One Court of Justice

On August 31, 2010, the Court of Appeals published Judge Wilder’s opinion in Auto Club Group Ins. Co. v. Booth, No. 290430, reversing the trial court’s conclusion that the insured was covered under his homeowner’s policy in response to an injury claim from the victim of a negligent shooting.  Here, several people were in the insured’s home when the intoxicated insured retrieved his automatic handgun and, thinking that there was no round in the chamber, placed the barrel the gun against the wrist of another man whereupon the weapon discharged (the insured could not recall pulling the trigger), causing significant injuries to the other individual.  The insured pled no contest to a misdemeanor charge of careless discharge of a firearm resulting in injury.  The injured party filed suit against the insured, but the homeowner’s insurer denied coverage citing an exclusion in the policy that barred coverage for injuries resulting from “a criminal act or omission.”  The Court of Appeals found that while the insured’s no contest plea  in the criminal case was not conclusive proof that the insured had committed a crime, the undisputed record clearly established that the insured had control over the gun, knew it had a loaded magazine, and held it against another person’s wrist (all while intoxicated), was sufficient to prove the careless discharge of a firearm.  Thus, the Court of Appeals reversed the trial court and found that the insurer was entitled to summary disposition.  

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On July 22, 2010, the Michigan Court of Appeals published its opinion in State Farm Insurance Co. v. Broe Rehabilitation Services, Inc. No. 289230.  The plaintiff-insurer filed a “complaint for discovery” against the defendant-healthcare-provider.  The plaintiff asked the trial court to compel the defendant to provide medical records and to force the defendant™s employees to submit to examinations under oath in order to allow the plaintiff to determine whether the defendant was properly billing the plaintiff and whether the treatments were covered.  The defendant had refused to do either.  The defendant sought summary disposition on the ground that the trial court had no jurisdiction because “there was no dispute between the parties.  The trial court denied summary disposition and issued an order compelling discovery.  The Court of Appeals affirmed the trial court™s denial of summary disposition. 

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On July 8, 2010, the Michigan Supreme Court published its opinion in Insurance Institute of Michigan v. Commissioner, Financial & Insurance Services, No. 137400.  The Office of Financial and Insurance Regulation (OFIR) issued rules banning the use of credit reports in calculating insurance premiums.  The insurance industry challenged the rules, arguing that they were beyond the OFIR’s authority.  The Supreme Court agreed and reinstated the trial-court order declaring the rules invalid and enjoining their enforcement.  Read more »

On June 29, 2010, the Court of Appeals published Judge Shapiro’s majority opinion in McNeel v. Farm Bureau Insurance Company of Michigan, No. 285008.  This case arose out of a denial of insurance coverage for a house that was destroyed by fire on March 18, 2003.  On April 17, 2003, the insurer denied coverage on the grounds that the house was vacant and/or unoccupied.  The insurer contends that the trial court erred in denying its motion for summary disposition on the statute of limitations.  The relevant statute requires such an action “be commenced within 1 year after the loss . . .  The time for commencing an action is tolled from the time the insured notifies the insurer until the insurer formally denies liability.”  MCL § 500.2833(1)(q).  Here, the insurer argues that the claim filed in October 2004 was untimely, based on its formal denial of coverage via letter in June 2003.  The majority of the Court of Appeals disagreed, finding that there was a question of fact as to whether the June letter constituted a “formal denial” because, subsequent to the denial, the insured (through its independent claims adjuster) communicated with the insurer challenging the basis for the denial and the insurer considered the evidence and arguments, and then issued another denial letter in October 2003.  Specifically, the Court found that, under these circumstances, it was reasonable to infer that the insurer “withdrew its formal denial while it reinvestigated the claim.”  Thus, the Court upheld the denial of summary disposition to the insurer, and also made ancillary rulings about the jury instructions, interest, and costs.  Judge Kelly dissented from the majority’s opinion on the statute of limitations, arguing that it was undisputed that the insurer never withdrew its denial of coverage and, in fact, maintained that denial in writing several times.  Additionally, Judge Kelly argued that the affidavit from the independent adjuster that the carrier’s representative was reconsidering the claim in light of subsequent information was hearsay insufficient to create a question of fact.

On June 8, 2010, the Court of Appeals published its opinion in Michigan Basic Property Insurance Association v. Office of Financial and Insurance Regulation, No. 293766.  Here, the Michigan Basic Property Insurance Association (“MBPIA”) requested a 18.9% rate increase from the state Insurance Commissioner based on an actuarial report.  The MBPIA, which is governed by the Commissioner, is an insurance pool created to provide property insurance to qualified individuals that cannot obtain such insurance in the standard market.  The relevant statute provides that MBPIA “rates . . . shall be equal to the weighted average of the 10 voluntary market insurer groups with the largest premium volume in this state.”  MCL § 500.2930a(1).  With this statutory authority, the Commissioner rejected the requested rate increase because it had been calculated on the base rates of those insurers, without regard to the discounts offered by those insurers resulting in a lower premium actually charged to consumers.  This constituted a break from the Commissioner’s prior position regarding the use of base rates only in such calculations.  MBPIA appealed this determination to the circuit court, which reversed the Commissioner’s decision.  Now, in an opinion authored by Judge Fort Hood, the Court of Appeals reverses the circuit court and reinstates the Commissioner’s decision.  Specifically, the Court of Appeals found the statute to be ambiguous, but that the Commissioner’s interpretation was consistent with the legislative intent to ensure fairness and reasonableness in rates charged by MBPIA.  Specifically, in this context, the Commissioner reasoned that its position regarding the use of base rates needed to be revised, and the statutory term “rates” had to include offered discounts (versus merely the base rates), because over recent years base rates had been artificially inflated to account for such discounts.  The Court of Appeals found that there were no cogent reasons for overturning this interpretation, particularly where the MBPIA’s own actuaries noted that other methods of acceptable actuarial analysis would yield a decrease in rates.  Judge Bandstra filed a concurring opinion arguing that a close reading of the statutory language suggests it refers to actual premiums charged (derived from the base rates minus applicable discounts) versus merely the base rates.

The Michigan Supreme Court resolved three cases by peremptory orders reversing the Court of Appeals’ decisions and ordered oral argument on the application for two cases in its next term. 

The Michigan Supreme Court reversed the Court of Appeals’ decision in Kachudas v. Invaders Self Auto Wash, No. 139794.  In Kachudas, the plaintiff slipped and fell at an auto wash on a winter day and sued the company that operated the facility.  The Court of Appeals concluded that the open-and-obvious defense was not available to the defendant because the plaintiff’s claims sounded in general liability and not premises liability.  Four justices of the Michigan Supreme Court disagreed, explaining that the plaintiff alleged injury because of a condition of the land and thus the plaintiff’s claims were for premises liability.  The Court further found that a person of average intelligence would anticipate that spraying water on a day with average temperatures between 11 and 24 degrees would likely lead to the formation of ice.  Accordingly, the Court also concluded that the danger was open and obvious.  The Court peremptorily reversed the Court of Appeals’ decision, and reinstated the trial court’s grant of summary disposition to the defendant.  Chief Justice Kelly and Justices Cavanagh and Hathaway dissented.

The Court apparently decided to revisit the open-and-obvious doctine by ordering oral argument on the application in Ahola v. Genessee Christian School, No. 140447.  The Court of Appeals, in a divided opinion, concluded that faults to the defendant school’s steps that caused the plaintiff’s injury were not open and obvious despite the plaintiff’s navigation of those steps several hours earlier because the steps were unlit at the time of the injury.  Read more »

On April 29, 2001, the Michigan Court of Appeals issued its published opinion in Ulrich v. Farm Bureau Insurance, No. 289467.  In 2005, the Office of Financial and Insurance Services (“OFIS”), now the Office of Financial and Insurance Regulation, issued an order prohibiting insurance companies from issuing new forms that provide a contractual limitations period of less than three years for claims for uninsured motorist coverage (the “OFIS Order”).  The plaintiff’s policy had a one-year contractual limitations period on uninsured motorist coverage.  However, because the policy was issued before 2005, the Court upheld the limitation.

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On April 6, 2010, the Court of Appeals published its opinion in Dancey v. Travelers Property Casualty Company of America, No. 288615.  The Court affirmed the trial court’s denial of the insurer’s motion for summary disposition on plaintiff’s claim to recover uninsured-motorist benefits arising from plaintiff’s collision with a ladder that was lying in a Detroit-area expressway.  First, the Court found that there were factual questions as to whether this plaintiff and/or the vehicle involved in the accident were added as insureds to a particular business’ automobile policy.  Additionally, the Court addressed the legal question of whether, under these circumstances, the plaintiff could establish she was entitled to uninsured-motorist benefits.  Under the policy, an uninsured vehicle can be an unknown “hit-and-run” vehicle that hits, or “cause[s] an object to hit” an insured vehicle.  In this case, plaintiff’s vehicle struck a ladder that was lying in the expressway, and there was no direct evidence that the ladder came from a vehicle.  After analyzing similar cases, the Court found that under these unique circumstances, where there was evidence that the accident site was not accessible to pedestrians or other non-vehicular traffic, a jury could find a substantial physical nexus between a hit-and-run vehicle and the ladder struck by the plaintiff.  Thus, the Court of Appeals found that summary disposition in favor of the insurer was not appropriate, and affirmed the trial court’s denial of that motion.

On March 23, 2010, the Court of Appeals published its earlier January opinion in Doe v. Citizens Insurance Company, No. 288776.  In this case, a plaintiff sought a declaratory judgment that the  homeowners’ insurance policy of a party alleged to be liable for a sexual assault had to defend and indemnify that party in plaintiff’s civil suit.  The Court of Appeals affirmed the trial court’s determination that the insurance policy’s sexual molestation exclusion barred coverage for such claims.  The plaintiff argued that, in this case, the sexual assault was allegedly committed by a minor, and thus there was no intent to injure.  The Court of Appeals found that while intent to injure is a relevant element of some policy exclusions, the sexual molestation exclusion explicitly excludes any injury arising out of a sexual assault, regardless of whether there was an intent to injure.

The debate over strict statutory language interpretation took a somewhat unusual, but very polite and respectful, turn in the Court of Appeals’ published opinion on March 16, 2010 in Progressive Michigan Ins. Co. v. William Smith, et al., No. 287505.  Judge Bandstra authored the opinion of the divided panel, which held that the warning notice requirement of MCL § 500.3009(2) for auto insurance policies must be strictly enforced as written, and thus the named driver exclusion here was unenforceable.  Judge Murray concurred, and Judge Markey dissented.  Judge Bandstra’s opinion of the panel can be found here.  Judge Murray’s concurrence can be found here, and Judge Markey’s dissent can be found here. Read more »

In Tinnin v. Farmers Insurance Exchange, No. 286141 (published Mar. 11, 2010), the Court of Appeals affirmed the entire amount of attorney fees awarded under MCL § 500.3148(1) against an insurer where the insurer’s failure to pay one component of medical expenses was unreasonable, but the insurer’s decision to not pay another component was reasonable.

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On Friday, January 29, 2010, the Michigan Supreme Court granted leave to appeal in Priority Health v. Commissioner of the Office of Financial and Insurance Services.  The case arose after the Office of Financial and Insurance Services (now the Office of Financial and Insurance Regulation (“OFIR”)) barred health insurance carriers from conditioning the issuance of small employer health insurance plans on the employer making a minimum contribution toward the employees’ premium costs.  The circuit court and the Court of Appeals both affirmed OFIR’s ruling.  The Court of Appeals explained that because the Michigan Small Employer Group Health Coverage Act, MCL 500.3701 et seq., prevented a health insurance carrier from declining to renew a small employer health insurance plan for failing to make the requisite minimum employer contribution, health insurance carriers could not condition the issuance of a health insurance plan to a small employer on the employer’s agreement to make minimum payments to defray each employee’s expense.  The Court of Appeals’ decision is here.     

The Michigan Supreme Court granted Priority Health’s application for leave to appeal and ordered the parties to address “(1) whether, as part of a plan under the Small Employer Group Health Coverage Act, MCL 500.3701, et seq., an insurer or licensed [HMO] can require an employer to pay a specific percentage of the premium charged for each employee; and (2) whether MCL 500.3711(2) limits the provisions that can be included in such policies.”  The Court invited the Michigan Chamber of Commerce and the Small Business Association of Michigan to submit amicus curiae briefs.  The Michigan Association of Health Plans submitted an amicus brief in support of the application for leave to appeal.

Disclaimer:  WNJ represents the successful petitioner, Priority Health, in this matter.

On remand from the Michigan Supreme Court, the Court of Appeals determined in Auto-Owners Insurance Co. v. Ferwerda Enterprises, Inc., No. 277574 (Jan. 28, 2010), that the trial court should not have awarded attorney fees against the insurer when the insurer’s argument that no coverage existed was not frivolous.  The Court also reversed the award of penalty interest because the liability of the insurer was reasonably in dispute.  The opinion, authored by Judge O’Connell, is available here.

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On Friday, January 22, 2010, the Michigan Supreme Court granted leave to appeal in Beach v. Township of Lima to address whether a plaintiff who seeks to establish an adverse possession claim that affects property in a recorded plat must bring a claim under the Land Division Act if the plaintiff is not expressly requesting that the plat be vacated, corrected or revised.  The Court of Appeals held that a plaintiff need not bring a claim under the Land Division Act when he or she brings a quiet title action to establish adverse possession because a Land Division Act claim only alters the plat consistent with already existing property interests.  In other words, under the approach adopted by the Court of Appeals, a plaintiff may prevail in a quiet title action and later bring a claim under the Land Division Act to alter the plat–the two claims do not need to be brought simultaneously.  Such an approach has the effect of permitting inaccurate recorded plats.  The Michigan Supreme Court invited the Michigan Municipal League and the Real Property Section of the State Bar of Michigan to submit amicus briefs.  Our earlier post on the Court of Appeals’ decision is here.

Appellate criminal defense practitioners should note Justice Corrigan’s concurrence in People v. Henderson, No. 139375.  In Henderson, the Court of Appeals dismissed the defendant’s appeal because he did not timely file his appeal brief.  The Michigan Supreme Court remanded the case  to the Court of Appeals for consideration as though the defendant’s brief had been timely filed because the delay was solely attributable to the neglect of appellate counsel.  The Court concluded that defendant was deprived of effective assistance of counsel and ordered appellate counsel to pay costs to the Court.  Justice Corrigan concurred recommending that in cases where an attorney fails to timely prosecute a criminal appeal and thereby deprives the defendant of effective assistance of counsel, the Court should refer the negligent counsel to the Attorney Grievance Commission. Read more »

On November 24, 2009, the Court of Appeals published its opinion in Hastings Mutual Ins. Co. v. Safety King Inc., No. 286392.  The Court of Appeals reversed the Oakland County Circuit Court’s decision that the pollution exclusion contained in an insurance policy barred coverage for a third party’s claim against an insured because that claim arose from the insured’s duct cleaning services, where the active cleaning ingredient qualified as a pesticide.  The Court of Appeals pointed out that while the ingredient at issue in this case might technically be a “pesticide,” it is also a “ubiquitous antimicrobial agent found in a variety of cosmetic and personal hygiene products.”  The definition of “pollutant,” however, was limited to a contaminant or irritant and does not specifically reference pesticides.   The Court of Appeals reasoned that an ingredient that is not generally expected to cause injury through its normal use, does not meet that definition.  Because the ingredient at issue did not qualify as a pollutant, the pollution exclusion was not triggered, and summary disposition in favor of the insurer was not warranted.

On October 6, 2009, the Court of Appeals published the majority opinion of Judges Talbot and Hoekstra in In re Estate of Gaylord Genaw, Sr., No. 284214.  The majority affirmed summary disposition in favor of a decedent’s estate that sought to recover life insurance proceeds from an insurer which had already paid policy benefits to the decedent’s ex-wife, who was still listed on the policy as the beneficiary, but whose rights to the policy proceeds were extinguished through her divorce decree.  Judge Fitzgerald dissented. Read more »

In Smith v. Meemic Insurance Company, No. 286140 (published Sept. 10, 2009), the Court of Appeals held that a default judgment against an uninsured motorist that has been set aside does not trigger an insurance-policy exclusion denying coverage where claims against the uninsured motorist are settled or prosecuted to judgment without the insurer’s knowledge or consent.  The Court’s opinion may be found here.

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On Wednesday, September 2, 2009, the Michigan Supreme Court denied four applications for leave to appeal and dismissed one application on stipulation of the parties.  The Court also ordered the clerk to schedule oral argument to consider the application for leave to appeal in Lenawee County Board of Road Commissioners v. State Auto Property & Casualty Insurance Co., Case No 137667.  A copy of the Court’s order can be found here. Read more »

In an editorial published today, the Lansing State Journal urged the Legislature to revisit the enabling legislation for the Michigan Catastrophic Claims Association, the fund that pays for catastrophic injuries sustained in auto accidents.  A line item on every driver’s insurance bill ($124.89 this past year) provides the monies for the fund.  In U.S. Fidelity Ins. & Guaranty Co. v. Michigan Catastrophic Claims Ass’n, the Michigan Supreme Court held that the fund is responsible for paying all claims for reimbursement, rather than only those claims that are “reasonable.”  (See our post on the opinion here.)  The LSJ said that it is now up to the Legislature “to protect the MCCA and Michigan residents” from unreasonable claims.  The complete editorial can be found here.

On Friday, July 31, 2009, the Michigan Supreme Court denied leave to appeal in four cases, denied a motion for reconsideration in one case, and granted a motion for reconsideration in University of Michigan Regents v. Titan Ins. Co., No. 136905.  The Court granted the University of Michigan Regents’ application for leave to appeal and ordered the parties to address “whether Liptow v. State Farm Mutual Automobile Insurance Co., 272 Mich. App. 544 (2006), lv den 478 Mich 853 (2007), and Cameron v. ACIA, 476 Mich. 55 (2006), were correctly decided.”  Justices Corrigan and Young dissented, claiming that the “new majority” was seizing upon the change in the composition of the Court to vindicate their previous disseents.