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State Farm v Ruuska; (MSC-PUB, 1/8/1982; RB #487)


Michigan Supreme Court; Docket No. 63553; Published  
Opinion by Justice Williams; ____________  
Official Michigan Reporter Citation: 412 Mich 321; Link to Opinion alt    

Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]  
Scope of Mandated Coverages [§3131(1)]  
Liability Policy Exclusions for Owned and Non-Owned Vehicles [§3131]  
General / Miscellaneous [§3135]

Private Contract (Meaning and Intent)    

In separate Opinions by Justice Williams, by Justice Levin, and by Chief Justice Coleman, the Supreme Court held invalid a residual liability exclusion in plaintiffs own insurance policy which denied liability coverage to plaintiff when she was operating a "non-owned" vehicle which was owned by or registered in the name of a relative residing in the same household.

The plaintiff, Gloria Carlson, lived with her father. Gloria and her father each owned separate automobiles, insured under separate policies with State Farm. While driving her father's car, Gloria became involved in an accident causing serious personal injuries to a motorcyclist. Coverage for residual liability under each policy was limited to $25,000 for bodily injury to any one person.

The controversy in Ruuska centered around the question of the applicability of the added coverage of Gloria's separate policy of insurance to an accident involving Gloria's father's vehicle.

State Farm did not dispute that it was obligated to provide residual liability coverage under the policy issued to Gloria's father. State Farm did dispute that there was coverage under Gloria Carlson's separate policy on a vehicle not involved in the accident.

The policy provision upon which State Farm relied was the definition of a "non-owned" vehicle.

Gloria's separate policy did extend liability coverage to her use of a "non-owned automobile." However, in the part of the policy containing definitions of terms, a "non-owned" automobile was defined as an automobile not owned by or registered in the name of any relative residing in the same household.

Since it was undisputed that, at the time of the accident, Gloria was driving an automobile owned by her father, with whom she resided, State Farm took the position that her "non-owned" automobile coverage was excluded by the definition of non-owned vehicle.

The trial court had ruled the attempted exclusion contrary to the provisions of the No-Fault Act, and, therefore, invalid. The Court of Appeals affirmed, but on the ground that, while the exclusion was permissible, it was not plainly set out in the policy and, therefore, unenforceable.

Justice Williams, in an opinion joined by Justices Fitzgerald and Moody, wrote that the No-Fault Act requires an insurer to provide its insured with residual liability for losses caused by the use of a motor vehicle, and precludes an insurer from denying liability solely on the basis that the accident involved the insured's use of a vehicle owned by or registered in the name of a relative residing in the same household. Justice Williams also wrote that this same reasoning prevents an insurer from denying coverage solely on the basis that the accident involved the insured's use of a vehicle "furnished or available for the frequent or regular use of the named insured."

The Williams opinion found such exclusions repugnant to the clear directive of the No-Fault Act (§3101, §3131, and §3135) requiring that a policy purchased pursuant to that Act provide residual liability coverage for the use of a motor vehicle, without regard for whether the named insured was using a vehicle owned by a relative with whom she resides, and without regard for whether she was using a vehicle furnished or available for her frequent or regular use.

Because of its invalidation of the policy exclusion on public policy grounds, the Williams opinion did not reach the question as to the ambiguity of the definition.

In a separate opinion, concurring in the result, Justice Levin wrote that, although he did not find this particular exclusion contrary to the requirements of the No-Fault Act, he did find it unenforceable.

Justice Levin wrote that, although he concurred with the result of the lead opinion, he did not agree with its rationale. Justice Levin wrote that the No-Fault Act does not require an insurer to provide "portable" residual liability coverage when the owner drives another insured vehicle.

The Levin opinion did find the "exclusion" unenforceable, however, because it is unconscionable and contrary to the reasonable expectations of an insured. Justice Levin pointed out that Gloria's policy stated that it did cover her when she drove a "non-owned automobile" and to the average person buying insurance this means simply a vehicle not owned by the insured. It was pointed out that the "exclusion" of coverage for what would probably be the most common use of another's automobile - the borrowing of a family member's car was not on the face page or the certificate, or in the declaration, and was not in the lengthy list of exclusions, but rather, was embedded in the definition of a term which the average consumer would probably consider clear on its face.

In a separate opinion to reverse, Justice Coleman, joined by Justices Kavanagh and Ryan, agreed with Justice Levin that the No-Fault Act does not prevent the exclusion of coverage for certain non-owned vehicles. The Coleman Opinion also felt, however, that the language of the contract was unambiguous, and did not accept the "reasonable expectations" argument set forth by Justice Levin.

[Author's Comment: This affirms the result in item number 217.]

Michigan auto accident attorney Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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