Michigan Coverage Decisions, Issue 22

Horace Mann v Zheng and Ziquine

Unpublished. Decided March 16, 2001. Michigan Court of Appeals Docket Number 221731.

Plaintiff homeowners carrier sought a declaratory ruling in this action that it did not owe a duty to defend or indemnify its insured in a lawsuit alleging injuries resulting from a fight. Plaintiff asserted that the “occurrence” requirement in its policy and intentional acts exclusion precluded coverage for this incident. The Trial Court denied Plaintiff’s motion for summary disposition based on the insured’s claim that he was acting in self-defense.

The Court of Appeals reversed and directed that judgment be entered in favor of Plaintiff insurer. The Court held that because the Intentional Acts Exclusion in Defendant’s policy precluded coverage for intentional and/or expected harm there was no coverage. The Court relied on the Supreme Court decision in Auto-Owners vs. Harrington, 455 Mich 377 (1997) where the Court addressed claims of self-defense. In that decision, the Supreme Court held that the harm was expected by the insured even if it was justified by self-defense and that therefore, the exclusion applied to eliminate coverage. The Court also rejected the claim that there was coverage because the complaint “disingenuously” characterized the insured’s conduct as “negligent flailing of arms”.

[su_box title=”Kallas & Henk Note”] The decision in this case is consistent with precedent. The Court did not address the question whether injury inflicted as a result of actions taken in self-defense eliminates coverage as a result of the “occurrence” requirement of the policy. [/su_box]


Rednour v Hastings Mutual Insurance Company

Published. Decided April 20, 2001. Michigan Court of Appeals Number 216025.

Plaintiff sought personal injury protection benefits under a no-fault policy issued by Defendant for injury sustained in an accident occurring out of the state of Michigan while Plaintiff was changing a tire on the subject vehicle. Defendant denied coverage on the basis that the no fault act only requires benefits to be paid for a out-of-state accidents when the insured is an “occupant” of the vehicle. The Trial Court agreed and granted summary disposition to Defendant.

The Court of Appeals reversed finding that, while the No Fault Act would not require coverage in this circumstance because, under the definition of “occupant” established by the Supreme Court, the Plaintiff would not have been an occupant, in this case there was coverage because Defendant insurer’s policy had a broader definition of “occupant”. In the Defendant’s policy “occupying” is defined as “in, upon, getting in, on, out or off,” the vehicle. The Court held that the act of changing a tire would qualify as “occupying” under this definition. The Court also held that an insurer must provide coverage greater than that required by law if the policy terms provide greater coverage.

[su_box title=”Kallas & Henk Note”] While the general principle that an insurer is bound by the terms of its coverage even if the terms provide greater benefits than required by law is sound, this Court’s determination that the Plaintiff was “upon” the vehicle because he was within six inches of the vehicle and “still in sufficient contact with the vehicle to be pinned against it upon impact” is questionable. [/su_box]


Allstate Insurance Company v Harris

Unpublished. Decided April 24, 2001. Michigan Court of Appeals Docket Number 215264.

In this declaratory action brought by Plaintiff insurer, the issue was whether Plaintiff properly notified its insured of its reservation of rights when it undertook a defense of the insured. The insured took the position that no reservation of rights letter was received or, alternatively, that the letter purportedly sent by Plaintiff was insufficient to adequately inform the insured of potential conflicts. The Trial Court granted summary disposition in favor of Plaintiff insurer finding that the reservation of rights letter was sent and received by the insured and that it was sufficient to raise coverage issues.

The Court of Appeals affirmed finding that Plaintiff had created a rebuttable presumption that the reservation of rights letter was sent by proof of mailing and received by the insured’s wife (she signed for the certified letter). The Court rejected the claim by the insured that there was an issue of fact created by his testimony that he did not recall receiving the letter. The Court held that this was not the same as testifying that he had not received the letter and was insufficient to overcome the presumption of receipt. The Court also rejected the insured’s claim that the content of the letter was vague and unclear and insufficient to put the insured on notice of the policy defenses.

[su_box title=”Kallas & Henk Note”] While not the subject of the appeal, the Court of Appeals noted in this case that the reservation of rights letter sent five months after the filing of the complaint in the underlying action was timely. [/su_box]


Wilkie v Auto Owners Insurance Company

Published. Decided May 1, 2001. Michigan Court of Appeals Docket Number 217919.

Plaintiffs, the driver and passenger of a vehicle involved in an automobile accident, brought this action for underinsured motorist benefits. The underinsured tortfeasor had policy limits of $50,000 which was split equally between the two Plaintiffs. Defendant’s underinsured motorist coverage had limits of $100,000/person. Plaintiffs claimed that they were entitled to $75,000 each ($100,000 limits minus $25,000 received from tortfeasor). Defendant claimed that the terms of the coverage provided that they were only entitled to $50,000 each ($100,000 limits minus $50,000 the policy limits of the tortfeasor). The trial court granted summary disposition in favor of plaintiffs.

The Court of Appeals affirmed finding that the terms of the policy were ambiguous and therefore to be construed against the insurer and that the reasonable expectations of the insured were that the higher amount would be available in this circumstance. The Court rejected Defendants argument that the policy language required a reduction of policy limits by the amount “available to the owner or operator of the underinsured automobile”. The Court held instead, that the term “available to the owner or operator “is equivalent to available to the insured for purposes of underinsured motorist coverage.

[su_box title=”Kallas & Henk Note”] In this decision, the Court of Appeals recognized the general rule that coverages that are not mandatory, such as underinsured motorist coverage, may be written and limited in any way by the insurer. The Court’s interpretation of the policy in this case, however, seems to abandon the rule that a Court is to give terms there ordinary meaning. The Court, in this case, took considerable liberty in determining that the term “available to the owner or operator” is the same as available to the insured. The Court also, in our opinion, erroneously relied on the “reasonable expectations” doctrine. While an argument could be made that underinsured motorist coverage, in principle, is intended to provide the coverage sought by the Plaintiffs in this case, Michigan law does not support an abandonment of the actual policy language to fulfill the “reasonable expectations” of the insured. [/su_box]

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