LEGAL UPDATES

Facts – In this case Plaintiff’s decedent, Robert Woodcock, who insured his automobiles through his company, elected underinsured motorist coverage. Mr. Woodcock asked the defendant’s decedent, Mr. Taylor, to drive him to a service station to pick up his automobile. En route, a vehicle crossed the median and crashed into the vehicle driven by Mr. Taylor. Both Mr. Taylor and Mr. Woodcock’s estates sought Mr. Woodcock’s underinsured motorist coverage through Employers Mutual Casualty Company. Mr. Taylor’s estate maintained the Bonneville was a substitute vehicle (within the meaning of the UIM endorsement) for his Cadillac. The Court noted that the policy term "temporary substitute for a covered ‘auto’" was not defined within the policy. As such, the Court used the commonly used dictionary definition. The Court noted that a substitute vehicle meant that it was in the possession or under the control of the insured to the same extent of the disabled car. In this case, Mr. Taylor’s vehicle was not a "covered auto" or a "temporary substitute for a covered auto" and thus, his estate was not entitled to UIM benefits. Haley v Nahikian, Michigan Court of Appeals Unpublished Decision Dated August 1, 2006, Docket Number 265794.

Recommendation – When a term is not defined within the policy, the Court will look to the commonly used dictionary terms to determine if coverage is available.

Facts – Plaintiffs sustained water damage to their home and personal property on December 21, 2003 as a result of a faulty water heater. On or about December 29, 2003, Plaintiffs submitted a claim to Defendant, their insurer. After the Defendant conducted an investigation, they concluded the amounts claimed were exaggerated and in an April 12, 2004 letter, denied the claim due to fraud and false swearing. Negotiations followed and in a letter dated January 4, 2005 Plaintiffs offered a compromise settlement. Defendant declined Plaintiffs’ offer to settle. Suit was filed on June 24, 2005 alleging breach of contract. Defendant asserted that Plaintiffs failed to file suit within one year of the date of formal denial (April 12, 2004). Plaintiffs’ counsel maintained that the statute of limitations was tolled in light of settlement negotiations engaged in from November 2004 through mid March 2005. In addition, during the pendency of the matter, an offer to proceed through appraisal/arbitration pursuant to the policy was made.

In dismissing the claim the Court noted the unambiguous language of Defendant’s policy which provided that suit could not be brought after one year following the date of loss, not including the time that the statute was tolled before formal denial. The Court held that the statute of limitations was tolled from December 29, 2003 until April 12, 2004. Thus, under the terms of the policy, Plaintiffs initially had until the final week of March 2005 to file suit. However, the Trial Court concluded that Defendant was not entitled to rely on the March 2005 deadline given the fact that it had engaged in settlement negotiations. Notwithstanding, Plaintiffs did not file suit within a reasonable time following termination of negotiations. Therefore, Plaintiffs provided no justification for the delay of commencing action.

In addition, the appraisal/arbitration provision was not appropriate given the circumstances. This provision was inapplicable under the circumstances due to the fact that the dispute was over more than just the amount of loss sustained. The Court noted that policy language was derived from the statutory requirements for a fire insurance policy. This particular provision was a substitute for a judicial determination regarding the amount of the loss. In this case, the appraisal process was not proper because of the issue of coverage. A judicial determination regarding the existence of coverage was necessary prior to any appraisal. Gjertson v Pioneer State Mutual Insurance Co., Michigan Court of Appeals Unpublished Decision, Dated July 27, 2006, Docket Number 266342.

Recommendation – Pursuant to the policy, the Statute of Limitations was tolled until formal denial of the claim. Settlement negotiations following denial may toll the statute of limitations if suit is brought within a reasonable time following the end of negotiations. Therefore, following formal denial of the claim, settlement negotiations should not be conducted inasmuch as same may inadvertently extend the time to commence suit.

Facts – Plaintiff’s original complaint alleged that Appellee’s agent did not clean the air ducts as required. This was due to the fact that he brought the wrong cleaning equipment to the job site. Appellee’s agent then failed to return before the restaurant used the fans and ductwork in its normal kitchen operations. Appellant’s insurance contract specifically exempted completed work from coverage and defined same as "has been put to its intended use". It also provided that "work that may need service, maintenance, correction, repair or replacement, but which is otherwise complete, will be treated as completed".

The Court looked to the plain language of the contract and held that because the exhaust hood fans were on, the exhaust ducts had been put back to their intended use making that work complete. Therefore, the Court held the cleaning did not fall under the policy exclusion. Thus, Appellant had no duty to defend Appellee in the underlying action. Citizens Ins Co v De Lau Fire and Safety, Inc., Michigan Court of Appeals Unpublished Decision Dated August 17, 2006, Docket Number 268754.

Recommendation – When determining whether coverage is available and a duty to defend is owed, the insurer must look to Plaintiff’s allegations in the complaint.

Facts – Rory Osentoski was riding his motorcycle when he was struck by a van driven by Lynn Smith. Ms. Smith and her boyfriend, John Petiprin, owned the van. On the day of the accident the van was uninsured because Ms. Smith had failed to pay her insurance premium. Defendant Farm Bureau Insurance Company issued a no-fault insurance policy to Mr. Petiprin on that same day. However, that insurance policy did not list Ms. Smith as an insured and it did not list the van as an insured vehicle.

Mr. Osentoski submitted first party no-fault benefits claims to the Assigned Claims Facility. This in turn was assigned to Plaintiff, Farmer’s Insurance Exchange. Plaintiff requested that Defendant begin making no-fault payments to Mr. Osentoski and further, reimburse Farmer’s for benefits already paid.

Plaintiff claimed that pursuant to MCL 500.3114(5) it was last in priority to pay first party no-fault benefits. Defendant argued it owed no first party no-fault benefits because the policy did not cover the van involved in the accident. The Trial Court issued an Opinion granting Plaintiff’s motion for summary disposition.

The Court of Appeals held that the language of MCL 500.3114(5)(a): "the insurer of the owner or registrant of the motor vehicle involved in the accident" established that Defendant was the first in priority because it had issued the policy of insurance to Mr. Petiprin, as an owner or registrant of the motor vehicle. Farmers Insurance Exchange v Farm Bureau General Insurance Co of MI, Michigan Court of Appeals, Approved for Publication, Decided August 17, 2006, Docket Number 259763.

Recommendation – In determining priority of first party no-fault benefits owed, the insurer of the owner or registrant of the motor vehicle involved in the accident is first in priority, regardless of whether the motor vehicle was listed on the policy or the driver was a named insured.

Facts – An insured of Defendant, Allstate Insurance Company was injured in a motor vehicle accident and he obtained treatment from PT Works, Inc. PT Works in turn sought payment for services rendered. Allstate Insurance Company maintained that PT Works was not entitled to payment because it was improperly incorporated under the Business Corporation Act instead of the Professional Service Corporation Act. In addition, the shareholders of PT Works were not licensed as physical therapists and as such, not lawfully entitled to benefits. (However, it was noted that the individual actually providing physical therapy was properly licensed to provide treatment.)

The Trial Court held that PT Works was properly incorporated under the BCA and was not required to be formed under the PCSA. In interpreting the plain language of MCL 500.3157, the Court noted that "treatment" itself must be lawfully rendered. In this case, physical therapy sessions were performed by a properly licensed physical therapist. The clinic or institution had nothing to do with rendering treatment. Therefore, PT Works was entitled to reimbursement under the no-fault act. Miller v Allstate Ins Co, Approved for Publication, Decided September 19, 2006, Docket Number 259992.

Recommendation – When determining whether benefits are owed an insurer must look to the individual rendering treatment to determine whether it was lawfully provided.