Michigan Coverage Decisions, Issue 8

Farm Bureau Mutual Insurance Company of Michigan v Steven Jacob Nikkel

Decided July 20, 1999. Michigan Supreme Court Number 111341.

Steven Nikkel was involved in an accident while driving a truck owned by his father’s company. The truck was insured by the company. This action involved Steven’s efforts to obtain coverage from his parents’ personal auto policy. The insurer denied coverage based on the policy’s definitions of owned and nonowned vehicles. The truck was not listed as an insured vehicle under the personal auto policy and the issue was whether the policy was ambiguous in describing what vehicles were covered and whether this vehicle in this circumstance was covered.
The Trial Court granted summary disposition in favor of the insured finding that the policy definitions of owned and nonowned were ambiguous and that, therefore, there was coverage no matter how the truck was used. The Court of Appeals affirmed.
The Supreme Court reversed, finding that the policy was unambiguous. The Court rejected prior decisions suggesting the definitions of owned and nonowned vehicles were ambiguous merely by virtue of the fact that the definitions should have been in the exclusions section of the policy. The Court also rejected the argument that the policy is ambiguous because its definitions are not consistent with common understandings of the terms.

[su_box title=”Kallas & Henk Note”] This is another in a series of cases decided by the Supreme Court over the last several months which have addressed and clarified insurance policy interpretation issues. Over the last 15 years, a divided Supreme Court was unable to provide clarity that the lower courts could rely on. It seems that the present composition of the Court is determined to address prior conflicting decisions and provide guidance to the lower courts. [/su_box]


Wolverine Mutual Insurance Company v Pack et al.

Unpublished. Decided July 30, 1999. Michigan Court of Appeals Number 205627.

The plaintiff filed a declaratory action seeking a court ruling that it had no insurance coverage in place for defendant Pack and that it had no duty to defend or indemnify Pack in an action for personal injuries resulting from an automobile accident. Plaintiff issued a no-fault automobile policy to defendant which expired on August 11, 1995. Following August 11, 1995, defendant was told by an employee of an independent agency that there was a ten day “grace” period to pay the renewal premium. Defendant then called the plaintiff directly and an employee told her she had until August 25, 1995 to pay the premium. On August 22, 1995 defendant was involved in the automobile accident and had not yet paid the premium although she testified at trial that she had written a check for the premium payment. On August 23, 1995 plaintiff’s sister was told by the claims adjuster for the plaintiff that the defendant was “fully covered”. The premium was paid after August 25, 1995. Plaintiff denied coverage and returned the premium payment.
The Trial Court held that plaintiff was equitably estopped from denying coverage based on the statements made by the agency, plaintiff’s employee and the claims adjuster. The Court of Appeals upheld the judgment in favor of defendant insured, specifically finding that because the defendant relied on the statements made to her, plaintiff could not deny the existence of coverage.

[su_box title=”Kallas & Henk Note”] This case is an example of a Court using a strained interpretation of case law to reach a desired result. The Court of Appeals held in favor of the insured in this case despite language in the policy clearly stating that the policy expired on the expiration date if premium payments were not made on time and that the terms of the policy could not be modified except in writing. The facts of this case are so unusual, however, that it is unlikely that this decision will impact any future decisions.  [/su_box]


Harts v Farmers Insurance Exchange

Decided July 30, 1999. Michigan Supreme Court Number 110683.

In this action, defendant insurer provided no-fault insurance coverage to plaintiff. The policy did not contain uninsured motorist coverage. Following an accident, plaintiffs sued the insurance agent for negligence for failure to advise them of the availability and advisability of obtaining uninsured motorist coverage. The defendant was sued on a respondeat superior theory. The Trial Court granted summary disposition to both defendants on the basis that an insurance agent, in the absence of a special relationship, does not owe such a duty to an insured. The Court of Appeals affirmed.
The Supreme Court affirmed and modified the standard for establishing a special relationship between an agent and an insured. The Court held that a special relationship may arise when: (1) the agent misrepresents the nature or extent of the coverage offered or provided; (2) the insured makes an ambiguous request that requires clarification; (3) an inquiry is made that may require advice and the agent gives advice that is inaccurate; or (4) the agent assumes an additional duty by either express agreement or promise to the insured.

[su_box title=”Kallas & Henk Note”] This case may have significance to insurers who place their coverage through independent agents. While not entirely clear, this case seems to involve an agent exclusive to the defendant insurance carrier. The Supreme Court in its discussion in this case did not distinguish between agents of this type and independent agents placing coverage for several carriers. In the case of malfeasance or nonfeasance by independent agents, case law suggests that the insurer cannot be liable because the agent represents the insured, not the insurer. The Supreme Court in this case makes the blanket statement that insurance agents are agents of the insurer without distinguishing between agents exclusively representing one carrier and independent agents who specifically market their services based on the fact that they look out for the interests of the insured.  [/su_box]


Robbins v American Fellowship Mutual Insurance Company

Unpublished. Decided August 3, 1999. Michigan Court of Appeals Number 204533.

American Fellowship issued an automobile policy to Richard Robbins. In his application, Mr. Robbins misrepresented his driving record. His wife, Michelle Robbins, was injured in an automobile accident and sought first party benefits. American Fellowship filed a third party action against Richard Robbins seeking reimbursement for any amounts it was forced to pay to Michelle Robbins. The Trial Court held that she was entitled to benefits because she was an innocent third party. The Court also held that American Fellowship could not seek reimbursement from Richard Robbins because the terms of their policy did not provide for such a remedy in the event of misrepresentation. The policy provided that the remedies for false information were either a higher premium or cancellation of the policy.

The Court of Appeals affirmed on the basis that where a contract provides for specific remedies, the contracting party is limited to those remedies. The court also held that American Fellowship could not recover under the theory of innocent misrepresentation because that cause of action requires that the misrepresentation must inure to the benefit of the party who makes misrepresentation. In this case, the benefits were paid to Michelle Robbins who made no misrepresentation.

[su_box title=”Kallas & Henk Note”] This decision is troubling in that it takes a very narrow view of the equitable principal of fraudulent misrepresentation. It is not clear whether the decision is based on a rejection of traditional fraud remedies or if the appropriate arguments were not made to the Court. It has been assumed by most practitioners in the insurance coverage area that an insurer could seek reimbursement for amounts paid to an innocent person from the party who made the misrepresentation.  [/su_box]

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