Michigan Coverage Decisions, Issue 167

Washington v. Allstate Property & Cas Ins Co

Unpublished. Decided January 17, 2013 Michigan Court of Appeals Docket No. 305473.

The plaintiff contacted the defendant directly to purchase a policy to cover rental premises he owned. After completing the application process and paying the premium, the defendant erroneously issued a homeowners policy to the plaintiff instead of the landlord policy he had requested. The property suffered a fire loss due to tenant arson, and the defendant refused to pay on the basis that the policy only applied if the plaintiff resided in the insured premises.

The trial court granted summary disposition to the defendant on the basis that, even though the plaintiff had requested coverage for the property as a landlord, the policy as issued was a homeowners policy, and the policy’s condition (requiring the plaintiff to reside on the premises) was not met. The Court of Appeals affirmed. The policy was not ambiguous and clearly applied only if the insured resided on the premises. Because he did not the policy was inapplicable and the claim was properly denied.

[su_box title=”Kallas & Henk Note”] The decision may appear to be a harsh result, however, an insured has a duty to read and understand a policy – and to raise questions about coverage. The policy that was delivered to the plaintiff plainly stated it was a homeowners policy and required the insured to reside on the premises. [/su_box]


Sparkle Bldrs. I, Ltd. v. Williams

Unpublished. Decided December 6, 2012 Michigan Court of Appeals Docket No. 307522.

The defendant suffered a fire loss and entered into a contract with the plaintiff to repair the damage. The defendant assigned any rights she had to insurance proceeds that were to be paid as a result of the fire. After entering into this contract, but before the plaintiff began repairs, the defendant decided instead to re-build a house at a different location, which she was entitled to do under her policy. The plaintiff sued the defendant and her insurer for breach of contract on the basis that it had a contract to repair and, by virtue of the assignment, the insurer should have paid the plaintiff, even though repairs were not made.

The trial court granted summary disposition to the insurer and the Court of Appeals affirmed. The defendant only assigned to the plaintiff her right to insurance proceeds that she may have been owed, and only for the purpose of paying the plaintiff for services rendered. The defendant did not have her house repaired, however, and, as a result, did not have a right to receive insurance proceeds for work performed. The Court held the only right that the plaintiff had under its contract with the defendant was to receive insurance proceeds payable to the defendant for repairs performed, and because those repairs were not performed, the plaintiff could not recover from the insurer.

[su_box title=”Kallas & Henk Note”] This case affirms the premise that an assignee does not have any greater rights under a contract than the assignor, so the plaintiff could not recover proceeds to which the defendant was not entitled. The plaintiff may have an action against the plaintiff for not breach of contract, but not the insurer. [/su_box]


Ile v. Foremost Ins. Co.

Order. Decided December 20, 2012 Michigan Supreme Court Docket No. 143627.

The Court of Appeals had determined that the under-insured motorist coverage issued by the defendant to the plaintiff was illusory because the plaintiff “could reasonably believe” that he had such coverage. The Supreme Court granted leave to appeal from that decision, and issued an order reversing the Court of Appeals. The Court’s order does not provide any facts upon which the decision is based, but the Court of Appeals decision noted that the insured was killed in a motorcycle accident, and that he had uninsured/under-insured coverage. UIM benefits were not available, however, if the vehicle was insured to at least the statutory minimum. The insured had selected coverage providing UIM benefits equal to $20,000/$40,000.

The Court of Appeals determined that, based on the insured’s selection of coverage limits, and the policy limitation on when UIM benefits would be available, such benefits would never be paid because there would not be a vehicle that is insured for less than the statutory minimum and still be considered as under-insured (rather, the vehicle would be uninsured.) The Court of Appeals held that the UIM coverage was illusory, but the Supreme Court disagreed and construed the policy language as limiting recovery only in those instances when a vehicle was not insured to the statutory minium. The fact that such a vehicle would be uninsured, instead of under-insured, does not mean that benefits would never be paid, only that there would be few circumstances in which a payment was due.

[su_box title=”Kallas & Henk Note”] The Supreme Court did not consider whether the insured had a reasonable expectation of coverage, as the Court of Appeals and trial court had done, but applied well-established principles of contract interpretation. [/su_box]


Krueger v. Auto Club Ins. Ass’n

Unpublished. Decided January 8, 2013 Michigan Court of Appeals Docket No. 306472.

The plaintiff was injured in an accident caused by an under-insured motorist. He had coverage up to $100,000 in UIM benefits, but the policy imposed a 3-year limitation on actions related to payment of benefits. After the plaintiff began a third-party lawsuit against the at-fault driver, and discovered that the driver was under-insured, he made a demand for UIM coverage. When the parties did not agree on the amount of payment, the plaintiff filed a demand for arbitration of that dispute. That demand, however, was made more than 3 years after the accident. When the defendant did not participate in arbitration, and refused to pay UIM benefits, the plaintiff filed suit.

The trial court held that the 3-year limitation of action provision was not applicable because the parties did not have a dispute to arbitrate within that time period. The Court of Appeals reversed because the plain terms of the policy did not limit the requirement of filing an arbitration to situations in which the parties had an active dispute, and the plaintiff could have made a conditional demand in order to preserve his right to litigate that dispute.

[su_box title=”Kallas & Henk Note”] The Court also rejected the plaintiff’s argument that the defendant should be estoppel from relying on the 3-year limitation in the policy because the defendant had represented to the plaintiff’s attorney that UIM coverage was not available. The plaintiff was unable to provide evidence as to when that misrepresentation was made, and could not establish that he had relief on that misrepresentation. [/su_box]


Price v. McCullough

Unpublished. Decided January 29, 2013 Michigan Court of Appeals Docket No. 307045.

The plaintiff was injured while operating a vehicle owned by and insured through his mother, who was listed in the insurance application as the only driver of the vehicle. When the insurer denied no-faut benefits to the plaintiff on the basis of fraud in the application the plaintiff filed suit. Evidence in the case established that the plaintiff, and not his mother, was the primary driver of the vehicle. The trial court granted summary disposition to the plaintiff on the basis that, if a misrepresentation had been made, the plaintiff’s mother made the misrepresentation, not the plaintiff, and benefits could not be denied to the plaintiff because he was an innocent party. The Court of Appeals reversed

The Court noted that the plaintiff was not actually an innocent party merely because he did not personally make misrepresentations to the insurer. The plaintiff was aware that his mother had purchased the car for him and that she was insuring it in her name for him. The Court held that there was at least a question of fact as to whether the plaintiff knew that the insurer was being provided false information in the insurance application, and summary disposition for the plaintiff was inappropriate.

[su_box title=”Kallas & Henk Note”] The argument the plaintiff was trying to make, that he was an innocent third-party and should still receive insurance benefits, usually applies in the context of a person injured by an insured who obtained coverage through fraud. The plaintiff by his own admission appeared to be much more involved in the process of obtaining coverage, and the Court was not going to permit an unjust benefit to result. [/su_box]

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