Michigan Coverage Decisions, Issue 24

National Union Fire Insurance v Owens Corning, Inc. and Falcon Foam Corp. v Gulf Insurance Co.

Decided May 29, 2001. United States District Court, Western District of Michigan. Case No 1:99 cv 519.

In this declaratory action, Plaintiff sought a ruling resolving a dispute over the proper allocation of responsibility for a $3,000,000.00 settlement.The underlying action involved an explosion of a commercial tractor trailer. The injured parties were preparing to transport a load of foam board to Kentucky. The boards had been improperly stored causing the build-up of noxious gases in the cab. In order to illuminate the cab, one of the injured parties lit a cigarette lighter, which ignited the gases and triggered the explosion.

Plaintiff took the position that coverage is excluded because the injury did not arise out of “the use” of a covered automobile as required by its policy. The Court disagreed holding that the accident bore a causal relationship to the use of the trailer as a transportation vehicle because locating the documents was necessary before transport could commence, the injured parties were in the cab for the sole purpose of preparing for transport, and no other intervening act broke the chain of events related to the use of the truck.

[su_box title=”Kallas & Henk Note”] The District Court relied on Michigan’s expansive interpretation of “use” of a vehicle to include “a range of activities unrelated to actual driving.” [/su_box]

 

Auto Club v Chincak and Macvicar

Unpublished. Decided June 8, 2001. Michigan Court of Appeals Docket Number 219082.

Defendant’s minor child sexually molested several neighborhood children. Plaintiff issued a homeowners policy to the parents. The Trial Court found that no insurance coverage was available for a claim based on negligent supervision. The Court of Appeals disagreed with the Trial Court’s reasoning, but affirmed the decision to grant the Motion for Summary Disposition.

The Court of Appeals held that the plain language of the policy in effect at the time the sexual molestation occurred excluded bodily injury due to sexual molestation and bodily injury arising from a criminal act. Based on the plain language of the policy, coverage was not available for the acts that allegedly caused the bodily injury.

[su_box title=”Kallas & Henk Note”] This decision is consistent with Michigan precedent that coverage is not dependent on the theory of liability alleged, but rather, on the underlying cause of injury. Because the underlying cause of injury in this case was sexual molestation, and because it was expressly excluded from coverage, the decision to grant Plaintiff’s Motion for Summary Disposition was upheld.  [/su_box]

 

Grosso and Red Keim Premier Real Estate v St. Paul Fire & Marine Insurance Co.

Unpublished. Decided June 12, 2001. Michigan Court of Appeals Docket Number 218622.

In this professional liability insurance action, Plaintiff insured appeals from the lower court’s ruling that Defendant insurance company owed no duty to indemnify or defend him. The lower court found that the policy covers the insured for damages resulting from the “conduct of real estate agent or broker duties” caused by a “wrongful act.” The underlying claim alleged that the owner of the insured real estate agency who was brokering the sale of a business, knowingly allowed the seller of the business to advertise for his new business using a customer mailing list, notwithstanding the fact that this list was included in the sale of the business. The Trial Court held that these actions were not covered for two reasons. First, because they were intentional, and therefore not a “wrongful act” as defined in the policy, and second, because they were outside the scope of “real estate agent or broker duties.” The Court of Appeals affirmed specifically holding that the agent’s actions were intentional and neither a mistake nor an “error.”

[su_box title=”Kallas & Henk Note”] The Court found that fraudulent or dishonest conduct cannot be construed as the failure to use due care, or a mistake, but must be considered intentional. [/su_box]

 

Battaglia v Anthony’s Pizza and State Mutual Insurance Co.

Unpublished. Decided June 26, 2001. Michigan Court of Appeals Docket Number 217683.

In this garnishment action, Plaintiff sought to recover a judgment taken against Defendant’s insured under a commercial general liability policy. Plaintiff had been injured by an employee of Defendant’s insured who had failed to stop at a stop sign while delivering pizza. The policy has an automobile exclusion precluding coverage for bodily injury arising out of the use of an automobile. The lower court denied coverage based on this exclusion. Plaintiff argued on appeal that his claim is based on liability due to negligent hiring and supervision, and not as the result of the use of the automobile. The Court of Appeals disagreed and affirmed the lower court’s holding that the policy exclusion clearly focuses on the injury sustained rather than the legal theory.

[su_box title=”Kallas & Henk Note”] There is a dissent in this case.The dissent would find that coverage exists based on negligent hiring/supervision because the bodily injury was caused by an “occurrence,” and occurrence is defined in the policy as an “accident” taking place within the coverage territory during the policy period. However, the dissent does not explain how this view avoids the automobile exclusion. This decision is curious because neither the majority nor the dissent discuss prior appellant decisions which have directly addressed this issue. [/su_box]

 

State Farm Mutual Auto Insurance Company v Curran

Unpublished. Decided June 29, 2001. Michigan Court of Appeals Docket Number 219235.

In this declaratory action, Defendant appeals the Trial Court’s decision to deny coverage and grant judgment to Plaintiff. Defendant was involved in a car accident and brought a novel uninsured motorist claim against Plaintiff insurance carrier. She claimed that because the driver of the other vehicle’s parents owned the vehicle involved in the accident, and they had the driver listed as an ‘excluded’ driver, the vehicle was effectively “uninsured.” The lower court disagreed with her position, holding that the vehicle did not fall within the policy’s definition of “uninsured motorist vehicle.” This decision was based in large part on the fact that the driver carried his own auto insurance policy.

[su_box title=”Kallas & Henk Note”] This case is extremely fact specific and based on an unusual set of facts. [/su_box]

 

Farm Bureau Mutual Insurance Company v Buckallew

Published. Decided July 6, 2001. Michigan Court of Appeals Docket Number 216773.

Defendant’s decedents were pedestrians fatally injured by Plaintiff’s insured driver. The policy had $100,000 “per person” and $300,000 “per occurrence” automobile insurance liability limits. The Trial Court ruled that the policy entitled the decedent’s estate to the $300,000 “per occurrence” limit. Plaintiff argued on appeal that the “per occurrence” limit is subject to the “per person” limit, and, therefore, $200,000 is the limit of liability.

The Court of Appeals in this decision agreed with Plaintiff and reversed the lower court’s ruling relying on persuasive authority from other jurisdictions.

[su_box title=”Kallas & Henk Note”] This is a case of first impression in Michigan. The Court held that where an insurance policy contains language making the “per occurrence” limit subject to the “per person” limit, the policy unambiguously limits recovery to the “per person” amount regardless of the number of people injured in the accident. [/su_box]

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