Michigan Coverage Decisions, Issue 47

Aaron and Dionna Lloyd v Allstate Insurance Co. et. al.

Unpublished. Decided April 15, 2003 State of Michigan Court of Appeals Docket Number 239552 and 239553.

Plaintiffs filed a garnishment action against Defendant to collect on a judgment rendered against Defendant’s insured. Plaintiffs were involved in an injury accident with Defendant’s insured and filed suit. Insurer defended, but subsequently sought a determination that no policy existed due to lapse of coverage. Insurer admitted in several pleadings that coverage existed under the policy, but denied coverage in the garnishment action. The Trial Court granted summary disposition for Plaintiffs declaring the insurer was estopped from denial of coverage.

Insurer claimed that admissions of coverage in one action do not impact other litigation. The Court of Appeals noted the record supported a conclusion that the insured negligently induced the Plaintiffs into believing coverage existed. The Court concluded that equitable estoppel applied and affirmed the Trial Court’s entry of judgment.

[su_box title=”Kallas & Henk Note”] Following traditional estoppel rules, the Court used the factual situation to determine the insurer was liable for coverage beyond the express terms of the policy because the Plaintiffs were prejudiced by the denial the existence of coverage. If coverage information had been disclosed immediately, the insurer likely would not have been responsible for the judgment.  [/su_box]

 

William Bledsoe v Auto Owners Insurance Co. et. al.

Unpublished. Decided April 24, 2003 State of Michigan Court of Appeals Docket No. 236735.

Plaintiff sought coverage for uninsured motorist benefits. Plaintiff was run over while kneeling down next to the vehicle. The policy excluded coverage for any person not “occupying” a vehicle when injured, but did not define “occupying” in the uninsured motorist provisions. Insurer denied coverage claiming Plaintiff was not “occupying” the vehicle. The Trial Court denied insurer’s motion for partial summary disposition.

The Court used the common ordinary definition of “occupying” to mean that someone is not an occupant unless he is physically inside the vehicle at the time of the accident. Because the Plaintiff was not inside the vehicle, the Court precluded recovery of uninsured motorist benefits. The Court of Appeals reversed the Trial Court.

[su_box title=”Kallas & Henk Note”] This decision is consistent with prior decisions that uninsured motorist coverage is determined by the contract provisions. The Court also applied the rule that undefined terms are interpreted using common meanings.  [/su_box]

 

Northland Insurance Co. v Stewart Title Co. et. al.

United States Court of Appeals 6 Circuit. Decided April 25, 2003.

Plaintiff insurer filed a declaratory action on a Title Agent Errors and Omissions Liability Policy to determine if any duty to defend or indemnify existed for an action against its insured. The policy contained several exclusions eliminating coverage for non-monetary and non-compensatory damages resulting from certain types of conduct: breach of contract, dishonest or criminal acts, damages arising out of any illegal gain or profit and damages from co-mingling or misappropriation of funds. The allegations against the insured fell directly under these exclusions. The Court determined no duty to defend existed because none of the allegations fell within the policy coverage. The district Court also granted summary judgment in the insurer’s favor requiring no indemnity.

The Court analyzed the exclusions and determined they excluded coverage for the specific actions alleged. The 6th Circuit upheld the District Court.

[su_box title=”Kallas & Henk Note”] The decision in this case is consistent with Michigan appellate cases on an insurer’s duty to defend and indemnify. [/su_box]

 

Progressive Michigan Insurance Co. v American Community Mutual Insurance et. al.

Unpublished. Decided June 17, 2003 State of Michigan Court of Appeals Docket No. 237926 and 238104.

Two insurers dispute responsibility for payment of benefits under their respective policies. Insureds were injured in separate auto accidents. Both had auto coverage with Plaintiff and health coverage with Defendant. The health insurance policies contained definitions of “Other Coverage”. The health policies specifically excluded auto accident injuries. Each insurer filed motions for partial summary disposition claiming the other company as responsible for payment. The Trial Court granted partial summary disposition in favor of each insurer.

Defendant’s policies expressly exclude auto accident injuries. The provision does not distinguish between drivers or passengers. The exclusion applies to eliminate coverage for any auto accident injuries. The Court of Appeals affirmed summary disposition in one case and reversed in the other matter where summary disposition in favor of Defendant insurer was denied.

[su_box title=”Kallas & Henk Note”] Consistent with other Michigan decisions, this case held that, where a policy exclusion is clear, it must be enforced as written. [/su_box]

 

Craig A. Klapp v United Insurance Group Agency, Inc.

Decided June 18, 2003 Michigan Supreme Court Docket No. 119175, 119176.

Plaintiff sued Defendant on a breach of contract relating to the payment of commissions on insurance policies that Plaintiff sold on behalf of defendant. Plaintiff claimed entitlement to the commissions based on a vesting schedule contained in the contract. The trial court denied summary disposition concluding the contract was ambiguous and such questions of fact should be decided by the jury, which could consider extrinsic evidence. The jury found in favor of Plaintiff.

Defendant appealed arguing the contract was unambiguous and therefore extrinsic evidence could not be considered. The court of appeals agreed and reversed the jury verdict concluding the contract was not ambiguous in its terms and the trial court should have granted defendant’s motion for summary disposition.

The Supreme court determined the primary intent in contract construction is to honor the intent of the parties. The court concluded that the rule contra proferentem – construing ambiguities against the drafter should only be applied as a rule of last resort. The supreme court reversed the court of appeals and agreed with the trial court that the contract was ambiguous, extrinsic evidence could be considered, and the interpretation was a question of fact for the jury to determine and remanded to the court of appeals to resolve other appellate issues.

[su_box title=”Kallas & Henk Note”] While this case is not an insurance case, the Court addressed the rule of contra proferentem – construing ambiguities against the drafter. This rule is known as the “contra-insurer” rule in the context of insurance contracts. Based on the case law cited by the Court and the determination that the use of contraproferentem is a last resort for contracts, Michigan Courts may extend this rule to insurance policies, thus eliminating the contra-insurer rule for resolution of ambiguous insurance policy provisions.  [/su_box]

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