August 11, 2015
In a published decision, the Michigan Court of Appeals has affirmed that when the plain and unambiguous language of a statute, as well as the clear and unambiguous terms of an insurance policy, are not in conflict they must both be enforced.
In Frankenmuth Ins. Co. v. Leonard Poll and Ruth Heubel and Citizens Ins. Co. Of America and Hanover Ins. Co., (___ Mich App ____, 7/21/15), Plaintiff Frankenmuth appealed the Trial Court’s decision granting Citizens/Hanover’s Motion for Summary Disposition. Citizens/Hanover argued that the named-driver exclusion in its policy relieved it from any insurance liability for damages resulting from Leonard Poll’s operation of the Citizens/Hanover insured vehicle where Leonard Poll was an excluded driver.
In this case, Frankenmuth insured a home located in Michigan which was struck and damaged by a 1999 Lincoln automobile insured by Citizens/Hanover and driven by Leonard Poll. However, the Citizens/Hanover policy contained a named-driver exclusion that specifically warned that all liability coverage would be void if Leonard Poll operated the Lincoln. After the accident, Frankenmuth paid the homeowner $108,260.42 to cover the damages to the home. It then initiated a subrogration action to recover those costs from Citizens/Hanover. The Trial Court granted Citizens/Hanover’s Motion for Summary Disposition ruling that the named-driver exclusion relieved it from any insurance liability for damages caused while Leonard Poll was driving the Lincoln.
Thereafter, Frankenmuth appealed the Trial Court’s ruling and argued that, pursuant to Turner v Auto Club Ins Ass’n, 448 Mich 22; 528 NW21d 681 (1995), Citizens/Hanover was liable for the property damage where: (1) there was accidental damage to tangible property arising out of the operating and use of a motor vehicle as a motor vehicle (MCL 500.3121); (2) no exceptions to the insurer’s liability enumerated in MCL 500.3123 applied; and (3) Citizens/Hanover insured the owner of the vehicle involved in the accident. The Court of Appeals held that the named-driver exclusion in Citizens/Hanover’s policy negated Frankenmuth’s conclusion. Specifically, the Court relied on the opinion of Farmers Ins. Exch. v. Kurzman, 257 Mich.App 412, 418; 668 NW2d 199 (2003), which said “an insurer is free to define or limit the scope of coverage as long as the policy language fairly leads to only one reasonable interpretation and is not in contravention of public policy.”
The Court of Appeals noted that the operative effect of a named-driver exclusion is that when a named excluded driver operates the insured vehicle, coverage is void and no one is insured. MCL 500.3009(2). Moreover, a Court must enforce as written both the plain and unambiguous language of the statue, as well as the clear and unambiguous terms of the insurance policy not in conflict with that statute. Bronson Methodist Hosp v Mich Assigned Claims Facility, 298 Mich App 192; 826 NW2d 197 (2012). In the present case, because Leonard Poll operated the vehicle at the time of the accident, and Poll was an excluded driver under the policy, the insurance policy was void at the time of the accident. Therefore, Citizens/Hanover was not the insurer of the vehicle “involved in the accident” at the time of the accident, and it was not liable for the damages incurred.
Finally, Frankenmuth argued that the named-driver exclusion was void as against public policy. The Court of Appeals affirmed that an insurance policy is invalid as against public policy if it conflicts with a statute. However, in the present case, the named-driver exclusion is specifically permitted by MCL 500.3009(2) and MCL 500.3009(2) is a valid exercise of legislative power. As such, the Court of Appeals found that the Trial Court properly granted Citizens/Hanover’s Motion for Summary Disposition.
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