Michigan Coverage Decisions, Issue 49

Amerisure Insurance Co. v Graff Chevrolet et. al.

Published. Decided July 22, 2003 Michigan Court of Appeals Docket No. 238478.

This case involves a dispute between two insurance companies over the responsibility for an auto settlement. A rental vehicle, being driven by a permissive user while delivering pizzas was in an accident. The rental agreement excluded insurance coverage when the vehicle was being used to carry property for consideration. The Trial Court held that the rental agreement precluded coverage for the excluded use of the car and Plaintiff insurer was responsible for the settlement. The rental car agency’s (the vehicle owner) insurer did not have to provide insurance.

The Court of Appeals upheld the Trial Court determining that the rental agreement exclusion applied to eliminate the vehicle owner’s (the rental car agency), obligation to provide insurance on an owned vehicle used by a permissive user in violation of the terms of the rental agreement.

[su_box title=”Kallas & Henk Note”] The Court addressed a specific factual circumstance surrounding the permissive user and the use of the rental vehicle and the particular language providing insurance contained within the rental agreement in reaching its decision. [/su_box]


Cincinnati Insurance Co. v Interlochen Center for the Arts

Decided July 31, 2003 United States District Court, Western District of Michigan Case No. 1:02-CV-745.

Plaintiff insurer sought a determination of no coverage under commercial general liability and commercial umbrella policies issued to its insured for a trademark infringement lawsuit and counterclaim by the insured. Insurer also sought reimbursement of attorney fees paid on behalf of its insured. The policy contained exclusions for advertising injury and a definition of advertising injury.

The Court determined no duty to defend or indemnify based on a prior 6th circuit decision holding that allegations of trademark or trade dress infringement do not constitute advertising injury as defined. The Court applied the reasoning that if an insurer intended to cover liability for trademark and trade dress, it would have referred to this conduct by name. The Court ordered a reimbursement of attorney fees to the insurer relating to the underlying lawsuit and counterclaim, but did not award costs and fees for the declaratory action.

[su_box title=”Kallas & Henk Note”] The Court gave no reasoning for ordering the payment of attorney fees. It is unlikely that Michigan Courts would award reimbursement of attorney fees absent an agreement between the parties or a policy provision allowing reimbursement.  [/su_box]


Michigan Municipal Risk Management Authority v Seaboard Surety Co. et. al

Unpublished. Decided August 7, 2003 Michigan Court of Appeals Docket No. 235310.

Plaintiffs sought judgment that Defendant insurer’s owners and contractors protective liability policy provided defense and indemnity. Several hundred homes were flooded due to negligent installation of a bulkhead by contractors hired on a storm drain/sewage drain project. A settlement fund was created with the insurer refusing to contribute. Based on filing of cross motions for summary disposition, the Trial Court granted summary disposition in favor of the insured refusing to apply the absolute pollution exclusion in the policy.

On appeal, the insurer argued the pollution exclusion applied and reasonable expectations did not. The Court rejected plaintiffs’ ambiguity argument. The Court relied on previous decisions which had analyzed identical pollution exclusion language to preclude coverage. The Court of Appeals reversed the Trial Court finding the rule of reasonable expectations was inappropriate because the policy pollution exclusion was not unambiguous.

[su_box title=”Kallas & Henk Note”] The Court followed extensive precedent on the pollution exclusion eliminating coverage. The Court relied on the recent Supreme Court decision in Wilkie v. Auto Owners which eliminated the reasonable expectations doctrine in insurance coverage disputes. [/su_box]


Aero-Motive Company v Great American Insurance

Decided August 11, 2003 United States District Court Western District of Michigan Case No. 1:03-CV-55.

Plaintiff insured claims that its commercial general liability insurer owes coverage relating to pollution cleanup at the insured’s manufacturing facility. Insured contends coverage for pollution generated from four sources: 1) disposal pit; 2) degreaser; 3) factory addition; and 4) underground storage tank. Defendant insurer denied coverage under the “sudden and accidental pollution exclusion”. The Court found the insured did not meet its burden of proving coverage existed for fires occurring in the disposal pit, degreaser and factory addition but declined to rule due to lack of factual information about the coverage for the pollution created by dumping in the disposal pit.

[su_box title=”Kallas & Henk Note”] The Court relied on the Michigan Supreme Court ruling in Upjohn Co. v. Aetna Cas. & Surety Co. to determine the sudden and accidental exclusion was not ambiguous.  [/su_box]


Robert Miller v Zurich Insurance Co. et. al

Decided September 2, 2003 Michigan Court of Appeals Docket No. 235698.

Plaintiff sued Defendant insurer to collect uninsured motorist benefits based on hit and run accident. The policy included coverage for specifically described vehicles under a standard uninsured motorist endorsement, including an arbitration clause. The Trial Court determined uninsured motorist benefits were payable and upheld the arbitration.

The insurer appealed arguing that (1) the policy contained a typographical error in the listing of covered vehicles and should be reformed to reflect the parties’ intent, (2) enforcement of the arbitration was improper, (3) the Trial Court improperly expanded coverage under estoppel and (4) Plaintiff is not a proper party. The Court of Appeals affirmed the Trial Court finding that the policy coverage was afforded, Plaintiff qualified as a defined insured, no reformation was warranted and affirming the arbitration award.

[su_box title=”Kallas & Henk Note”] The Court determined that the parties’ intent was not clear from the record, therefore the ambiguity must be construed in favor of coverage against the drafter. This reasoning follows the recent Supreme Court determination in Klapp v. United Insurance Group Agency, Inc of using the contra-proferentem rule as last resort in the context of an insurance contract. [/su_box]


Allstate Insurance Co. v Daniel Granger et. al.

Decided September 9, 2003 Michigan Court of Appeals Docket No. 236753.

Plaintiff homeowner insurer sought a determination of coverage for a third-party action arising from a sexual assault at the insured’s home. A minor social guest sued for sexual acts between the minor and an adult social guest. The policy expressly excluded coverage for intentional or criminal actions. Insurer argued no “occurrence” and/or the exclusion. The Trial Court granted summary disposition in favor of the insureds.

The Court of Appeals reversed finding that sexual relations between minors and adults infers intent and the actions of the insured were not an accident, therefore, no “occurrence” took place and no coverage existed.

[su_box title=”Kallas & Henk Note”] The Court relied on the Michigan line of cases dealing with interpretation of insurance coverage when criminal sexual conduct is involved to reach its decision. [/su_box]

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