Michigan Coverage Decisions, Issue 42

Allstate Insurance Company v Nail Maroki et. al.

Unpublished. Decided September 24, 2002 State of Michigan Court of Appeals docket No. 230051.

Plaintiff sought declaratory judgment that its auto policy was void due to fraud in obtaining the policy. The policy was issued to one brother for another’s leased auto. Plaintiff discovered the misrepresentation and sought to deny benefits. A jury determined material misrepresentation had occurred and the Trial Court declared the policy void.

Defendants appealed, claiming an improper burden of proof standard for fraud. The insurer established fraud by a preponderance of the evidence. The Court of Appeals upheld the insurer’s right to deny coverage on the basis that the parties were not properly insured.

[su_box title=”Kallas & Henk Note”] Prior precedent supports the Court’s holding that the proper standard of proof is preponderance of the evidence (as opposed to a clear and convincing standard). [/su_box]


Michigan Department of Transportation, State of Michigan v CNA Insurance

Unpublished. Decided October 11, 2002 State of Michigan Court of Appeals Docket No. 233976.

Plaintiff filed a breach of contract action against Defendant insurer for recovery of defense and indemnity costs incurred from defense and settlement of a suit due to an injury auto accident. Plaintiff was an additional named insured on a contractor’s liability policy. The underlying suit contained allegations of vicarious liability against Plaintiff and other allegations. The insurer refused defense due to uninsured allegations. The Trial Court concluded that the insurer owed indemnity and granted summary disposition in favor of Plaintiff.

The Court of Appeals found a duty to defend, because at least some allegations came within the insurance coverage. The Court of Appeals upheld the Trial Court on the basis that the insurer did not show summary disposition should have been granted in their favor. The Court of Appeals required indemnity due to the breach of the duty to defend.

[su_box title=”Kallas & Henk Note”] The Court held consistent with prior Court of Appeals decisions, that an insurer which breaches by refusal to defend, is bound to pay any reasonable settlement between the insured and a third party. The Michigan Supreme Court, however, has never held that such settlement payment is required. [/su_box]


Allstate Insurance Company v Deborah Jean Morton et. al.

Unpublished. Decided October 15, 2002 State of Michigan Court of Appeals Docket No. 232923.

Plaintiff insurer sought determination that no liability coverage existed under a homeowner’s policy. The underlying suit alleged vicarious liability for assault and battery. The insured had furnished alcohol to minors, including the injured third party. Plaintiff argued exclusions precluded coverage, specifically the intentional or criminal acts exclusion. The Trial Court denied Plaintiff’s motion for summary disposition and found that the injured third party had standing under an assignment of rights by the insured.

The Court of Appeals agreed that the injured party had standing to litigate the coverage because the insurer had named the third party as a Defendant. However, the Court of Appeals overturned the Trial Court finding that no coverage applied based on the intentional or criminal acts exclusion.

[su_box title=”Kallas & Henk Note”] The Court cited Allstate v.Hayes in support of its holding on standing. Standing, however, does not create coverage where it is not provided by the policy. [/su_box]


Donna Geller v Farmers Insurance Exchange

Published. Decided November 1, 2002 State of Michigan Court of Appeals Docket No. 232579.

Plaintiff insurer filed this declaratory action to determine if defense and indemnity is owed for the death of the insured’s daughter. The insured’s daughter was killed when accidently struck by the insured while the insured was driving a non-owned vehicle. Coverage was sought on the basis that any residual liability exclusion denying coverage to any insured was invalid against public policy. The policy contained a liability exclusion for bodily injury to an insured. The Trial Court denied the insurer’s summary disposition finding the exclusion void.

Court of Appeals determined the insured was only required to provide residual liability for vehicles owned by or registered to the insured. Residual liability coverage is not required for any vehicle, which the insured neither owns nor has registered where a valid exclusion applies to eliminate coverage. The Court of Appeals overturned the Trial Court directing summary disposition for the insurer.

[su_box title=”Kallas & Henk Note”] Using the reasoning in two Michigan Supreme Court cases, Citizens v Federated and Husted v Auto Owners, the Court upheld the liability exclusion as valid under no-fault. [/su_box]


Pieces of 8, Inc. v Insurance by Burley Agency, Inc. et. al.

Unpublished. Decided November 1, 2002 State of Michigan Court of Appeals Docket No. 233904.

Plaintiff insured sued for its insurer’s refusal to accept a late proof of loss after a fire loss. The policy required filing within a certain time period after loss. Plaintiff failed to file timely. The insurer rejected the claim. The Trial Court granted summary disposition in favor of the insurer.

Plaintiff appealed arguing that a “functional equivalent” was filed in time and the insurer was not prejudiced, requiring payment. The Court rejected this argument finding the Plaintiff’s failure of timely filing the proof of loss is deemed a failure of a condition precedent. The insurer never waived the filing of the proof of loss by its conduct. The Court of Appeals affirmed the Trial Court decision granting summary disposition to the insurer.

[su_box title=”Kallas & Henk Note”] In reaching its decision, the Court followed a line of cases requiring a timely proof of loss. The insurer is relieved from payment when the insured fails to meet this condition precedent.  [/su_box]

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