Michigan Coverage Decisions, Issue 39

William Charles Stover v James Garfield, D. O.

Decided June 25, 2002 State of Michigan Supreme Court docket No. 120165.

Plaintiff commenced an action on behalf of the estate alleging intentional misconduct and gross negligence but not medical malpractice. The decedent was placed into a doctor’s care in advanced stage of illness. The doctor ordered discontinuation of nourishment based on instructions from the decedent’s wife. The decedent’s living will specified that the only treatment to be withheld was mechanical respiration. The Defendant had a policy with garnishee-Defendant which provided indemnity in matters arising from providing of medical services and excluding intentional misconduct and exemplary damages. A consent judgment against the insured was entered. The company denied coverage because of Plaintiff’s characterization of the wrongdoing as other than malpractice.

The trial Court determined that the insurance contract provided broader coverage than medical malpractice and the withdrawal of defense was in error. The trial Court held the insurer was responsible for the agreed upon settlement. The Court of Appeals reversed the trial Court agreeing with the insurer’s argument that the policy only provided professional liability or malpractice coverage.

The Supreme Court reversed the Court of Appeals determining that the insured’s acts or omissions causing the death were in the course of delivering professional services. The Court further stated that regardless of the theory of liability, the insurer had a duty to defend unless a policy exclusion applied.

[su_box title=”Kallas & Henk Note”] The Court followed the long-standing rule that the duty to defend is broader than the duty to indemnify and looked to the underlying cause of injury rather than the theory of liability in the complaint to determine coverage.  [/su_box]


Katikutie E. Dutt v Farm Bureau Mutual Insurance Company

Decided June 25, 2002. Unpublished. State of Michigan Court of Appeals docket No. 231188.

Plaintiff sued the Defendant insurer for breach of contract. An office building where Plaintiff practiced medicine was damaged by fire and he lost revenue. Defendant denied the claim. because Plaintiff had no insurable interest in the property because he transferred his ownership prior to the fire. The trial Court determined that Plaintiff was entitled to lost business income on the basis that coverage does not require a property ownership interest.

On appeal, the insurer argued that because Plaintiff did not own the business personal property at the time of the fire, Plaintiff was not entitled to the lost business income coverage. The Court of Appeals disagreed and upheld the trial Court stating that ownership of the business personal property was not dispositive of Plaintiff’s entitlement to loss of business income. The Court stated that a party need not hold ownership interest to have an insurable interest in property

[su_box title=”Kallas & Henk Note”] The Court followed the minority trend which expands insurable interest beyond mere ownership to include other interests, such as financial loss. [/su_box]


Kimberly Boursaw v Justin Hawks and Middle Cities Risk Management Trust

Unpublished. Decided July 9, 2002, State of Michigan Court of Appeals Docket No. 230319.

Plaintiff, a transportation aide on a school bus, was injured in an assault by a student passenger. The parties entered into a consent judgment, which Plaintiff attempted to recover from the insurer garnishee-Defendant. The trial Court ruled that Plaintiff’s injuries did not arise out of the student’s use of the bus.

[su_box title=”Kallas & Henk Note”] The Court of Appeals affirmed, finding that the injury did not arise out of the nature of the auto, did not arise out of the actual use nor did the auto produce the injury. The bus was merely the site of a physical attack by the student and not related to the transportation function. This decision is consistent with other Michigan cases which find that the auto must be more than the mere location of the injury. The injuries must be related to the transportation use of the auto.  [/su_box]


Martin A. Nowell v Titan Insurance Company

Decided July 9, 2002 State of Michigan Supreme Court Docket No. 119013.

Plaintiff sought recovery from Defendant under a policy which was canceled for nonpayment. An accident occurred after the date of cancellation. Defendant insurer mailed a notice of cancellation. The notice provided that the policy would be canceled March 5, 1997 unless a specified premium was received prior to that date. No payment was made.

Lower Courts determined that actual notice was required under the no-fault section governing cancellation, therefore, Plaintiff was entitled to coverage. The Michigan Supreme Court reversed and held that actual notice to the insured is not required to effectuate the cancellation Mailing must be reasonably calculated to be delivered so as to arrive at the insured address at least ten days before the effective date specified for cancellation. The Court distinguished between “mailing” notice and “giving” notice. The statute only requires “mailing” to make the cancellation effective.

[su_box title=”Kallas & Henk Note”] The Supreme Court reversed a line of published cases which held insurers to a standard for cancellation which was higher than that required by the relevant statute. The Court applied the “plain meaning” rule to find that mailing was sufficient. [/su_box]


Mychelle Prough v Farm Bureau General Insurance Company of Michigan

Unpublished. Decided July 12, 2002 State of Michigan Court of Appeals docket No. 229490.

Plaintiff sought uninsured motorist coverage from an accident involving an unidentified vehicle. The unidentified vehicle caused a third vehicle to hit Plaintiff. The unidentified vehicle and Plaintiff’s car did not make contact. The trial Court ruled uninsured motorist coverage was available based on a substantial physical nexus between the unidentified vehicle and the third vehicle which caused the Plaintiff’s injury.

On appeal, the insurer argued that the trial Court erred in its conclusion that there was “physical contact”. The Court of Appeals upheld the trial Court saying that the physical contact requirement has been interpreted to include situations where indirect contact occurs where there is a direct causal connection with the hit- and-run vehicle.

[su_box title=”Kallas & Henk Note”] The Court followed the line of Michigan cases allowing a broader interpretation of the uninsured motorist “physical contact” requirement based on factual circumstances of the accident. [/su_box]

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