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Amerisure Mutual Insurance Company v Citizens Insurance Company of America and Citizens Insurance Company of America v Amerisure Mutual Insurance Company and Detroit Board of Education; (COA-UNP, 1/23/2007, RB #2843)


Michigan Court of Appeals; Docket #259889 and #259890; Unpublished
Judges Fort Hood, Talbot, and Servitto; unanimous; per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion courthouse image

Not applicable

No-Fault Insurer Claims for Reimbursement: Reimbursement Based on a Mistake
Private Contract (Meaning and Intent)
Reformation of Insurance Contracts: Reformation for Mutual Mistake

In this unanimous unpublished per curiam opinion, the Court of Appeals affirmed summary disposition for defendant Citizens Insurance, finding that because Citizens and the Detroit Board of Education (DBE) never intended for Citizens to insure the DBE’s fleet of school buses, Citizens was entitled to reform its policies to exclude coverage for the buses.

In 1995, Citizens issued an insurance policy to the DBE which covered “any auto.” The word “auto” was defined as “a land motor vehicle, trailer, or semi trailer designed for travel on public roads but does not include ‘mobile equipment.’” The DBE policy was renewed until July 2002. The Earl Jones Commonwealth Agency serviced the policy until July 1988, at which time the servicing was taken over by the Long Insurance Agency. During this same time period, the DBE also had an insurance policy with Amerisure Mutual Insurance Company. From 1995 to 2002, all claims arising out of the liability for the school buses was submitted to Amerisure. In October 2001, Amerisure discovered the Citizens’ policies and sent Citizens a list of bus-related claims. Amerisure also informed Citizens that it reserved the right to seek reimbursement for claims previously paid. In March 2002, Citizens asked the DBE to agree to reform its policies to reflect the scope of coverage intended by Citizens and the DBE, that is, that the Citizens’ policies would only provide liability coverage for the DBE’s service vehicles. In September 2002, Citizens issued endorsements to provide coverage for “‘any’ auto except school buses.’”

Amerisure sued Citizens for breach of contract, claiming Citizens breached its contract with the DBE when it failed to reimburse Amerisure for one-half of all the claims it had paid. Citizens then filed a complaint against Amerisure and the DBE for reformation of its policies. The trial court consolidated the two cases and granted Citizens summary disposition. In affirming, the Court of Appeals determined that the evidence established that Citizens and the DBE agreed that Citizens would provide coverage to the DBE’s fleet of service vehicles, but not the fleet of school buses. In so holding, the Court of Appeals noted there was evidence that when the DBE originally purchased the policy from Citizens, the DBE’s agent first asked for a quote covering both the service vehicles and the buses. However, a Citizens underwriter informed the agent that Citizens would not insure the buses. Therefore, although the agent filled out an application for insurance for “any ‘auto’” by requesting “a one quote coverage,” the agent’s cover letter that accompanied the application only mentioned coverage for the service vehicles, which consisted of “some 223 units.” At that time, the DBE owned 223 service vehicles and about 275 buses for a total of approximately 500 vehicles. In addition, Citizens provided evidence that the amount it charged for the insurance was equivalent to coverage for 223 vehicles, not 500. The evidence further indicated that in 1996, Citizens refused a request to insure the DBE’s buses. Moreover, in 1998, when DBE gave Citizens a list of vehicles which included its buses, Citizens requested the buses be removed from the list. In this regard, the court stated:

. . . the evidence establishes that Citizens and the DBE reached an agreement that Citizens would provide liability coverage to the DBE’s fleet of service vehicles, but not to the DBE’s fleet of school buses. In 1995, Bostic asked Citizens to insure the DBE’s fleet of service vehicles and its fleet of school buses. John Carlisle, an underwriter at Citizens, agreed to look at the DBE’s fleet of service vehicles, but, according to Bostic, Carlisle made it clear to him that Citizens was not willing to insure the DBE’s fleet of school buses. Bostic then submitted a formal application for insurance to Citizens. Although, Bostic requested liability coverage for covered auto symbol ‘01' in the application, it is clear from Bostic’s cover letter, the rest of the application, and Bostic’s explanation for requesting covered auto symbol ‘01' that Bostic was not requesting liability coverage for the DBE’s fleet of school buses. In his cover letter, Bostic stated that the insured risk was ‘the service fleet for the Detroit Public Schools,’ which consisted of ‘some 223 units.’ In 1995, the DBE’s fleet of school buses consisted of more than 500 units. . . .  The conduct of Citizens after it issued the initial policy to the DBE in 1995 also demonstrates that Citizens never intended to provide liability coverage to the DBE’s fleet of school buses. The premium for the initial policy issued by Citizens was approximately $180,000, but . . . the premium for the Amerisure policy in 1995 exceeded $600,000. In addition, in 1998, when the DBE included a school bus on its list of service vehicles, Citizens requested that the school bus be removed because it did not insure the liability of school buses. Finally, in 1996, Citizens refused a request from the Long Insurance Agency to insure the DBE’s fleet of school buses. The refusal demonstrates that Citizens did not believe that it was providing liability coverage to the DBE for its fleet of school buses.”

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