Michigan Coverage Decisions, Issue 180

Vaughan v. Doe, et al

Unpublished. Decided July 29, 2014, Michigan Court of Appeals Docket No. 315313.

The plaintiff was injured while driving a vehicle owned by her father. At the time of the accident, plaintiff was not living with her father. The vehicle was insured by Defendant, 21st Century Centennial Insurance Company. The uninsured coverage provided that only an “insured” is able to recover benefits. The uninsured motorists portion of the policy defined “insured” as “you” or “any family member”. The policy defined “you” as “the person or persons shown as a named insured on the Declarations Page.” The term “family member” is defined as a person related to you who is a resident of your household. The only person named as an insured on the declarations page was plaintiff’s father. Although plaintiff was listed in another section as a “driver”, she was not listed on the first page where it listed the “named insured”.

The Court of Appeals affirmed the order granting reconsideration and summary disposition in favor of Defendant 21st Century finding that plaintiff is not entitled to uninsured motorist benefits under the clear and unambiguous policy language because plaintiff was not an insured.

[su_box title=”Kallas & Henk Note”] The Court of Appeals enforced the contract as written and applied the plain language of the insurance policy to determine that plaintiff was not an insured. Because uninsured motorists coverage is not required by statute, insurers are free to limit it any way they see fit. [/su_box]


Auto Club Group Ins. Co. v. Worthey, et al

Unpublished. Decided August 5, 2014, Michigan Court of Appeals Docket No. 315715.

This case arises out of a series of sexual assaults committed by Wells (14 years old) against another minor at Worthey’s home. Wells pled no contest to first-degree criminal sexual conduct. The next-friend of the minor filed suit against Wells and Worthey. Auto Club (Worthey’s insurer) filed this declaratory action stating that it had no obligation to provide coverage for the sexual assaults.

The trial court found that the insurance policy explicitly excluded coverage for incidents of sexual assault. The Court of Appeals affirmed summary disposition in favor of Auto Club finding that the policy’s sexual molestation exclusion specifically excludes coverage for damages that arise from sexual molestation. The Court of Appeals also found that coverage for Wells’ conduct is excluded by the policy’s criminal act exclusion which precludes coverage for bodily injury resulting from the criminal acts of anyone.

[su_box title=”Kallas & Henk Note”] In this case, the Court of Appeals found the criminal acts exclusion excluded a minor’s conduct. Wells was only 14 years old at the time he committed the assault. The Court of Appeals did not need to decide whether the sexual assault was an “occurrence” under the policy because clear and specific exclusions applied to eliminate coverage. [/su_box]


Stone v. Auto-Owners Ins. Co.

Published. Decided August 5, 2014. 307 Mich. App. 169 (2014).

The plaintiff sought survivor’s loss benefits from Auto-Owners for the death of his wife Stephanie Stone. Stephanie died in an automobile accident in October of 2010 while driving a Ford Taurus which she owned and registered. In August of 2010, Stephanie’s parents, John and Linda Stone, added Stephanie’s Taurus to their existing no-fault policy with Auto-Owners. The policy continued to list “John & Linda Stone” as the “insured”. The Morris W. Smith Insurance agency added the Taurus to the policy on Linda’s behalf. Linda said that she told an agent at Morris Smith that Stephanie owned the Taurus and was not living with her and John. Linda thought she would be receiving a new policy in plaintiff’s and Stephanie’s name. She paid Auto-Owners a six-month premium to cover Stephanie’s vehicle, which Auto-Owners accepted. Linda acknowledged that she received a copy of the policy listing only “John & Linda Stone” as the “insured” and delivered a copy to plaintiff.

The trial court denied Auto-Owner’s motion for summary disposition on the basis that Auto-Owners accepted premiums from John and Linda and knew that Stephanie did not live with them. The Court of Appeals reversed and remanded, finding that neither Stephanie nor plaintiff was a named insured in the policy.

[su_box title=”Kallas & Henk Note”] The Court of Appeals followed the long standing rule that courts are to enforce an agreement as written. This case also follows the line of prior Michigan decisions holding that an independent insurance agent is considered an agent of the insured rather than an agent of the insurer. [/su_box]


Estate of Charlotte. R. Morse v. Titan Ins. Co.

Unpublished. Decided August 14, 2014, Michigan Court of Appeals Docket No. 309837; Application for Leave to Appeal denied 497 Mich. 1029 (2015).

Ms. Morse was involved in an auto accident on November 24, 2004. On November 19, 2004, Ms. Morse went to Adrian Insurance Agency to insure a Ford Taurus. She obtained insurance for the Taurus under a Titan policy and paid the six month premium. Testimony differed as to whether an effective date for the policy was discussed. The Adrian agent prepared the application with an effective date of November 25, 2004 and the policy was issued with the same effective date.

The jury determined that the policy issued by Titan to Ms. Morse went into effect on November 19, 2004. The trial court entered a judgment reforming the contract nunc pro tunc to make November 19, 2004 the effective date for coverage by Titan. The Court of Appeals determined that the trial court erred in finding that Adrian was acting as both plaintiff and Titan’s agent in the submission of the application for insurance. The Court of Appeals vacated the judgment in favor of plaintiff and remanded for entry of a judgment of no cause of action in favor of Titan because Adrian was the agent of Ms. Morse and not Titan and there was no basis for reformation of the Titan policy.

[su_box title=”Kallas & Henk Note”] The Court of Appeals provides a rather in-depth discussion on agency and the role of an independent insurance agent in this opinion.  The Court of Appeals explains that an independent insurance agent can be considered as an insurer’s agent for some limited purposes, such as collecting premiums, but those purposes are very specific and do not alter the fact that the agent is, for most purposes, considered an agent of the insured. The Supreme Court of Michigan recently denied application for leave to appeal this matter. 497 Mich. 1029 (2015). [/su_box]

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