This newsletter has been compiled utilizing the latest reported Michigan Court of Appeals and Supreme Court Decisions. Case citations (if published at the time this newsletter is distributed) will reference the specific reporter, volume and page number. Unpublished Decisions (or those which have not been published as of the date of newsletter distribution) will be cited by Appellate Slip Opinion number. Copies of all Decisions summarized within this newsletter are available for your review upon request. Questions and comments are welcomed.

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Facts – In this case, the trial court refused to enforce the one year contractual limitations period contained in the insurance policy issued to Plaintiffs. It concluded that the one year provision was unfair, unreasonable, and an unenforceable adhesion clause. The Court of Appeals affirmed.

This case raised two fundamental questions of contract law:

(1)       Are insurance contracts subject to a standard of enforcement different from

            that applicable to other contracts, and

(2)       Under what conditions may a court disregard and refuse to enforce       

            unambiguous contract terms.

The Supreme Court held that insurance policies are subject to the same contract construction principles that apply to any other species of contract. Unless a contract provision violates law, or one of the traditional defenses to the enforceability of a contract applies, a court must construe and apply unambiguous contract provisions as written. The judiciary is without authority to modify unambiguous contracts or rebalance the contractual equities struck by the contracting parties because fundamental principles of contract law preclude such subjective post-hoc judicial determinations of "reasonableness".

The legislature has enacted a statute that permits insurance contract provisions to be evaluated and rejected on the basis of "reasonableness". The legislature has explicitly assigned this task to the Commissioner of the Office of Financial and Insurance Services rather than the judiciary. The Commissioner allowed Defendant’s insurance policy form to be issued and used in Michigan. No party challenged the Commissioner’s action to allow the policy to be issued or used in this state. Accordingly, the Court of Appeals decision was reversed and the case was remanded to Circuit Court for entry of an order for summary disposition in favor of Defendant.

In this particular case, Plaintiffs submitted a claim for uninsured motorist benefits. Defendant denied the claim because it was not filed within one year after the accident as required by the insurance policy. The Trial Court had denied Defendant’s Motion for Summary Disposition holding that the one year limitations period contained in the contract was unreasonable. Rory, et al. v. Continental Insurance Company, a/k/a CNA Insurance Company, 473 Mich 457 (2005).

Recommendations – This decision is obviously significant from the respect that the Michigan Supreme Court has left the determination as to whether insurance policy terms are "reasonable" to the Insurance Commissioner. As such, a plain reading of any particular contract of insurance should be made. If the insured has failed to comply, the appropriate action should be taken to deny benefits.

Facts – In September 2000, Plaintiff was seriously injured in an automobile accident. His mother cared for him after he was discharged from the hospital. Defendant paid benefits for home health care for four months. On February 14, 2001, Defendant received a physicians prescription stating that Plaintiff could function without "supervision". Defendant discontinued home health care payment based on the prescription indicating that Plaintiff did not require supervision.

Plaintiff’s mother continued to provide services for her son, including driving him to and from school and the doctor’s office. Eight months after benefits had been discontinued, Defendant wrote a letter memorializing that decision.

Plaintiff filed a complaint seeking payment for services allegedly rendered for which no payment was received. At issue in this case was the nine month period beginning the day after Defendant discontinued paying home health care benefits and ending one year prior to the filing of the complaint. Defendant moved for partial summary disposition with respect to the benefits sought for that nine month period, arguing that Plaintiff was precluded from recovering benefits under the one year back rule of MCL 500.3145(1).

Plaintiff contested Defendant’s motion arguing that pursuant to Lewis, the one year limitations period provided for in Section 3135(1) was tolled from the date that Defendant discontinued home health care benefits and attendant care benefits, to the date of Defendant’s letter memorializing the termination.

The trial court denied Defendant’s motion for summary disposition, citing Lewis. The Michigan Supreme Court entered an Order granting Defendant’s Application for Leave to Appeal. It held that the Lewis court exceeded its constitutional authority by engrafting to the statutory one year period, a judicial tolling mechanism. Devillers v. Auto Club Insurance Association, 473 Mich 562 (2005).

Recommendation – The court gave this decision retroactive effect for this and pending cases in which a challenge to Lewis has been preserved. A review of pending litigation should be conducted and motions for rehearing and/or reconsideration filed where warranted.

Facts – Plaintiff was involved in a motor vehicle accident. Defendant initially paid PIP benefits but subsequently refused. Defendant filed a motion to compel independent medical examination pursuant to MCR 500.3151 of the No-Fault Act. It alleged that it had made many attempts to schedule the Plaintiff to undergo medical examinations, but the Plaintiff declined unless Defendant agreed to enter into a stipulation with numerous limitations contrary to the pertinent provisions of the Michigan No-Fault Act and prejudicial to Defendant’s ability to investigate Plaintiff’s claims. Defendant claimed that it had a statutory right to examine Plaintiff and that the No-Fault Act did not authorize the imposition of conditions on the exam. Plaintiff responded by arguing that MCR 2.311 allows the trial court to impose conditions on medical examinations and that the conditions Plaintiff sought to impose were reasonable and did not prejudice the Defendant.

The trial court allowed examination but imposed several conditions, citing MCR 2.311. These conditions included that Plaintiff’s counsel be allowed to attend, that the exam be videotaped and that Plaintiff be precluded from giving Defendant’s examiners an oral account of the accident or her medical history.

The Court of Appeals held that the touchstone for upholding the provisions of MCL 500.3151, is one of "reasonableness". No Michigan cases address what constitutes a reasonable provision. The fact that the contract is silent as to certain details of performance, means only that a standard of reasonableness should be applied in a manner that would not clash with Michigan’s No-Fault Act. The legislature has expressed a plain intent to give the trial court authority to issue a discovery order (MCL 500.3159). MCR 2.311 is consistent with that statute.

Because the discovery rule in MCR 2.311 and the contract rights authorized by MCL 500.3151 do not conflict, the court rejected Defendant’s claim that MCL 500.3151 is alone controlling. It felt that the trial court correctly treated the motion as a discovery device subject to MCR 2.311. Muci v. State Farm Mutual Automobile Insurance Company, 267 Mich App 425 (2005).

Recommendation – This was a non-unanimous decision. As dissenting Judge Saad indicated, if a No-Fault carrier abuses its right under Section 3151, a trial court should use No-Fault law and apply the remedies available in Sections 3153, 3142, and 3148, rather than use MCR 2.311 to impose conditions for the taking of such examinations (conditions the legislature chose not to impose). We suspect that the Michigan Supreme Court may eventually have a chance to further rule on this particular issue and will advise accordingly.

Facts – This case arose out of a slip and fall incident which occurred during construction of an IMAX theatre at Henry Ford Museum in Dearborn. The Edison Institute signed a construction contract with Turner Construction Company. Turner then negotiated trade contractor agreements with subcontractors and administered them as the construction manager.

Plaintiff, an employee of an electrical subcontractor, was injured on the construction site when he tripped on pipes left on the floor of a storage area.

The Court held that an irreconcilable conflict arises: One doctrine (common work area) imposes an affirmative duty to protect against hazards that are open and obvious, while the other (open and obvious) asserts that no duty exists if the hazards are open and obvious. Because of that logical conflict, the Court had no difficulty concluding that the two doctrines are incompatible. Ghaffari v. Turner Construction Company, et al., 473 Mich 16 (2005).

Recommendation – The Court specifically noted its concern with the issue of workers’ safety. Application of the open and obvious doctrine in the construction setting would largely nullify the doctrine of comparative negligence in the construction setting and effectively restore the complete bar to a contractor’s liability which was abolished by prior case law. The Court did leave open the possibility that there might exist a cause of action by the general contractor against relevant subcontractors. When investigating a work place accident, the liability of any potential subcontractors should be fully explored.

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