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Wilkie v Auto-Owners Insurance Company; (COA-PUB, 5/1/2001, RB #2210)


Michigan Court of Appeals; Docket No. 217919; Published 
Judges Doctoroff, Hoekstra ,and Markey; Unanimous; Per Curiam
Official Michigan Reporter Citation: 245 Mich App 521; Link to Opinion alt
On July 16, 2003, the Michigan Supreme Court REVERSED this Court of Appeals Opinion; Link to MSC Summary alt  

Not Applicable

Private Contract (Meaning and Intent)
Underinsured Motorist Coverage: Setoffs Applicable to Underinsured Motorist Cases

In this unanimous published opinion written by Judge Markey, the Court of Appeals held that under the language of the insurance policy involved in this case, plaintiff’s claim for underinsured motorist benefits could only be reduced by the specific amount of the settlement actually received by plaintiff from the tortfeasor’s insurance company where the tortfeasor’s entire liability limits had been exhausted by settlements among multiple plaintiffs.

The set off clause in defendant’s underinsured motorist policy, stated that the limit of coverage for underinsured motorist benefits “shall not exceed the lowest of the amount by which the Underinsured Motorist Coverage limits stated in the Declarations exceed the total limits of all bodily injury liability bonds and policies available to the owner or operator of the underinsured automobile.”  In this particular case, the owner/operator of the underinsured automobile had liability limits of $50,000 per occurrence.  In the subject accident, plaintiff’s decedent was killed and another person severely injured.  The damages of both claimants far and away exceeded the tortfeasor’s coverage.  The tortfeasor’s $50,000 single limits were divided equally between the two claimants, with each receiving $25,000.  Plaintiff’s decedent was covered under an underinsured motorist policy issued by defendant Auto-Owners which provided underinsured policy limits of $100,000 per person.  Plaintiff contended that Auto-Owners could reduce the $100,000 limits by only the $25,000 settlement received by plaintiff’s decedent.  Defendant Auto-Owners claimed that it could reduce the underinsured motorist policy limits by the full $50,000 of coverage, because that was the amount that was “available to” the underinsured defendant.

The trial court and Court of Appeals rejected the argument of Auto-Owners and held that Auto-Owners could only reduce its underinsured motorist limits by the amount actually received by the plaintiff from the tortfeasor.  In this regard, the Court of Appeals stated:

“Here, what is ‘available’ to each plaintiff is not the ‘theoretically or hypothetically available’ amount of $50,000, but rather, what was ‘actually’ or ‘reasonably’ available to each plaintiff, the amount of $25,000, which each actually received from the insurer of the [underinsured] vehicle....  In summary, because of the ambiguity in the defendant’s insurance policy and the fact that an insured, reading the contract would reasonably expect coverage under the circumstances of this case involving multiple claimants, we hold that the amount actually received by each plaintiff and not the entire policy limits should be set off against the amount available to each plaintiff under the underinsured motorist coverage provision.  The trial court properly granted summary disposition in favor of plaintiffs.  We affirm.”

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