Michigan Coverage Decisions, Issue 37

Clifton Sterling v Auto-Owners Insurance Company

Unpublished. Decided May 21, 2002 State of Michigan Court of Appeals docket No. 230919.

Plaintiff insured filed a breach of contract complaint against the insurer for failure to pay timely benefits. At issue was a rental property where a fire occurred and plaintiff was paid on an actual cash value basis. Plaintiff notified the insurer that a replacement property had been purchased and requested the difference between the policy limit and the actual cash value payment. The insurer declined to pay the additional payment. Plaintiff filed a motion for partial summary disposition claiming he had replaced the property by purchasing another dwelling, therefore the replacement cost claim must be paid. The circuit court granted plaintiff’s motion for partial summary disposition on the basis that the denial letter cited an inapplicable policy provision.

Defendant argued that its denial letter was clear and notified plaintiff why his replacement cost claim was denied. Defendant admitted that the denial did not cite the proper policy provision, but argued that it was not required to cite any policy provision. The court reversed the trial court finding that the error did not render the notice inadequate. The insurer was not required to cite particular policy provisions upon which it relied.

[su_box title=”Kallas & Henk Note”] The Court followed the rule that reasonable notice, even with error, was enough to inform the insured that the claim was denied. [/su_box]

 

Allstate Insurance Company v Frank Kotsonis et al.

Unpublished. Decided May 28, 2002 State of Michigan Court of Appeals docket No. 228366.

Plaintiff insurer sought a declaratory judgment that it owed no coverage to its insured with regard to injuries suffered by a third party who was intentionally fouled during a high school basketball game. The trial court granted summary disposition for plaintiff.

Defendant appealed arguing no intentional act occurred. The Court of Appeals disagreed determining that an intentional act turns on whether the consequences of the act were intended by the insured or reasonably should have been expected because of the direct risk of harm intentionally created by the insured’s actions. The court determined that the insured intentionally created a direct risk of harm by pushing the third party during the basketball game. The court further determined that this incident did not constitute an “occurrence” under the policy. The Court of Appeals upheld the trial court’s grant of summary disposition.

[su_box title=”Kallas & Henk Note”] The Court followed Nabozny v Burkhardt in their determination that the creation of a direct risk of harm is not an occurrence and is an intentional act. [/su_box]

 

Meridian Mutual Insurance Company v Robert L. Crapo et al

Unpublished. Decided May 28, 2002 State of Michigan Court of Appeals docket No. 226558.

Plaintiff insurer sought a declaratory judgment in regard to an insurable event resulting from a building fire. The building was sold and an assignment of policy was prepared. The buyer was told that there was immediate coverage under the assignment of policy. Renovations resulted in the fire. At the agent’s request, the buyer forwarded a premium check which was cashed and applied to the policy.

Plaintiff insurer argued that the agency lacked authority to assign the policy. The trial court granted the defendant’s motion for summary disposition concluding that the insurer could not escape liability under the relevant policy and dismissed the insurer’s action. The trial court found that the agency had actual and apparent authority to bind coverage, and the insurer’s actions following the assignment constituted ratification.

On appeal, plaintiff argues the trial court erred in dismissing the lawsuit. The Court of Appeals affirmed the dismissal, finding that the agency’s authority, under provisions in the agency agreement is actual authority to bind the insurer to insurance contracts. The court found, at the very least, an oral binder was issued by the insurer, through the agent, providing insurance on the building in question.

[su_box title=”Kallas & Henk Note”] The Court used the terms of the agency agreement to determine that the agent could bind the insurance company to an assignment of policy. [/su_box]

 

Michigan Educational Employees Mutual Insurance Company v Keith Steensma et al

Unpublished. Decided June 4, 2002 State of Michigan Court of Appeals docket No. 229348.

Plaintiff insurer markets its products to school employees, through a general agency. The general agency contracted with an independent agent to market the plaintiff’s insurance products which required the independent agent to sell the plaintiff’s products to school employees. A teacher obtained homeowner’s insurance through the independent agent on a new home. Coverage lapsed due to nonpayment of premium. The home caught fire and the agent advised the homeowner to contact the insurer to ask for reinstatement, which was granted. The claim was then reported and the reinstatement was revoked for failure to disclose the information about the fire.

The insurer filed suit against the independent agent for breach of fiduciary duty and negligence. The trial court granted defendant’s motion for summary disposition on the basis that the insurance agent was not the agent of the insurer.

On appeal, the Court of Appeals following the general rule that an independent agent is an agent of the insured, not the insurance company and upheld the trial court’s summary disposition.

[su_box title=”Kallas & Henk Note”] The Court applied the general rule that an independent agent is an agent of the insured, not the insurance company.  [/su_box]

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