Michigan Court of Appeals; Docket No. 216444; Unpublished
Judges Fitzgerald, Neff, and Smolenski; Unanimous; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Underinsured Motorist Coverage: Exclusions from Underinsured Motorist Benefits
Release and Settlements
Private Contract (Meaning and Intent)
Extra Contractual / Mental Anguish Damages
In this unanimous unpublished per curiam Opinion, the Court of Appeals held that a settlement with multiple tortfeasors in a motor vehicle accident case, without first obtaining the consent of the insurer providing underinsured motorist insurance protection and without exhausting all available coverages, renders the underinsured motorist endorsement inapplicable where the policy language requires prior consent and requires exhaustion of available limits before such coverage is owed.
In this case, the Knipples were injured in a rear-end collision with a vehicle occupied by defendants Dyer and Robinson. At first, reports indicated that Dyer was operating the vehicle, but subsequent investigation disclosed that Robinson, in fact, was operating the vehicle and that they had switched seats after the accident. The case also gave rise to a dram shop claim against the bar where the tortfeasors apparently had been drinking.
Farm Bureau provided underinsured motorist benefits in the amount of $100,000. Discussions occurred between the Knipple's attorney and Farm Bureau Insurance Company, regarding the underinsured motorist benefits claim. The Farm Bureau policy provided that the insured may not settle with anyone responsible for the accident, without the company's written consent. The policy further provided that if an insured agrees to settle with the persons responsible for the accident for an amount which does not exhaust the sum of the limits of liability under "all bodily injury liability bonds and insurance policies applicable at the time of the accident," the coverage under the underinsured motorist benefits endorsement shall be void.
Negotiations ensued between the Knipples and Dyer and Robinson and the dram shop. Ultimately, five days before a scheduled trial, the attorney for Knipple notified Farm Bureau's adjuster that defendant Robinson had offered his policy limit of $3S,000, and requested permission to settle. Before receiving consent, the case was resolved at a settlement conference. Additionally, the dram shop agreed to pay $30,000 of its $50,000 policy limit, and Dyer agreed to pay $5,000 of his $20,000 policy limit.
On appeal, the Court of Appeals held that the terms of the underinsurance protection are governed by the insurance contract. The terms of the policy were deemed not ambiguous, and under its terms, the claim will not be covered if the resulting lawsuit is settled for less than applicable policy limits without Farm Bureau's written consent. The court held that the settlement with the dram shop was relevant to this case, and the Knipple's failure to exhaust the dram shop's liability insurance policy limit rendered the underinsured motorist endorsement void.
The court further determined that the trial court should have dismissed the Knipple claim of "bad faith refusal to pay an insurance claim." The Court of Appeals held that this action is not recognized by the courts of this state.
Finally, the Court of Appeals held that the claim of the Knipple's for "intentional infliction of emotional distress" should also have been dismissed, because as a matter of law, failure to pay a contractual obligation does not amount to outrageous conduct as required by such a claim, even if it is willful or in bad faith.