Michigan Coverage Decisions, Issue 35

Ronald I. Weiss, Executor and Trustee for Plaintiff Walter L. Abt v St. Paul Fire and Marine Insurer

Unpublished. Decided March 18, 2002 for the 6th Circuit Court of Appeals No. 00-3267/3297.

Plaintiff filed a declaratory judgment action seeking coverage under a commercial liability policy in a patent infringement case. The District Court held that the insurer had a duty to defend the insured in the patent litigation but no duty to indemnify. Because the insurer breached its duty to defend, the insurer was liable for attorney’s fees and costs. At issue was the advertising injury coverage, the definition of advertising injury, and the exclusion of advertising claims which were the result of infringement of trademark, service mark or trade name.

The insurer appealed arguing that contract construction rules applied to determine the meaning of policy terms. The policy terms were not ambiguous by the lack of controlling legal interpretation and terms could be defined by the plain meaning. The Court of Appeals reversed the Trial Court stating that the split of legal authority defining policy terms in other jurisdictions did not create ambiguity and no duty to defend existed. The Court of Appeals upheld the Trial Court’s decision that because no coverage existed, no duty to indemnity existed.

[su_box title=”Kallas & Henk Note”] The court correctly applied contract construction rules using common meanings to define undefined policy terms and found neither a duty to defend or duty to indemnify.  [/su_box]


State Farm Mutual Automobile Insurance v Joycelyn Underwood et al

Unpublished. Decided April 19, 2002 State of Michigan Court of Appeals Docket No. 227013.

Plaintiff insurer filed a declaratory judgment action against Defendant insureds and the underlying Plaintiff. The insurer previously defended the insureds under a reservation of rights. In the declaratory judgment action, the insureds failed to answer the complaint. Plaintiff petitioned for default judgment against the insureds which was denied. The Trial Court concluded that Plaintiff was estopped from denying coverage.

The Court of Appeals overturned the Trial Court on the basis that a proper basis existed for entry of the default judgment. Such default would not preclude the injured party from litigating coverage with the insurer. The Court of Appeals further stated that the Trial Court lacked any factual basis for estoppel and acted improperly in deciding coverage sua sponte.

[su_box title=”Kallas & Henk Note”] Defending under a reservation of rights does not preclude a determination of coverage in a later declaratory action. In this action, the court of appeals held that an insurer is not prejudiced by its action of providing a defense.  [/su_box]


Sheryl Ann Borger v Auto-Owners Insurance Company

Unpublished. Decided April 23, 2002 State of Michigan Court of Appeals Docket No. 229856.

Plaintiff initiated the lawsuit against Defendant auto insurer over uninsured motorist benefits. Plaintiff’s uninsured motorist coverage included a statute of limitations provision limiting uninsured motorist claims to the same statute of limitations applying to bodily injury claims in the state where the accident occurred. Plaintiff was allegedly injured in two separate motor vehicle accidents and filed a lawsuit against the alleged at-fault parties five days prior to the expiration of the three-year limitation. After the three-year limitation period expired, Plaintiff made an uninsured motorist claim. The Trial Court held that the statute of limitations in the policy had expired prior to the Plaintiff making a claim and Plaintiff’s claim was time-barred.

Plaintiff argued that it was unreasonable to strictly enforce the limitation period on the basis of the facts surrounding the lawsuit. The Court of Appeals noted that the initial contact was made beyond the three-year limitation period and rejected Plaintiff’s argument. The Court noted that the statute of limitations begins to run on the date an insured has a legally enforceable claim that Plaintiff’s claim was time-barred.

[su_box title=”Kallas & Henk Note”] The terms of the uninsured motorist coverage dictate the availability of coverage, including any applicable time limitation for filing a claim. [/su_box]


Progressive Michigan Insurance Company v Nathan Karpinski, et al.

Unpublished. Decided March 5, 2002 State of Michigan Court of Appeals Docket No. 22866.

Defendant’s decedents were killed while riding a motorcycle. Defendant sought uninsured motorists benefits under an auto policy issued to the decedents. The insurer denied benefits under an owned vehicle exclusion. The Trial Court granted summary disposition in favor of the insurer.

The uninsured motorist coverage portion of the policy excluded coverage while using or occupying an owned vehicle, other than a covered vehicle. Defendant relied on a prior Court of Appeals decision to interpret the term vehicle. The Court of Appeals noted that the Michigan Supreme Court reversed the decision on which the Defendant relied. The Court determined a motorcycle is a motor vehicle by the common definition of the word. The Court upheld the Trial Court’s decision to grant summary disposition because the policy exclusion applied to other owned vehicles.

[su_box title=”Kallas & Henk Note”] The Court of Appeals used the policy language to determine the issue of coverage and used commonly understood meanings to define terms in the policy. [/su_box]

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