Michigan Coverage Decisions, Issue 173

Duffy v. Grange Ins. Co. of Mich.

Unpublished. Decided October 29, 2013 Michigan Court of Appeals Docket No. 308789.

The plaintiff was severely injured while operating an off-road vehicle on a trail and claimed first-party benefits under an auto policy (the OV was not insured). The defendant denied coverage for a number of reasons and the litigation proceeded through appellate review and trial on issues related to the availability of PIP benefits. This resulted in a verdict for the plaintiff, who sought penalty interest under MCL 500.3142(2), which requires PIP benefits to be paid within 30 days after the insurer receives reasonable proof of the damages.

The trial court held that the plaintiff was entitled to penalty interest on all medical expenses the plaintiff incurred, even though the plaintiff had not provided the defendant with any proof of her medical expenses until the trial. The Court of Appeals reversed. Penalty interest is only available if an insurer fails to pay a claim after receiving proof of the amount of the claim, and because the defendant never received any proof, the plaintiff could not establish a right to penalty interest.

[su_box title=”Kallas & Henk Note”] The Court also rejected the plaintiff’s argument that she should be excused from providing proof of loss because the insurer had denied the claim before she even had time to compile her information. While the Court noted there was some “equitable appeal” to the argument, the plain terms of the statute require a claimant to inform the insurer of the amount of loss claimed before penalty interest can apply. [/su_box]


Showman v. Busser

Unpublished. Decided November 14, 2013 Michigan Court of Appeals Docket No. 311141.

The defendant was insured under a no-fault policy providing mandatory minimum coverage of $20,000/$40,000 at the time he struck the plaintiff’s vehicle and caused injuries. The plaintiff carried under-insured motorist coverage, which provided that the policy would pay a maximum of $20,000/$40,000 reduced by amounts received by any other insurer. Because the plaintiff received the policy limits from the defendant’s no-fault policy, the plaintiff’s insurer denied coverage for UIM benefits on the basis that the UIM policy limits were set-off by the amount the plaintiff had already received.

The plaintiff filed suit claiming that the insurer’s interpretation of the UIM policy resulted in a policy providing illusory coverage. The trial court agreed, but the Court of Appeals reversed. The Court noted that there were instances in which UIM benefits would be paid, such as an accident involving an out-of-state driver, or if more than one person was injured, and held that there was an insurance benefit provided and, consequently, coverage was not illusory.

[su_box title=”Kallas & Henk Note”] The Court’s decision was consistent with the policy language and the principle that UM and UIM coverage is not mandatory and based exclusively on contractual language. [/su_box]


Pal-O-Mar Bar IV v. Badger Mut. Ins. Co.

Unpublished. Decided November 26, 2013 Michigan Court of Appeals Docket No. 310448.

The insured parties disputed the allocation of insurance proceeds arising from the theft of appliances from a business, which included equipment such as coolers, sink and fans. All of the items were attached to the realty, but could be removed without damaging the structure. The trial court found that the equipment constituted fixtures that had become assimilated into the real property and allocated the loss accordingly.

The Court of Appeals affirmed, finding that a fixture can become an attachment to real property, and held that because the value of the property would be substantially impaired if the equipment was removed, the appliances should be considered as part of the real property.

[su_box title=”Kallas & Henk Note”] While this case is not directly related to coverage issues, the Court’s analysis of what constitutes an attachment provides direction on how to make this type of determination when considering coverage for business property loss. [/su_box]


Daniel v. Wm. Beaumont Hosp.

Unpublished. Decided November 21, 2013 Michigan Court of Appeals Docket No. 310947.

This claim arose out of a demand for payment of no-fault insurance benefits. The plaintiff was unable to purchase insurance on his own due to an inability to make the premium payment, but he borrowed the money from a friend and asked that friend to deliver the payment to the insurer. While the friend was in the process of delivering the payment, the plaintiff was in an auto accident. The payment was processed a few minutes after the accident.

The insurer denied coverage on the basis that the plaintiff did not have a policy in place when the accident occurred. The trial court agreed, and the Court of Appeals affirmed on the basis that no-fault benefits did not take effect until the policy was actually issued. Because no policy was in effect when the accident occurred, the plaintiff was not entitled to no-fault benefits.

[su_box title=”Kallas & Henk Note”] This decision is a straightforward application of the principle that if the policy states that it is not in effect until the premium is received, there is no insurance until the premium is received. [/su_box]


Hobbs v. Shingobee Bldrs, Inc. (Clark Const. Co. v. State Auto Ins.

Unpublished. Decided November 7, 2013 Michigan Court of Appeals Docket No. 307539.

Several claims were raised in this litigation arising out of injuries the plaintiff incurred while working for a sub-contractor. The coverage issues relate to whether the insurer for the plaintiff’s employer owed a duty to defend the general contractors of the projects. The main issue was whether the general contractors were additional insureds under the general liability policy the defendant had issued..

The trial court held, and the Court of Appeals affirmed, that the general contractors were additional insureds on the bases that (1) the policy provided coverage to any entity for whom the insured was performing operations and (2) a written contract required the insured to add the entity as an additional insured. The Court also held that the employer liability exclusion did not apply because, even though the plaintiff was working on behalf of the general contractors, he was not employed by them.

[su_box title=”Kallas & Henk Note”] The Court’s opinion is confirmation of the principle that the plain terms of contracts are to be enforced, but the decision may be significant in holding that the employee of a sub-contractor is not an employee of a general contractor, even when performing work directly for, or on behalf of, the general contractor. [/su_box]

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