Michigan Coverage Decisions, Issue 9

Folts v CIGNA Insurance Company

Decided August 6, 1999. Michigan Court of Appeals Number 210163.

The Court of Appeals affirmed summary disposition granted in favor of defendant worker’s compensation carrier. Plaintiff had alleged in the trial court that the defendant compensation carrier had failed to pay benefits in a timely fashion and had otherwise obstructed plaintiff’s recovery and mismanaged his compensation claim. Plaintiff’s action was for negligence and intentional infliction of emotional distress.

The Court of Appeals held that Michigan does not recognize a cause of action for negligence where the allegations merely state a failure to comply with contractual obligations. Additionally, the court held that even if Michigan recognizes the tort of intentional infliction of emotional distress against an insurer, the actions in this case do not meet the standard for such a claim.

[su_box title=”Kallas & Henk Note”] The Michigan Supreme Court has rejected a tort cause of action for breach of insurance contract. As this decision notes, no court in Michigan has recognized a cause of action against an insurer for intentional infliction of emotional distress for the manner in which a claim is handled. Given the standard for intentional infliction of emotional distress (conduct so outrageous so as to be deemed intolerable in a civilized community), it is unlikely that such a cause of action will be recognized.  [/su_box]


Aldrich v Auto Club Group insurance Company

Decided August 13, 1999. Michigan Court of Appeals Number 206375.

The trial court granted defendant insurer summary disposition in this coverage action. The trial court held that the criminal acts exclusion contained in the subject homeowners policy was applicable. Plaintiffs sought coverage for acts of child abuse. The insured pleaded guilty to second-degree child abuse.

The Court of Appeals affirmed the summary disposition finding that because the insured pleaded guilty to a crime, there was no dispute that the insured committed a criminal act. The Court also rejected plaintiff’s argument that the insured did not intend injury to the victim of the crime for the reason that the exclusion did not require intent to harm to apply. The Court also affirmed summary disposition on the claim of coverage for a co- insured applying long-standing Michigan law that where a particular claim is excluded, derivative claims against a co- insured are also excluded.

[su_box title=”Kallas & Henk Note”] The criminal acts exclusion contained in the policy referenced in this case is somewhat unusual in that it is not combined with intentional acts exclusionary language. In addition, it does not contain language limiting the exclusion to acts expected or intended by the insured.  [/su_box]


Canal Insurance Company vs. Hill, et al

Decided September 3, 1999. Michigan Court of Appeals Number 208953.

In this action for declaratory relief, plaintiff issued insurance coverage to L.F. Transportation for a 1992 Kenworth tractor. L.F. Transportation, Inc., leased the tractor from Lassack. The lease allowed Lassack to use the trailer for its own purposes when L.F. Transportation, Inc., did not need it. On one such occasion, Komar, Lassack’s employee, was involved in an accident resulting in the death of Hill. Plaintiff, Canal Insurance Company, sought a ruling from the court that its policy did not cover Komar.

The persons listed as insured under plaintiff’s policy included: “any other person while using an owned automobile or a temporary substitute automobile with the permission of the name insured”. What happened in this case was that while transporting goods for Lassack (not L.F. Transportation, Inc.) the insured Kenworth tractor was disabled. Without L.F. Transportation’s knowledge, Lassack obtained the use of a Mack truck from a third party. The accident occurred while Komar was driving the Mack truck.

The Court of Appeals affirmed the trial court’s finding that plaintiff did provide coverage for this accident. The Court held that since it was contemplated between L.F. Transportation, Inc., and Lassick that the Kenworth tractor could be used for business other than L.F. Transportation, Inc., and since the policy specifically referenced temporary substitute automobiles, coverage would apply even though the truck involved in the accident was not the insured Kenworth. The Court also held that permission of L.F. Transportation, Inc. was implied by the arrangement between the parties.

[su_box title=”Kallas & Henk Note”] The courts in Michigan have found implied permission to use an insured vehicle in a variety of circumstances. Here, the Court of Appeals went one step further and found implied permission to substitute for an insured vehicle. [/su_box]


Westfield Insurance Company vs. Crane and Equipment Rental Inc.

Unpublished. Decided October 1, 1999. Michigan Court of Appeals Number 209118.

Plaintiff issued a business auto insurance policy to Usztan Construction Inc. While Usztan was operating a crane owned by Crane and Equipment Rental Inc., a steel beam being hoisted fell on and killed an individual named Levi. Levi’s estate brought an action against Crane and Equipment Rentals. Crane and Equipment Rentals sought coverage from plaintiff as they were named as an additional insured under Usztan’s policy. Plaintiff sought a declaratory ruling that it had no duty to defend or indemnify in this case because the crane involved was not included in the policy’s definition of “auto”. The trial court ruled against plaintiff and in favor of defendant finding that the policy was ambiguous and, therefore, must be construed in favor of coverage.

The Court of Appeals agreed with the trial court and affirmed summary disposition in favor of defendant. The Court agreed with plaintiff that the crane in question was “mobile equipment” which was specifically excluded from the definition of “auto”. The Court found that this language was in conflict with the declarations form of the policy which included the subject vehicle and the standard language that the insurer would pay all sums “resulting from the ownership, maintenance or use of a covered auto”.

[su_box title=”Kallas & Henk Note”] This is not a case where an exclusion takes coverage away where he would otherwise be covered. In such a case, Michigan case law is clear that the exclusion takes precedence. This is a case where two provisions which provide coverage are in conflict. Under such circumstances, the universal proposition that ambiguities must be construed against the insurer and in favor of the insured was applied.  [/su_box]


Pioneer State Mutual Insurance Company vs. Holmes

Unpublished. Decided October 12, 1999. Michigan Court of Appeals Number 210340.

The Court of Appeals affirmed summary disposition in favor of plaintiff insurer based on the Intentional Acts Exclusion contained in the homeowners policy issued to defendant. Defendant apparently struck an individual twice in the face with a closed fist. As a result, the victim fell and broke his leg. The insured had argued in the trial court and the Court of Appeals that because the broken leg was an unintended consequence, the Intentional Acts Exclusion did not apply.

In rejecting the insured’s argument, the Court of Appeals found that the actual harm (the broken leg) was the “natural consequence” of the insured’s intentional act. The Court also found that the particular policy language did not require that the actual harm be intended.

[su_box title=”Kallas & Henk Note”] This decision does not address the standard “occurrence” language and requirement in most policies. The Supreme Court in the recent decision of Frankenmuth Mutual vs. Masters, 460 Mich 105 (1999) held that where an insured commits an act intending to cause harm, there is no occurrence and, therefore, no coverage, even if the actual harm is different from that originally intended. This decision also seems to be in conflict with the recent decision of Nabozny vs. Pioneer State Mutual, 233 Mich App 206 (1998). The Court in this case distinguishes Nabozny but concludes in stating that if the opinion is in conflict with the Nabozny opinion, the Court is following prior precedent.  [/su_box]

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