Michigan Supreme Court; Docket #142956; Published
Michigan Court of Appeals; Docket #294505; Published
Justice Zahra for the majority joined by Justices Young, Markman, and M.B. Kelly; 4-3 per curiam; Justice Cavanagh dissenting, joined by Justices Hathaway and M. Kelly;
Official Michigan Reporter Citation: ____ Mich ____ (2012); Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Underinsured Motorist Benefits; Notice and Statute of Limitations for Uninsured Motorist Coverage
In this 4-3 per curiam Opinion by Justice Zahra, the Michigan Supreme Court reversed the Court of Appeals in a case involving uninsured motorist coverage that contained a 30-day notice provision regarding hit-and-run motor vehicle claims. In upholding the enforceability of this notice provision, the majority opinion stated:
“We hold that an unambiguous notice-of-claim provision setting forth a specified period within which notice must be provided is enforceable without a showing that the failure to comply with the provision prejudiced the insurer. Therefore, State Farm properly denied the claim for UM benefits sought in the instant case because it did not receive timely notice, a condition precedent to the policy’s enforcement. This conclusion is consistent with our decisions in Jackson v State Farm Mutual Automobile Insurance Company, [472 Mich 942 (2005)] and Rory v Continental Insurance Company, [473 Mich 457 (2005)], both of which the Court of Appeals was bound to follow. The Court of Appeals erred by disregarding this controlling authority in favor of an earlier decision, Koski v Allstate Insurance Company, [456 Mich 439 (1998)], wherein this Court held that a claimant’s failure to comply with a notice-of-suit provision contained in a homeowner’s insurance policy requiring notice immediately or within a reasonable time precluded an award of UM benefits only if the insurer established actual prejudice to its position. The Court of Appeals failed to recognize the critical ways in which Koski is distinguishable from the instant case. Accordingly, we reverse the judgment of the Court of Appeals and remand the case to the trial court for entry of summary disposition in favor of State Farm.”
In this case, William DeFrain, a pedestrian, was severely injured by a hit-and-run driver on May 31, 2008 causing him to suffer severe brain injuries that resulted in his death on November 11, 2008. It was undisputed that State Farm did not receive notice that DeFrain had been the victim of a hit-and-run driver until August 25, 2008, nearly 60 days after the expiration of the 30-day notice provision. The trial court and the Court of Appeals denied defendant State Farm’s motion for summary disposition on the basis that the decision in Koski v Allstate Ins Co required a showing of prejudice in order to enforce a contractual notice provision. In so ruling, the lower courts refused to follow Jackson v State Farm [RB #2575] on the basis that the Supreme Court’s disposition in that case was by an order issued without the benefit of full briefing and oral argument. Therefore, the lower courts ruled that Koski, not Jackson, was controlling.
The Supreme Court rejected this attempt to limit the applicability of its decision in Jackson, noting that the order issued in Jackson vacated the judgment of the Court of Appeals and reinstated the order of the trial court “for the reasons stated in the Court of Appeals dissent.” The majority opinion then went on to characterize such an order as fully binding precedent and in that regard, stated:
“An order of this Court is binding precedent if it constitutes a final disposition of an application and contains a concise statement of the applicable facts and reasons for the decision. [People v Crall, 444 Mich 463 (1993)]. These requirement derive from article 6, § 6, of our 1963 Constitution and can be satisfied by referring to another opinion, [Wechsler v Wayne Co Rd Comm, 215 Mich App 579 (1996)]. With regard to this Court’s order in Jackson, the Court of Appeals dissent set forth the facts and legal analysis necessary to support the final disposition of the application. By referring to the Court of Appeals dissent, this Court adopted the applicable facts and reasons supplied by the dissenting judge as if they were its own.”
The majority opinion then went on to distinguish the Koski decision, which imposed the prejudice requirement, but did so in a different context. Specifically, the court distinguished Koski in the following manner:
“The holding in Koski imposed a prejudice requirement only on contractual provisions ‘requiring notice immediately or within a reasonable time.’ Id. The Court did not purport to impose a prejudice requirement on contractual provisions requiring notice within a specified time such as 30 days. There is an obvious distinction between a contract provision requiring notice ‘immediately’ or ‘within a reasonable time,’ which are temporally imprecise terms, and one that requires notice ‘within 30 days,’ which could not be clearer.”
The majority opinion also stated that its result in this case was consistent with the holding in Rory v Continental Ins Co [RB 2575] where the Supreme Court upheld the enforceability of a shortened one-year statute of limitations provision in an uninsured motorist contract. The majority opinion stated that the basis for enforcing such time limitation provisions is that, “When a court abrogates unambiguous contractual provisions based on its own independent assessment of ‘reasonableness,’ the court undermines the parties’ freedom of contract.” [Id. At 468-469]
Finally, in rendering its holding, the majority opinion overruled the Court of Appeals’ decision in Bradley v State Farm Mut Auto Ins Co, 290 Mich App 156 (2010) [RB #3142] which had applied a prejudice requirement in a manner that was inconsistent with the ruling in the case at bar. Therefore, Bradley was overturned.
Justice Cavanagh, joined by Justices Hathaway and Marilyn Kelly, dissented. Justice Cavanagh argued that the decision in Koski should control this case and that an insurer should not be permitted to relieve itself of responsibility to pay a claim based upon failure to strictly comply with the contractual notice provision unless the insurer is able to prove prejudice. Failure to adopt such a prejudice rule would, according to Justice Cavanagh, “ . . . ignore the unique character of insurance policies, which, although in the form of a contract, are in actuality ‘a product prepared and packaged by the insurer’ without ‘negotiation or explanation of the scope of the coverage.’ . . . I would not turn a blind eye to the manner in which the insurance industry operates and discount the effects of encouraging insurers to include technical escape hatches to preclude coverage at the expense of unwary injured citizens.”
