Michigan Court of Appeals; Docket No. 159838; Published
Judges Reilly, Taylor, and Kobza; Unanimous; Opinion by Judge Reilly
Official Michigan Reporter Citation: 207 Mich App 674; Link to Opinion 
STATUTORY INDEXING:
Liability Policy Exclusions for Owned and Non-Owned Vehicles [§3131]
TOPICAL INDEXING:
Equitable Estoppel
CASE SUMMARY:
In this unanimous published Opinion by Judge Reilly, the Court of Appeals reversed summary disposition that the trial court had granted in favor of plaintiffs against State Farm in a case involving a dispute concerning whether State Farm had waived or was estopped from asserting an exclusion in its policy which would preclude coverage for plaintiffs bodily injury claim.
Plaintiff was injured when a minivan driven by State Farm's insured struck the motorcycle driven by plaintiff. State Farm's insured [Senneker] was driving a delivery van for her employer which was owned by her employer and insured by Farm Bureau. Plaintiff settled with Farm Bureau for its $200,000 limits, in exchange for a stipulated consent judgment against State Farm's insured in such amount as the court determined to be plaintiffs full and fair compensation. Additionally, State Farm's insured assigned her rights against State Farm to plaintiff allowing plaintiff to seek collection of his judgment against State Farm and to litigate the coverage dispute. The trial court entered a judgment in plaintiffs favor in the amount of $500,000, and subtracting the $200,000 paid by Farm Bureau, entered judgment against Senneker in the amount of $300,000. Plaintiff sought to enforce this judgment by writ of garnishment against State Farm. In the garnishment proceedings, State Farm moved for summary disposition on the basis of a policy exclusion which precluded coverage for its insured, Senneker's negligent driving, in the circumstance where the loss occurs during the "operation, maintenance or use of any vehicle owned by or registered or leased in the name of an employer of State Farm's insured."
The trial court granted plaintiffs cross-motion for summary disposition and held that State Farm was obligated to provide coverage. The court held that State Farm was precluded from asserting the policy exclusion regarding vehicles owned by its insured's employer because the exclusion raised in State Farm's motion was not raised in its initial denial of coverage which asserted in correspondence to plaintiffs counsel. The trial court, in its granting of summary disposition in favor of plaintiff, relied upon the "general rule" that insurance companies would be held to waive all defenses not raised in their initial denial of coverage; The trial court held that State Farm was "estopped" from raising defenses not raised in the initial correspondence to plaintiffs counsel.
On appeal, the Court of Appeals reversed and remanded, holding that State Farm was not estopped and had not waived the defense contained in the exclusion in its policy. Although the general rule is that once an insurance company has denied coverage to an insured and stated its defenses, the company has waived or is estopped from raising new defenses, there are exceptions to this rule as discussed in Ruddock v Detroit Life Insurance Company, 209 Mich 638 (1920). In that case, the Supreme Court distinguished cases applying the doctrine of waiver and estoppel, and held that waiver and estoppel are not available where their application would result in "broadening the coverage of a policy," such that it would cover a loss it never covered by its terms. In further discussing this principle, the court noted that in Lee v Evergreen Regency Corp, 151 Mich App 281 (1986), subsequent cases have been decided which have applied the doctrine of waiver and estoppel even where the effect was to bring within coverage risks not covered by the policy terms or expressly excluded from the policy. Those two classes of cases involved situations where (1) companies have rejected claims of coverage and declined to defend their insureds in the underlying litigation, in which instance the court has held that the insurance company cannot later raise issues that were or should have been raised in the underlying litigation; and (2) cases where the inequity of forcing the insurer to pay on a risk for which it never collected premiums is outweighed by the inequity suffered by the insured because of the insurance company's actions.
The Court of Appeals herein determined that neither exception applied because (1) State Farm is not attempting to now raise an issue that was or should have been litigated in the underlying action; and (2) the inequity suffered by the insured (whose rights were assigned to plaintiff) because of the insurance company's actions does not outweigh the inequity to the insurance company. Here, the insured is in no worse position than she was when coverage was initially denied and the insured did not rely on the statements of the insurer to her detriment. Because the trial court did not decide whether the vehicle was in fact owned by Senneker's employer, thus making the exclusion applicable, the matter was remanded for further proceedings on this issue.
