Michigan Coverage Decisions, Issue 36

Carvan Williams v Continental Insurance a/k/a CNA Insurance

Unpublished. Decided April 23, 200, State of Michigan Court of Appeals Docket No. 229183.

Plaintiff filed an action to recover underinsured motorist benefits against his insurer. Plaintiff had sustained injuries in a collision, filed for first party no-fault benefits and demanded underinsured motorist benefits when it was ascertained that the other driver’s policy limits were inadequate. The insurer was granted summary disposition on the underinsured motorist coverage, because a claim must be brought within one year from the date of the accident.

On appeal, Plaintiff argued that the suit for first-party benefits served as notice to the insurer of the potential for additional claims, including an underinsured motorist claim and that the requirement of filing the underinsured motorist claim within one year of the accident is unreasonable. The Court of Appeals rejected Plaintiff’s argument that reporting a no-fault claim was sufficient to qualify as a claim for underinsured motorist benefits. The Court further rejected the argument that the year limitation was unreasonable and upheld the Trial Court’s grant of summary disposition in favor of the insurer.

[su_box title=”Kallas & Henk Note”] This case is consistent with prior Michigan law that an insurer may limit uninsured / underinsured motorist coverage as it sees fit, including any applicable time limitation for filing a claim. [/su_box]


Auto-Owners Insurance Company v Richard C. Davis et al

Unpublished. Decided April 26, 2002 State of Michigan Court of Appeals Docket No. 224879.

Plaintiff insurer filed an interpleader action and paid into the Court its policy limits, thus discharging it from further obligation, including the obligation to defend for injuries resulting from a fireworks explosion. The Trial Court issued a final order distributing the interpleaded funds to the various injured Defendants.

Defendant insured appealed alleging that the Trial Court erred in allowing the funds to be distributed before settlement, mediation or trial. The Court of Appeals determined that under the terms of the policy, Plaintiff insurer had paid its full policy limit into the Court in interpleaded funds and the insured had received full benefit of the insurance contract. Once Plaintiff had fulfilled the duties under the contractual relationship, the insured had no legal claim or interest in the funds. The Court held that because the insured had no legal interest with respect to the monies that Plaintiff admitted were owed to the injured parties, Defendant insured was not entitled to contest the distribution of those funds.

[su_box title=”Kallas & Henk Note”] The Court determined the payment of the policy limits into the Court fulfilled the insurance company’s duties under the terms of the subject policy. Different policy language, however, could have changed the outcome of this case. This case has limited application because the Court of Appeals felt bound not to address the insured’s main arguments because they had previously been raised on application for leave to appeal and had been rejected on the merits. The Court in this case held that the “law of the case doctrine prevented any review.  [/su_box]


Sue A. McGill et al v Scottsdale Insurance Company

Unpublished. Decided April 26, 2002. State of Michigan Court of Appeals Docket No. 227525.

Plaintiff commenced a declaratory judgment action to determine limits of coverage under an insurance policy for injuries sustained due to professional services provided by the insured. The Trial Court granted Plaintiff’s motion, determining that the policy was ambiguous and should be construed against the insurer and determined the appropriate policy limit. The underlying action was settled by agreement with the participation of the insurer’s assigned attorney for the insured. The settlement was made with the amount required under the settlement agreement put into escrow. The Trial Court determined that the insurer was estopped from contesting the Plaintiff’s standing.

Defendant insurer appealed arguing it was not estopped from contesting the Plaintiff’s standing. The Court of Appeals disagreed stating that the Defendant was fully aware of the settlement terms at the time it made payment into escrow and thereby ratified the settlement agreement. Defendant insurer further argued that the policy was not ambiguous in its exclusion for professional services. The Court of Appeals disagreed stating that the lack of description of professional services created an ambiguity and therefore coverage was provided in the policy limit.

[su_box title=”Kallas & Henk Note”] The Court determined that the insurer was bound because it ratified the agreement by its actions in paying the agreed amount. The Court further found the policy ambiguous because of omissions in the declarations page. [/su_box]


Joy Kline et al v Gulf Insurance Company

Decided May 1, 2002. United States District Court Western District of Michigan Southern Division Case No. 1:01-CV-213.

Defendant umbrella insurer filed an counterclaim for declaratory relief relating to the attachment point of the umbrella coverage. A wrongful death action was settled by agreement and garnishment disclosures were filed indicating the amounts owed by each insurer. Plaintiff filed an action against the insurance companies to obtain judgment maintaining that both of the disclosures were inaccurate.

The umbrella insurer maintains that its payment is in excess of the underlying self-insured retention, the deductible and primary limits. Plaintiff contends that the umbrella carrier has a lower attachment, which does not including the deductible. The umbrella used extrinsic evidence to demonstrate that the umbrella covers only liability above the “retained limit” which would first exhaust limits of the underlying policy, including the deductible. The Court found the correct attachment point for the umbrella carrier included the deductible.

[su_box title=”Kallas & Henk Note”] The Court looked at underwriting files to determine that the insured and insurer intended to apply the umbrella coverage only to amounts in excess of the SIR and deduct able and primary coverage. [/su_box]

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