Michigan Coverage Decisions, Issue 17

Gorshe v Kent, Schulte

Unpublished. Decided October 13,2000. Michigan Court of Appeals Docket Number 213184.

Plaintiffs were injured in an automobile accident. The driver of the other automobile was defendant Kent who was driving his own vehicle in the course of his employment for Detroit Edison. Plaintiffs made a claim against Kent who was insured by ACIA. A settlement in the amount of $19,000 was reached and plaintiffs signed a broad form release, releasing not only the defendant Kent but also “all persons or organizations”. Plaintiff’s attorney subsequently determined that an excess policy covering Detroit Edison existed.

Plaintiffs then brought an action against Kent, ACIA, and Detroit Edison. The trial judge dismissed the action on the basis that the release extinguished any claims plaintiffs would have against these defendants.

The Court of Appeals affirmed the holding that the broad form release extinguished all claims against these defendants. The Court also rejected plaintiffs claim that defendant ACIA could be liable for silent fraud for failing to disclose the existence of the excess coverage for Detroit Edison. The Court held that ACIA was under no duty to discuss or disclose the existence of the excess coverage.

[su_box title=”Kallas & Henk Note”] The law with respect to silent fraud imposes a duty to speak under circumstances where the failure to speak will create a false impression. The plaintiffs in this case attempted toexpand this cause of action arguing that the insurer was required to advise the plaintiffs on all potential sources of recovery. If such an argument were accepted, it would charge the insurer with the same duties to the plaintiff as the attorney for the plaintiff. [/su_box]


American States Insurance Company v Home Indemnity Company

Unpublished. Decided October 24, 2000. Michigan Court of Appeals Docket Number 213834.

In this declaratory action, plaintiff general liability insurer sought a ruling that defendant, auto insurer (truckers coverage) had a duty to defend and indemnify the insured trucking company in two personal injury lawsuits. The two lawsuits involved the same plaintiff. Plaintiff in the personal injury lawsuits was an employee of the insured, Martin Leasing and was injured in two separate incidents at the premises of General Motors. GM had contracted with Martin Leasing for transportation of goods and Martin agreed to defend and indemnify GM from any liability associated with the services.

The dispute in this case was which carrier had to indemnify and defend GM in these two lawsuits. The first incident involved an injury to the underlying plaintiff while he was cranking the leg of trailer down to unload it. He slipped on ice on the ground and caught his arm in the crank. The second incident involved injuries to his shoulder when cargo in a truck shifted after a sudden stop.

The trial court found in favor of the auto carrier and against the general liability carrier on the first incident holding that it was a premises liability situation. The trial court found in favor of the general liability carrier on the second incident holding that it arose out of the operation of the truck.

The Court of Appeals reversed the trial court on the first incident and affirmed the trial court on the second incident. The Court held that both incidents arose out of the use of the truck and, as a consequence, were excluded under the general liability policy and specifically covered under the trucking policy.

[su_box title=”Kallas & Henk Note”] This case is consistent with recent appellate decisions which broadly define both “arising out of” and “resulting from use of an auto” language excluding coverage in general liability policies and providing coverage in auto related policies. The Court also rejected the principal of concurrent causation which would require coverage under both policies, in accord with the Supreme Court decision, Vanguard Insurance Company vs. Clarke, 438 Mich 463 (1991). [/su_box]


Michigan Basic Property Insurance Association v Rosemond

Unpublished. Decided October 31, 2000. Michigan Court of Appeals Docket Number 208146.

Plaintiff, homeowners insurer, brought this declaratory action seeking a ruling that it had no duty to defend or indemnify the defendants in a wrongful death action. Plaintiff sought to deny coverage to the named insured on the basis that she misrepresented her status as an owner/resident of the premises. Plaintiff sought to deny coverage to the named insured’s sister on the basis of late notice of the lawsuit.

The trial court entered judgment in favor of the defendants finding that the named insured was a resident of the premises and that the plaintiff had notice of the pendency of the lawsuit against the sister and failed to take timely action to defend her notwithstanding this notice.

The Court of Appeals affirmed the findings of the trial court. Specifically, the Court found that while there were facts indicating that the named insured spent considerable time in South Carolina and at her friend’s residence, her principal residence was the insured home and it was her intent to permanently reside there. The Court also rejected the plaintiff insurer’s late notice claim with respect to the sister on the basis that plaintiff had knowledge of the lawsuit.

[su_box title=”Kallas & Henk Note”] This case is consistent with other appellate decisions which have generally found residency even in circumstances where the person spends more time away from the residence than at the residence. This case involved an insured with very little personal property or clothing. As a result, the Court focused on the insured’s intent with regard to permanent living arrangements. Because the testimony of the insured with regard to her intent to permanently live at the insured dwelling was unrefuted, the Court held it to be dispositive. The decision also seems to suggest that unless an insurer specifically defines the term resident, the Court will likely find it to be ambiguous, resulting in an interpretation in favor of residency.

With respect to the late notice argument, the Court held that an insurer is obligated to take steps to protect the insured’s interest once it has knowledge of the lawsuit against the insured, even where there is no specific request by the insured. The broad statements to this effect in this decision are troublesome in that there are circumstances in which, in our opinion, an insurer may not act on behalf of an insured without the insured’s knowledge and consent. [/su_box]


Singer v American States Insurance

Published. Decided December 5, 2000. Michigan Court of Appeals Docket Number 217148.

Plaintiff sold a residence on a land contract. The purchaser bought property insurance from the defendant. Plaintiff was named as a “contract holder” on the declarations page. The purchaser defaulted on the land contract and quitclaimed her interest in the property back to the plaintiff and then leased the home from plaintiff. The fire destroyed the property and plaintiff made claim under the policy. Defendant rejected plaintiff’s claim taking the position that only the named insured was entitled to recover for loss to the property. The trial court granted summary disposition to defendant.

[su_box title=”Kallas & Henk Note”] The Court of Appeals reversed and directed the trial court to enter judgment in favor of plaintiff. The court found dispositive the fact that the policy made reference to persons other than the named insured having an insurable interest and being entitled to payment in the event of a loss. Specifically, the designation of plaintiff as a “contract holder” indicated to the Court that payment to plaintiff was contemplated. Defendant’s position in this case was clearly untenable. A footnote suggests that the insurer believed that plaintiff had something to do with causing the fire. No such defense was raised, however, and the Court of Appeals properly held that a land contract holder can recover where the contract holder is specifically identified and the policy language contemplates such a recovery.  [/su_box]

Comments are closed.