Michigan Coverage Decisions, Issue 26

Edward Ososki, d/b/a Federal Oil Co. v St. Paul Surplus Lines

Decided August 6, 2001. United States District Court Eastern District of Michigan Northern Division Case No. 00-10026-BC.

The Plaintiffs sought recovery under an insurance policy covering perils associated with accidental damage suffered during the course of Plaintiff’s oil well drilling operations. The Plaintiffs sought indemnification for repairs and restoration of wells which were damaged by the failure of a component part of the drilling apparatus, “the traveling block”. During the repair operations, a below ground fire or explosion caused damage to the well. The insurance policy provided coverage for costs of restoration or redrilling caused by collapse of a derrick or mast. The insured argued that the traveling block was part of the mast, which “collapsed”, and on this basis, was covered by the policy.

The insurer argued that the policy provisions defining “derrick“ and “mast” do not include the traveling block, which is an independent device that can be removed from the structure. The insurer further argued that the structural failure did not constitute a “collapse”. The terms “derrick”, “mast”, “collapse”, and “pull-in” were not defined in the insurance policy. Although the defect prevented the mast from performing as intended, it did not jeopardize the structure of the mast in any way as the mast did not fall, distort or lose its strength. Even determining that the term “collapse” is subject to several meanings, the Court found that the occurrence in this case did not fall within any one of the definitions and no coverage existed.

[su_box title=”Kallas & Henk Note”] In finding no coverage under the policy, the Trial Court rejected the Plaintiff’s expansive definitions of “collapse”. This opinion also contains an excellent discussion of what does and does not make policy language ambiguous, and the proposition of Michigan law in interpreting a term in an insurance policy should not accept a meaning that is forced, strained or results in the creation of a new contract.  [/su_box]


Janet Polk v Allstate Insurance Company

Unpublished. Decided August 21, 2001. State of Michigan Court of Appeals Docket No. 219956.

Plaintiff sued her homeowner’s insurance carrier on the basis of breach of contract and misrepresentation. In 1987, the Plaintiff who was moving to Michigan, rented a storage unit in Nevada to store certain personal property. Plaintiff returned to check on the storage unit in 1989, but did not return again until 1997. Plaintiff discovered most of the personal property missing from the storage unit. In 1998, Plaintiff filed a property loss claim with her insurance carrier. In June 1998, the Defendant denied the Plaintiff’s claim on the basis that the property was not covered by the policy at the time of loss and that Plaintiff had failed to provide reasonable proof of the amount of loss as required by the terms of the policy.

The Trial Court found in favor of the insurer on the basis that although the property was covered by the policy, Plaintiff had failed to specify the time and date of loss when filing her claim and that the insurer had suffered actual prejudice in investigation of the claim.

The Court of Appeals reversed finding the question of actual prejudice as a result of Plaintiff’s failure to provide the date of loss with specificity is a question to be resolved by the trier of fact. The Court determined that the Defendant failed to provide any evidence establishing it was actually prejudiced by the Plaintiff’s failure.

[su_box title=”Kallas & Henk Note”] The Court of Appeals held that the Trial Court was in error in finding that the 7 ½ year period in which the theft of the belongings could have occurred, by itself, prejudiced the insurer. According to the opinion, the insurer failed to present any evidence at Trial as to why the failure to specify the date of the actual loss prejudiced the insurer. Presumably, on remand to the Trial Court, the insurer will present evidence on its inability to investigate the cause of the loss because of the uncertainty of the date of the loss. [/su_box]


Imogene Cobb v State Farm Fire and Casualty Company

Unpublished. Decided August 24, 2001. State of Michigan Court of Appeals Docket No. 225216.

Plaintiff claimed loss of personal property items as a result of a burglary of her home. Defendant provided homeowners coverage and refused to pay for certain items. Plaintiff initiated a breach of contract action and moved for summary disposition on the basis (1) she testified that she had owned the personal property items and that they were gone after the burglary and (2) the insurance representative conceded that he had no evidence Plaintiff had committed fraud or false swearing. The Trial Court denied the summary disposition and Plaintiff appealed that denial.

The Court of Appeals affirmed the denial finding that there is no requirement that a Defendant has direct evidence to refute a Plaintiff’s claims where the claims are dependent on the credibility of testimony. The Court held that the trier of fact was free to reject Plaintiff’s claims if they did not find her credible.

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior Michigan case law which holds that a party’s testimony may be rejected by a trier of fact even if it is not directly refuted, particularly in circumstances where there is no supporting evidence and the credibility of the party is questionable. [/su_box]


Pioneer State Mutual Insurance Company v Timothy C. Splan and Deidra Splan

Unpublished. August 24, 2001. Michigan Court of Appeals Docket No. 220477.

Plaintiff provided homeowner’s coverage to Defendants. The Defendant’s dwelling suffered damages to the roof as a result of buildup of snow and ice. The insurer denied coverage on the basis that the damage was caused by structural defects that pre-dated the Defendants’ ownership of the home. The Trial Court found in favor of the insurer on the basis that coverage was excluded due to an exclusion for damage caused by faulty design and construction and because the damage was not included in the definition of “collapse”.

The Court of Appeals found that the term “collapse” was ambiguous and construed the term to include any substantial impairment of the structural integrity of the covered home. The Court further stated that the home need not be reduced to a pile of rubble for it to be considered in a state of collapse. The Court also determined that the exclusion for faulty design and construction did not apply to the additional coverage provided for “collapse”.

[su_box title=”Kallas & Henk Note”] The result in this case is peculiar to the structure of the coverage. It appears from the decision that the panel of the Court of Appeals would have found in favor of Plaintiff insurer if the exclusion for damages caused by defective design and/or construction applied to the coverage for collapse. Because, however, in this case, the coverage for collapse was provided for in an additional coverage, the Court held that the exclusions listed in the main body of the policy did not apply.  [/su_box]

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