Michigan Coverage Decisions, Issue 32

Melody Kinyon v Secura Insurance Company

Unpublished. decided December 28, 2001 State of Michigan Court of Appeals Docket No. 226064.

Plaintiff filed a claim for underinsured motorist benefits with her auto insurance carrier. The insurer authorized her to settle the claim against the underinsured motorist for the underinsured motorist’s policy liability limit. The settlement authorization did not however, waive any right of subrogation against the underinsured motorist. As part of the settlement, Plaintiff signed a document releasing the underinsured motorist from any and all claims and demands arising from the accident. The insurer thereafter refused to pay underinsured motorist benefits because Plaintiff’s had released the underinsured motorist which was in violation of its authorization.

The Trial Court granted summary disposition for Defendant on the basis that the release signed by the Plaintiff was inconsistent with the insurer’s consent.

The Court of Appeals held that the Plaintiff settled the case in a manner inconsistent with the insurance company’s consent and summary disposition in favor of the insurance company was proper.

[su_box title=”Kallas & Henk Note”] While the Court of Appeals reached the right result in this case, the underlying facts are a little curious. The consent to settle authorization by the insurer would seem to be meaningless unless the underinsured motorist was being released. No payment on behalf of the underinsured motorist would be possible without a release. Most carriers, as a practical matter, will allow the release of the underinsured motorist if they are consenting to settlement. Otherwise, no settlement with the underinsured motorist will, in most instances, be possible.  [/su_box]


Matthew T. Overall v Paul J. Riharb and Farm Bureau Mutual Insurance Company

Unpublished. decided December 28, 2001 State of Michigan Court of Appeals Docket No. 225545.

Defendant insurance company appealed the Trial Court’s motion for summary disposition in favor of Plaintiff and the holding that the insurance company was responsible for expenses incurred by its Defendant insured in defending the underlying lawsuit.

In the underlying action, the Plaintiff filed a lawsuit against the insured alleging assault and battery, and later amended the complaint to include a claim of negligence.

On appeal, the insurance company argued that the amended complaint was an obvious attempt to trigger insurance coverage for an otherwise excluded intentional act. The Court of Appeals disagreed stating that the duty to defend was broad to include defense when underlying allegations arguably fell within the policy coverage. The Court of Appeals stated that the insurance company failed to support its argument with anything more than speculation. The Defendant insured’s conduct was sufficiently ambiguous to raise the question of whether the actions were intentional or negligent. Because this question exists, the Defendant insurance company owed its insured a duty to defend in the underlying action.

[su_box title=”Kallas & Henk Note”] While this case involved only the duty to defend, the opinion of the Court seems indefensible in light of prior Michigan appellate decisions. There is suggestion in the opinion that the outcome of this case may have been impacted by failures of the parties to properly document the record for the Court of Appeals. The opinion notes the absence of deposition transcripts and or trial transcripts and any supporting authority by the insurer for its position.  [/su_box]


Andre Spearman v State Farm Mutual Automobile Insurance Company

Unpublished. decided January 8, 2002 State of Michigan Court of Appeals Docket No. 224351.

Plaintiff sought uninsured motorist benefits under his mother’s policy. Defendant insurer denied the claim. Neither the owner or operator of the vehicle involved in the accident carried insurance. Plaintiff brought suit against both owner and operator. Plaintiff signed a document releasing the owner along with all other parties.

Plaintiff filed this action to compel the insurer to arbitrate his claim for uninsured motorist benefits. The Trial Court granted the insurer’s motion for summary disposition based on the terms of the signed release. Additionally, the insurer argued that pursuant to the terms of its policy, there was no coverage because Plaintiff settled the claim without its consent.

On appeal, Plaintiff argued that by releasing the owner he did not settle the bodily injury claim because he was not legally entitled to recover any damages from the owner based on the owner’s claim that the driver did not have permission to use the vehicle. The Court of Appeals upheld the Trial Court finding that by executing the release, Plaintiff settled the bodily injury claim with the owner of the vehicle.

[su_box title=”Kallas & Henk Note”] The Court of Appeals relied entirely on the policy language contained in the uninsured motorist coverage form. The Court also relied on long-standing appellate decisions in Michigan finding that an insurer need not show prejudice in order to rely on these types of provisions in uninsured/underinsured motorist coverage forms.  [/su_box]


Stanislaw Golec v Metal Exchange Corp et al.

Unpublished. Decided January 11, 2002 State of Michigan Court of Appeals Docket No. 220166 and 22044.

Plaintiff filed a garnishment action against his employer’s umbrella policy for a workplace injury. Plaintiff was burned in an explosion and sued under the intentional tort exception to Workers’ Compensation. It was determined that the allegations fell under the intentional tort exception. Plaintiff and his employer entered into a consent judgment providing for enforcement only against the employer’s insurers.

The Trial Court granted summary disposition in favor of the employer’s umbrella insurer concluding that no coverage applied based on exclusionary wording for expected or intended injuries. Plaintiff appealed arguing that the implied intentional tort exception under workers’ compensation is equivalent to the subjective standard envisioned in the policy’s expected or intended injury exclusion.

The Court of Appeals overturned the Trial Court finding that it was possible for the employer to disregard actual knowledge an injury was certain to occur without actually intending the injury. Under the intentional tort exception, consent can be inferred when actual intent cannot be established and not be intended from the standpoint of the insured. The policy exclusion requires consideration of the subjective expectation of the employer.

Plaintiff argued that the umbrella policy was intended to be excess over the workers compensation policy (which provided coverage),therefore, should be construed to provide coverage. Court of Appeals found that coverage under the workers compensation policy had no bearing on coverage under the umbrella because it was not a “follow form” policy and did not contain an endorsement broadening coverage.

[su_box title=”Kallas & Henk Note”] The Court held only that there was an issue of fact as to the subjective intent of the insured and that the intentional tort exception to the exclusive remedy provisions of the workers compensation act could apply even without subjective intent to cause harm. Because the Court rejected Plaintiff’s argument that the umbrella carrier must provide coverage if the primary carrier provides coverage, it remains a possibility that the trier of fact could determine that the injury was intentionally caused.  [/su_box]

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