JUDICIAL ESTOPPEL PREVENTS $475,000 JUDGMENT AGAINST HOMEOWNER'S INSURER

Kevin L. Travis

A motor-vehicle-exclusion provision in a homeowner’s policy shielded State Farm from responsibility to pay a $475,000 award in a consent judgment, as decided in the unpublished Court of Appeals case of Estate of Michael Wells v State Farm. The facts of this case involve the tragic loss of life of a group of underage and intoxicated high-schoolers. The teens were furnished drugs and alcohol at the home of their friend Gregory Bobchick. Michael Wells’ family sued Bobchick’s parents for automobile negligence and social-host liability.

A unique aspect of this case involved disputed ownership of the at-issue automobile and the doctrine of judicial estoppel. The plaintiff’s underlying complaint asserted that, although the Bobchicks were not the titled owners of the automobile, they became the owners under MCL 500.3101(3)(l) because they took possession of the automobile, made payments for it, and regularly used it. Based on the plaintiff’s argument regarding ownership, the Bobchicks settled the automobile negligence claim, pursuant to MCL 257.401, for $100,000.

The plaintiff then attempted to settle the social-host liability for $475,000, and a consent judgment was entered in favor of plaintiff in that amount. Plaintiff then sought a declaratory judgment against State Farm to determine it was liable for payment of that judgment under the home-owners policy it issued to the Bobchicks.  However, the Bobchicks’ policy included an exclusion of coverage for personal liability, or payment of medical expenses of others, stemming from “bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of . . . a motor vehicle owned or operated by or rented or loaned to any insured . . . .”

The Circuit Court granted summary disposition in favor of State Farm, finding State Farm need not pay the consent judgment. Plaintiff appealed that decision, and the Court of Appeals reversed. The Michigan Supreme Court then reversed again, and remanded to the Court of Appeals for reconsideration of the issue whether the motor-vehicle-exclusion in State Farm’s policy applied to deny coverage, and if so, whether Plaintiff pled a covered accident under the policy.

On remand, the Court of Appeals looked only at plaintiff’s pleadings. The Court noted that plaintiff asserted automobile owner’s liability against the Bobchicks in the underlying lawsuit which resulted in settlement of the automobile negligence claims, and plaintiff entered an agreement regarding the social host liability claims impliedly arguing that the Bobchicks had an insurable interest in the subject vehicle. Having asserted the Bobchicks’ insurable interest all the way to accepting a settlement from State Farm, Plaintiff could not now be allowed to take a “wholly inconsistent” position that the Bobchicks’ association with the subject vehicle was so remote as to avoid the homeowner’s policy’s exclusion of coverage. The Court of Appeals noted that “Judicial estoppel is an equitable doctrine, which generally prevents a party from prevailing in one phase of a case on an argument and then relying on a contradictory argument to prevail in another phase.” Spohn v Van Dyke Pub Sch, 296 Mich App 470, 479; 822 NW2d 239 (2012).

Because the plaintiff’s argument in the declaratory judgment phase of the litigation was “wholly inconsistent” with their previous argument regarding ownership, and because they had previously prevailed on that argument, the Court found that the policy exclusion applied and shielded State Farm from the $475,000 in social host liability set forth in the consent judgment between plaintiff and the Bobchicks.