Michigan Coverage Decisions, Issue 6

Schultz vs. AAA Michigan

Unpublished. Decided May 28, 1999. Michigan Court of Appeals Docket No: 201175.

In this garnishment action, plaintiff sought to recover a judgment rendered against defendant’s insured . In the underlying action, plaintiff sued defendant’s insured for personal injuries received asa result of a fireworks accident at the insured’s home. Defendant denied coverage on the basis of a criminal acts exclusion.

The trial court granted summary disposition in the garnishment action to plaintiff on the bases that (1) defendant was precluded from raising an exclusionary clause because it had failed to defend its insured in the underlying action and (2) the judgment in the underlying action was based on a negligence cause of action as opposed to an intentional criminal act.

[su_box title=”Kallas & Henk Note”] The Court of Appeals reversed the trial court’s summary disposition finding that a failure to defend does not prevent the raising of exclusions where the insured was provided with a reservation of rights letter citing the exclusion or exclusions. The Court also rejected the trial court’s finding that there was coverage as a matter of law because the underlying judgment was based on the negligence cause of action. The Court of Appeals held that defendant insurer could prove in the coverage action that the actual injury was caused by a criminal act in which case the theory of liability in the underlying action would be irrelevant.  [/su_box]

 

 

Horning vs. Reeter vs. Citizens Insurance Company of America

Unpublished. Decided June 4, 1999. Michigan Court of Appeals Docket No 210950.

In this garnishment action, plaintiff sought recovery of a judgment entered against the insured from the garnishee defendant insurer under its auto policy. In the trial court, the insurer defended on the basis that the policy was canceled prior to the accident and that even if the policy was effective, the insured failed to provide notice of the lawsuit prior to entry of judgment. The trial court granted summary disposition in favor of garnishee defendant on the second issue without ruling on whether the policy was canceled.

[su_box title=”Kallas & Henk Note”] The Court of Appeals reversed and remanded to the trial court to decide the question of cancellation. The Court of Appeals held that if the trial court found that the policy was not effectively canceled, the determination would then have to be made whether the insurer was prejudiced by the late notice. The actual prejudice requirement in order to deny coverage for late notice is consistent with prior Michigan decisions. In this case, the Court cited a federal court decision which held that an insurer must do more than show the fact that evidence has been lost. It must show that the lost evidence would have improved its position in defending the underlying action. [/su_box]

 

Toth vs. Auto Owners

Unpublished. Decided June 15, 1999. Michigan Court of Appeals Docket No 208735.

In this action, the Court of Appeals reversed a judgment rendered in favor of plaintiff in the trial court. Defendant issued a “Garage Liability Policy” which had two optional coverages. Division I coverage pertained to vehicles owned by the insured and Division II pertained to vehicles not owned by the insured. In reversing the trial court, the Court of Appeals held that the policy was unambiguous in separating the two coverages, and it was clear that the insured had purchased only Division II coverage which did not insure the owned vehicles.

[su_box title=”Kallas & Henk Note”] The Court of Appeals also rejected the trial court’s holding that the term “hazard” was ambiguous for the reason that the policy defined the hazards covered. [/su_box]

 

Orr vs. Jurick vs. Farm Bureau Insurance Company

Unpublished. Decided June 18, 1999. Michigan Court of Appeals Docket No 205107.

In this coverage action under a homeowners policy, the trial court held that the criminal acts exclusion contained in the policy barred coverage in this shooting incident. Apparently, the insured handed a loaded weapon to a companion who discharged the weapon injuring the underlying plaintiff.

The Court of Appeals held that the trial judge had correctly granted summary disposition to defendant insurer but on different grounds. The Court of Appeals held that there was no “occurrence” as required by the policy because the incident was not an accident from the standpoint of the insured. The Court of Appeals held it was unnecessary to address the criminal acts exclusion or the intentional acts exclusion in light of the fact that there was no “occurrence”.

[su_box title=”Kallas & Henk Note”] The interesting aspect of this case is that the actual shooting was not done by the insured but by a companion. The Court of Appeals held that the act of handing a loaded weapon to a person involved in a “confrontational, tense atmosphere”resulting in a shooting could not be held to be accidental. This is farther than any other appellate court in Michigan has gone in applying the “occurrence” requirement. [/su_box]

 

Burton vs. Metropolitan Property and Casualty Insurance Company

Unpublished. Decided June 18, 1999. Michigan Court of Appeals Docket No 208265.

Plaintiff sought coverage for losses he sustained when his vehicle was vandalized and valuable contents stolen. Defendant auto insurer sought to rescind the policy for misrepresentations in the application related to plaintiff’s driving record and prior insurance. The trial court granted summary disposition in favor of defendant insurer.

On appeal, plaintiff took the position that rescission was inappropriate because the misrepresentations were innocent. Plaintiff claimed that he properly advised the agent of his driving record and that the agent
incorrectly completed the application. He further claimed that his wife had allowed prior insurance to lapse without informing him. The Court of Appeals rejected plaintiff’s arguments and held that even innocent misrepresentations are properly the basis of rescission where the insurer relies on the misrepresentation in issuing the policy.

[su_box title=”Kallas & Henk Note”] As with other cases of this type, the Court of Appeals reaffirmed the requirement that the insurer prove that it would not have issued the policy had it known the actual facts. This generally requires testimony from an underwriter. [/su_box]

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