Michigan Coverage Decisions, Issue 174

Farm Bureau Mut. Ins. Co. of Mich. v. Bowers

Published. Decided November 27, 2013 Michigan Supreme Court Docket No. 147611.

The injured party’s spouse was operating a boat owned by his parents. Plaintiff insured the boat. The policy excluded coverage for injuries to an insured person. An insured person was defined in the policy as anybody legally responsible for watercraft owned by an insured. The plaintiff argued that both the injured party and his spouse were legally responsible for the boat, because they were using it with the owners’ permission, and, as an insured person, coverage for damages to the injured party was excluded.

The trial court denied summary disposition to the plaintiff. The Court of Appeals affirmed on the basis that there was insufficient evidence as to whether the injured party was legally responsible for the boat. The Court of Appeals questioned whether the parents had given full control of the boat to the injured party (see Michigan Coverage Decisions, Issue 170.) Instead of granting leave to appeal, the Michigan Supreme Court reversed. The Supreme Court found that there was sufficient evidence to establish that the injured party and his spouse had control of the boat, were insured persons as a result, and that the insured person exclusion applied.

[su_box title=”Kallas & Henk Note”] The Supreme Court characterized the situation as a bailment, with the insured party having custody and use of the boat, thereby implicating the exclusion.  [/su_box]


Chaney v. Titan Indem. Co.

Unpublished. Decided January 7, 2014 Michigan Court of Appeals Docket No. 311513.

The plaintiff, a minor, was injured an auto accident, and PIP benefits were claimed on his behalf under a policy issued to his mother. At the time of the accident, the plaintiff lived with his half-sister in a house owned by his mother, but in which she did not reside. The trial court held that the plaintiff was not domiciled with his mother and therefore was not entitled to PIP benefits under her auto policy. The Court of Appeals reversed.
Even though the evidence showed the plaintiff’s mother only visited him two or three weekends per month, there was a court order awarding her custody, and that the plaintiff was to be considered domiciled with his mother. Based on that order alone, the Court held that the plaintiff was domiciled with his mother.

[su_box title=”Kallas & Henk Note”] The Court noted that there are special rules that are applicable when considering the domicile of a minor for PIP purposes. Relying on a recent Supreme Court case [Grange Ins Co of Mich v Lawrence, 494 Mich 475 (2013)], the Court of Appeals held that a minor’s domicile is conclusively established as a matter of law by a court order. The Court did leave open the possibility , however, that the insurer could challenge the authenticity of the judgment in which the plaintiff’s domicile was established (the Court did not provide any facts, however, as to why there might be a question as to the veracity of the judgment.) [/su_box]


Hani & Ramiz, Inc, v. North Pointe Ins. Co.

Unpublished. Decided December 12, 2013 Michigan Court of Appeals Docket No. 316453.

The roof of the plaintiff’s business premises collapsed from the weight of ice and snow. The trusses supporting the roof had deteriorated and weakened due to flame-retardant chemicals that had been applied prior to installation on the building. The insurer denied coverage for the loss on the basis of exclusions for damages arising from deterioration or latent defects, and arising out of collapse. The collapse exclusion did not apply, however, if that occurred due to ice and snow. A provision for additional coverages added back coverage for damages caused by decay that is hidden.

The trial court granted summary disposition to the plaintiff, finding that the additional coverage provision of the policy added coverage for damages arising from hidden decay, and that the defects in the trusses constituted hidden decay. The Court of Appeals affirmed, finding that the trusses failed due to decay caused by the application of flame-retardant chemicals. This also made the materials defective, and the exceptions to the coverage exclusions applied.

[su_box title=”Kallas & Henk Note”] The Court’s decision turned on the definition of terms that were not defined in the policy. A different result may have been reached if the terms at issue (“decay,” and “defective materials”) had been defined in the policy. [/su_box]


Auto-Owners Ins. Co. V. All State Lawn Specialists Plus, Inc.

Published. Decided December 3, 2013 Michigan Court of Appeals Docket No. 30711.

The underlying plaintiff worked for the defendant performing lawn maintenance. In the course of his duties, he was injured while unclogging a jammed leaf vacuum machine. The insurer covered the defendant under a workers compensation policy, a general liability policy, and a no-fault auto policy. The issue was whether the underlying plaintiff was an employee, with worker’s compensation as his exclusive remedy for his injuries, or whether he was an independent contractor. The trial court granted summary disposition to the underlying plaintiff finding that he was an independent contractor, and the Court of Appeals affirmed, but only on the basis of a prior decision of the Court, with which the panel disagreed. A special panel was then convened to decide the disagreement between this case and the prior decision. See Michigan Coverage Decisions, Issue 170.

The special panel overruled the prior decision [Amerisure Ins Co v Time Trans, Inc, 196 Mich App 569 (1992)], and concluded that, under the applicable rules of statutory interpretation, a plaintiff does not lose his or her status as an employee for purposes of the worker’s compensation exclusive remedy unless all 3 factors set forth in MCL 418.161(1)(n) are met. Because the plaintiff in this case could establish only two of those factors, he was an employee, and worker’s compensation was his exclusive remedy.

[su_box title=”Kallas & Henk Note”] The dissent reached a different conclusion by starting from the premise that a plaintiff is not an employee unless all three statutory factors are met, and because only two of those factors were met, the plaintiff should have been considered an independent contractor. The implication in this case for the insurer was that it would have had to cover the injuries under a general liability policy issued to the defendant if the underlying plaintiff was an independent contractor. [/su_box]


Salmo v. Memberselect Ins. Co.

Unpublished. Decided December 12, 2013 Michigan Court of Appeals Docket No. 310738.

This decision did not set forth any facts regarding the basis for the plaintiff’s insurance claim, except that the plaintiff incurred some type of damage to his house and that he failed to provide a signed and sworn proof of that loss within 60 days as required by the policy. The trial court granted summary disposition for the insurer, and the Court of Appeals affirmed.

The plaintiff attempted to argue that the insurer waived the proof of loss condition by notifying the plaintiff that it would assist in the inventory of personal property. The Court rejected this argument principally because that notice expressly reserved all rights and defenses in the policy, including the proof of loss condition. The plaintiff also argued waiver because an adjuster advised that he had enough information to evaluate the value of the claim. The Court rejected this notion on the basis that there is a significant purpose for the proof of loss requirement, such as defending against fraudulent, invalid or excessive claims, in addition to determining the extent of liability. The plaintiff also argued that the insurer waived the proof of loss requirement because the insurer never rejected his unsigned loss statement. The Court determined that “mere silence” cannot establish waiver. The plaintiff also asserted waiver on the basis that the insurer paid some benefits under the policy after the time required for providing the sworn proof of loss. The Court also rejected this argument as irrelevant because the plaintiff had already failed to fulfill the proof of loss condition, and there was no longer any right for the insurer to waive (particularly in that it had reserved the right to deny coverage for failing to meet policy conditions).

[su_box title=”Kallas & Henk Note”] This decision affirms the principle that there are multiple purposes for the proof of loss requirement.  [/su_box]

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