Michigan Court of Appeals; Docket #360846; Unpublished
Judges Cavanagh, Markey, and Borrello; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion, Link to Dissent
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Interpretation of Insurance Contracts
Underinsured Motorist Coverage in General
Exclusions from Underinsured Motorist Benefits
Setoffs Applicable to Underinsured Motorist Cases
SUMMARY:
In this 2-1, unpublished decision (Markey, dissenting), the Court of Appeals affirmed the trial court’s denial of Defendant The Auto Club Group’s (“Auto Club”) motion for summary disposition, in which it sought dismissal of Plaintiffs Randall Shaw and Hillary Shaw’s action for underinsured motorist (“UIM”) coverage against it. The Court of Appeals held that the driver who caused the subject motor vehicle accident—who had bodily injury liability coverage of up to $300,000—was operating an “underinsured vehicle” for purposes of the Shaws’ policy with Auto Club. The Auto Club policy provided for UIM coverage up to $250,000 per person/$500,000 per accident, and contained a typical exclusion from coverage if the limits of the tortfeasor’s policy exceeded the limits of UIM coverage. The Court held that the $500,000 “per accident” limit—not the $250,000 “per person” limit—was the relevant amount for determining whether the exclusion applied, because both Randall Shaw and Hillary Shaw were “insured persons” under the policy and were entitled to up to $500,000 for the accident. The Court of Appeals held, second, that based on the language of the Shaws’ policy, UIM coverage could not be reduced by any amount paid or payable by the liability insurer of the bar, Defendant Crispelli’s LLC (“Crispelli’s”), which served intoxicating liquor to the driver who caused the accident.
Both Randall and Hillary Shaw were injured as a result of a motor vehicle accident caused by a drunk driver, Kamil Nowakowski. At the time of the accident, the Shaws had an insurance policy with Auto Club which provided for UIM coverage up to $250,000 per person/$500,000 per accident, and Nowakowski personally maintained bodily injury liability coverage up to $300,000. A dispute arose between the Shaws and Auto Club over whether the Shaws were eligible for UIM coverage under their policy, which defined ‘underinsured motor vehicle’ as:
“[A] motor vehicle whose ownership, maintenance or use has resulted in bodily injury of an insured person and for which the sum of the Limits of Liability under all bodily injury liability insurance policies, bonds or other security required to be maintained under law applicable to the driver or to the person or organization legally responsible for such vehicle and applicable to the vehicle is less than the limits of Underinsured Motorists Coverage provided the insured person at the time of the accident.”
Auto Club argued that, because the definition of ‘underinsured motor vehicle’ used the term ‘insured person,’ “limits of underinsured Motorists Coverage” meant the $250,000 ‘per person’ amount—not the $500,000 ‘per accident’ amount. The Shaws proceeded to file suit, alleging both that the $500,000 ‘per accident’ amount was the relevant figure for determining whether Nowakowski’s ‘Limits of Liability’ were ‘less than the limits of Underinsured Motorist Coverage provided the insured person at the time of the accident.’ Auto Club moved for summary disposition and, in addition to its argument regarding the policy limits, Auto Club argued that, under the Shaws’ policy, their UIM recovery would have to be reduced by the $2 million liability policy of Crispelli’s, the establishment which served intoxicating liquor to Nowakowski before the crash. Auto Club pointed to a provision in the Shaw’s policy which provided,
“4. Any amount payable under this Part will be reduced by:
a. any amount paid or payable by or on behalf of the owner or operator of the uninsured motor vehicle or organization which may be legally liable;
b. any amount paid or payable under the Liability Insurance Coverage of this or any other policy;”
In response to this argument, the Shaws pointed to the preceding section of their policy, which provided that UIM coverage was only to be reduced by liability coverage ‘applicable to the driver or to the person or organization legally responsible for the underinsured motor vehicle.’ Since Crispelli’s was not ‘legally responsible for” Nowakowski’s vehicle, the Shaws argued that their UIM coverage was not to be reduced by Crispelli’s policy.
In ruling on Auto Club’s motion, the trial court determined that the $500,000 ‘per accident’ limit was the relevant amount for purposes of UIM coverage, and that the Shaws’ UIM recovery could not be reduced by Crispelli’s $2 million policy. Accordingly, Auto Club’s motion was denied.
The Court of Appeals affirmed the trial court’s summary disposition order, holding, first, that in this case, ‘limits of Underinsured Motorist Coverage’ meant the $500,000 ‘per accident’ amount, because both Shaws were named insureds and entitled to up to $500,000, collectively, for their damages arising out of the accident.
“Defendant contends that the only reasonable interpretation of the policy is that the per-person limit rather than the per-accident limit applies. Specifically, defendant argues that because the definition of an underinsured motor vehicle and provision 1(a) under the ‘Limits of Liability’ subsection both use the phrase “insured person,” this definitively implicates the $250,000 per-person limit. . . .
Defendant’s argument, however, ignores that the definition of an ‘underinsured motor vehicle’ explicitly uses the term ‘limits’ in reference to UIM benefits coverage, which implies there is more than one applicable limit. And, the declarations page of plaintiffs’ policy clearly states the $250,000 per-person and $500,000 per-accident limits are both available to plaintiffs as insured persons. That is, the definition of “underinsured motor vehicle” uses the plural of the word ‘limit’ and states ‘the limits of Underinsured Motorists Coverage,’ leading to a reasonable interpretation that—when there is more than one ‘insured person’ in the accident, the $500,000 per-accident limit applies when determining if the other vehicle involved in the accident was ‘underinsured.’ As the trial court noted, in this case, if both plaintiffs proved $250,000 in bodily injury damages, defendant would be liable for the per-accident limit of $500,000, which far exceeded Nowakowski’s $300,000 policy limit. But if the definition of ‘underinsured motor vehicle’ only referred to the per-person limit of $250,000—plaintiffs’ UIM policy would not be triggered despite the fact that Nowakowski’s policy would only cover $300,000 of those bodily injury damages. As the trial court also noted, defendant has failed to explain—even on appeal—‘why is the $500,000 per occurrence limit not the applicable ‘Limit of Liability,’ especially in a situation involving two plaintiffs who are both seeking bodily injury benefits?’ Therefore, because the insurance policy does not explicitly state which limit applies when two or more insured persons are injured in the same accident for purposes of the ‘underinsured motor vehicle’ definition, and the terms of plaintiffs’ insurance policy can reasonably be read to provide or deny coverage under the same set of circumstances, the policy is ambiguous, and ambiguous terms must be resolved in favor of plaintiffs as the insureds. See Seils, 310 Mich App at 146. Thus, the trial court properly rejected defendant’s argument and denied defendant’s motion for summary disposition.”
The Court of Appeals held, second, that the Shaws’ UIM recovery could not be reduced by Crispelli’s $2 million liability policy. This issue implicated two provisions under the ‘Limits of Liability’ section of the Shaws’ policy: provision 3, which provided—
“3. If the damages are caused by an underinsured motor vehicle, the most we will pay will be the lesser of:
a. the difference between the Limits of Liability of this coverage and the sum of the Limits of Liability under all bodily injury liability insurance policies, bonds or other security required to be maintained under law applicable to the driver or to the person or organization legally responsible for the underinsured motor vehicle and applicable to the underinsured motor vehicle; or
—and provision 4, which provided:
“4. Any amount payable under this Part will be reduced by:
a. any amount paid or payable by or on behalf of the owner or operator of the uninsured motor vehicle or organization which may be legally liable;”
Auto Club argued that since Crispelli’s ‘may be legally liable’ to the Shaws for their injuries, the Shaws’ UIM recovery must be reduced by Crispelli’s $2 million liability policy pursuant to provision 4(a). Auto Club also argued that Provision 4(a) should be read independent of provision 3(a), which the Shaws argued made clear that UIM coverage could only be reduced by amounts payable under policies ‘applicable to the driver or to the person or organization legally responsible for the underinsured motor vehicle and applicable to the underinsured motor vehicle.’
The Court of Appeals determined that provisions 3 and 4 needed to be read together, and that, as a result, “Provision 4(a) should be read to apply only to organizations legally responsible for the motor vehicle.”
“The Limits of Liability subsection determines the maximum amount of recovery plaintiffs may receive from defendant in any one accident. Provision 3 determines the maximum recovery for damages caused by an underinsured motor vehicle. Provision 4 reduces the amount recovered under provision 3. It is reasonable to conclude these provisions are related and serve the same purpose of determining the maximum amount of plaintiffs’ recovery. Therefore, the trial court did not err in reading provisions 3 and 4 together.
Because provisions 3 and 4 should be read together, the trial court did not err in finding Crispelli’s insurance policy cannot be used to preclude plaintiffs’ recovery. Provision 3 explicitly references liability insurance policies for ‘organizations legally responsible for the underinsured motor vehicle and applicable to the underinsured motor vehicle.’ Provision 4(a) also references an “organization which may be legally liable.” Further, the insurance policy’s definition of an underinsured motor vehicle, which states, in relevant part: ‘[B]odily injury liability insurance policies. . . applicable to the driver or to the person or organization legally responsible for such vehicle and applicable to the vehicle.’ As such, provision 4(a) should be read to apply only to organizations legally responsible for the motor vehicle because all three provisions are used to determine coverage for an underinsured motor vehicle, and thus may be construed together even if they do not explicitly reference each other. See Omne Fin, Inc v Shacks, Inc, 460 Mich 305, 312; 596 NW2d 591 (1999). And because Crispelli’s is not an organization legally responsible for Nowakowski’s motor vehicle, the trial court properly excluded Crispelli’s insurance policy from provision 4(a).”
Judge Markey dissented, arguing that the majority erred by focusing on provision 4(a), which ‘plainly does not apply . . . because Nowakowski’s vehicle was not uninsured.’ Rather, she argued that the majority should have focused on provision 4(b), which required that any amount paid or payable under the Liability Insurance Coverage of this or any other policy (emphasis added)’—e.g., Crispelli’s dramshot liability policy.