Michigan Coverage Decisions, Issue 179
State Farm Fire and Casualty Company v. Kapraun
Unpublished opinion per curiam of the Court of Appeals, issued July 3, 2014 (Docket No. 310564).
The defendant hired a company that sent fax advertisements on behalf of the defendant, and was thereafter sued for conversion (property damage) and violations of the federal Telephone Consumer Protection Act from the advertising injury. The plaintiff was defendant’s insurer and alleged that it had no duty to defend or indemnify the defendants in the underlying lawsuit.
The Court of Appeals found that the underlying complaint did not allege any bodily injury or potential personal injury as defined under the terms of the policy. However, the Court of Appeals did determine that the damages in the underlying complaint fell within the advertising injury coverage. The Court of Appeals additionally found that the definition of advertising injury was ambiguous and construed it against the plaintiff. Specifically that the policy language does not indicate an intention of the parties that advertising injury be limited to injury from the content of the advertisement.
Additionally, while the coverage for the property damage claim was excluded under the policy, the plaintiff still owed a duty to defend defendants because they were already obligated to provide a defense for the advertising injury. While recognizing that there were valid public policy arguments that the courts should not encourage illegal activities, the Court of Appeals declined to abrogate coverage for the Telephone Consumer Protection Act claims.
[su_box title=”Kallas & Henk Note”] The state of the law for coverage under the TCPA is in flux. Most policies now exclude coverage for allegation violations by endorsement. [/su_box]
Travelers Property Casualty Company of America v. Peaker Services, Inc.
306 Mich App 178; 855 N.W.2d 253 (2014); issued July 22, 2014 (Docket No. 315070).
The plaintiff issued a commercial general liability (CGL) insurance policy to the defendant; which contained a “contractual liability” exclusion. The defendant performed work installing equipment at the University of Michigan pursuant to a contract which obligated the defendant to be responsible for damage to property owned by the university caused in whole or part by the defendant performing its obligations under the contract. The defendant improperly calibrated some equipment which caused damage to university property.
The plaintiff argued that, while there was an occurrence under the policy, the terms of contractual liability exclusion precluded coverage. The contractual liability exclusion excluded coverage “for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement.” The term “assumption of liability” was determined to only apply to special contracts and refer to the assumption of a third party’s liability, such as a hold harmless or indemnification agreement; not liability that results from a breach of contract. The Court of Appeals concluded that to construe assumption of liability to include an insured’s own liability for breach of contract renders the phrase surplusage. The contractual liability exclusion did not apply and the plaintiff was required to defend and indemnify the insured.
[su_box title=”Kallas & Henk Note”] The reasoning in this decision is not consistent with general principles of Michigan coverage law. This decision essentially eviscerates the contractual liability exclusion. The Supreme Court denied application for leave. We question whether this decision will stand if the Supreme Court addresses the issue in a subsequent action. [/su_box]
Brandywine v. State Farm Mutual Automobile Insurance Company
Unpublished opinion per curiam of the Court of Appeals, issued June 26, 2014 (Docket Nos. 314273, 314274).
The plaintiff was a passenger of a vehicle involved in an accident. The plaintiff did not own a vehicle nor was she listed as an insured under any No-Fault policy of insurance. The vehicle she was a passenger in was insured with Starr Indemnity & Liability Company. At the time of the accident the injured claimant stated that she lived by herself in Detroit, however, she also spent time living with and taking care of her mother in Southfield. The plaintiff’s mother was insured for No-Fault benefits with State Farm. The plaintiff sued both Starr Indemnity and State Farm for outstanding PIP benefits; both insurers claimed the other was in the higher priority position under MCL 500.3114. If the plaintiff was domiciled in Detroit, Starr Indemnity would be highest in priority; however if she was domiciled with her mother, State Farm would be highest in priority.
The plaintiff had two residences, had bedrooms at both, received mail at both, and did not pay for utilities at either. The plaintiff’s mother testified that her daughter always returned to live with her and would only stay at the other address for a couple of days or at most a week. The plaintiff’s food stamps went to one address but her application for No-Fault benefits indicated the other address. The trial court determined that the plaintiff’s affidavit that she lived by herself in Detroit was dispositive in establishing the plaintiff’s domicile. The Court of Appeals reversed and found that a question of fact existed regarding where was the plaintiff’s domicile on the date of the accident.
[su_box title=”Kallas & Henk Note”] This case follows a long line of decisions where the outcome is dependent on residence at the time of an accident. The outcomes of these cases are inconsistent because all of the persons with knowledge have an interest in either lying or exaggerating facts. [/su_box]
Ken Holdings, LLC, v. Auto-Owners Insurance Company
Unpublished opinion per curiam of the Court of Appeals issued June 26, 2014 (Docket No. 312894).
The plaintiff sold a commercial building to HCSL under a land contract. The defendant issued a commercial insurance policy to HCSL which also listed the plaintiff under “Additional Interests”, “Contract Holder”, and there is a separate notation identifying plaintiff as “Land Contract Holder”. The building was damages by fire and defendant denied the claim. The insurance policy contained two loss payable clauses, an ordinary and standard loss payable clause. The issue was which loss payable clause applied to the plaintiff.
The Court of Appeals found that the policy was ambiguous regarding which loss payable clause applied to the plaintiff, the relationship between the loss payable provisions and the declarations, and the overuse and repetition of “loss payable” and “loss payee” to describe separate interests. The Court of Appeals found that these ambiguities created a question of fact regarding the plaintiff’s right to recover under the policy and remanded to the trial court.
[su_box title=”Kallas & Henk Note”] This case demonstrates issues that can arise from reference to what is contained in the declarations page. The insurer in this case relied on the contents of the declarations for explanation of policy language. [/su_box]
Collins v. Farm Bureau General Insurance Company
Unpublished opinion per curiam of the Court of Appeals issued June 10, 2014 (Docket No. 314522).
The plaintiff owned a home that was insured under a homeowners insurance policy with the defendant. The plaintiff claimed that he lived at the home, however he had rented it out and only kept some belongings on the property. The home was destroyed by fire and the defendant denied the plaintiff’s claim because he did not reside in the home at the time of the loss and misrepresented and concealed material facts and circumstances regarding his residency before and after the loss.
The Court of Appeals affirmed a dismissal of the plaintiff’s claims because the plaintiff’s own testimony unequivocally established that he did not reside at the home before or at the time of this loss. Additionally, the Court of Appeals rejected the plaintiff’s estoppel argument as there were no representations made by the defendant that the plaintiff was properly insured.
[su_box title=”Kallas & Henk Note”] This type of problem is usually created because the retail agent does not ask the right questions or fails to educate the insurance consumer on the limitations of coverage. [/su_box]