Michigan Coverage Decisions, Issue 50

Trimas Corp. v Zurich American Ins. Co. et. al.

Decided September 11, 2003 Michigan Supreme Court Docket No. 123405.

Plaintiff insureds sought coverage under an employer’s liability policy issued by Defendant insurers for a lead paint poisoning lawsuit for injuries to an employee’s son. Insurers denied coverage. The Trial Court held a duty to defend existed and granted summary disposition for Plaintiff and was affirmed by the Court of Appeals. On rehearing, the Court of Appeals reaffirmed that a duty to defend existed.

The Supreme Court reversed the Court of Appeals decision on rehearing determining the policy contained a condition precedent requiring bodily injury to an employee before consequential injuries were covered and determined no duty to defend. The Supreme Court determined the underlying action did not plead the condition precedent, therefore, such condition was not at issue.

[su_box title=”Kallas & Henk Note”] The original unpublished February 11, 2003 Court of Appeals decision was reported in our August 2003 Coverage Reporter. The Supreme Court held a “condition precedent” is a fact or event that the parties intended must take place before there is a right to performance.  [/su_box]


Westfield Insurance Co. v Jesse Adam McClusky et. al.

Unpublished. Decided September 11, 2003 Michigan Court of Appeals Docket No. 238947.

Plaintiff homeowner insurer sought determination that it was not obligated to pay any consent judgment against its insured for a lawsuit resulting from an auto accident. Insurer declined coverage based on an “operation of a motor vehicle” exclusion. The insured, a vehicle passenger, jerked the steering wheel causing the accident. After a bench Trial, the Court required the insurer to pay the judgment stating that the motor vehicle exclusion did not apply because the insured was not operating the vehicle.

Insurer appealed arguing the Trial Court used a definition of “operation” from a factually distinguishable case. The Court of Appeals disagreed finding the definition of “operation” was controlling authority. The Court of Appeals affirmed but reversed and remanded for further proceedings on the issue of indemnity.

[su_box title=”Kallas & Henk Note”] The Court used the definition of the disputed term from prior case law in reaching its decision. [/su_box]


John Arnold et. al. v Auto Owners Insurance Co. et. al.

Unpublished. Decided September 16, 2003 Michigan Court of Appeals Docket No. 240513.

This case involves a dispute between insurers and their insureds over uninsured motorist coverage and the setoff provisions. Insurers claim the set off provisions relieve any obligation to pay uninsured motorist benefits. Insureds claim the set-off provisions do not apply or even if applied, they are entitled to the difference between the total damages and not the uninsured motorist limits. The Trial court granted summary disposition in favor of insurers.

Relying on the respective language in each policy, the Court of Appeals affirmed, determining the set-offs applied to the policy limits rather than the total damages.

[su_box title=”Kallas & Henk Note”] This case uses identical reasoning and analysis of the uninsured motorist coverage as used by the Supreme Court in Wilkie v Auto Owners Insurance Company.  [/su_box]


Royal Oak School District v MASB-SEG Property and Casualty PPL, Inc.

Unpublished. Decided September 16, 2003 Michigan Court of Appeals Docket No. 235260.

This is an insurance dispute between Plaintiff insured and Defendant insurer over Y2K computer problems. Insurer denied coverage based on the Y2K exclusion. The 1999 renewal package included notice of exclusion for any Y2K problems. The Trial Court granted summary disposition to insurer finding that by the renewal premium payment the insured assented to the changes in coverage.

Insured appealed arguing that the addition of the exclusion was a prohibited midterm change without proper notice. The Court of Appeals disagreed finding that the notice specifically noted the change, the timing of the notice did not render the revision a midterm change and the exclusion was unambiguous. Court of Appeals affirmed the Trial court.

[su_box title=”Kallas & Henk Note”] While the Court declined to apply the “renewal exception”, based on timing of the insured’s notice, the Court may have reached the different decision had a loss taken place prior to the insured receiving the information pertaining to the change in coverage. [/su_box]


Etkin Management et. al. v Federal Insurance Co.

Unpublished. Decided September 18, 2003 Michigan Court of Appeals Docket No. 240674.

Plaintiff insured sought coverage for third-party negligence action. Defendant insurer denied coverage claiming the location was not an insured location. The policy included an endorsement entitled “GL location extension” identifying seven named locations, none of which were the location where the third-party’s injury occurred. The insuring agreement provided coverage for “occurrences” with the only limitation that the claim occurred during the policy period. Coverage was not restricted to “occurrences” at particular locations. The Trial Court entered judgment in favor of Plaintiff finding insurer failed to express the intended location limitation clearly.

The Court determined insurer’s intentions were not properly expressed as the “GL location extension” endorsement was redundant, but not contrary to the form policy. Therefore the terms the endorsement did not supersede the form policy. The Court of Appeals affirmed.

[su_box title=”Kallas & Henk Note”] The Court used the construction rule to read the contract as a whole and give meaning to all its terms. [/su_box]


St. Paul Fire and Marine Ins. Co. et. al. v Michigan Mutual Insurance Co.

decided September 26, 2003 Michigan Supreme Court Docket No. 123535.

This case involves a dispute between two insurance companies over responsibility for a third-party auto settlement, where Defendant auto insurer refused to contribute. An employee driver operating a non-owned bus caused the accident. Plaintiff, general insurer paid and sued claiming the auto insurer owed defense and indemnity. The Trial Court held that the coverage was included for non-owned vehicles used in connection with the insured’s business. Defendant insurer provided no evidence to refute the employee was operating the bus “in connection with the insured’s business” and was responsible for defense. Defendant insurer was responsible for payment of the settlement due to its failure to provide defense.

The Court of Appeals affirmed finding a duty to defend if there exist any possible theory of recovery which fall within the policy. The Court also determined that the insured was not required to obtain consent of the insurer because of its failure to defend.

[su_box title=”Kallas & Henk Note”] The Court applied the rule that duty to defend is broader than the duty to indemnify based on specific policy language which created the possibility of coverage.  [/su_box]

Comments are closed.