Farm Bureau Mut. Ins. Co. v. Nikkel

• Decision Date: 20 July 1999
• Docket Number: Docket No. 111341, Calendar No. 16.
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Plaintiff-Appellant, v. Steven Jacob NIKKEL, Steven John Nikkel and Blue Water Contracting, Inc., Defendants, and Elex Cagle, as Personal Representative of the Estate of Frances Arlene Cagle, and Wayne Fitzgerald, as Personal Representative of the Estate of Sherry Lee Fitzgerald, Defendants-Appellees.
• Court: Michigan Supreme Court

596 N.W.2d 915

460 Mich. 558

FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Plaintiff-Appellant, v. Steven Jacob NIKKEL, Steven John Nikkel and Blue Water Contracting, Inc., Defendants, and Elex Cagle, as Personal Representative of the Estate of Frances Arlene Cagle, and Wayne Fitzgerald, as Personal Representative of the Estate of Sherry Lee Fitzgerald, Defendants-Appellees.

Docket No. 111341, Calendar No. 16.

Supreme Court of Michigan.

Argued April 7, 1999.

Decided July 20, 1999.

Willingham & Cote, P.C. (by John A. Yeager and Anthony S. Kogut), East Lansing, for the plaintiff-appellant.

Lopatin, Miller, Freedman, Bluestone, Herskovic, Heilmann & Domol (by Richard E. Shaw), Southfield and Gursten & Koltonow (by David E. Christensen), Southfield, for defendants-appellees.

Opinion

CORRIGAN, J.

We granted leave in this case to determine whether a nonowned automobile clause¹ of a no-fault insurance policy is ambiguous. We hold that the policy language at issue here is unambiguous and enforceable. In doing so, we repudiate the two-justice plurality opinion in Powers v. Detroit Automobile Inter-Ins. Exchange, 427 Mich. 602, 398 N.W.2d 411 (1986), upon which the Court of Appeals relied. Under the clear language of the no-fault policy involved in this case, the policy does not cover vehicles furnished for regular use of either the named insured or any relative, unless the vehicle qualifies as a "temporary substitute vehicle." We therefore reverse the decision of the Court of Appeals and remand to the trial court to consider whether the nonowned automobile clause applies in this case.

I. Underlying Facts and Procedural History

This case arises from an automobile accident resulting in two fatalities. A pickup truck driven by defendant Steven Jacob Nikkel and owned by defendant Blue Water Contracting, Inc., rear-ended a car occupied by Frances Cagle and Sherry Fitzgerald. The impact of the collision forced the Cagle car into oncoming traffic, resulting in a head-on collision. Cagle and Fitzgerald died from their injuries. The personal representatives of their estates later brought wrongful death actions.

At the time of the accident, sixteen-year-old Steven Jacob Nikkel, a newly licensed driver, resided with his parents. His father, defendant Steven John Nikkel, the president and sole shareholder of Blue Water Contracting, allowed Steven Jacob to use the Blue Water pickup truck. Plaintiff insured the pickup truck under a commercial no-fault policy issued to Blue Water, and tendered the full $500,000 limit on that policy in covering the accident. Plaintiff, however, also insured two automobiles owned by Steven Jacob's parents under a family automobile insurance policy. That policy is the subject of this declaratory action.

The family automobile insurance policy covers losses sustained by "the insured" arising out of the ownership, maintenance or use of the "owned automobile" or any "non-owned automobile." The policy defines the phrase "owned automobile" as follows:

(a) a private passenger, farm or utility automobile described in this policy for which a specific premium charge indicates that coverage is afforded.

(b) a trailer owned by the named insured.

(c) a private passenger, farm or utility automobile ownership of which is acquired by the named insured during the policy period, provided

(1) it replaces an owned automobile as defined in (a) above, or the company insures all private passenger, farm and utility automobiles owned by the named insured on the date of such acquisition and (2) the named insured notifies the company within 30 days after the date of such acquisition of his election to make this and no other policy issued by the company applicable to such automobile, or

(d) a temporary substitute automobile....

The policy further defines "non-owned automobile" as "an automobile or trailer not owned by or furnished for the regular use of either the named insured or any relative, other than a temporary substitute automobile...."

Plaintiff sought a declaratory ruling that it was not obligated to provide coverage in the wrongful death action because the truck was neither "owned" nor "non-owned" under the terms of the policy since it was "furnished for the regular use of either the named insured or any relative." The trial court granted summary disposition for defendants under MCR 2.116(C)(10). The trial court reasoned that the policy language is ambiguous and, thus, affords coverage whether the truck was furnished for the regular use of Steven John or Steven Jacob Nikkel. The Court of Appeals affirmed.² Although recognizing that it was not bound by Powers, supra, because only two justices had signed the plurality opinion,³ the Court of Appeals reviewed the plurality opinion for guidance and held that the policy affords coverage in this case.⁴

We granted plaintiff's application for leave to appeal.⁵

II. Ambiguity of No-Fault Policy Language

The question presented is whether plaintiff's no-fault policy is ambiguous regarding coverage of losses incurred by an insured arising out of the use of a "non-owned automobile."⁶ Because the limitation of residual liability coverage pursuant to a nonowned automobile clause is valid under the no-fault act,⁷ the question is one of contract interpretation. See Bianchi v. Automobile Club of Michigan, 437 Mich. 65, 68, 467 N.W.2d 17 (1991). Whether contract language is ambiguous is a question of law, which this Court reviews de novo. Port Huron Ed. Ass'n v. Port Huron Area School Dist., 452 Mich. 309, 323, 550 N.W.2d 228 (1996); Cardinal Mooney High School v. Michigan High School Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991).

A

In Powers, supra, this Court considered whether substantially identical policy provisions defining the phrase "non-owned automobile" were valid. The plurality opinion would have held that

the insurers' method of exclusion—by the definition of terms at variance with their common meaning, which most policyholders would consider clear without definition—renders it invalid as (a) ambiguous, (b) not made clear, (c) a technical construction, and (d) contrary to the reasonable expectations of the insured reading the insurance contract. [Id. at 611, 398 N.W.2d 411.]

The plurality relied on six rules of contract interpretation to conclude that the clauses were invalid:

1) "[E]xceptions in an insurance policy to the general liability provided for are to be strictly construed against the insurer."

2) An insurer may not "escape liability by taking advantage of an ambiguity...." "`[W]herever there are two constructions that can be placed upon the policy, the construction most favorable to the policyholder will be adopted.'"

3) An insurer must "so ... draft the policy as to make clear the extent of nonliability under the exclusion clause."

4) An insurer may not "escape liability by taking advantage of ... a forced construction of the language in a policy...." "[T]echnical constructions of policies of insurance are not favored...."

5) "The courts have no patience with attempts by a paid insurer to escape liability by taking advantage of an ambiguity, a hidden meaning, or a forced construction of the language in a policy, when all question might have been avoided by a more generous or plainer use of words."

6) "[N]ot only ambiguous but deceptive." "[T]he policyholder must be protected against confusing statements in policies...." [Id. at 623-624, 398 N.W.2d 411 (citations omitted).]

The plurality emphasized the second, third, fourth and fifth rule in concluding that the clauses were invalid. The plurality reasoned that ambiguity existed because "owned automobile" and "nonowned automobile" were terms in common use that had unambiguous meanings that differed from the definitions provided in the policy. Id. at 624-627, 398 N.W.2d 411. It determined that the insurers' construction was a technical one, "requiring the application of an obscurely drafted definition to an apparently unambiguous meaning of a commonly used English word." Id. at 628, 398 N.W.2d 411. Further, the plurality explained, clarity required that the policy either specifically reference the definitions to alert the insured that they may differ from common meaning or include the "exclusions" in the exclusion section of the policy to provide notice to the insured. Id. at 627-630, 398 N.W.2d 411.

The plurality additionally relied on the related rule of reasonable expectations to conclude that the exception for nonowned automobiles was invalid. The plurality determined that a person reading the liability provisions of the policy would reasonably expect coverage when driving both the automobile insured under the policy and the cars of others. It reasoned that the policy did not identify the exception as an exclusion, but rather, exempted a group of automobiles by defining the terms in a manner contrary to their common usage. Id. at 631-633, 398 N.W.2d 411. The plurality would have held that "an insurer may not, by artful definition of terms at variance with their commonly understood meanings, and by failure to speak plainly and clearly, effect an exclusion of coverage in an automobile liability policy." Id. at 634, 398 N.W.2d 411.

B

We repudiate the plurality opinion in Powers, supra,⁸ and hold that the nonowned automobile clause of the policy involved in this case is unambiguous. The principles of construction governing other contracts apply to insurance policies. Arco Industries Corp. v. American Motorists Ins. Co., 448 Mich. 395, 402, 531 N.W.2d 168 (1995). Where no ambiguity exists, this Court enforces the contract as written. Morley v. Automobile Club of Michigan, 458 Mich. 459, 465, 581 N.W.2d 237 (1998).

An insurance contract is ambiguous when its provisions are capable of conflicting interpretations. Bianchi, supra at 70, 467 N.W.2d 17. In Raska v. Farm Bureau Mut. Ins. Co., 412 Mich. 355, 362, 314 N.W.2d 440 (1982), we explained:

A contract is said to be ambiguous

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