November 13, 2014
In the unpublished decision, Whitney K. Fox v Donald Knoblock, d/b/a Knoblock Riding Stables, 316058 (Mich App 2014), the Michigan Court of Appeals reversed a Huron County Trial Court’s decision in favor of the plaintiff, and found the negligence exception to the Michigan Equine Activity Liability Act (EALA) was inapplicable based upon the fact of the matter
Plaintiff, a business invitee of defendant Knoblock, was participating in a trail ride with two other people, one of whom was defendant’s niece and his alleged agent, when plaintiff’s horse suddenly and without any command accelerated into a full gallop causing her to fall and sustain unspecified injuries for which she was awarded $15,000.00 plus attorney fees and costs of $4,942.00 by the trial court. The court found that defendant’s niece, while acting as an agent on the trail ride with plaintiff, unintentionally and negligently caused the horses to increase their pace, leading directly to the plaintiff’s fall and attendant injuries.
The trial court’s ruling in favor of plaintiff was premised in large part upon an EALA exception to civil liability limitations, found in MCL 691.1665(d), which provides for liability in regard to “a negligent act or omission that constitutes a proximate cause of the injury, death, or damage.” The trial court found that defendant’s niece’s conduct in increasing the speed of the horses to a canter, given plaintiff’s equestrian inexperience, constituted an unreasonable risk for an already dangerous activity and was therefore negligent.
In reviewing the trial court’s ruling, the Court of Appeals noted that there was no testimony on the part of defendant’s niece, plaintiff, or any other witness which could lead to a determination that the niece was responsible directly or otherwise for the sudden increase of the pace of the plaintiff’s horse. Plaintiff, in fact, testified in relation to her horse’s sudden acceleration that, “I didn’t understand what was going on or why it [the horse] would do that.” Likewise, the defendant’s niece testified that the riders went from a “walk” to a “trot,” but could not recall how the different paces were initiated. The niece further indicated that, regardless, plaintiff proceeded along comfortably in the trot, defendant’s niece testified that the trotting speed did indeed accelerate into a “canter” but again had no recollection as to why the horses accelerated to that canter. It was at that point, that the plaintiff exhibited signs of being in trouble, at which time the niece yelled to plaintiff to pull back on the reins and the plaintiff failed to do so. In the end, the Court of Appeals found no evidence that the niece behaved in any negligent manner and therefore the matter was reversed and remanded to the trial court for entry of judgment in favor of the defendant.
THE PHRASE “LIMITS OF LIABILITY OF THIS COVERAGE”
REFERS TO THE POLICY LIMIT, NOT AN INSURED’S TOTAL DAMAGES
In Justice v American Family Mutual Insurance Company, 4 NE3d 1171 (Ind. 2014), the Indiana Supreme Court addressed the following question of contract interpretation: In an insurance policy, does the phrase “limits of liability of this coverage” refer to the policy limit or to the insured’s total damages? The Court found it to be the former.
In Justice, an underinsured motorist collided with an IndyGo city bus driven by plaintiff. To compensate plaintiff for the damages he sustained as a result of the accident, plaintiff received $77,469.56 in workers’ compensation from IndyGo’s insurer, GAB Robbins. That workers’ compensation award comprised $51,829.81 paid to plaintiff’s medical providers, $18,939.75 for his lost wages and temporary disability, and $6,700 for his permanent partial impairment. Pursuant to those payments, GAB Robbins asserted a lien in the amount of $77,469.56 against plaintiff’s bodily injury claim. Plaintiff settled this lien for $5,511.06, bringing his net workers’ compensation to $71,958.50. Plaintiff also received $25,000 from the underinsured’s insurer, bringing his total recovery to $96,958.50. At the time of the accident, plaintiff carried an underinsured motorist policy issued by American Family that provided coverage up to $50,000 per person and $100,000 per accident.
Plaintiff submitted an underinsured motorist claim to American Family, which denied coverage. Plaintiff subsequently sued American Family for breach of contract, arguing he was entitled, under the terms of the policy, to $25,000—the difference between plaintiff’s underinsured motorist policy limit of $50,000 and the $25,000 he received from the underinsured’s insurer. American Family moved for summary judgment, arguing plaintiff was not entitled to recover under the policy because the $71,958.50 he received in workers’ compensation benefits operated as a “setoff” against the $50,000 policy limit, thus reducing American Family’s liability to zero. After a hearing, the trial court granted American Family’s motion.
On appeal, the Indiana Supreme Court found the American Family policy expressly and unambiguously stated that the “limits of liability of this coverage will be reduced by … [a] payment made or amount payable by or on behalf of any person or organization which may be legally liable [and] … [a] payment made or amount payable because of bodily injury under any workers’ compensation or disability benefits law.” (emphasis added). The Court determined the phrase “limits of liability of this coverage” clearly refers to the $50,000 policy limit, not to plaintiff’s total damages. In application, this means the “limits of liability of this coverage,” $50,000, would be reduced by the $25,000 payment plaintiff received from a “legally liable” entity—the underinsured’s insurer—and by the $71,958.50 plaintiff received in workers’ compensation and disability benefits. The Court’s equation worked out as follows: $50,000.00 policy limit—$25,000.00 from the underinsured’s insurer—$71,958.50 + -$46,958.50. Thus, the Court reasoned the policy limit was reduced to zero.
The Court then addressed the application of Ind.Code § 27–7–5–2(a) to the present case. Ind.Code § 27–7–5–2(a) requires that UIM coverage must be made available in limits of not less than $50,000. Here, plaintiff’s UIM policy limit was $50,000, which is the minimum amount the statute allows, but the worker’s compensation set-off provision, as the above equation demonstrates, operated to reduce that policy limit to zero. In analyzing whether Ind.Code § 27–7–5–2(a) permits such a reduction, the Court noted that plaintiff did not receive the full statutory minimum from the underinsured tortfeasor’s insurer. The minimum was $50,000, but plaintiff received only $25,000. The Court found that if the underinsured had carried the required amount of liability insurance, plaintiff would have received $50,000, and the purpose of Indiana’s uninsured/underinsured motorist statute is to put plaintiff in that position. Pursuant to the statutory purpose of Ind.Code § 27–7–5–2(a),and previous Court decisions in Leist v Auto–Owners Ins Co, 160 IndApp 322, 311 NE2d 828 (1974), and Hardiman v Govt’l Interins Exch, 588 NE2d 1331 (IndCtApp1992), the Court found that plaintiff was entitled to recover the remaining $25,000 from American Family. Any policy provision to the contrary is unlawful and unenforceable and against public policy.