Michigan Coverage Decisions, Issue 168

Westfield Ins. Co.. v. D&G DollarZone

Unpublished. Decided February 28, 2013 Michigan Court of Appeals Docket No. 306408.

The defendant sold cosmetic contact lenses to the underlying plaintiff, who had a severe reaction which resulted in serious injuries, including permanent impairment of her vision. She filed a lawsuit against the defendant, and the plaintiff defended under a reservation of rights to deny coverage on the basis that the sale of the lenses did not constitute an occurrence and in reliance on a professional services exclusion in the policy. The trial court held that the injuries to the underlying plaintiff arose from an occurrence, and the professional services exclusion was not applicable because the defendant was not performing a professional service when selling cosmetic lenses.

The Court of Appeals affirmed. The Court reasoned that the defendant did not intend or expect an injury to arise from the sale of the lenses and, consequently, from the defendant’s standpoint, the injuries were an accident, and constituted an occurrence for purposes of coverage. The court further agreed that the professional service exclusion did not apply because the service the defendant provided was merely the sale of cosmetic lenses, and it was not engaged in a vocation requiring specialized knowledge or skill.

[su_box title=”Kallas & Henk Note”] It is likely that a different result would have been obtained if the defendant was selling prescription lenses or engaged in conduct other than offering these items for sale. [/su_box]


Auto Club Ins. Ass’n v. Kondziolka

Unpublished. Decided March 5, 2013 Michigan Court of Appeals Docket No. 308255.

The defendant injured the underlying plaintiff while hunting. In low light conditions, the defendant mistook the underlying plaintiff for a deer, and without looking very carefully, he aimed and shot the underlying plaintiff. The insurer argued that the defendant violated MCL 750.235(1), which makes it a crime to intentionally aim and discharge a firearm at another person, and that the criminal acts exclusion in the defendant’s homeowners policy eliminated coverage. The trial court held that the defendant had not violated the criminal statute because he did not intentionally aim a gun at another person, which the court found to be a required element of the crime. The Court of Appeals agreed.

The Court analyzed the criminal statute and concluded that, in order to constitute a crime, the defendant must have specifically intended to aim his gun at another person. Because he thought he was shooting at a deer, no crime was committed. Without a crime, the criminal acts exclusion was inapplicable.

[su_box title=”Kallas & Henk Note”] The insurer attempted to raise other criminal statutes as separate bases for denying coverage, however, the arguments had not been raised in the trial court and the Court of Appeals refused to consider them as a result.  [/su_box]


Usewick. v. Safeco Ins. Co. of America

Unpublished. Decided March 19, 2013 Michigan Court of Appeals Docket No. 300657.

The plaintiffs purchased a rental home and obtained insurance to cover property damage and liability as landlords. The house subsequently was damaged in a fire, and the plaintiffs made a claim with the defendant-insurer for coverage of loss. The insurer denied liability for loss under the policy on the basis that there were material misrepresentations in the application for insurance, specifically, one of the plaintiffs had misrepresented that the condition of the house was excellent, when it clearly was not. The plaintiffs claimed that they had expressly told their insurance agent that the house was in poor condition and that this was the information they intended to be conveyed to the insurer. The plaintiff’s position was that the agent was at fault for the erroneous information at that coverage for their loss should not be denied as a result.

The trial court disagreed, and granted summary disposition for the insurer. The Court of Appeals affirmed and relied on the well-settled premise that any material misrepresentation in an insurance application renders the policy void at the election of the insurer.

[su_box title=”Kallas & Henk Note”] The Court also noted that there were many misrepresentations in the application, which the plaintiffs signed, and that they could not avoid the fact that they had approved the application for submission to the insurer. This case further affirms that when a party enters into a contract on the basis of erroneous information from the other contracting party, that contract can be rescinded. [/su_box]


Secura Ins. Co. v. Matthews

Unpublished. Decided March 19, 2013 Michigan Court of Appeals Docket No. 308425.

The defendant was injured in an accident while driving an all-terrain vehicle. The accident resulted when the insured’s adult son was not able to restrain his dog, which ran out in front of the ATV causing it to overturn. The son was residing in a home on one of the properties owned by the insured, and the insured resided in a separate home on the other property she owned. The plaintiff brought this action for a declaration that it did not have a duty to defend or indemnify the son because he was not a resident relative and not an insured.

The Court of Appeals affirmed summary disposition for the insurer on the basis that the son was not a member of the insured’s household. The Court noted that there are many factors to consider in determining whether a person is a member of a household. The Court stated that a person’s relationship to the house in particular and the members of the house in general is the primary consideration. In this case, the evidence showed that the son, while residing on his mother’s property, was occupying the property in a separate residence, and had done so for about 30 years. Based on the facts in this case, the son was not a member of the household, and not an insured.

[su_box title=”Kallas & Henk Note”] The Court of Appeals acknowledged that residing on the same premises is not necessarily determinative of whether a person is a member of the same household, and that there are situations where persons could reside in separate dwellings but still be considered as part of the same household. A stronger connection would be required in those instances, such as greater dependence on one structure over another, or a closer proximity between the dwellings. [/su_box]

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