Michigan Court of Appeals; Docket No. 292716; Published
Judges Murphy, Hoekstra, and Stephens; 2-1 Opinion (Hoekstra dissenting)
Official Michigan Reporter Citation: 290 Mich. App. 156, Link to Opinion 
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Uninsured Motorist Benefits - Notice and Statute of Limitations for Uninsured Motorist Coverage
Underinsured Motorist Coverage
CASE SUMMARY:
In this 2-1 published opinion written by Chief Judge Murphy, with Judge Hoekstra dissenting, the Court of Appeals held that plaintiff was not disqualified from recovering uninsured motorist benefits under her policy with defendant, where plaintiff failed to comply with a policy provision requiring that the uninsured tortfeasor be joined in any lawsuit against the defendant for recovery of uninsured motorist benefits. The uninsured motorist limits applicable to the instant case were $25,000. Prior to filing suit against defendant for uninsured motorist benefits, the plaintiff sued the uninsured tortfeasor who failed to defend and was defaulted. Plaintiff then took a default judgment against the uninsured tortfeasor for $50,000. When plaintiff filed suit against defendant to collect uninsured motorist benefits and did not join the tortfeasor, defendant argued that plaintiff was not entitled to recover uninsured motorist benefits because plaintiff violated the policy provision requiring joinder of the uninsured tortfeasor. The trial court agreed with defendant and the Court of Appeals reversed.
In reversing the trial court, the majority opinion by Judge Murphy applied the “prejudice rule” adopted by the Supreme Court in Koski v Allstate Ins Co, 456 Mich 439 (1998). In Koski, the court held that an insurer who seeks to cut off responsibility on the ground that its insured did not comply with the contract provision requiring notice must establish actual prejudice in order to avoid liability under the policy. In reliance on Koski, the majority stated:
“We conclude that the Koski principle is equally applicable to an analogous joinder provision; there is no valid distinguishing reason not to apply Koski. We acknowledge our Supreme Court’s decision in Rory v Continental Ins Co, 473 Mich 457, 461 703 NW2d 23 (2005), wherein the Court held that an unambiguous provision in an uninsured motorist policy must be enforced as written regardless of the equities and reasonableness of the provision. However, Koski carved out a narrow prejudice requirement relative to all insurance contracts, and Rory did not overrule the Supreme Court’s earlier ruling in Koski, which we find controlling.”
The majority opinion then went on to state that the joinder provision in the policy at issue was primarily intended to protect the defendant’s subrogation rights. Here, the defendant’s right to subrogation was not, in any way, affected by entry of the default judgment against the uninsured tortfeasor, as the judgment could be enforced by defendant and the judgment was twice the amount of defendant’s uninsured motorist policy limits. Therefore, there was no prejudice in plaintiff’s failure to join the tortfeasor in the case seeking uninsured motorist benefits.
Judge Hoekstra dissented. He agreed that the Rory decision did not overrule Koski with regard to the requirement of showing prejudice in failure to give notice cases. However, the case at bar did not involved a failure to give notice, but rather involved the breach of a clear policy provision requiring joinder, not notice. Therefore, under Rory, the joinder provision should be enforced strictly without regard to the Koski prejudice rule.
