Michigan Coverage Decisions, Issue 165

Heaton v Pristine Home Builders, LLC

Unpublished. Decided October 25, 2012 Michigan Court of Appeals Docket No. 305305.

The plaintiffs filed suit related to damages arising from the construction of their home, and named the defendant and several other contractors. The case proceeded to trial and the plaintiffs recovered judgments against the defendants for their damages, all of which related to faulty construction. The defendant did not pay the judgment assessed against it and the plaintiffs garnished the defendant’s commercial general liability insurer.

The insurer denied liability for the garnishment because the policy only provided coverage for an occurrence, which is defined as an accident. Faulty construction, however, is not an accident to which coverage applies. The Court of Appeals agreed, noting that the plaintiffs’ damages related to defects in the defendant’s construction responsibilities, and such defects are not accidental for purposes of liability coverage.

[su_box title=”Kallas & Henk Note”] In addition to being supported by well-established coverage principles, the rationale for the decision is based on the premise that, because the damage was confined to the insured’s own work, the insured was in effect the injured party, and coverage is not intended to be available for such damages. [/su_box]


Nenoff v Transportation Station Auto Sales, LLC

Unpublished. Decided November 20, 2012 Michigan Court of Appeals Docket No. 300300.

The plaintiff filed suit due to injuries he received while on a boat that had been purchased by the sole member of the defendant, who used funds from the defendant to pay a portion of the purchase price. The member testified at deposition that he intended for the defendant to be the owner of the boat for tax and insurance purposes. The plaintiff and defendant settled that lawsuit and the plaintiff garnished a commercial general liability policy issued to the defendant.

The policy contained a standard watercraft exclusion, but the terms of that exclusion were modified by endorsement, which provided that coverage was available for boats that were not owned by the defendant. The trial court held that the boat was owned by the defendant, and the endorsement did not apply to provide coverage. The Court of Appeals agreed. While the purchase price for the boat was paid only in part by the defendant, the Court held that there can be more than one owner of property for application of the exclusion, and, consistent with the intent to which the member testified, the defendant was at least part owner of the boat.

[su_box title=”Kallas & Henk Note”] This result is to be expected because the Court was analyzing the plain terms of the policy in light of the undisputed facts of this situation to which the insured’s member had testified. [/su_box]


Hunt v Hunt

Published. Decided November 20, 2012 Michigan Court of Appeals Docket No. 299405.

The plaintiffs were injured in an automobile accident caused by a truck driver, who was not hauling a load at the time of the accident. While the driver had been dispatched to pick up a trailer for hauling, he had not reached the truck yard when the accident occurred. The policy covering the truck driver’s vehicle only applied if he was not engaged in a business purpose, and the only issue on appeal was whether the driver was using the truck for a business purpose at the time because he was on his way to pick up a load for delivery.

The business use exclusion eliminated coverage in two instances. The first part of the exclusion applied if the vehicle was being used to carry property in any business. The Court determined, relying on the title of the policy (Insurance for Non-Trucking Use) that the truck was in fact being used for a trucking purpose, namely to pick up a load for delivery, and it was not material that he had not actually picked up that load at the time of the accident; it was sufficient that he was using the truck for a trucking purpose for the exclusion to apply.

[su_box title=”Kallas & Henk Note”] The Court was arguably interpreting the policy according to all of its terms, and making sure that none of those terms, including the title, was rendered ineffective. The facts of the case demonstrate that the driver was involved in a business purpose (picking up a load) at the time of the accident, and not on a personal mission. [/su_box]


Dokho v Jablonowski

Unpublished. Decided November 15, 2012 Michigan Court of Appeals Docket No. 306082.

This case arises out of a garnishment against the defendant-insurer who had issued a home owners policy covering property on which the plaintiff had fallen, causing injuries. After judgment, the plaintiff garnished the defendant-insurer, which denied liability because the named insured had passed away prior the accident, and the policy was “renewed” by a party who had no ownership interest in the property (the decedent’s son). The plaintiffs attempted to argue that the policy was in effect transferred to the son because he paid the insurance premiums. The Court of Appeals disagreed.

The policy specifically stated that it could not be transferred to any other person without the insurer’s written consent, and the Court enforced the policy according to the explicit terms. In addition, the Court noted that the parties did not make a mutual mistake as to the “renewal” of the policy. While the son thought he was renewing the policy, the only mistake the insurer made was that it was unaware that the named insured had passed away, and had it been made aware of that fact, the policy would not have been renewed.

[su_box title=”Kallas & Henk Note”] The Court also addressed an issue related to the destruction of the insurer’s files. The plaintiff maintained that the files should have reflected notice of the named insured’s death, and because the files had been purged, the insurer had destroyed crucial evidence. While the Court held that the insurer should have kept its files, because it was on notice of litigation, there was no inference that the material that the plaintiff sought would have been included in those files.  [/su_box]

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