Facts – This action arose by virtue of an underinsured motorist benefit claim. Plaintiff and Defendant agreed to arbitrate. The agreement provided that it was subject to the terms and conditions of Plaintiff’s policy. The insuring agreement provided that it would pay all sums the insured was legally entitled to recover as compensatory damages. The arbitration panel issued an award in favor of the Defendant which also included a separate amount for interest from the date of the accident to the date of the arbitration award.

Plaintiff paid the principal amount of the award but refused to pay the amount designated as interest. It filed suit seeking to vacate the arbitration award on the ground that the panel exceeded its authority.

The Michigan Court of Appeals held that an arbitrator derives his authority from the parties’ contract and is bound to act within the terms of that contract. The parties to an arbitration are conclusively bound by a binding arbitrator’s decision absent a showing that the award was procured by duress or fraud; the arbitrator was guilty of corruption or misconduct that prejudiced a parties’ rights; the arbitrator exceeded his powers; or the arbitrator refused to postpone the hearing on a showing of sufficient cause or refused to hear material evidence.

The Court further found that an arbitrator’s authority encompasses the authority to grant pre-award interest. Neither the insurance contract nor the arbitration agreement precluded the panel from deciding the issue of interest. Farm Bureau Insurance Company v Kennell, Michigan Court of Appeals Unpublished Decision dated August 16, 2002, Docket Number 232071.

Recommendation – Before voluntarily entering into arbitration, it is important that the ground rules be established. As illustrated in this case, some type of agreement should be reached with respect to any limitation on the award of damages which may be appropriate. If interest is not to be awarded, the arbitration agreement should so specify.

Facts – Defendant submitted an application to the Plaintiff for insurance on a vehicle. He indicated that he lived in St. Clair Shores (he really lived in Hamtramck), and failed to include his daughter on the policy as the principal driver of an insured van. The insurance contract provided that the entire policy was void if an insured person intentionally concealed or misrepresented a material fact relating to the policy, the application for the policy, or any claim made under the policy.

Plaintiff filed a declaratory action seeking a declaration that due to the fraud and/or misrepresentation in procuring the policy, Plaintiff’s liability for the accident could not exceed the statutorily required limits of $20,000 per person/$40,000 per accident.

The trial court found that Defendant did not make material misrepresentations and ruled in favor of the policyholder. The Court of Appeals affirmed that decision based on the specific facts which were involved.

More importantly, the Court reiterated the proposition that an insurer is justified in rescinding a policy if it relied on a misrepresentation that related to the insurer’s guidelines for determining eligibility for coverage. However, once an innocent third-party is injured in an accident that is subject to the coverage provided by the policy, the insurer is estopped from asserting fraud to rescind the policy with respect to required coverage. Auto Club v Juncaj, Michigan Court of Appeals Unpublished Decision dated August 6, 2002, Docket Number 231298.

Recommendation – Generally speaking, even if rescission is an appropriate remedy, the insurer will still be required to provide liability coverage which will not exceed the statutorily required limits of $20,000 per person/$40,000 per accident. The initial claim investigation should include an inquiry into representations made on the insurance application in order that a determination be made as to whether a declaratory judgment action should be filed.

Facts – Decedents were motorcyclists who were killed after being struck by a utility trailer which detached from a motor vehicle owned and operated by Sandlin. The trailer was owned by McKinzie who had loaned it to Sandlin. The Estates commenced an action against McKinzie. Allstate filed a declaratory judgment action, seeking a determination that it did not have a duty to defend or indemnify McKinzie under either a homeowner’s or automobile policy issued to McKinzie. The trial court granted Summary Disposition in favor of the Personal Representatives, determining that the automobile insurance policy provided coverage because McKinzie’s trailer was attached to an insured automobile.

In reversing the trial court, the Court of Appeals held that coverage did not exist under the McKinzie auto policy because it was not the insurer of the automobile to which McKinzie’s trailer was attached. An insurance contract is an agreement between the parties which will be read and interpreted as a whole. It must be enforced according to the policy terms. In this case, the policy language was quite clear that a trailer would be covered only while attached to an insured auto (referring to any auto insured under the policy and not any auto that has some type of insurance). There was no ambiguity. Allstate Insurance Company v McKinzie, et al, Michigan Court of Appeals Unpublished Decision dated August 16, 2002, Docket Number 227866.

Recommendation – One of the first steps in evaluating a claim would include a "common sense" reading of the applicable insurance policy language. If there is any question as to whether coverage applies, a legal opinion should be obtained. A decision can then be made as to whether a declaratory judgment action should be filed.

Facts – Plaintiff filed suit after having been involved in a low-speed auto accident. While at the scene, Plaintiff denied loss of consciousness, neck or back pain. A few hours later she presented at the hospital complaining of a headache. There were no obvious injuries. X-rays were negative. At some point, Plaintiff began complaining of pain in her neck, back and shoulder, memory loss and numbness in her hand. Subsequent testing revealed no objective evidence of injury. She also underwent neuropsychological testing. The report stated that her complaints were inconsistent with the type of head injury pattern associated with a motor vehicle accident.

The Plaintiff admitted that she was able to work 40 hours per week, was able to perform household tasks and could participate in aerobic exercise several times per week. She could cut grass and pull weeds. Her inability to knit or plant flowers did not establish a significant alteration of her ability to lead a normal life. Corder v Lucero, Michigan Court of Appeals Unpublished Decision dated July 30, 2002, Docket Number 231656.

Recommendation – This is yet another example of a factual pattern which will not qualify as a serious impairment of body function under MCLS 500.3135. Discovery should be conducted with a view toward determining what extra-curricular activities or lifestyle impairments actually result from the accident at issue.

Facts – This case arises from an accident involving an automobile and a pedestrian. Jeffrey sustained injuries when a van driven by Miller (owned by Miller’s father) struck him. Pioneer insured two other vehicles that Mr. Miller, Sr. owned. The van that struck Jeffrey was not listed as an insured vehicle on the declaration page of the policy. Miller, Sr. did not renew insurance coverage on the van because he had given the vehicle to his son (Miller, Jr.) and did not consider it to be a part of his household. Although Miller, Jr.’s wife had obtained insurance on the vehicle, the coverage was cancelled just days before the accident. The injured pedestrian (Jeffrey) did not carry automobile insurance, nor was he covered by an auto policy issued to a spouse or relative.

After the accident, Jeffrey filed a claim for first-party no-fault benefits with Pioneer. Pioneer denied the claim on the ground that it did not insure the van. Jeffrey then filed a claim for PIP benefits with the Assigned Claims Facility. The claim was assigned to Titan who paid benefits to or on behalf of Jeffrey.

Jeffrey subsequently filed suit against Titan and Pioneer seeking payment of certain no-fault benefits. Various cross-claims were filed between the insurers. Pioneer moved for Summary Disposition arguing that because the van was not a "covered auto" under the policy issued to Miller, Sr., there was no insurance coverage from Pioneer. In response, Titan asserted that under the Michigan Endorsement attached to Pioneer’s policy issued to Miller, Sr., the van was a "covered auto" because it was a vehicle on which Miller, Sr. (the owner and registrant) was required to maintain coverage. Titan argued that under the bodily injury liability section of the Michigan Endorsement, Pioneer was liable for payment of PIP benefits because Jeffrey, a pedestrian, was injured in an accident involving a "covered auto" driven by a family member of Miller, Sr.

The Michigan Court of Appeals held that, MCLS 500.3115(1)(a) does not state that the injured person must seek benefits from the insurer of the motor vehicle. Stated another way, the statute does not mandate that the vehicle involved in the accident must have been insured by the insurer of the owner before an injured person can seek benefits. (Under this statute, if a pedestrian is not covered under his or her own insurance policy or a policy issued to a spouse or a relative, he or she must first seek personal protection insurance benefits from "insurers of owners or registrants of motor vehicles involved in the accident"). Holding Pioneer liable for payment of PIP benefits was "consistent with the legislative intent that persons rather than vehicles be insured against loss." The issue of whether third-party residual liability coverage existed for either of the Millers was remanded to the trial court for further determination. Jeffrey v Titan and Pioneer, Michigan Court of Appeals Published Decision dated July 23, 2002, Docket Number 229407.

Recommendation – According to the Court, this decision was mandated by the "plain language" of Section 3115(1)(a). Where insurance policy language conflicts with statutory requirements, legislative intent will prevail. Nonetheless, it is very important that, when attempting to make a determination as to coverage, both the basic policy and all applicable endorsements be reviewed.

Facts – Plaintiff allegedly fell off steps in front of Defendants’ store. The court held that steps are such a common occurrence that they do not pose an unreasonable risk of harm. Thus, a landowner does not owe a duty to protect invitees from any harm the steps may present unless special aspects of the condition (that is, something unusual about the character, location, or surrounding conditions) make the risk of harm unreasonable. In this case, Plaintiff did not show any defect in the steps themselves. While they were oddly configured at one end, there was no evidence that Plaintiff was at the end of the steps when she fell or that she lost her balance because of the odd configuration. Plaintiff testified the steps were slippery from rain, but admitted that she did not know if she slipped on the steps or sidewalk. There was no evidence to show that something about the concrete surface made it unusually slick when wet, or that Defendants had reason to know of the condition.

The Court also indicated that a shop owner is liable to invitees for injuries incurred on his premises where the injury results from an unsafe condition caused by the act of negligence of the owner or his employees. If the unsafe condition results from other causes, the shop owner is liable if the condition is known to him or is of such a character or has existed a sufficient length of time that he should have knowledge of it. Ingalls v Koester, et al, Michigan Court of Appeals Unpublished Decision dated August 2, 2002, Docket Number 231603.

Recommendation – When investigating a "slip" or "trip" and fall incident, it is very important to thoroughly document the claimed defect. As this case illustrates, the mere fact that an accident occurred does not require a finding of negligence on behalf of the property owner.

Facts – This claim arose out of a medical malpractice action. Facilitation eventually resulted in an award which was signed by all parties. Shortly thereafter, Plaintiffs became dissatisfied with the award and sought advice from alternate counsel. In the interim, Plaintiffs’ original attorney filed a motion for the court’s approval of the settlement. Before the hearing, Plaintiffs’ counsel was discharged and instructed to withdraw. He nevertheless appeared before the trial court and continued with the motion to approve settlement. The court did find that the proposal served the minor’s "best interests". The judge did not take testimony from the minor or his next friend.

The Court of Appeals, in reviewing the issues involved, restated the requirements set forth by MCR 2.420 with respect to settlements on behalf of minors. In pertinent part, that rule makes it mandatory that a proposed consent judgment, settlement, or dismissal pursuant to settlement must be brought before the judge to whom the action is assigned. That judge shall pass on the fairness of the proposal. If the minor’s claim for damages arises out of a personal injury, the minor (or legally incapacitated individual) shall appear in court personally to allow the judge an opportunity to observe the nature of the injury, unless for good cause, the judge excuses the minor (or legally incapacitated individual’s presence). The court may require medical testimony by deposition or otherwise if not satisfied of the extent of the injury.

The court also recognized that a parent has no authority to compromise an unliquidated claim, nor to liquidate a claim on behalf of a child absent the formal procedures and proper supervision suggested by the court rule. MCR 2.420 seeks to protect an interested minor child’s rights in settlement of a claim.

Additionally, where a next friend acting on a minor’s behalf states a claim in the same action and thus stands to benefit from the settlement, the court must also appoint a guardian ad litem to represent the minor’s legal interests. The guardian ad litem must conduct an investigation and make a report in open court, or file a written report of the investigation and recommendations (MCR 5.121(C)). The guardian ad litem’s recommendation is not dispositive.

Given the above, the decision of the trial court to approve settlement was reversed. The matter was remanded with instructions to conduct a hearing and therein determine whether the proposed signed agreement purporting to settle the minor child’s claims was fair and served the minor child’s best interests. Bowden v Hutzel Hospital, Michigan Court of Appeals Published Decision dated August 9, 2002, Docket Number 230057.

Recommendation – Every settlement which involves a minor or incapacitated person must be approved by the appropriate court (Circuit/District Court if the matter is in litigation; Probate Court if the lawsuit has not yet been filed). Following this procedure will ensure that the insured is fully protected, and that the settlement agreement will not be later set aside due to irregularities.

Facts – The trial court dismissed Plaintiff’s negligence claim based on the statute of limitations. There was no dispute that Plaintiff’s "latest" complaint was filed over 11 years after the auto accident in question. Plaintiff had filed a complaint alleging injuries arising from the same accident within three years of that accident, but allowed the action to lapse by failing to serve the complaint. She was aware of injuries to her low back and hip which could have been caused by the accident well within the three years of that accident. While Plaintiff did not learn of her herniated discs until much later, this was a matter of misjudging the severity of the injury, rather than not knowing of any injury or possible cause of action. Pero v Faught, Michigan Court of Appeals, Unpublished Decision dated July 30, 2002, Docket Number 231036.

Recommendation – One of the first determinations which should be made when investigating a claim, is whether the applicable statute of limitations has expired. Although application of the "discovery rule" might be appropriate in certain situations, the courts have been very clear that the doctrine will not be utilized where the Plaintiff knew or should have known of the accrual of his/her potential claim.

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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