In a recent unpublished opinion, Randall Shaw and Hillary Shaw v Nowakowski, et al the Court of Appeals addressed the issue of Plaintiffs Randall and Hillary Shaw’s right to recover underinsured motorist (UIM) benefits and whether Plaintiffs’ no-fault insurance policy contained ambiguous language regarding bodily injury policy limits and other possible liability limits. The Court of Appeals majority affirmed the trial court’s denial of Defendant Auto Club Group’s motion for summary disposition finding the policy language was ambiguous.
Plaintiffs’ vehicle was insured by Defendant Auto Club, and the policy included UIM policy limits of (1) $250,000 per person, and (2) $500,000 per accident. Defendant Nowakowski had a $300,000 combined single-limit policy of insurance. Nowakowski had struck Plaintiffs’ vehicle after consuming alcohol at Defendant Crispelli’s.
Auto Club moved for summary disposition arguing that Plaintiffs were not entitled to UIM benefits because, under the terms of Plaintiffs’ policy, the $250,000 per person limit was less than Nowakowski’s bodily injury limit such that Nowakowski was not “underinsured.” Auto Club further argued, citing Wilke v Auto Owners Ins Co, 469 Mich 41; 664 NW2d 776 (2003), that the UIM benefit limit should be reduced by the limit of Nowakowski’s policy, not by the amount Plaintiffs actually received from Nowakowski’s policy. Auto Club further argued that Plaintiffs were not entitled to UIM benefits because Crispelli’s liability limits of $2 million exceeded the Plaintiffs’ per person liability limit.
Plaintiffs argued in response that the terms of their policy were ambiguous because the policy did not clearly articulate which of the two limits of liability applied. Because ambiguous policies must be construed in favor of plaintiffs, the $500,000 per-accident liability limit should apply with respect to determining whether Nowakowski’s vehicle was “underinsured.” The trial court agreed with Plaintiffs finding that Auto Club failed to explain why the $500,000 per-accident limit was not applicable particularly because Plaintiffs would “ostensibly, be eligible for up to $250,000 in UIM benefits each for personal injury.”
The trial court further rejected Auto Club’s argument that Wilkie applied, noting that case was about whether the payment of a specific amount reduces recovery under a UIM policy, while the present lawsuit is about the applicable policy limits for purposes of determining the viability of a UIM claim. Further, the trial court found that Crispelli’s $2 million liability policy did not apply because that policy was not a no-fault policy which applied to Nowakowski’s vehicle under provision 4 of the “Limits of Liability” found in Plaintiffs’ policy.
The Court of Appeals majority noted that Plaintiffs’ insurance policy explicitly provided two limits of liability for an insured person – $250,000 per person, and $500,000 per accident – and the UIM provision used the term “insured person” suggesting the “per person” limit should apply. The policy’s definition of an “underinsured motor vehicle”, however, used the term “limits” in reference to UIM coverage, suggesting more than one applicable limit. The declarations page of Plaintiffs’ policy also stated the $250,000 per person / $500,000 per accident limits are both available to Plaintiffs as insured persons. Because the terms of Plaintiffs’ insurance policy can reasonably be read to provide or deny coverage under the same set of circumstances, the policy is ambiguous, and ambiguous terms must be resolved in favor of Plaintiffs as the insureds.
The Court of Appeals majority further found that because it was reasonable to interpret the plain terms of Plaintiffs’ insurance policy to exclude Crispelli’s as a qualifying organization or policy, the terms of Plaintiffs’ insurance policy are again ambiguous. The majority noted that Auto Club raised an argument under provision 4(b) of the policy’s Limits of Liability provision, suggesting Crispelli’s qualified as “any other policy” which would reduce Plaintiffs’ UIM benefits to zero, for the first time on appeal and therefore waived that argument such that the Court would not consider it. The majority instead found that, under provision 4(a), Auto Club’s liability would be reduced by the amount paid or payable by Crispelli’s, for an uninsured motor vehicle. However, as Nowakowski’s vehicle was not uninsured, the interpretation excluded Crispelli’s insurance policy.
The Court of Appeals dissent started by assuming that the pertinent limit of liability under Auto Club’s policy for purposes of the definition of “underinsured motor vehicle” is the $500,000 per-accident limit. Therefore, Nowakowski’s vehicle was an “underinsured motor vehicle.” The dissent then found that, under paragraph 3 of the Limits of Liability provision of the policy, Nowakowski’s $300,000 limit must be subtracted from Plaintiffs’ $500,000 limit before considering any other reductions. Therefore, Auto Club’s total liability for UIM benefits was limited to $200,000. The dissent then addressed paragraph 4 of the Limits of Liability provision, finding paragraph 4.a did not apply because Nowakowski’s vehicle was not an “uninsured motor vehicle.” Paragraph 4.b, however, did apply because of Crispelli’s “other policy”, and, as the dissent noted, Auto Club’s policy did not require the “other policy” to be a no-fault policy. Because Plaintiffs settled their claims against Crispelli’s for $350,000, Auto Club could further reduce its total liability by that amount. Subtracting it from $200,000, and leaving less than zero. The dissent noted that the majority refused to consider Auto Club’s argument regarding paragraph 4.b because it was not raised in the trial court, but found the argument should have been reviewed. In re Conservatorship of Murray, 336 Mich App 234 (2021).
