Frankenmuth Mutual Insurance Company v Masters et al and Lake States Insurance Co.
Published June 15, 1999. Michigan Supreme Court, Number 110452.
In this declaratory action, Frankenmuth provided general liability insurance to Masters. Masters owned a clothing store and intentionally started a fire with the intent to destroy inventory and to collect first party insurance proceeds for that inventory. The fire ultimately spread to nearby businesses causing extensive property damage to those businesses.
The Trial Court held that there was no liability coverage for this incident because it was not accidental and, therefore, there was no “occurrence” as required under the policy. The Court of Appeals reversed finding that there was a question of fact whether the damage to the adjacent businesses was accidental. The Court of Appeals relied on interpretations of prior Michigan Supreme Court decisions.
The Supreme Court reversed and found that Frankenmuth was entitled to judgment as a matter of law. The Supreme Court adopted the following language from a prior decision: “When an insured acts intending to cause property damage or personal injury, liability coverage should be denied, irrespective of whether the resulting injury is different from the injury intended.”
Henderson v State Farm Fire and Casualty Company
Decided July 8, 1999. Michigan Supreme Court Docket Number 110822.
State Farm issued a homeowner’s policy to Bonnie Twitchell. Living in the residence was Dawn Mysierowicz. Dawn was the 18 year old girlfriend of Twitchell’s 20 year old son. Dawn was sued for instigating an assault. She sought coverage under State Farm’s policy alleging she qualified as an insured because she was a resident under age 21 “in the care of” an insured.
The Trial Court granted summary disposition in favor of State Farm holding that because she was over the age of majority, not suffering from any disabilities and not under the control of Bonnie Twitchell, she was not “in the care of” the insured. The Court of Appeals reversed finding that the phrase “in the care of” was ambiguous and that there was no genuine issue of fact that coverage applied to her. The Supreme Court reversed the Court of Appeals’ finding that the phrase “in the care of” is not ambiguous and remanded the matter to the Trial court for trial to determine whether Dawn was actually “in the care of” Bonnie Twitchell. The Court listed eight factors that the fact finder should consider to determine whether an individual is “in the care of” another individual.
Smith v Globe Life Insurance Company
Decided July 13, 1999. Michigan Supreme Court Number 110065.
The insured, when applying for a credit life and disability policy from defendant, misrepresented prior health problems. He subsequently died of a heart attack and the personal representative of his estate made claim for benefits under the policy. Defendant denied coverage on the basis that the policy was void and rescinded because of misrepresentations in the application. The Trial Court granted summary disposition to the insurer based on misrepresentations. The Trial Court also granted summary disposition on plaintiff’s claim that defendant insurer violated provisions of the Michigan Consumer Protection Act on the basis that the Act was unavailable because activities of insurers are regulated by the Michigan Commissioner of Insurance.
The Court of Appeals reversed the Trial Court finding that there was the question of fact whether the insured had made the actual misrepresentations or whether the information contained in the application was filled in by the agent or someone else. The Court of Appeals also held that the Michigan Consumer Protection Act was available for actions against insurers under the circumstances.
The Supreme Court reinstated the summary disposition on the misrepresentation issue but affirmed the Court of Appeals on the Michigan Consumer Protection Act issue and remanded to the Trial Court for trial on this issue. The Court held that a statute governing rescission for disability policies did not limit rescission to situations where the insurer would not have issued the policy had it known the actual facts. The Court held that rescission was also available as a remedy where the actual cause of loss was related to the misrepresentation.
A second very significant holding in this case pertains to the standard for granting summary dispositions. In recent years, trial courts have been relying on language from appellate decisions which state that summary disposition is appropriate only if it is impossible for the nonmoving party to support his or her claim at trial because of a deficiency that cannot be overcome or if a record “might be developed” that will leave open an issue upon reasonable minds may differ. In this case, the Supreme Court held that the proper standard is that the nonmoving party must present documentary evidence establishing the existence of a material factual dispute at the time of the hearing, or the motion should be granted. All pending cases in which a motion for summary disposition has been denied under the old standard, should be reviewed for possible reconsideration using the correct standard as applied in this decision. [/su_box]