Michigan Court of Appeals; Docket No. 175571; Published
Judges Michael Kelly, Marilyn Kelly, and Taylor; Unanimous; Opinion by Judge Michael Kelly
Official Michigan Reporter Citation: 218 Mich App 672; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Underinsured Motorist Coverage: Underinsured Motorist Coverage in General
Underinsured Motorist Coverage: Exclusions from Underinsured Motorist Benefits
Private Contract (Meaning and Intent)
Release and Settlements
CASE SUMMARY:
This unanimous published Opinion by Judge Michael Kelly represents the third time this case was before the appellate courts (see Item Nos. 1638 and 1759), and deals with a clause in an underinsured motorist policy requiring that plaintiff obtain the written consent of the underinsured motorist insurer before settling and releasing the underlying tortfeasor. The specific issue on this remand was to answer the question framed by the Supreme Court, which directed the Court of Appeals to "consider and decide whether a condition of prejudice should be incorporated into the exclusionary clause contained in the policy of insurance." The Court of Appeals held that failure to obtain written consent before settling with the tortfeasor entitles the underinsured motorist carrier to deny underinsured motorist coverage without regard to whether the insurer is prejudiced. The court stated:
"Michigan courts have consistently upheld policy exclusions barring recovery of benefits where the insured party releases a tortfeasor from liability without the insurer's consent, recognizing that such a release of liability destroys the insurance company's right to subrogation.... A plaintiff’s settlement with a negligent motorist or other responsible party destroys the insurance company's subrogation rights under the policy and bars plaintiffs action for uninsured motorist benefits unless the insurer somehow waives the breach of the policy conditions. The language of Auto-Owners' policy exclusion is unambiguous and does not contravene Michigan law or public policy. Michigan law recognizes that an insured's release of a potentially liable tortfeasor is prejudicial to the insurer because such a release destroys any possibility that the insurer could recoup some of the amounts paid via its right to subrogation. There is no need to require Auto-Owners to actually prove prejudice due to the loss of its right to subrogation. Clear and specific exclusions contained in policy language must be given effect The exclusion in Auto- Owners' policy must be enforced as written, without incorporating a condition of prejudice."
The case was remanded to the trial court for entry of an order of dismissal.
