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Zulakis v Auto-Owners Insurance Company, (COA-UNP, 11/20/2001, RB #2261)


Michigan Court of Appeals; Docket #221948; Unpublished
Judges O’Connell, White and Smolenski; unanimous; per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion courthouse graphic

Not applicable

Underinsured Motorist Coverage: Setoffs Applicable to Underinsured Motorist Cases

In this unanimous per curiam opinion involving a claim for underinsured motorist benefits, the Court of Appeals issued three (3) holdings. First, the court held that, under the circumstances presented in this case, the trial judge did not err by instructing the jury that an adult could be a resident of two (2) households. This was an issue in the case because the underinsured motorist policy extended coverage to “a relative” of a named insured. Relative was defined as “a person who resides with you and who is related to you by blood, marriage or adoption.” The court held that in the case at bar, the term “resides with” could be interpreted in more than one manner and therefore the term is ambiguous and must be construed against the defendant. Therefore, it was possible for the plaintiff’s decedent to “reside with” both his sister and his grandparents, thus affording coverage under the grandparents’ policy. Accordingly, the Court of Appeals held that the jury instructions, although “imperfect” adequately and fairly presented the theories of the party and the applicable law to the jury.

Second, the Court of Appeals ruled that the trial court erred in concluding that two (2) inoperable, broken down, non-functional motor vehicles that were titled in the name of plaintiff’s decedent were not “automobiles” as that term is used in the policy. This was an issue because the policy only extended coverage to a resident relative “who does not own an automobile.” The Court of Appeals held that there was a material factual dispute regarding whether these inoperable vehicles could properly be construed as “automobiles” within the meaning of the policy. Therefore, the issue should not have been decided on summary disposition, but rather submitted to the trier of fact for a determination whether the vehicles were “automobiles” within the meaning of the policy.

Third, the Court of Appeals ruled that the underinsured motorist carrier was only entitled to set-off the actual amount of the settlement received by the decedent’s estate from the tortfeasor where the entire liability limits available to the tortfeasor were exhausted by multiple settlements. The total liability limits available to the tortfeasor was a policy providing liability coverage in the amount of $20,000 per person/$40,000 per occurrence. There were five (5) plaintiffs killed or injured in the accident. Each of these five claimants received $8,000, thereby completely exhausting the coverage. The defendant argued that it was entitled to offset the full $20,000 per person policy limit because the language in the underinsured motorist policy limited the extent of that coverage to the amount by which the underinsured coverage “exceeds the total limits of all bodily injury liability bonds and policies available to the owner or operator of the underinsured automobile.” The Court of Appeals, relying upon its earlier published opinion in Wilkie v Auto-Owners Insurance Company [Item No. 2210] found that the term “available” was unambiguous. Therefore, the court held:

In cases involving multiple claimants, the pro-rata amount actually received by each plaintiff and not the entire policy limits is the proper amount set off against the amount available to the plaintiff under the underinsured motorist coverage provision. In this case, the proper setoff was $8,000 rather than $20,000.”

Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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