Michigan Coverage Decisions, Issue 198

Electric Stick, Inc. v Prim One Ins Co.

Unpublished, Decided September 15, 2016, Michigan Court of Appeals Docket No. 327421, leave denied October 3, 2017 (Docket No. 154899).

The plaintiff failed to disclose bankruptcies and tax liens during the insurance policy application process. When the plaintiff later sued for benefits, the defendant insurer brought a motion for summary disposition on the basis of fraud, and sought to rescind the policy. The trial court denied the motion, holding that the defendant insurer had access to the plaintiff’s financial records and could have discovered this fraud if they had searched diligently enough.

The Court of Appeals reversed, holding that the defendant insurer had no duty to investigate or verify the representations of a potential insured following Titan Ins Co v Hyten, 491 Mich 547; 817 NW2d 562 (2012) as the Titan Court declined to hold insurers to a higher standard than other contracting parties.

Kallas & Henk Note
The Court Appeals noted that the elements for several bases for fraud, including innocent misrepresentation were proved by the insurance carrier to allow rescission.


Michigan Battery Equipment, Inc. v Emcasco Ins Co.

Unpublished, Decided September 15, 2016, Michigan Court of Appeals Docket No. 326945, leave denied May 2, 2017 (Docket No. 154643).

Prolonged water infiltration through rubber grommets on the roof weakened the roof over time causing the trusses to rot. Eventually, an accumulation of snow caused the rotted roof trusses to crack and the roof to collapse. The defendant insurer sought to exclude coverage through policy exclusions regarding collapse and damage caused by rot. The trial court granted summary disposition in favor of the insurer on the basis of the “rot” exclusion.

The Court of Appeals reviewed the exclusion, finding that there was no applicable exception, affirmed the trial court decision.

Kallas & Henk Note
The Court of Appeals enforced the policy language as written. Notably, the Court looked at potential applicable exceptions to the pertinent exclusion but did not address the Michigan case law which dictates that an exception to an exclusion cannot create coverage. See Crouchman v. Motor City Electric v. Auto Owners Ins. Co., 474 Mich 987 (2005).


A.B. Petro Mart, Inc. et.al. v Prime One Ins. et.al.

Unpublished, Decided September 15, 2016, Michigan Court of Appeals Docket No. 327481, leave denied July 31, 2017 (Docket No. 154644).

The plaintiffs, a gas station corporation and its sole owner, sought to recover insurance benefits related to the destruction of a gas pump on a theory of breach of contract. The policy was issued to the corporation only. The trial court granted summary disposition to the defendant insurer because while the plaintiff gas station insured the pump, it did not possess an insurable interest in the pump (the pump was owned by the sole owner of the gas station, not the entity itself) and that the individual was not entitled to maintain a breach of contract claim against the insurer because he was not named in the policy.

The Court of Appeals affirmed that the individual owner was not entitled sue the insurer for breach of contract because he was not named in the policy, but reversed as to the issue of insurable interest in the damaged property by the gas station entity. The Court of Appeals found that while the plaintiff gas station did not own the gas pump, it was financially affected by the non-functioning status of the pump, so the trial court erred when it determined the plaintiff gas station lacked an insurable interest in the pump.

Kallas & Henk Note
This decision follows the long-standing principles of Michigan law which dictate that only a party to a contract can pursue a remedy under the contract and insurable interest is necessary to maintain a valid insurance policy.


Banks v AAA Ins.

Unpublished, Decided September 15, 2016, Michigan Court of Appeals Docket No. 327416.

A child was assisting with getting groceries from the trunk of the vehicle; when he leaned in to get groceries, he was struck from behind by another vehicle. The mother plaintiff, as next friend, sued the defendant insurer for Uninsured Motorist benefits. The trial court granted the defendant insurer’s motion for summary disposition, holding that there was no uninsured motorist coverage for the child because he was not “in, getting into or getting out of” the vehicle at the time of the accident.

The Court of Appeals affirmed noting that uninsured motorist coverage is optional and the rights and liabilities of the parties are purely contractual and are to be “construed without reference to the No-Fault Act. The Court reviewed the meaning of “in” as in relation to the circumstances and found that under the commonly used meaning the child was not “in” the vehicle at the time it was struck by the other vehicle, therefore, not entitled to uninsured motorist coverage.

Kallas & Henk Note
The Court found that the undefined term did not render the policy ambiguous which is in keeping with Michigan insurance contract interpretation standards when reviewing an undefined term to use the common meaning.


Ward v State Farm Mut Auto Ins Co.

Unpublished opinion per curiam of the Court of Appeals, issued September 15, 2016 (Docket No. 327018).

In a claim for PIP benefits, the defendant insurer sought summary disposition against the plaintiff insured, alleging that the insured made false representations to the insurer with the intent to conceal or misrepresent material facts in connection with an insurance claim, in violation of the policy terms. Specifically, the insurer alleged that the insured misrepresented the replacement services which were being provided(the alleged services provider testified that she did not do cleaning and washing services which the insured claimed were done for her) and the circumstances that resulted in the insured losing her job (the insured alleged that she could not work because of an accident-related injury, but she was actually fired for misconduct). The trial court granted the insurer’s motion for summary disposition.

On appeal, the Court of Appeals affirmed the trial court because the plain terms of the insurance contract provided that all coverage would be forfeited if the insured “made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under [the] policy.” The contract did not state that the insurer must have relied on any false statements. The Court of Appeals rejected the argument that the trial court had improperly made a credibility determination when it credited the testimony of the alleged household services provider and discredited the plaintiff’s testimony.

Kallas & Henk Note
The Court specifically noted that the analysis in Bahri v. IDS Property Casualty Ins. Co., 308 Mich App 420 (2014) was instructive with respect to the issue of reliance and finding that reliance was not required under the policy provision at issue.

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