Michigan Coverage Decisions, Issue 20

Cohen vs. Auto Club Insurance Association

Decided January 17, 2001.Michigan Supreme Court Docket Number 116473.

Plaintiff was involved in an automobile accident with an uninsured driver. She made a claim with Defendant for uninsured motorist coverage. In the course of submitting information to Defendant insurer, she allegedly submitted fraudulent wage loss information. Defendant insurer denied coverage on the basis of a clause in its policy stating that the policy is void if an insured intentionally misrepresents any fact relating to any claim. Defendant also refused arbitration, as required under the policy, for the same reason.

Plaintiff initiated this action asking the Trial Court to order arbitration. The Trial Court and the Court of Appeals found in favor of plaintiff on the basis that the clause in the insurance policy that Defendant was relying on was unlawful because it was contrary to requirements of law for automobile liability policies. The Trial Court and the Court of Appeals relied on MCL 257.520 (f) (1) which limits the ability of an automobile liability insurer to void coverage on the basis of fraud or misrepresentation once a claim has accrued.

In this decision, the Supreme Court reversed finding that the provision of law relied on by the lower courts applies only to liability coverage mandated by law. The Court held that because uninsured motorist coverage\ is not mandatory coverage, the parties are free to agree to any contract terms, including those contained in Defendant’s policy. The Supreme Court remanded the case back to the Trial Court for further proceedings, presumably for a determination as to whether plaintiff’s conduct did invoke the portion of the policy voiding coverage for fraudulent or misrepresented facts.

[su_box title=”Kallas & Henk Note”] The Supreme Court specifically declined to address the question of whether the clause in the insurance policy voiding coverage for misrepresentation could be applied by the insurer to void coverages other than uninsured motorist coverage. In the case of uninsured and underinsured motorist coverage, Courts in Michigan have consistently held that insurers are free to limit the coverage because it is not mandatory and, consequently, not subject to requirements imposed on mandatory coverages.  [/su_box]


Kessel v Rahn

Published. Decided January 23, 2001. Michigan Court of Appeals Docket Number 220013.

Plaintiff was injured when the vehicle she was driving was struck by a vehicle operated by the Defendant. The vehicle Plaintiff was driving was uninsured and titled in the name of Plaintiff’s mother. The Trial Court granted summary disposition to Defendant on the basis of MCL 500.3135 (2) (c) which prohibits recovery of noneconomic damages by a person operating “his or her own vehicle” without having insurance on that vehicle. The Trial Court held that the statute applied to Plaintiff even though the title was not in her name.

In this decision, the Court of Appeals affirmed the Trial Court. The Court adopted the reasoning in Ardt vs. Titan Insurance Co., 233 Mich App 685 (1999) in which the Court of Appeals held that a similarly situated Plaintiff could not recover first party benefits. The Court, in this decision, agreed that the definition of “owner” contained in the insurance code, § 3101 (2) (g) was applicable. In that definition, “owner” includes a person having the use of a motor vehicle for a period greater than 30 days. Plaintiff had the exclusive use of the vehicle titled in her mother’s name. The Court held that exclusive use for more than 30 days qualifies a person as an “owner” for purposes of the prohibition on recovery of noneconomic damages.

[su_box title=”Kallas & Henk Note”] Because of the high percentage of uninsured vehicles on the road, this decision makes it imperative for both personal and commercial auto carriers to investigate not only the title ownership of the Plaintiff’s vehicle but also its usage. The focus of the investigation needs to be on whether the Plaintiff had merely incidental usage of the vehicle or “proprietary or possessory” usage. [/su_box]


O’Neill v Auto Owners Insurance Company

Unpublished. Decided February 20, 2001. Michigan Court of Appeals Docket Number 219481.

Plaintiff’s decedent was struck by an unidentified hit and run driver while the decedent was riding his motorcycle. The motorcycle was insured with State Farm and included uninsured motorist coverage. A policy also providing uninsured motorist coverage in the decedent’s household was issued by Defendant insurer. Defendant insurer’s policy limits were significantly higher than those issued by State Farm. The decedent was the principal driver of the vehicle insured by Defendant.

The Trial Court granted summary disposition to Defendant based on an exclusion in the uninsured motorist coverage. That exclusion provided that there was no coverage to any person while occupying any automobile owned by the insured or relative if the automobile was not insured for uninsured motorist coverage by the subject policy (Defendant’s). The Trial Court reasoned that because the decedent owned the motorcycle and the motorcycle was an automobile as defined in the policy, there was no coverage.

[su_box title=”Kallas & Henk Note”] The Court of Appeals affirmed the decision of the Trial Court and rejected Plaintiff’s argument that because different endorsements of Defendant’s policy had different definitions of “automobile” the policy was ambiguous. The Court held that the common policy definitions apply unless an endorsement had a different definition for purposes of that endorsement. The Court of Appeals in this decision followed prior cases which held that a motorcycle was included in the definition of “land motor vehicle” which is a common term used in insurance policies. The decision also clearly supports Defendant insurer’s position that the same term (in this case “automobile”) could be defined differently in different portions of the policy and particularly in endorsements. [/su_box]


Ritzema v Farm Bureau

Unpublished. Decided February 23, 2001. Michigan Court of Appeals Docket Number 222344.

In this garnishment action, Defendant insured a church which was sued for actions of one of its former pastors. The underlying Plaintiffs complained of improper advice and improper sexual conduct and sought damages from the pastor and the church. Defendant denied a defense on the basis of an exclusion for liability resulting from “actual or alleged conduct of a sexual nature”.

The Plaintiffs and the church entered into a settlement agreement with the church assigning all of its rights against Defendant insurer to the underlying Plaintiffs. They brought a garnishment action alleging a breach of the duty to defend and indemnify. The Trial Court agreed with Plaintiffs that Defendant had breached its duty to defend for the reason that some of the offending conduct (the counseling) was not sexual in nature and was prior to the sexual relationship.

The Court of Appeals affirmed on the basis that the counseling was separate and distinct from the offensive sexual conduct and therefore the exclusion did not apply to eliminate coverage entirely. As a consequence, the Defendant was found to have a duty to defend and was liable for a portion of the consent judgment (there was another insurer that did defend).

[su_box title=”Kallas & Henk Note”] The Court of Appeals’ decision distinguished this situation from one involving dual or concurrent causation. The Court defined concurrent causation as involving “the convergence of two or more causes of an indivisible injury to the insured”. Michigan Supreme Court has held that the concept of dual or concurrent causation cannot create coverage where an unambiguous exclusion eliminates coverage. In this case, the Court reasoned that because the counseling allegations were separate and could give rise to separate injury and/or damages, the dual or concurrent causation ruling of the Supreme Court was inapplicable. [/su_box]

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