Michigan Coverage Decisions, Issue 46

Trimas Corp. and Norris Cylinder Co. v Michigan Mutual Ins. Co. et. al.

Unpublished. Decided February 14, 2003 State of Michigan Court of Appeals Docket No. 23559.

Plaintiff insureds sought liability coverage under an employer’s liability policy issued by Defendant insurers for a third-party lawsuit for lead paint poisoning injuries to the son of an employee. Insurers denied coverage. The policy restricted coverage for consequential damages to relatives of the employee only if the injuries were a direct consequence of the employee’s injuries arising out of the employment. The trial court held a duty to defend existed and granted summary disposition for Plaintiff.

Insurers appealed arguing that they are only required to defend if the child’s injury arose out of his father’s injury. Plaintiff interpreted coverage as applying if the child’s injury arose out of the father’s employment. The court found that the possibility of coverage exists when a contract may reasonably be understood in different ways. Because coverage is possible, a duty to defend existed. The Court of Appeals affirmed the

[su_box title=”Kallas & Henk Note”] This decision is consistent with the line of cases requiring a broader duty to defend. [/su_box]


Vera and John Pyles v MIC General Ins. Co.

Unpublished. Decided February 21, 2003 State of Michigan Court of Appeals Docket No. 237712.

Plaintiff insureds filed an action seeking a declaration that they were entitled to underinsured motorist benefits under Defendant insurer’s policy. The policy defined underinsured motor vehicle as a vehicle to which insurance applied but the limit for bodily injury liability is less than the limit of liability for the underinsured motorist coverage. Plaintiffs argued that because only a portion of the limits remained and had to be divided among the injured parties underinsured motorist coverage applied. Insurer filed a motion for summary disposition that no underinsured coverage applied because the limits of liability were identical. The trial court granted defendant’s motion for reconsideration and summary disposition.

Plaintiffs argued because the available insurance was less than the underinsured limits coverage should be afforded. The Court of Appeals disagreed holding that the policy specifically refers to the limits of liability for underinsured motorist coverage and does not reference the available insurance, Plaintiffs were not entitled to coverage and affirmed the trial court.

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior decisions that underinsured motorist coverage is determined by the contract provisions. [/su_box]


Vince Gill Tours, Inc. v T.H.E. Insurance Co. et. al.

Unpublished. Decided February 25, 2003 State of Michigan Court of Appeals Docket No. 23835.

Plaintiff additional insured sought indemnity under a general liability policy issued by Defendant insurer. An employee was injured and received worker’s compensation benefits from Plaintiff. Plaintiff sought to recover the benefits paid. A lease required the Named Insured to obtain insurance with an additional insured endorsement including Plaintiff. The policy included a worker’s compensation exclusion and an employer’s liability exclusion including a contract exception. The Trial Court entered judgment in favor of Defendant insurer finding the worker’s compensation exclusion barred coverage.

Plaintiff argued (1) since no direct worker’s compensation claim was made, the worker’s compensation exclusion did not apply, and (2) the contract exception applies only to the employer’s liability exclusion, not the worker’s compensation exclusion. Because Plaintiff qualified as an employer of the injured party under worker’s comp law, the exclusion applied and the Court of Appeals affirmed the Trial Court.

[su_box title=”Kallas & Henk Note”] This decision is consistent with other cases interpreting the same exclusionary language. The dissenting opinion noted that the reimbursement sought was under an indemnity agreement, rather than any theory that the worker was an employee.  [/su_box]


Amway Distributors v Northfield Ins. Co.

Decided March 19, 2003 6 Circuit Court of Appeals Docket No. 01-209.

Plaintiff insureds brought a breach of contract action against the Defendant insurer for denial of an excess liability claim arising out of losses and settlement of two copyright infringement lawsuits. The issue involved the definition of “advertising injury” contained in the excess liability policy. The district court held that the conduct did not meet the definition of “advertising injury” incorporated into the policy from the underlying primary policy and that the insurer was not responsible for the failure to notify by the primary insurer of the change and granted summary judgment in favor of the insurer. The district court also denied the insureds’ motion for reconsideration based on the argument that the definition of “advertising injury” contained in the policy controlled the terms of coverage.

Insureds appealed both rulings arguing that “advertising injury” was defined in prior policy terms, therefore, amending the policy to follow the underlying policy definition effectively changed the scope of the coverage without notice. The court held that the definition of “advertising injury” applied to the excess liability policy or at worst was ambiguous, therefore, construed against the insurer to find coverage applies to the loss. The court reversed the district court decision.

[su_box title=”Kallas & Henk Note”] The Court examined the “renewal rule” which requires an insurer to notify its insured of any reduction in coverage. The majority opinion of the court would require an excess liability carrier be bound by the actions of the underlying carrier’s failure to comply with the “renewal rule”. The dissent states that Michigan law does not support an imposition of liability on an excess insurer for the actions of the underlying insurer. The dissenting opinion is more consistent with Michigan case law addressing liability under agency principles. [/su_box]


Michigan Basic Property Insurance Assoc. v Laryssa Pope et. al.

Unpublished. Decided April 15, 2003 State of Michigan Court of Appeals Docket No. 238353.

Plaintiff insurer filed this action seeking a declaration that its homeowners policy did not afford coverage for claims by one insured against another insured. A land contract sale took place between Defendants. The policy included the buyer as named insured and the sellers as additional insureds. The policy excluded coverage for “bodily injury” to an insured, and defined insured. The Trial Court denied insurer’s motion for summary disposition holding the policy was unclear when suit was filed between unrelated insureds and declared coverage existed.

Insurer argues that the focus of the exclusion is the party who suffered bodily injury and is asserting the claim. The policy excludes coverage for any bodily injury claims by another insured. The Court determined the exclusion applies to any injury to anyone who meets the definition of insured with no exception for claims asserted against non-related insureds. The Court of Appeals reversed determining the insurer was entitled to summary disposition.

[su_box title=”Kallas & Henk Note”] The Court applied long-standing insurance policy construction rules concerning definitions and exclusions to reach its decision.  [/su_box]

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