Michigan Coverage Decisions, Issue 31

Meijer, Inc. v Ray’s Landscaping & Nursery, Inc. and Meridian Mutual Insurance Company

Unpublished. Decided December 14, 2001 State of Michigan Court of Appeals Docket No. 223968.

Plaintiff sued alleging breach of contract by the insurance company for their refusal to defend an underlying tort action. A third party fell on the Plaintiff’s premises sustaining injuries and sued the Plaintiff alleging negligent failure to remove snow and ice from the parking lot on the premises. The Plaintiff tendered defense to the landscaper’s insurance company who declined to defend on the basis that documentation established satisfactory performance of contractual duties. The Trial Court granted summary disposition in favor of Plaintiff and awarded damages.

Plaintiff and Defendant landscaper entered into a contract for snow removal services which included an indemnification provision stating that the landscaper agreed to indemnify Plaintiff from any and all claims and damages arising directly or indirectly from acts or omissions on the Plaintiff’s premises. The Defendant insurance company issued a general liability policy to the landscaper naming Plaintiff as an additional insured.

The Court of Appeals affirmed the Trial Court because the indemnity agreement and additional insured language of the policy stated that the landscaper would defend and indemnify Plaintiff against all claims arising directly or indirectly from its acts or omissions. The Court held that these claims were arguably within the scope of the indemnification provision in the coverage provided by the landscaper’s insurance.

[su_box title=”Kallas & Henk Note”] The Court of Appeals in this case held only that the broad indemnifying language in the indemnification agreement and additional insured endorsement in this case required response by the insurer. This case does not hold that limiting language in additional insured endorsements will be disregarded. [/su_box]


Secura Insurance and Erwin Kuester v Reed’s Lake Inn, Inc. and American States Insurance Company and Peng Yu-Chun Ko

Unpublished. Decided December 21, 2001. State of Michigan Court of Appeals Docket No. 222339.

This is a declaratory judgment action to determine the extent of the liability between two insurance companies for a settlement paid on an underlying personal injury claim. The injury occurred in a back hallway of a building, a portion of which was leased to a restaurant. The hallway was not part of the described leased premises, but the restaurant proprietor had permission to use the hallway to access a bathroom and storage facilities. The coverage dispute arose between the building owner’s insurance company and the restaurant proprietor’s insurance company over which company should pay the settlement. The Trial Court held that the building owners’ insurer was liable for the entire amount of the settlement.

The building owner’s insurer appealed the judgment because the lease between the parties contained an indemnity agreement in favor of the building owner. The Court of Appeals upheld the Trial Court on the basis that the lease provision language was plain and unambiguous and could only be construed to apply to injury inside the leased portion of the building. The Plaintiff argued that the existence of a license to use the common areas made such areas part of the leased premises. The Court of Appeals disagreed that the lease indemnification provision applied to any “licenses” available to the tenants. Plaintiffs also asserted that the building owner did not have exclusive possession and control over the\ hallway and therefore did not retain full liability for any injuries which occurred in that area. The Court of Appeals affirmed the Trial Court’s finding that the building owner retained sole possession and control of the hallway and its insurance company was liable for the entire amount of the personal injury settlement.

[su_box title=”Kallas & Henk Note”] The facts of this case are somewhat difficult to decipher. Apparently, the two carriers agreed to front a settlement in the amount of $250,000 with the agreement to later litigate the question of which company should pay. The Court correctly held that the only entity that could be liable would be that which had the possession and control over the area in which the injury occurred. Additionally, the Court properly restricted the indemnification language to the leased premises. [/su_box]


George Muganis v Citizens Insurance Company and Zervos Agency

Unpublished. Decided December 28, 2001 State of Michigan Court of Appeals Docket No. 223822.

The Plaintiff purchased an auto policy from the Defendant insurance company through the independent insurance agent including underinsured motorist coverage. Plaintiff contended that the independent insurance agent represented that the underinsured motorist coverage would be in addition to any insurance benefits received from the underinsured motorist. The insurance policy contained a deduction provision for any benefits received from the underinsured motorist. Both Defendants filed motions for summary disposition claiming that the policy unambiguously provided for a set off. The Defendant insurance company also argued that even if the independent insurance agent had misrepresented that there was no set off provision, the statements of the independent insurance agent could not be imputed to the insurance company. The Trial Court found that the policy did contain an unambiguous set off provision and that the independent insurance agent did not owe a duty to advise Plaintiff of the adequacy of coverage.

On appeal, the Plaintiff claimed that the Defendant independent insurance agent did owe a duty to explain coverage and a question of fact was created by the Plaintiff’s deposition testimony. The Court of Appeals reversed the Trial Court’s dismissal of the Plaintiff’s negligence claim on the basis that there was a fact question whether the independent insurance agency had a duty to the Plaintiff. Plaintiff also argued that the independent insurance agent was the insurance company’s agent and the misrepresentations should be imputed to the insurance company. However, the Court of Appeals disagreed and upheld the decision that the independent agent was Plaintiff’s agent and any representations made could not be imputed to the insurance company. The unambiguous set off provision in the insurance company’s policy applied to any payment to the Plaintiff for underinsured motorist benefits.

[su_box title=”Kallas & Henk Note”] This case follows a line of appellate decisions in Michigan holding that independent insurance agents represent the insured and not the insurer. As a consequence, the agent cannot find the insurer by any misrepresentation by the agent.  [/su_box]

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