Facts – Plaintiff sought a determination of its obligation to indemnify its insureds in connection with an underlying wrongful death lawsuit stemming from a shooting death. On the date of the incident, McCarn removed a shotgun from under his grandfather's bed. The gun was always stored in that location and was not normally loaded. Both McCarn and LaBelle handled the gun which McCarn believed to be unloaded. McCarn pointed it at LaBelle's face from approximately one foot away, pulled back the hammer and pulled the trigger. The gun fired, killing LaBelle.

The trial court held that these events constituted an "occurrence" within the meaning of Allstate's policy. It also held that McCarn's conduct was not intentional or criminal within the meaning of the policy.

The Michigan Court of Appeals reversed the trial court in an unpublished opinion, holding that McCarn's intentional actions created a direct risk of harm that precluded coverage.

The Supreme Court held that an insurance policy must be enforced in accordance with its terms. If not defined in the policy, terms will be interpreted by using their common meaning. The term "occurrence" was defined in the policy as an "accident" resulting in bodily injury or property damage. The Court found that an accident is an "undesigned contingency, a casualty, a happening by chance, something out of the usual course of things, unusual, fortuitous, not anticipated and not naturally to be expected." Accidents are evaluated from the standpoint of the insured, not the injured party. An insured need not act unintentionally in order for the act to constitute an "accident" and therefore an "occurrence."

If both the act and the consequences were intended by the insured, the act does not constitute an accident. On the other hand, if the act was intended by the insured, but the consequences were not, the act does constitute an accident, unless the intended act created a direct risk of harm from which the consequences should reasonably have been expected by the insured. The question is not whether a reasonable person would have expected the consequences, but whether the insured reasonably should have expected the consequences. To avoid coverage, the consequence of the intended act which created a direct risk of harm, reasonably should have been expected by the insured.

The policy language dictates whether a subjective or objective standard is to be used. In this case, the policy did not indicate whether a subjective or objective standard applied. Because there was doubt in that regard, the policy was construed in favor of the insured and a subjective standard was utilized.

The court found that in this case, there was no intentional creation of a direct risk of harm because of the undisputed evidence that McCarn believed he was pulling the trigger of an unloaded gun. McCarn had no intention of firing a loaded weapon. No bodily injury would have been caused by McCarn's intended act of pulling the trigger of an unloaded gun. Although McCarn may have been negligent in failing to see if the gun was loaded before he pulled the trigger (particularly because he was the last person to use the gun weeks earlier for target practice), the issue of negligence was not before the court. The negligence of the insured acting as he did, is not enough to prevent an incident from being an accident if the consequence of the action should not have been reasonably expected by the insured. In other words, his careless and foolish conduct did not rise to the level of an expectation of harm.

Allstate had also maintained that McCarn's actions constituted a criminal act under the policy's criminal act exclusion. Because the Court of Appeals did not reach this issue, the case was to be remanded for further determination in that regard (Allstate Insurance Company v McCarn, et al., (After Remand), 471 Mich 283 (2004).

Recommendation – When determining whether an insurance company has an obligation to defend and indemnify its insured, one must evaluate liability according to the policy language in existence at the time of the incident. That language will determine whether a "subjective" or "objective" analysis will be utilized.

Facts – Horgan agreed to purchase a policy from Meridian Mutual Insurance Corporation through its agent, Robert Crapo. The agency prepared the paperwork but did not transmit it until after the fire loss occurred. Plaintiff argued that the agency lacked authority to assign the policy. The trial court disagreed.

In upholding the lower court's decision, the Court of Appeals indicated that it has recognized the existence of certain insurance contracts called "binders". An insurance binder is a contract of temporary insurance, to be effective insurance coverage until a formal policy is drafted and issued. A binder may be written or oral, founded upon words or deeds of an agent. At the very least, an oral binder was issued by Plaintiff through its agent, providing property and liability insurance coverage (Meridian Mutual Insurance Company v Crapo, et al., Michigan Court of Appeals Unpublished Decision dated May 28, 2002, Docket Number 226558).

Recommendation – In this case, the agency agreement gave specific authority to its agent to "solicit, receive and transmit proposals for such insurance contracts as the Company is licensed to write." The agent was also authorized to bind the Company on such classes or risks, and to such limits as may be from time to time authorized. Whenever the issue of agent authority arises, a copy of the agency agreement should be thoroughly reviewed.

Facts – Plaintiff alleged that Defendant negligently caused the accident by turning left without ascertaining the status of oncoming traffic and by failing to yield. The Trial Court denied Plaintiff's Motion for Summary Disposition and the case proceeded to Trial. The jury returned a verdict in favor of Defendant, finding no negligence.

The Court of Appeals observed that in Michigan, a statutory violation does not establish negligence as a matter of law. Violation of a penal statute creates a prima facie case of negligence from which a jury may draw an inference of negligence. The presumption of negligence can be rebutted by any legally sufficient excuse.

Drivers are required to exercise reasonable care under the circumstances. While a favored driver is allowed to assume that subordinate drivers will yield the right of way, and is not bound to anticipate unlawful or negligent acts, he/she is required to exercise reasonable care for his/her own protection. The driver must remain alert to hazards surrounding him/her and must attempt to avoid collision when continuing observations reveal, or should reveal to the reasonably prudent person, an impending danger. (Pausch v Gallo, Michigan Court of Appeals Unpublished Decision dated June 14, 2002, Docket Number 228481).

Recommendation – In this particular case, Defendant had been "inching forward" into the turn lane to get a better look at approaching traffic. She was hit by Plaintiff's vehicle. The jury found that Plaintiff had not been using the requisite degree of care and caution expected of an ordinarily prudent driver. When evaluating a third-party auto claim, one should always attempt to determine whether Plaintiff may have been more than fifty percent comparatively negligent.

Facts – Plaintiff sought damages for injuries sustained in an accident. At the close of Plaintiff's case, Defendant's moved for a directed verdict which was denied. The jury subsequently found that Defendant's negligence proximately caused Plaintiff's injuries, and that those injuries met the No-Fault threshold for recovery.

In reversing the jury's verdict, the Court of Appeals held that although the ability to move one's back constitutes an important bodily function, Plaintiff did not establish serious impairment of body function as a matter of law. Plaintiff's doctors noted that he enjoyed full range of motion in his back. Although Plaintiff had to restrict his work activities for a period of time because of the injuries, neither he nor his doctor indicated that his work or recreational activities are currently restricted. Plaintiff's only treatment for his condition was the use of pain medication, and his prognosis was for continuation of the status quo (Balma v Leep, Unpublished Michigan Court of Appeals Decision, dated June 7, 2002, Docket Number 234196).

Recommendation – In determining whether the impairment of an important body function is "serious", one must consider a nonexhaustive list of factors including the extent of injury, treatment required, duration of disability, extent of residual impairment and prognosis for eventual recovery. As such, as much background information as possible should be acquired for analysis.

Facts – Defendant appealed the circuit's court award of attorney fees in this first-party automobile No-Fault insurance action. The court found that Defendant unreasonably delayed or denied payment for personal protection insurance benefits.

In affirming the lower court's decision, the Court of Appeals indicated that in determining whether an insurer's delay was reasonable, the court will focus not on whether the insurer was ultimately held responsible for a given expense, but whether its refusal to pay the expense was unreasonable. In this case, Defendant had no reasonable basis for denying or delaying payment of certain benefits. In fact, there was no dispute that Plaintiff's chronic neck pain was caused by injuries sustained in the auto accident. The fact that Defendant had a bona fide reason for disputing some claims, did not justify the refusal to pay undisputed claims. Because Defendant failed to pay undisputed PIP benefits, the trial court did not err in awarding attorney fees to Plaintiff (Johnson v Auto Owners Insurance Company, Michigan Court of Appeals Unpublished Decision dated June 4, 2002, Docket Number 235600).

Recommendation – When first-party litigation is commenced, an effort should be made to pay all expenses which are not reasonably in dispute, including statutory interest.

Facts – The constitutionality of this damages cap raises a question of first impression. On the date of this accident, Defendant was doing business as Enterprise Rent-A-Car. It rented the vehicle to Reed. The decedent was a passenger in that automobile. A jury trial appears to have resulted in an adjusted $250,000.00 verdict. Defendant sought entry of judgment for $20,000.00, pursuant to MCL 257.401(3).

Subsection 401(3) provides in pertinent part that unless the lessor (or its agent) was negligent in the leasing of the motor vehicle, the lessor's liability under this subsection is limited to $20,000.00 because of bodily injury to or death of one person in any one accident, and $40,000.00 because of bodily injury to or death of two or more persons in any one accident (Phillips v Mirac, Inc., Michigan Court of Appeals Published Decision dated June 7, 2002, Docket Number 227257).

Recommendation – This non-unanimous decision will undoubtedly be reviewed by the Michigan Supreme Court. Until that time however, this decision should greatly assist in determining the owner liability of a commercial lessor.

Facts – Plaintiff's decedent was killed in an auto accident when he struck a disabled vehicle. At the time, decedent was driving an uninsured pickup truck. He lived in the home of his grandfather who was an insured under an auto policy issued by Defendant. Plaintiff alleged that as a resident relative in the household of his grandfather, he was entitled to coverage under the insurance policy issued by Defendant.

Under the No-Fault Act, a person is not entitled to personal injury protection benefits for accidental bodily injury if at the time of the accident, the person was the owner or registrant of the motor vehicle involved in the accident, for which the insurance required under the act was not in effect. Defendant denied Plaintiff's claim, contending that decedent was an owner of the uninsured pickup truck involved in the accident.

On the day that decedent purchased the vehicle in question, he gave the owner half of the agreed upon purchase price. That individual accepted the partial payment and gave decedent the truck and all of its keys, but retained the truck's title. It was the prior owner's intent that he would sign over the title to decedent when the remainder of the purchase price was paid. The original license plates were still on the truck when it was given to decedent. The insurance was switched to another vehicle prior to sale. The responsibility for transferring plates and obtaining insurance for the truck was left to decedent.

It was undisputed that decedent did not hold legal title to the vehicle at the time of the accident. The Court of Appeals held that for purposes of determining ownership under section 3101, an individual must have actual use of the vehicle for more than 30 days. Here, it was undisputed that decedent had use for less than 30 days. Therefore, he was not an owner under this statutory provision (Twichel v MIC General Insurance Corporation, Michigan Court of Appeals Published Decision dated May 31, 2002, Docket Number 228363).

Recommendation – Where the issue of ownership is significant to the evaluation of a claim, all aspects of the vehicle's sale should be explored. More than one person can be considered the owner of a motor vehicle for purposes of section 3101.

Facts – Plaintiff sought non-economic damages for injuries sustained in a single vehicle accident. At the close of Plaintiff's proofs, Defendant's moved for a directed verdict which was denied by the trial court based upon the existence of a material factual dispute as to serious impairment of body function and/or permanent serious disfigurement. The jury found that Defendant's negligence proximately caused the Plaintiff's injuries, but that those injuries did not meet the No-Fault threshold for recovery.

The Court of Appeals agreed that the trial court erred by failing to determine whether a factual dispute existed regarding the nature and extent of Plaintiff's injuries. However, no remand was necessary. The Court's review of the record found no material conflict between Plaintiff's testimony and that of various doctors. The medical witnesses agreed that as a result of Plaintiff's injuries, his range of motion was limited. Plaintiff suffered sensitivity to touch and occasional pain in arm, and had a 6-7 inch scar on his forearm. Plaintiff testified that he had resumed nearly all of his pre-injury activities, although he could not participate fully in certain sports. The doctors agreed that no restrictions were necessary on Plaintiff's activities.

Plaintiff did suffer an objectively manifested impairment of an important body function (use of his arm). Plaintiff's doctor prohibited him from working immediately after the accident, and Plaintiff missed several weeks of school while taking narcotic pain medications. Although Plaintiff's injury impaired the use of his arm, the injury prevented him from performing activities of his daily life for only a few weeks. He suffered little residual impairment (specifically, a 7-15 degree loss of pronation in the left arm). Further, he was provided a positive prognosis. Based upon the foregoing, the Court concluded that Plaintiff's injuries did not affect his general ability to live his normal life. Consequently, there was no serious impairment of body function. Likewise, there was no permanent serious disfigurement. Plaintiff's scar was on his non-dominant arm. Plaintiff noted that the scar could be covered by long sleeves. A smaller scar was located on the inside of Plaintiff's lower lip, unnoticeable in everyday encounters. Though the scars may be permanent, they do not constitute serious disfigurements for purposes of the No-Fault Statute (Spies v Parker, Michigan Court of Appeals Unpublished Decision, dated June 25, 2002, Docket Number 227581).

Recommendation – This case was handled by our office. Further details regarding trial testimony can be obtained by contacting the firm. It is significant to note that although Plaintiff's injuries appear to have been fairly severe, a good recovery occurred through the efforts of treating physicians. It is very important to establish what if any lasting effect a Plaintiff's injuries might have on that person's general ability to live a normal life. The Courts will compare Plaintiff's pre and post injury activities as a part of their analysis.

Should you have any questions or comments regarding this or any of our newsletters, please feel free to contact us by voice 989.799.3033, e-mail jtc@saginaw-law.com or write to Collison & Collison, P.C., 5811 Colony Drive, North, P.O. Box 6010, Saginaw, MI 48608-6010.

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