United States District Court for the Western District of Michigan; File No. 1:94-CV-264;
Judge Robert Holmes Bell; Published
Official Federal Reporter Citation: 20 F Supp 2d 1113; Link to Opinion
Casualty Insurance Policies – Minimum Coverages and Required Provisions (MCL 500.3009)
Cancellation and Rescission of Insurance Policies
Reformation of Insurance Contracts
In this Opinion authored by Judge Robert Holmes Bell, the court considered whether property protection benefits were payable under a policy of no-fault insurance where the driver of the insured vehicle was not listed on the policy as an insured driver.
The case arose out of a collision between a propane truck and an Amtrak train. The truck was owned by Van Andel LP Gas and was being driven by one of its employees at the time of the accident. The truck was insured by Homestead Insurance Company, as part of a risk retention plan offered by a propane dealer and distributor organization. The truck was registered in Michigan where the accident site was located.
The Homestead policy provided that no coverage was afforded if the vehicle was operated by anyone other than specifically enumerated people. However, the driver of the propane truck involved in the car-train collision was not listed on the policy. There was some question as to whether the employer/vehicle owner had notified the insurance company to add the driver to its list of insured persons. In all events, Homestead contended that since the driver was not listed as an insured driver, coverage for property protection benefits was excluded.
The Homestead policy provided that it was to be construed in accordance with the laws of the state of Utah, and. thus, the first issue before the court was whether Utah law or the Michigan no-fault law applied to this case. The court noted that the Michigan Supreme Court has embraced the Restatement of Torts, 2nd, § 187 and § 188, which, in general, provides for the application of the parties' choice of law, subject to certain exceptions. One such exception to the general rule is where the application of the chosen state's law "would be contrary to a fundamental policy of a state which has a materially greater interest than the chosen state in the determination of the particular issue."
The court noted that in Michigan, the scope of vehicle liability coverage is determined by statute, specifically, the Financial Responsibility Act and the Michigan No-Fault Act, which mandate property protection insurance coverage on vehicles registered in this state. Under §3009(2) of the no-fault act, an automobile insurer may exclude a named individual. In the Homestead policy, however, all drivers were excluded except those people specifically named. The court held that this provision does not meet the requirements of Michigan's named driver exclusion provision as set forth in §3009(2) and, therefore, the exclusion is invalid and the policy must be applied to provide the required coverage.
The court held that if it were to adopt Homestead's argument that Utah law controlled, then any insurer of a vehicle registered in Michigan could add a similar choice of law provision to circumvent the requirements of Michigan's no-fault act. The court also held that Michigan has a materially greater interest in this coverage issue then does the state of Utah. Therefore, the court held that the Homestead policy must be analyzed under Michigan law, and that under the Michigan no-fault act, the policy's limitation of coverage to named drivers only is invalid.
Finally, Homestead argued that its insured made a material misrepresentation by not providing it with information regarding the driver of the accident vehicle, and, therefore, the insurer was entitled to rescind the policy. However, the court held that the right to rescind the policy is extinguished once there is a claim involving an innocent third party, as was the case here.