Volume XXIII, No. 1 January 11, 2011

LAW FAX

www.garanlucow.com

From the Co-Editors

James L. Borin & Simeon R. Orlowski

MICHIGAN COURT OF APPEALS REJECTS INSURER’S INTERPRETATION OF THE LIMIT OF LIABILITY PROVISION CONTAINED IN THE UIM POLICY CONTRIBUTOR – CARYN GORDON

Long v Pioneer State Mut Ins Co, Nos 293556, 293569, (Mich App 2010), dealt with the interpretation of the Limit of Liability provision contained in an Underinsured Motorists (“UIM”) policy issued by Pioneer State Mutual Insurance Company. In Long, a vehicle driven by William Lowry collided with a vehicle operated by Plaintiff Patrick Maloney. Plaintiff Joanne Long was a passenger in Maloney’s truck. Auto-Owners Insurance Company insured Lowry’s vehicle and provided a single limit for accidental bodily injury liability insurance of $100,000. Maloney maintained a no-fault insurance policy issued by Pioneer, which included an endorsement for UIM benefits in the amounts of $100,000 per person and $300,000 per occurrence. Maloney and Long

settled with Lowry for $100,000, the full amount of Lowry’s policy limit, and agreed to share this amount equally. Maloney and Long then sought UIM benefits from Pioneer State Mutual Insurance Company.

Pioneer argued that any UIM coverage potentially available to Long and Maloney must be reduced by $100,000, the total amount of the settlement with Lowry. Pioneer argued that after reducing its policy’s $100,000 limit on UIM coverage for each person by the $100,000 Maloney and Long obtained from Lowry, no UIM benefits were owed under the policy. Pioneer relied on the Limit of Liability provision of its UIM endorsement to support this argument. The Limit of Liability provision provides:

A. The limit of liability shown in the Schedule or in the Declarations for each person for Underinsured Motorists Coverage is our maximum limit of liability for all damages . .. arising out of “bodily injury” sustained by any one person in any one accident. Subject to this limit for each person, the limit of liability shown in the Schedule or in the Declarations for each accident for Underinsured Motorists Coverage is our maximum limit of liability for all damages for “bodily injury” resulting from any one accident:

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B. The limit of liability shall be reduced by all sums paid because of the “bodily injury” by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A of this policy.

Pioneer argued that because paragraph B limits its liability to the extent of “all sums paid” by the underinsured driver, it was entitled to reduce the UIM coverage available to each claimant by $100,000, the settlement amount paid by Lowry. The effect of this reduction is that Pioneer’s per person limit is reduced to $0 which means that neither Maloney nor Long would be entitled to recovery under Pioneer’s policy.

Pioneer supported its position with the Michigan Supreme Court decision in Wilkie v Auto Owners, which had similar facts. In Wilkie, a car driven by Stephen Ward collided with a vehicle occupied by Janna Frank and Paul Wilkie. Wilkie died in the accident, and Frank sustained injuries. Ward’s insurance company paid his bodily injury liability insurance limit of $50,000, which Frank and Wilkie’s estate shared equally. Wilkie’s estate then sought UIM benefits from Auto Owners, which had issued him UIM coverage with limits of $100,000 for each person to a total of $300,000 for each occurrence. The relevant portion of Wilkie’s UIM policy provided: a. Our Limit of Liability for Underinsured Motorists Coverage shall not exceed the lowest of:

2Ms. Ludden is an Associate in the Firm’s Troy Office and can be reached at (248)641-7600 or kludden@garanlucow.com

(1) 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; or

(2) the amount by which compensatory damages for bodily injury exceed the total limits of those bodily injury liability bonds and policies. Auto-Owners argued that because its policy limited UIM benefits to an amount in excess of coverage “available” to the underinsured vehicle and Ward’s policy made available $50,000 in coverage, the plaintiffs could recover $50,000 each. Wilkie and Frank contended that Auto Owners owed them each $75,000, reasoning that “having equally split the Ward policy limits of $50,000, only the $25,000 they received should have been subtracted from the $100,000 policy limit to determine the amount each was due.” The Supreme Court agreed with Auto-Owners and concluded the amount of coverage “available” dictated the extent of reduction. In other words, Wilkie and Frank were each entitled to UIM benefits of $50,000, rather than $75,000.

The Court of Appeals in Long, however, concluded that the Limit of Liability language contained in Pioneer’s UIM policy materially differed from the language in Wilkie. First, the Court noted that paragraph A of the Limit of Liability portion specifically identified as the relevant guidepost for further calculations the policy limit available “for each person” making a UIM claim. Next, paragraph B of the endorsement instructs the “limit of liability shall be reduced by all sums paid” by the legally responsible person. The Court concluded that this language differed from that of Auto Owners policy interpreted in Wilkie, which contained no reference to per person coverage limits and reduced the insurer’s UIM liability according to the total limit of coverage “available” to the owner of the underinsured vehicle.

Based on this interpretation, the Court ultimately concluded that since each plaintiff had received $50,000 from Lowry’s insurer, Pioneer was entitled to deduct $50,000 from the $100,000 in UIM benefits available to each claimant.

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Governor Snyder appoints conservative jurist Brian K. Zahra to the Michigan Supreme Court

CONTRIBUTOR – KAREN LIBERTINY LUDDEN2

Governor Snyder has appointed Michigan Court of Appeals judge Brian K. Zahra to be the next Michigan Supreme Court Justice, taking the place of Justice Maura Corrigan, who was

recently appointed to head the Michigan Department of Human Services. Justice Zahra served on the Court of Appeals since 1999, when he was appointed by then-Governor Engler. Before the Court of Appeals, Justice Zahra served on the Wayne County Circuit Court, from 1994 to 1998. He was a partner at the Detroit law firm of Dickinson Wright from 1989 to 1994. Justice Zahra is a conservative jurist, who has generally taken a strict constructionist viewpoint on interpreting statutes. He is expected to continue the philosophy of the conservative majority of the Michigan Supreme Court.

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GARAN LUCOW MILLER, P.C. SPRING DEPOSITION BOOT CAMP Garan Lucow Miller, P.C. is hosting a free Spring Deposition Boot Camp to take place on Wednesday March 2, 2011, from 8:00 a.m. to 1:00 p.m. at the Troy Marriott. The seminar will be a workshop designed to provide claims adjusters who are subject to being deposed in PIP cases with the skills necessary to successfully handle the deposition process.

To register please contact Eileen Carty at ecarty@garanlucow.com

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GARAN LUCOW MILLER, P.C. TITLE SPONSOR FOR THE CHERRY-ROUBAIX BICYCLE RACE 2011 Garan Lucow Miller, P.C., title sponsor of the Cherry-Roubaix bicycle race in Traverse City, Michigan, is pleased to announce that Cherry-Roubaix will host the Michigan State Road Race Championship in 2011.

Cherry-Roubaix is actually a series of bicycle races, taking place over a three day period. The first day is devoted to a sprints competition in downtown Traverse City; the second day to criterium races, also in downtown Traverse City; and the third day is dedicated to a road race, which will crown the Michigan State Champion. The races are scheduled to take place on August 12, 13 and 14, 2011, and will also kick off Traverse City’s annual Third Coast Bicycle Festival and a charity ride benefitting the Munson Healthcare Women’s Cancer Fund. If you have any questions about Cherry-Roubaix and Garan Lucow Miller, P.C.’s involvement in it, please contact Peter Worden at the Firm’s Traverse City office, (231)941-1611 or via email at Pworden@GaranLucow.com.