Michigan Court of Appeals; Docket No. 78-820; Published
Judges Cynar, D. E. Holbrook, and D. E. Holbrook, Jr.; Opinion by Judge Cynar with Judge D.E. Holbrook Concurring
Official Michigan Reporter Citation: 90 Mich App 767; Link to Opinion 
STATUTORY INDEXING:
Liability Policy Exclusions for Owned and Non-Owned Vehicles [§3131]
TOPICAL INDEXING:
Motor Vehicle Code (Financial Responsibility Act) (MCL 257.501, et seq.)
CASE SUMMARY:
In a lengthy Opinion by Judge Cynar with a separate concurring opinion by Judge D. E. Holbrook, the Court of Appeals held that a residual liability exclusion in plaintiff’s policy which denied liability coverage to plaintiff when she was operating a "nonowned automobile" was void and of no force and effect.
The plaintiff in this case lived with her father. Both plaintiff and father each owned an automobile which was insured with State Farm. One day, plaintiff was driving her father's automobile and became involved in an accident causing serious personal injuries to a motorcyclist. The plaintiff’s policy provided that coverage was afforded when plaintiff was using a "nonowned vehicle" with the permission of the owner. However, under the definitional section of the policy, a nonowned automobile was defined as an automobile which is not available for the frequent use of the named insured, his spouse, or any relative of either residing in the same household. The exclusion section of plaintiff’spolicy listed no exclusions which applied to the present fact situation. Based upon the policy's definition of "nonowned automobile," State Farm argued that it owed no liability coverage to plaintiff under her own policy.
The Court held that there was nothing conceptually defective with this type of an exclusion. The Court noted that there is nothing in the no-fault act which requires one to have residual liability coverage for injuries occurring when one is driving another's automobile. The Court held that an exclusion of liability coverage when driving a particular vehicle or a class of vehicles is valid under the no-fault statute. An owner's policy need only provide liability coverage for those cars owned by the insured. The policy in this particular case satisfied that requirement and also provided coverage when the insured was driving an automobile not owned by him or by a member of the household, or available for his frequent use. This additional coverage, although not required, is permissible as of course an insurer may provide liability coverage in excess of that required.
However, the Court concluded that this particular exclusion of liability coverage was invalid because the policy definition of "nonowned vehicle" is in conflict with the normal, ordinary, and commonly understood meaning of that phrase. In order to determine that coverage was not provided under the circumstances of this particular case, it would have been incumbent upon plaintiff to read the definition of "nonowned vehicle" which was buried in another part of the policy in order to be appraised that there really was no coverage for this particular nonowned vehicle. The Court felt that this type of policy construction violated the provisions of MCLA 257.520(b)(1) which requires that an owner's policy of liability coverage must designate "by explicit description or by appropriate reference" all motor vehicles covered by the policy. Because the policy's definition for "nonowned vehicle" is in conflict with its normal usage, this fact should have been highlighted in some way, such as boldface type or by a warning, or at least in the lengthy list of the exclusions, so that plaintiff would have been appraised of the lack of coverage that would have existed should she decide to use her father's car.
