Michigan Coverage Decisions, Issue 172

Craig v. Larson

Unpublished. Decided October 17, 2013 Michigan Court of Appeals Docket No. 311467.

The plaintiff was injured in an auto accident and filed suit against the at-fault driver, as well as against her auto insurance carrier, claiming a right to under-insured motorist benefits under her auto policy. The trial court dismissed her claims against the insurer on the basis that it had not been determined that the plaintiff incurred injuries exceeding the policy limits of the at-fault driver’s policy. The plaintiff and the at-fault driver subsequently accepted a case evaluation award that was within policy limits and settled that case.

The plaintiff then filed suit against her insurer, again claiming a right to under-insured motorist benefits. The trial court granted summary disposition to the insurer on the basis that the plaintiff had settled the prior case with the at-fault driver without obtaining her insurer’s consent to that settlement, which was a condition precedent to filing suit against the insurer. The Court of Appeals affirmed because the plain terms of the plaintiff’s policy provided that she could not settle a claim without insurer consent.

[su_box title=”Kallas & Henk Note”] The Court reaffirmed in this opinion the principle that an insurance policy can only be enforced as written. Even though the policy at issue involved under-insured motorist coverage, the legal principle at issue should be applicable to any policy that contains a consent to settle clause. [/su_box]

 

Taylor v. Frankenmuth Mut. Ins.

Unpublished. Decided September 19, 2013 Michigan Court of Appeals Docket No. 308213.

The plaintiff was injured in an auto accident while riding as a passenger in a vehicle owned by the defendant’s insured. She received social security and long-term disability payments related to the injury. The plaintiff claimed that she was also entitled to UIM benefits from the driver of the vehicle in which she was riding, but that the amount was not subject to a set-off for the social security and long-term disability payments she received. The parties arbitrated the dispute and, when the arbitrators rendered an award which provided for a set-off of the social security and disability payments, the plaintiff sought to vacate that award.

The trial court held that the arbitrators properly set-off the payments the plaintiff had received, particularly in light of the policy’s language which provided that UIM benefits were to be reduced by any amount paid because of bodily injury “under any worker’s compensation, disability benefits law or any similar law,” and that the payments she received were contemplated as a set-off by the plain terms of the policy.

[su_box title=”Kallas & Henk Note”] Even though the legal principles behind the Court’s decision are well-established, the Court engaged in a more detailed analysis of the plaintiff’s claim on the premise that the arbitrators were not necessarily attorneys with an understanding of applicable precedent. The Court did determine that the award was not erroneous and that the amounts that the plaintiff recovered or her injuries should set-off the insurer’s obligation for UIM benefits. [/su_box]

 

Torres Hillsdale Country Cheese, LLC v. Auto-Owners Ins. Co.

Unpublished. Decided October 1, 2013 Michigan Court of Appeals Docket No. 308824.

The plaintiff produced food products that became contaminated and, due to a government order, the plaintiff had to recall substantial amounts of product it had shipped. The government order also prevented the plaintiff from shipping other product that had not been contaminated, however, due to the inability to ship that product, the food expired and could not be sold. The plaintiff claimed a right to recover its losses under its commercial property coverage. The policy generally applied to covered property lost or damaged due to a covered cause of loss, but contained numerous exclusions, including exclusions for losses relating to government action. When the insurer denied coverage, the plaintiff filed suit

The trial court granted summary disposition to the insurer on the basis that the exclusions eliminated coverage. The Court of Appeals affirmed. While the plaintiff attempted to argue that endorsements to the policy, which applied in specific circumstances not relevant to the losses alleged by the plaintiff, provided coverage, the Court determined that the loss arose from government action and the exclusions clearly eliminated coverage.

[su_box title=”Kallas & Henk Note”] The plaintiff’s arguments were based mainly on an attempt to ignore the exclusions in favor of policy terms contained in endorsements, which, by the terms of those endorsements, only applied to specific losses unrelated to the plaintiff’s claim.  [/su_box]

 

Stein v. Home-Owners Ins. Co.

Unpublished. Decided October 17, 2013 Michigan Court of Appeals Docket No. 310257.

The plaintiff suffered a fire loss which the insurer determined was intentionally set. The insurer denied coverage for the loss on the basis of an exclusion eliminating coverage for losses intentionally caused by an insured, as well as due to policy conditions which voided the coverage if an insured made false statements, engaged in fraudulent conduct, or intentionally concealed from the insurer a material fact (such as that the insured had somebody intentionally set fire to her house).

The trial court granted summary disposition to the defendant, but the Court of Appeals reversed, stating that the issue of whether an insured made a misrepresentation was a question of fact that a jury had to decide. The case then proceeded to trial where the trial court instructed the jury that, because the exclusion at issue applied if the insured engaged in fraudulent conduct, the insurer was required to prove that conduct by the enhanced burden of proof applicable to fraud cases generally. The Court of Appeals reversed, stating that the application of the exclusion was a contract matter, and that the insurer was only required to prove the application of the exclusion by a preponderance of the evidence.

[su_box title=”Kallas & Henk Note”] The Court clarified an issue that occasionally arises, particularly when an exclusion applies in the event of some fraudulent conduct. While a greater level of proofs are required to establish fraud, the Court recognized that the construction of an exclusion is a contractual matter, and that an insurer should only be required to prove the terms of the contract. [/su_box]

 

Null v. Auto Owners Ins. Co.

Unpublished. Decided October 22, 2013 Michigan Court of Appeals Docket No. 308473.

The plaintiff was purchasing a home from her brother-in-law. The house was titled in the brother-in-law’s name, as well as the mortgage on the property and the homeowners policy that the defendant had issued. The plaintiff had been maintaining those payments, instead of the brother-in-law, and was the only occupant of the property at the time of a fire which destroyed the house. The plaintiff filed a claim for the loss, which the defendant denied on the basis that the named insured did not reside in the house, and the plaintiff filed suit.

The trial court, after hearing the plaintiff’s evidence during a bench trial, granted summary disposition to the defendant, finding that the policy only applied if the insured resided on the premises, and the insured was not a resident. The Court of Appeals affirmed because the plain terms of the policy provided that the house did not constitute covered property if the insured was not residing on the property at the time of the loss. The Court also held that the plaintiff failed to establish that the insurer knew that the insured was not residing on the premises, even though two prior claims (unrelated to the fire loss) had been paid to the plaintiff.

[su_box title=”Kallas & Henk Note”] The Court relied on prior case history interpreting the residency requirements of a homeowners policy to reach its conclusion in this matter, which gives effect to the plain terms of the policy. The plaintiff also failed to provide credible evidence that the insurer was aware that the insured was made aware that the insured was not residing on the premises in that there was ambiguous testimony on this issue. [/su_box]

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