Michigan Coverage Decisions, Issue 169

Oak Creek Apts, LLC v. Garcia

Unpublished. Decided March 21, 2013 Michigan Court of Appeals Docket No. 308256.

The plaintiff hired the defendant to repair the roof on one of its buildings. Part of the parties’ contract required the defendant to secure the building so that water could not infiltrate while the repairs were being made. The defendant failed to do that properly, and the building suffered extensive damage as a result. The damages were to parts of the building other than that upon which the defendant had been working, and the plaintiff sued the defendant for negligence in the repair and for breach of contract. When the defendant requested defense and indemnification under its commercial general liability policy, the insurer denied coverage on the basis that the alleged damages did not arise from an occurrence and the business risk exclusions eliminated coverage.

The trial court denied summary disposition to the insurer, finding that, because the damages were to parts of the building other than the defendant’s own work, an occurrence had arisen, and also that the policy exclusions were inapplicable for the same reasons. The Court of Appeals affirmed, and held that the trial court had correctly analyzed the law as it relates to an occurrence arising out of construction defects, and confirming that an occurrence does arise when construction defects result in damage to property other than the particular property on which the insured is working.

[su_box title=”Kallas & Henk Note”] Michigan is in a minority of jurisdictions which hold that defective workmanship resulting in damage to the insureds roof is not an occurrence. In this case because there was damage to other property the court found coverage. [/su_box]


Dairyland Ins. Co. v. Amerisure Ins. Co.

Unpublished. Decided April 23, 2013 Michigan Court of Appeals Docket No. 308452.

The plaintiff insured one of the commercial drivers for a delivery company, while the defendant covered the delivery company. In the course of work for the delivery company, the driver was injured. The plaintiff paid first -party benefits to the driver and brought this action claiming that the driver was an employee and that, under MCL 500.3114(3), the defendant, as the carrier for the alleged employer, had priority for no-fault benefits. The defendant claimed that the driver was an independent contractor and denied liability.

The trial court held that the driver was an employee as a matter of law, however, the Court of Appeals reversed. After applying the economic realities test, the Court concluded that there were insufficient facts to establish that the driver was an employee and remanded the case to the trial court for further development.

[su_box title=”Kallas & Henk Note”] While the application of this decision is limited to the facts of the case, the opinion is instructive in demonstrating the analysis that courts are to apply when determining whether an individual is an employee or independent contractor. [/su_box]


Silvernail v. Liberty Mut. Ins. Co.

Unpublished. Decided May 23, 2013 Michigan Court of Appeals Docket No. 308762.

The plaintiff was injured in an auto accident while driving a car for which a friend had obtained insurance; nether the plaintiff nor the friend owned the vehicle. The defendant denied no-fault benefits and rescinded the policy on the basis of fraud because, when obtaining the insurance, the defendant was not advised that the friend did not own the vehicle and that a person other than the owner, and the person insuring the vehicle, would be the primary driver. The defendant asserted that it does not issue auto policies to persons who are not owners of the insured vehicle.

The trial court granted summary disposition to the defendant and permitted rescission of the policy. The Court of Appeals affirmed, finding that the plaintiff and her friend were aware that the defendant would not insure the auto unless one of them was the owner, and that they were both aware that material information had not been disclosed to the defendant.

[su_box title=”Kallas & Henk Note”] The plaintiff had suggested that, because she denied the accuracy of the defendant’s documentary evidence, a question of fact existed as to whether she was complicit in the fraud. The Court rejected this notion because she had to provide documentary evidence showing a genuine issue of fact existed. [/su_box]


Pioneer State Mut. Ins. Co. v. Dells

Published. Decided June 18, 2013 Michigan Court of Appeals Docket No. 310986.

The defendant-driver was towing a trailer which became detached from his vehicle and caused an accident, killing the defendant-decedent. The plaintiff insured the driver under a home owners policy, which contained an exclusion for bodily injury arising out of the use of a motor vehicle (and including any trailers attached to the vehicle.) This exclusion contained an exception for trailers that were not being towed. The estate of the decedent argued that the trailer was not being towed at the time of impact and that the exception therefore applied.

The trial court granted summary disposition to the plaintiff on the basis that the intent of the exclusion was to eliminate coverage for damages arising out of a trailer, even if the trailer had become detached prior to the accident. The Court of Appeals affirmed, finding that it was not necessary to consider the exception for trailers that were not being towed because the accident arose out of the use of the motor vehicle. In other words, the trailer could not have caused the accident unless the driver was using the motor vehicle. The Court further held that, even though it did not need to consider the exception for trailers not being towed, the accident did arise from a trailer being towed. The fact that the trailer became detached moments before the accident did not mean that it was not being towed because the act of towing the trailer was necessary to cause the accident in the first place.

[su_box title=”Kallas & Henk Note”] The Court determined that the direct cause of the accident was the operation of the motor vehicle. Even though the accident was very tragic, the Court applied the plain language of the policy to affirm that there was no coverage under the homeowners policy for this automobile accident. [/su_box]


Cincinnati. Ins. Co. v. Hall

Unpublished. Decided June 20, 2013 Michigan Court of Appeals Docket No. 308002.

The corporate defendant provides services for developmentally disabled persons, including transportation. While driving some passengers, an employee of this defendant became annoyed at a passenger and told another passenger to “take care of it.” The passenger took this direction and struck the passenger who was allegedly annoying the driver in the eye and blinded him. The plaintiff insured the driver’s employer under a commercial general liability policy which contained an exclusion for injuries arising out of abuse or molestation. In a prior opinion, the Court of Appeals found that coverage was eliminated by the abuse exclusion, however, the Court stated that such a reading of the exclusion appeared to exclude coverage for all injuries, and remanded the case for determination as to whether coverage was illusory.

The trial court held that reading the exclusion to include injuries other than sexual molestation was such a broad interpretation that coverage was essentially excluded for all injuries and coverage was therefore illusory. The Court of Appeals reversed. The terms in the policy were not ambiguous and plainly excluded coverage for injuries arising out of abuse. The policy did not limit the exclusion’s application to situations of sexual abuse The Court also found that the exclusion did not render the coverage illusory because the exclusion did not apply to negligent conduct, only conduct that is purposeful and intentional.

[su_box title=”Kallas & Henk Note”] The Court relied on the common understanding of the term abuse to determine that the language of the policy exclusion referred to intentional conduct, as opposed to merely errors or omissions in carrying out duties to the passengers. [/su_box]

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