Michigan Court of Appeals; Docket #287505; Published
Judges Markey, Bandstra, and Murray; 2-1 (Judge Markey dissenting)
Official Michigan Reporter Citation: 287 Mich App 537, Link to Opinion
The Michigan Supreme Court Granted Leave to Appeal on 12/17/11, Link to Order
On 12/29/2011, the Michigan Supreme Court VACATED its 12/17/11 Order and DENIED Leave to Appeal; Link to Order
Casualty Insurance Policies: Minimum Coverages and Required Provisions
In this 2-1 published opinion by Judge Bandstra, the Court of Appeals held that a warning notice regarding an excluded driver is void if the warning does not strictly comply with the notice requirements contained in MCL 500.3009(2).
This action arose out of a motor vehicle accident that occurred when a truck driven by William Smith crossed the center line and struck another vehicle, injuring the occupants. When Smith purchased the truck, he added his friend, Sheri Harris, to the title because he did not have a valid license. Harris obtained no-fault insurance from Progressive Insurance and signed a form listing Smith as an excluded driver. The policy’s declaration page and the certificate of insurance both listed Smith as an excluded driver. Progressive sued for declaratory judgment regarding its liability and moved for summary disposition on the basis of the named driver exclusion. The trial court granted Progressive’s motion, and the injured occupants appealed.
In reversing, Judge Bandstra first rejected Progressive’s argument that the warning on the declaration page was adequate. Judge Bandstra noted that Progressive disregarded the statute’s grammatical structure. Judge Bandstra noted that the sentence in §3009(2) that stated, “‘Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance,’ contains two parallel clauses after the verb ‘is’: on the face . . .’ and ‘on the certificate of insurance . . . .’” Judge Bandstra explained that the first clause of the sentence contains three alternatives separated by the word “or.” The first and second clauses are then joined by the word “and.” Therefore, Judge Bandstra stated that in order to satisfy the statute, the warning must appear on two documents: on the certificate of insurance and on one of the following: the declaration page, the face of the policy, and the policy certificate. Therefore, Judge Bandstra concluded that the plaintiff’s argument that a warning on just the declaration page does not satisfy the statute. In this regard, the court stated:“
Appellee’s argument disregards the grammatical structure of the statute. The sentence, ‘Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance,’ contains two parallel clauses after the verb ‘is’: ‘on the face . . .’ and ‘on the certificate of insurance . . . .’ The first clause contains three alternatives, separated from each other by ‘or.’ The first and second clauses are joined by ‘and.’ Therefore, to satisfy the statute, the warning must appear on at least one of the three alternatives mentioned in the first clause and on the certificate of insurance. Plaintiff’s interpretation that a correctly worded warning on the declaration page alone satisfies the statute is inconsistent with the grammatical structure of the statute.”
(emphasis in original)
Judge Bandstra next rejected the trial court’s determination that the wording that Progressive used was sufficient. Progressive used the word “responsible” rather than the word “liable” in its exclusion. Judge Bandstra found that although there is no binding authority requiring strict compliance with §3009(2), the statute indicates that failure to follow its requirements makes the provision invalid. In so concluding, Judge Bandstra noted that the statute provides that, “Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance.” Judge Bandstra stated that the Legislature mandated use of the notice when it stated, “the following notice.” Moreover, he stated that the Legislature did state the effect of non-compliance by stating that if the notice was not provided the named person exclusion would not be valid. According to Judge Bandstra, “the statute could not be clearer.” In this regard, Judge Bandstra stated:
“Although there is no binding authority that states that ‘strict compliance’ with §3009(2) is necessary, the statute itself indicates that failure to follow its requirements results in the invalidity of the exclusion. . . . §3009(2) provides:
If authorized by the insured, automobile liability or motor vehicle liability coverage may be excluded when a vehicle is operated by a named person. Such exclusion shall not be valid unless the following notice is on the face of the policy or the declaration page or certificate of the policy and on the certificate of insurance: Warning — when a named excluded person operates a vehicle all liability coverage is void --- no one is insured. Owners of the vehicle and others legally responsible for the acts of the named excluded person remain fully personally liable.
The Legislature did not merely set forth the substance of the required warning. Instead, the statute mandates use of ‘the following notice,’ which notice is provided verbatim for insurers to use. Further, the Legislature did not merely state that this notice is required, without specifying the effect of noncompliance. If the required warning notice is not provided, the named person exclusion ‘shall not be valid.’ The statute could not be clearer.”