Michigan Coverage Decisions, Issue 41

Dow Chemical Company v Fireman’s Fund Insurance Company

Decided August 28, 2002. United States District Court Eastern District of Michigan Southern Division Case No. 96-75832.

This case arises from a dispute between an insured and its insurers over settlement of groundwater contamination claims. The insured produced chemical pesticides. Municipalities restricted pesticide amounts allowed in drinking water due to damaging effects.

Plaintiff argued coverage is triggered because the damage occurred during the policy term. Defendants argued that coverage is not triggered because the injury did not occur during the policy term. The injury-in-fact approach dictates actual injury must occur during the time the policy is in effect. Plaintiff argued that the policy requires an occurrence during the policy, but does not specify if the resulting property damage or liability must take place during the policy in order to trigger coverage. The Court determined that the contract is triggered by property damage that occurs during the policy period, even if liability arises post-coverage. The triggering event was the injury to the groundwater when the chemical was released.

[su_box title=”Kallas & Henk Note”] The Court followed the reasoning of Michigan Supreme Court in Gelman Sciences v Fidelity & Casualty Company to find that coverage is triggered under the policy. [/su_box]


Auto Club Group Insurance Company v Bearinger

Unpublished. Decided September 13, 2002 State of Michigan Court of Appeals docket No. 231706.

Plaintiff insurer sought to determine its obligation under a homeowner’s policy. A third party filed a personal injury claim from an unintentional shooting. The insured pled guilty to careless discharge of a firearm. The insurer provided a defense but refused to indemnify because of a “criminal acts” exclusion. The Trial Court granted Plaintiff’s motion for summary disposition.

The injured party appealed claiming that the “criminal acts” exclusion was ambiguous and merely excluded reimbursement for actual bodily injury, but not for other damages. The Court of Appeals disagreed stating that the definition of bodily injury specifically includes “required care and loss of services” and rejected the argument that the “criminal acts” exclusion was void as against public policy.

[su_box title=”Kallas & Henk Note”] The Court enforced the policy as written based on the rule requiring theenforcement of unambiguous policy terms, including exclusions.  [/su_box]


Hastings Mutual Insurance Company v Auto Owners Insurance Company

Unpublished. Decided September 17, 2002 State of Michigan Court of Appeals docket No. 232947.

Plaintiff, as subrogee brought action against a contractor’s insurer for payment of a default judgment entered against the contractor. Defendant asserted that coverage was lost when the contractor failed to cooperate in his own defense during the lawsuit. The Trial Court granted the Defendant insurer’s motion for summary disposition finding that the insurer was prejudiced by its insured’s failure to cooperate.

Plaintiff argued on appeal that the insurer did not sustain actual prejudice. The Court of Appeals disagreed and upheld the Trial Court stating that the insurance contract between the Defendant and its insured required cooperation and the evidence established that the insurer was materially prejudiced in its ability to defend or settle.

[su_box title=”Kallas & Henk Note”] The unambiguous policy provisions were interpreted by court and enforced in accordance with construction rules. The court established prejudice based on the extensive facts showing non-cooperation. [/su_box]


Rex Ellsworth v Farm Bureau Insurance

Unpublished. Decided September 20, 2002 State of Michigan Court of Appeals docket No. 231759.

Plaintiff filed a claim for uninsured motorist benefits against Defendant. Before his death, the decedent told police that a vehicle crossed over the centerline, forcing him to drive onto the shoulder and lose control of his vehicle. He also told police there was no physical contact between the vehicles. No evidence of physical contact surfaced and the other vehicle was never identified. When Defendant denied the claim, Plaintiff sought arbitration. The Trial Court granted summary disposition ordering arbitration of the claim.

The Court of Appeals reversed the Trial Court on the basis that any arbitrator’s authority is limited by the contract. The question of coverage is properly decided by a court. The policy at issue provided uninsured motorist coverage for a hit-and-run accident only if injury arose out of physical contact with the hit-and-run vehicle. A requirement of physical contact is enforceable, therefore, based on the evidence showing no physical contact between the vehicles, the Defendant insurer was entitled to summary disposition.

[su_box title=”Kallas & Henk Note”] Using the unambiguous policy provisions, the Court applied the physical contact requirement to eliminate coverage. This is consistent with prior decisions.  [/su_box]


Allstate Insurance Company v Muszynski et al.

Published. Decided September 24, 2002 State of Michigan Court of Appeals docket No. 22972.

Plaintiff, homeowner’s insurer, commenced an action to determine its obligations in a wrongful death action. This action arises from deaths of two children in a house fire. At the time the fire, the deceased children were “insured persons”. Plaintiff argued it had no duty based on an exclusion eliminating coverage for bodily injury to an insured person whenever any benefit would accrue to an insured. The Trial Court granted summary disposition in favor of Defendants determining that coverage does not benefit a deceased person and any benefit to an estate is not the same as a benefit to an insured.

Plaintiff appealed arguing this exclusion applied because the deceased children were “insured persons” and benefit of coverage would accrue to their estates. Because no coverage exists for the estates’ claims, there is no coverage for the personal representative’s claim, even though the personal representative is not an insured person. The Court of Appeals reversed the Trial Court, granted Plaintiff’s summary disposition, stating that the benefit of coverage would accrue indirectly to an insured person, i.e., the decedents’ estates. The Court emphasized that at the time of the triggering event, the children were indisputably insured persons and had they survived, the policy would clearly not have covered their claims. Therefore, it does not matter that their representative brought suit on the

[su_box title=”Kallas & Henk Note”] The Court followed other jurisdictions’ line of cases interpreting this exclusionary language as eliminating liability coverage in wrongful death actions and finding that an estate has the same rights as the deceased. [/su_box]

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