Michigan Coverage Decisions, Issue 40

Sherry Lynn Spears v CNA Insurance Company et al.

Unpublished. Decided July 26, 2002 State of Michigan Court of Appeals docket No. 231103.

Plaintiff filed suit seeking payment of uninsured motorist benefits. The Plaintiff was injured when she attempted to stop a thief from driving away in her vehicle. The insurer argued that Plaintiff did not state a claim because her injuries were not caused by the operator of an uninsured motor vehicle. The policy definition excluded any vehicle owned by the insured. The Trial Court granted summary disposition finding that the involved vehicle was not an uninsured motor vehicle.

On appeal, Plaintiff argued that an ambiguity existed, if the insured was struck by her own vehicle The Court of Appeals disagreed and upheld the Trial Court stating that entitlement to uninsured motorist benefits required that the vehicle be defined as an uninsured motor vehicle.

[su_box title=”Kallas & Henk Note”] The Court followed the rule that if an insurance contract sets forth definitions, policy language must be interpreted according to those definitions in denying coverage.  [/su_box]


Carpet Workroom v Auto-Owners Insurance Company

Unpublished. Decided July 30, 2002 State of Michigan Court of Appeals docket No. 223646 and 224040.

Plaintiffs sought declaratory rulings that commercial liability pollution exclusions did not eliminate the insurers’ duty to indemnify their insureds for injuries from exposure from flooring adhesive fumes. The insureds installed flooring and used industrial grade floor adhesives. Employees working in the building during the installation were overcome by the adhesive fumes and sued the floor installers. Both insurers denied coverage under identical pollution exclusions.

In one case, the trial Court granted summary disposition in favor of the insurer. In the other, the trial Court granted summary disposition to the injured third party.

The Court of Appeals held that the pollution exclusion wording was unambiguous precluding coverage for the toxic fumes exposure. The Court determined that the injuries arose out of the discharge, dispersal, migration, release or escape of pollutants. Therefore, the insurers were not required to defend or indemnify their insureds because the pollution exclusion eliminated coverage.

[su_box title=”Kallas & Henk Note”] The Court followed the well-known rule that clear and specific exclusions must be given effect to eliminate coverage, no matter the hardship imposed. [/su_box]


Auto Club Insurance Association v Vasel Juncaj, et. al.

Unpublished. Decided August 6, 2002 State of Michigan Court of Appeals docket No. 231298.

Plaintiff insurer sought a determination that its liability could not exceed statutory limits due to fraud and/or misrepresentation by its insured in obtaining the policy. The insured was sued due to an accident involving the insured’s sixteen year old daughter. Plaintiff rescinded coverage based on material misrepresentation on the application The insured did not disclose his true residence or his daughter as a driver. The Trial Court denied rescission stating that no material misrepresentations occurred because the changes occurred after application and that the policyholder was otherwise insurable.

Court of Appeals upheld the Trial Court finding no evidence existed to support that the insured made material misrepresentation at the time of application. The Court acknowledged that the insured failed to inform plaintiff that he moved and his daughter had begun driving. The Court noted, however, no evidence established that had Plaintiff been informed of these changes, it would have determined that the insured was ineligible for coverage.

[su_box title=”Kallas & Henk Note”] The Court used the insurer’s own eligibility guidelines to deny rescission.  [/su_box]


Allstate Insurance Company v Alvin McKinzie, et. al.

Unpublished. decided August 16, 2002 State of Michigan Court of Appeals docket No. 227866.

Plaintiff sought a declaration that it had no duty to defend or indemnify under its auto policy. The case arose from an accident involving motorcyclists who were killed after being struck by a utility trailer that detached from a motor vehicle operated by another defendant. The trailer was owned by the insured who loaned out the trailer. The Trial Court granted summary disposition in favor of defendants determining the auto insurance policy provided coverage because the insured’s trailer was attached to “an insured automobile”, defined as “any auto having insurance”.

On appeal, plaintiff argued that coverage did not exist because it was not the insurer of the automobile to which the trailer was attached. The Court determined that “an insured auto” meant any auto specifically insured under the policy, not any auto that had some type of insurance. The Court rejected defendants’ claim that the terms “your insured auto” and “any auto owned by you” would have been used if the insurer’s intent was to limit coverage only to autos insured under the policy. The Court of Appeals reversed stating that the only reasonable interpretation is that the trailer must be attached to an auto insured under the policy.

[su_box title=”Kallas & Henk Note”] The Court used the rationale of Allstate v Freeman to determine the meaning of the disputed policy definition and found the policy to be unambiguous. [/su_box]


Ronald Schmalfeldt v North Pointe Insurance Company

Published. Decided August 23, 2002 State of Michigan Court of Appeals docket No. 227697.

The plaintiff sought recovery for dental bills from a bar fight. Plaintiff contacted the bar’s insurer to secure direct payment for his medical bills. Defendant insurer refused to pay because its insured requested that it not do so. Plaintiff filed a motion for summary disposition arguing that he was entitled to benefits as a third-party beneficiary. District Court denied Plaintiff’s motion and granted Defendant’s summary disposition finding Plaintiff was not a third-party beneficiary. Plaintiff appealed to Circuit Court, which found that Plaintiff was a third-party beneficiary of the contract and entitled to payment.

Defendant appealed arguing that the medical payments provision was intended to benefit the insured and not Plaintiff. The Court reversed the Circuit Court determining Plaintiff was merely an incidental beneficiary, not entitled to enforce the contract. The Court further stated that the medical payments provision was for the benefit of the contracting parties.

[su_box title=”Kallas & Henk Note”] The Court followed the reasoning in Allstate v Keillor and Allstate v Hayes in determining that injured parties were not third-party beneficiaries of insurance policies and not entitled to enforce contracts to which they are not parties.  [/su_box]

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