Michigan Coverage Decisions, Issue 201

Farm Bureau General Insurance Co of Michigan v Ace American Insurance Co.

Unpublished, Decided January 19, 2017, Michigan Court of Appeals Docket Nos. 329585 and 329614, held in abeyance September 12, 2017 (S. Ct. Docket Nos. 155395 and 155396).

The wife of the Farm Bureau insured was injured as a pedestrian when hit by a vehicle insured with Ace. Prior to the accident, Farm Bureau notified its insured that the policy would be cancelled based on an incomplete application. The accident happened before the cancellation date, and the injured party (wife) applied for benefits with Farm Bureau. Farm Bureau subsequently determined that the application contained material misrepresentations and rescinded the policy. The disputed issues involved whether material misrepresentations were made, whether the initial cancellation prevented the later rescission; and whether the innocent third-party doctrine prevented Farm Bureau’s rescission. The trial court granted summary disposition in favor of Ace, finding that Farm Bureau must provide coverage.

The Court of Appeals held that misrepresentations had occurred based on the insured’s lied about any resident relative not having an OWI. Further, the Court of Appeals held that the earlier cancellation did not prevent later rescission, because the cancellation had a different basis than the rescission (the cancellation was based on simple failure to provide certain information). Further, the Court of Appeals held that, under Bazzi v Sentinel Ins Co, 315 Mich App 763(2016), the innocent third-party doctrine no longer exists in Michigan. The Court of Appeals reversed the trial court and remanded for entry of summary disposition in favor of Farm Bureau, allowing rescission.

Kallas & Henk Note
The Supreme Court is holding this case in abeyance pending the resolution of the ongoing appeal in Bazzi v Sentinel Ins Co, 315 Mich App 763; 891 NW2d 13 (2016) which was argued in January 2018 before the Supreme Court.

 

Danny Herrera v State Farm Mut Automobile Ins Co.

Unpublished, Decided January 19, 2017, Michigan Court of Appeals Docket No. 329507.

Plaintiff was riding a motorcycle in a group when an object lying on the road was bounced up by the tire of another motorcycle, struck and injured him. An expert determined that the object came from a protective coating on a commercial truck. The trial court denied the insurer’s motion for summary disposition on the issue of no causation, finding that there factual questions concerning whether the metal bar came off a truck and whether there was the requisite physical nexus to claim uninsured motorist benefits.

The Court of Appeals held that there was a genuine issue of fact whether the metal object came off the truck happened in a continuous and contemporaneously transmitted force to satisfy the substantial physical nexus requirement with indirect contact to afford uninsured motorist coverage. The Court of Appeals affirmed the lower court decision finding a factual question relative to the uninsured motorist coverage and remanded for further proceedings.

Kallas & Henk Note
The Court focused on the specific accident circumstances and policy language in finding the factual question regarding indirect contact between the injured party and the object and whether the policy afforded coverage in this situation.

 

Jermaine Jordan v State Farm Fire and Casualty

Unpublished, Decided February 9, 2017, Michigan Court of Appeals Docket No. 329305.

This is a fire loss claim from an intentionally set fire occurring while the plaintiff was away. Defendant insurer denied the claim based on its conclusion that the fire was arson in which the Plaintiff was involved either directly or indirectly and subsequently made misrepresentations about the fire and concealed evidence. The insurer raised the concealment or fraud provision as an affirmative defense based on the policy language. The jury found that the plaintiff did not have a guilty connection with the fire, but did commit misrepresentations regarding the insurance loss. The trial court entered an order of no cause of action against the plaintiff.

The Court of Appeals affirmed. The Court rejected the plaintiff’s argument that the defendant failed to plead fraud with the particularity required by the Court rules, holding that the plaintiff failed to timely object on that basis. Further, the Court of Appeals held that the plaintiff also failed to demonstrate that the defendant’s failure to plead fraud with specificity prejudiced him.

Kallas & Henk Note
The Court relied on Michigan law addressing timeliness of objections (or lack of objections) to the specific affirmative defenses regarding the specific policy provision versus the actual policy language in reaching its final holding.

 

Farm Bureau General Insurance Co of Michigan v Robert Elzer d/b/a Diverse Contracting

Unpublished, Decided January 24, 2017, Michigan Court of Appeals Docket No. 329332.

The insured obtained coverage on a commercial auto policy for a personal vehicle operated by a family friend. An accident occurred in which another party was driving the borrowed vehicle. Based on the misrepresentation, the insurer was entitled to rescind the policy and denied the claim for no-fault benefits of the injured party. The trial court denied the insurer’s attempt to rescind and decline to pay no-fault benefits based on the injured innocent third-party.

The Court of Appeals reversed the trial court based on the testimony of the policyholder who admitted that he knew the vehicle was not used commercially and added the vehicle to the policy anyway and the recent decision issued in Bazzi v Sentinel Ins Co, 315 Mich App 763; 891 NW2d 13 (2016) which allows rescission even when no-fault benefits are at issue.

Kallas & Henk Note
The Court of Appeals properly followed precedent in its holding. Notably, there is an ongoing appeal in Bazzi v Sentinel Ins Co, which was argued in January 2018 before the Supreme Court which may impact future rescission decisions involving no-fault benefits.

 

Michigan Insurance Co v Posen Chamber of Commerce

Unpublished, Decided February 23, 2017, Michigan Court of Appeals Docket No. 330176.

Plaintiff insurer filed the instant suit based on a policy exclusion for injuries arising out of the use of ‘mobile equipment’ (i.e. off-road vehicle) for a third-party injury lawsuit against the insured. During a community race put on by the defendant municipality, a go-kart driver struck an obstacle then rolled and was injured. The injured party brought a negligence suit against the municipality, who was insured by the plaintiff insurer. The trial court denied the insurer’s motion for summary disposition, reasoning that the ‘mobile equipment’ exclusion described industrial/agricultural vehicles, which did not describe the type of vehicle in question.

The Court of Appeals reversed noting that policy exclusion stated that mobile equipment meant ‘land vehicles’ including bulldozers, farm machinery, and other vehicles designed for use principally off public roads. There was no question that the vehicle at issue was designed to cross land, and that it was designed ‘principally’ for off-road use in off-road racing events, lacking lights, windows, and mirrors, which would be necessary for roadway operation. The Court of Appeals disagreed with the trial court’s use of the ejusdem generis doctrine to interpret the exclusion. The trial court assumed that by listing specific vehicles like bulldozers and farm machinery, the vehicle must be of that same character. Not only did the Court of Appeals disagreed with the trial court’s reasoning, it also held that it was impermissible for the trial court to engage in contractual interpretation when the plain language of the text is unambiguous.

Kallas & Henk Note
The Court followed long-standing contract construction principles requiring that the Court look to the plain language of the contract to determine the scope of coverage and refrain from rewriting the plain and unambiguous meaning of a policy under the guise of interpretation.

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