Michigan Coverage Decisions, Issue 25

Universal Underwriters Group v Allstate Insurance Company

Published. Decided July 20, 2001. Michigan Court of Appeals Case No. 217470.

In this action for reimbursement of benefits paid, Plaintiff insured an automobile dealership. Defendant insured a person injured while driving an automobile she was in the process of purchasing from the dealership. Plaintiff paid the PIP benefits. The lower court held that because the driver was injured before she actually purchased the car, she did not have an insurable interest in the vehicle, and defendant company had no duty to provide coverage because the insurance was not yet in effect.

[su_box title=”Kallas & Henk Note”] The Court of Appeals reversed based on the fact that Defendant had issued a binder for insurance on the vehicle holding that although someone must have “insurable interest” to support existence of valid automobile liability insurance policy, Allstate v State Farm, 230 Mich. App. 434 (1998), this does not mean that someone has to be the owner of the vehicle. [/su_box]

 

Cason v Auto Owners, 181 Mich. App. 600 (1989). Allstate Insurance Company v Henry et al

Unpublished. Decided July 27, 2001. Michigan Court of Appeals Docket No. 226002.

In this declaratory action, Plaintiff sought a ruling that it had no duty to provide automobile coverage to the insured who was involved in an accident while driving a non-owned vehicle. Plaintiff’s policy precludes coverage where a non-owned auto is “available” to the insured driver for “regular use.” The Trial Court held that the vehicle was not available for regular use.

In a 2-1 decision the Court upheld the Trial Court’s holding. The Court of Appeals noted the following facts in its finding that the Trial Court’s ruling was not clearly erroneous: The vehicle was uninsured, unlicensed, and unregistered, a “quintessential Junker” with bad brakes, a flat tire, no front grill, and a dead battery that needed replacement before it could be started. Also, that the insured did not live consistently where the vehicle was stored.

This case stands for two main propositions; first, that an otherwise valid binder should not be invalidated merely because a sale was unconsummated, and second, that an “insurable interest” does not necessarily require ownership.

[su_box title=”Kallas & Henk Note”] There is a dissent in this case. The dissent would find that the policy does not require the vehicle to be “available” for “regular use” on a highway, and that the mechanical adjustments necessary to start the car were minor. The dissent also points out that the insured driver lives with his father, but is often away from home because his job requires extensive travel. The dissent also noted that the driver’s father left the keys in the vehicle for use whenever he desired. We would predict that the Michigan Supreme Court would reverse the majority and adopt the dissenting opinion if it were to review the decision. [/su_box]

 

Jeffrey Lee Made and Thomas E. Walsh, personal representative of the estate of Sheila Chouinard v Jackson National Life Insurance Company of Michigan

Published. Decided July 30, 2001. Michigan Supreme Court Docket No. 114786.

In this life insurance dispute, Plaintiffs sought to recover life insurance benefits as named beneficiaries under the policy. The life insurance policy application required that the applicant inform the insurance company in writing if the applicant’s health or any answers or statements contained in the application changed between the time the original answers were given and the date that the policy was issued and delivered. The defendant took the position that the policy never became effective because the applicant failed, as required by the terms of the insurance application, to provide updated medical information between the dates of application and policy issuance.

The court agreed holding that the applicant’s failure to supplement medical history rendered the original answers false, making them “misrepresentations” within the meaning of MCL 500. 2218 (2). Further, the court concluded that these misrepresentations were material, and that defendant was therefore entitled to void the contract.

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior Michigan case law regarding misrepresentations in applications. It is the first case, however, to address a situation where the application required updated information between the time of completion and the issuance of the policy. [/su_box]

 

Charlene Cummings v State Farm Fire and Casualty Company

Unpublished. Decided July 31, 2001. State of Michigan Court of Appeals docket No. 220844.

The insurance policy at issue in this case provided one year from the date of loss to file suit against the insurer arising out of the denial of a claim. The one year limitation provision is expressly permitted by statute. Plaintiff contended that no notification of the denial occurred until June 7, 1997, while defendant maintained that it formally denied Plaintiff’s claim on April 29, 1997 by mailing two notices of denial to Plaintiff by first-class and certified mail.

The court decided in favor of the defendant on the basis that the date an insurer formally denies an insured’s claim is the date that notice is mailed to the insured, and not the date that the insured receives the notice.

[su_box title=”Kallas & Henk Note”] This decision relied on the recent Court of Appeals decision in Saad vs. Citizens Insurance Co of America, 227 Mich App 649 (1988) where it held that the date of mailing is the formal date of denial and not the date the insured receives the notice of denial. [/su_box]

 

Village of Nashville, Township of Castleton, and Township of Maple Grove v Michigan Township Participating Plan

Unpublished. Decided August 3, 2001. State of Michigan Court of Appeals docket No. 224598.

Defendant insurer provided general liability and errors and omissions coverage to Plaintiff municipalities. Both coverages contain pollution exclusions. In this declaratory action, Plaintiffs sought indemnification for attorney fees incurred in defending an action brought by a recycling plant. Plaintiffs had delivered waste oil, apparently contaminated with PCB to the recycling plant which contaminated other oil to be recycled. Defendant had refused to defend Plaintiffs.

The Trial Court granted summary disposition to Plaintiff municipalities on the basis that some of the claims in the lawsuit were not excluded by the pollution exclusions. The Court of Appeals reversed finding that the “absolute pollution exclusions” contained in the subject policies eliminated coverage for these claims and that there was no duty to defend or indemnify. The court further held that the allegations that the Trial Court relied on were all variants of the basic claim that the waste oil was contaminated and therefore not covered.

[su_box title=”Kallas & Henk Note”] The Court of Appeals relied on the recent decision of McKusick vs. Travelers Indemnity 246 Mich App 329 (2001) for the proposition that a pollutant need not cause traditional environmental pollution to trigger the pollution exclusions and on McGuirk Sand & Gravel vs. Meridian Mutual, 220 Mich App 347 (1996) for the proposition that the “absolute pollution exclusion” unambiguously excludes coverage for claims alleging damage from pollution.  [/su_box]

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