantially comply with his obligations by giving the information to the adjuster hired to assist the plaintiff. There was no evidence that the adjuster was the defendant’s agent, even though the defendant had hired him, and no evidence that the plaintiff was led to believe that the adjuster was acting on behalf of the defendant.

[su_box title=”Kallas & Henk Note”] Because the standard for a satisfactory proof of loss is relatively simple to meet, this decision easily could have gone in favor of the plaintiff, especially since the insurer had hired the adjuster for the specific purpose of assisting the plaintiff, and was informed that almost all of the plaintiff’s property was destroyed in the fire. [/su_box]


Erie Ins. Exchange v. Lake City Industrial Products, Inc

Unpublished.  Decided May 17, 2012 Michigan Court of Appeals Docket No. 302889.

The underlying plaintiff filed suit in federal against the defendant in this declaratory judgment action, seeking damages for violation of the Telephone Consumer Protection Act, 47 USC §227, arising out of the defendant’s delivery of unsolicited fax messages to the underlying plaintiff. The plaintiff, who insured the defendant under a general liability policy, filed this action for a declaration that it did not have a duty to defend or indemnify the defendant in the underlying action because the conduct at issue, sending unsolicited text messages, was intentional, not an occurrence, and not covered in the policy.

The trial court agreed with the plaintiff, and granted summary disposition, however, the Court of Appeals reversed based primarily on deposition testimony from one of the defendant’s employees in which he stated that the defendant had hired an outside firm to conduct the facts marketing program and that this outside firm was advised to not send any fax messages to an unwilling recipient. The court reasoned that sending unsolicited fax messages to unwilling recipients was unexpected from the standpoint of the defendant, there is at least a possibility of coverage, and the plaintiff did have a duty to defend its insured.

[su_box title=”Kallas & Henk Note”] This case presents a different twist on the situation when intentional conduct results in unintended harm. While the court applied Pennsylvania law to reach its decision, the reasoning is consistent with prior decisions in this state finding coverage when there is a question as to whether an insured intended or reasonably should have expected harm to follow from the insured’s actions. [/su_box]

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