Court of Appeals Rules on Definition of “Uninsured Motor Vehicle”

Christian Huffman

The Michigan Court of Appeals recently issued a published (and therefore binding) opinion resolving a conflict between an unpublished Court of Appeals’ decision and a United States District Court decision (both of which were not binding in future cases) regarding when a motor vehicle qualifies as an “uninsured motor vehicle” for the purposes of policies of uninsured motor vehicle coverage.

Background

Meemic Insurance Company issued a policy of automobile insurance to Ibo Ware. That policy contained an endorsement providing uninsured motor vehicle coverage. This is optional coverage not required by Michigan’s no-fault act. Thus, it is available only pursuant to the terms of the endorsement. The endorsement stated that Meemic would pay benefits to Ware if he sustained bodily injury caused by an “uninsured motor vehicle.” Meemic’s policy defined “uninsured motor vehicle,” in relevant part, as “a motor vehicle which is . . . not insured by a bodily injury liability policy or bond that is applicable at the time of the accident.”

Ware was thereafter struck and injured by a motor vehicle operated by Dustin Schilling. He was covered by an automobile liability policy issued by State Farm. But State Farm denied coverage on the basis that Schilling failed to timely notify State Farm of the accident.

Ware then sued Meemic seeking recovery of uninsured motor vehicle benefits under his Meemic policy. Meemic filed a motion for summary disposition. Meemic argued that the vehicle operated by Schilling did not qualify as an “uninsured motor vehicle” as defined by the Meemic policy. State Farm’s post-accident denial of coverage based on Schilling’s post-accident failure to notify State Farm of the accident did not change the fact that Schilling’s vehicle was “insured by a bodily injury liability policy or bond that [wa]s applicable at the time of the accident.”

But the Circuit Court disagreed and denied Meemic’s motion, and the Michigan Court of Appeals affirmed that denial in Ware v Meemic Insurance Company.

Conflicting Interpretations on Uninsured Motor Vehicle Coverage

The Court of Appeals began by noting that it had previously addressed the exact same issue in its unpublished, and therefore non-binding, decision in Integon National Insurance v Berry. In that case, the Integon policy contained virtually the same definition of “uninsured motor vehicle” as the Meemic policy, and Integon had proposed the same interpretation of that definition as State Farm. But, in Integon the Court rejected that interpretation, stating that the policy defines “uninsured motor vehicle”:

to be one that is not insured under a bodily liability policy “that is applicable at the time of the accident.” That is, a motor vehicle is uninsured unless it is covered by a bodily injury policy and the policy “is applicable” at the time of the accident. Something “is applicable” if it is capable of being applied in the appropriate context. In the context of a motor vehicle accident, a liability policy “is applicable” if the insured is entitled to the protection afforded under the policy. . . . Whether an insured is entitled to the protection afforded under the policy depends on the terms of the policy at issue and whether the insured complied with those terms. In the present case, [Integon’s insured] purchased a liability policy that covered the motor vehicle at issue, but that fact did not mean that the policy necessarily “applied” at the time of the accident. Rather, in order for the policy to be applicable, [Integon’s insured] had to perform all her obligations under the agreement. Until she met those obligations, the policy was not applicable. [Integon’s insured] failed to provide the notice required under her agreement. Consequently, her insurance policy did not apply to the accident at issue. Id at pp. 13-14.

Subsequently, in Collins v National General Insurance Company, 834 F Supp 2d 632 (ED Mich, 2011), the United States District Court for the Eastern District of Michigan considered a similar definition of “uninsured motor vehicle” contained in a policy of insurance issued by National General Insurance Company. But, in an opinion that also was not binding in future cases, the Court in Collins disagreed with the Court of Appeals’ holding in Integon. The Court explained:

Although the Integon court found a policy must be enforceable to be applicable, it appears to have completely read the crucial phrase “at the time of the accident” out of the contract. . . . Such an interpretation directly violates the well-established rule in Michigan and elsewhere that courts must give meaning to all terms in a contract to the extent possible. . . . In Integon, the court found that the failure of the insured to provide notice of the accident and lawsuit to the insurer absolved the insurer of all liability . . . and rendered the policy inapplicable. . . . The court went further, however, and decided that the failure to notify the insurer after the accident rendered the policy inapplicable at the time of the accident. . . . This court declines to follow that ruling. . . . Collins at 636-637.

Court of Appeals Decision

When it recently decided Ware, the Court of Appeals sought to settle the debate by issuing a published decision. Therefore, the Court made its ruling precedentially-binding on all subsequent courts presented with the same issue. (The exception is the Michigan Supreme Court.) The Court of Appeals then stated that it “f[ou]nd the legal reasoning of Integon sound and in keeping with the plain language of the insurance policy and [the] rules of interpretation for the same.” Ware, slip op at 5-6. The Court then rejected the United States District Court’s reasoning in Collins, stating:

The federal court reads “at the time of the accident” to modify “applicable,” but doing so fails to adhere to rules of statutory construction. “It is a general rule of grammar and of statutory construction that a modifying word or clause is confined solely to the last antecedent, unless a contrary intention appears.” . . . It is clear from the policy, taken as a whole, that “at the time of the accident” was not meant to modify applicable, because “applicable” is not the last antecedent but is itself a modifying word. . . . It is clear from the plain language that “applicable” modifies “bodily injury liability policy or bond.” . . . As a result, the only antecedent that “at the time of accident” could be read to modify is “insured.” Id, slip op at 6.

Conclusion

It is unclear whether Meemic will seek leave to appeal to the Michigan Supreme Court. If Meemic does, the Court will decide whether to grant the application. It may also consider overruling the Court of Appeals’ holding in Ware in favor of the reasoning used by the United States District Court in Collins. If Meemic either does not file such an application or the Michigan Supreme Court does not overrule Ware, Michigan insurers issuing endorsements providing uninsured motor vehicle coverage will need to amend their policies to alter the definition of “uninsured motor vehicle” if they want that definition to reflect the result reached by the United States District Court in Collins.