Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co.

Decision Date23 June 1998
Docket NumberDocket No. 191759
Citation230 Mich.App. 434,584 N.W.2d 355
PartiesLaura SMITH and James Smith, Plaintiffs-Appellees, v. ALLSTATE INSURANCE COMPANY, Defendant-Appellant, and STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Defendant-Appellee.
CourtCourt of Appeal of Michigan — District of US

Garan, Lucow, Miller, Seward & Becker, P.C. by James L. Borin and Robert D. Goldstein, Detroit, for Allstate Insurance Company.

Draugelis & Ashton, L.L.P. by John A. Ashton, Plymouth, for State Farm Mutual Automobile Insurance Company.

Gerald A. Sniderman & Associates by Gerald A. Sniderman, Huntington Woods, for Laura and James Smith.

Before SAAD, P.J., and WAHLS and GAGE, JJ.

WAHLS, Judge.

In this declaratory judgment action, defendant Allstate Insurance Company appeals as of right from an order granting summary disposition for defendant State Farm Mutual Automobile Insurance Company. We affirm.

The insurance law issues presented here arise from an underlying lawsuit filed by plaintiffs Laura and James Smith against third parties. The underlying facts are undisputed. In the early evening of June 4, 1993, Charles Hinton, Jr., sold his 1977 Buick LeSabre to Bruce Walsh. Walsh paid for the car, and Hinton gave him a receipt. Hinton then signed the title over to Walsh, removed his license plate, registration, and certificate of insurance from the car, and gave Walsh possession of the car. Hinton had insured the car through defendant State Farm Insurance. While driving the LeSabre a few hours later, Walsh rear-ended a vehicle driven by plaintiff James Smith, and in which plaintiff Laura Smith was a passenger. Laura Smith was injured in the accident. Although Walsh had placed a license plate on the LeSabre when he bought it, he had not obtained insurance. Plaintiffs initially sought uninsured motorist benefits from their own insurer, defendant Allstate Insurance Company. However, Allstate denied coverage, contending that Walsh was covered by Hinton's policy with State Farm. Plaintiffs then sued Walsh for negligence and Hinton for negligent entrustment. Hinton subsequently filed a motion for summary disposition, but agreed to hold it in abeyance to permit plaintiffs to file the instant declaratory judgment action. Plaintiffs sought a determination regarding which insurer, Allstate or State Farm, is liable for plaintiffs' damages. As noted above, the trial court granted summary disposition for State Farm.

The only issue on appeal is whether Walsh was covered by Hinton's policy with State Farm at the time of the accident, despite the fact that Hinton no longer owned the vehicle. In its motion for summary disposition and accompanying brief, State Farm never argued that the language of the policy excluded Walsh as an insured. 1 Instead, State Farm argued that, because Hinton had sold the vehicle in a bona fide sale, and because he had removed the license plate, registration, and proof of insurance from the vehicle, Hinton was no longer the owner or registrant of the vehicle, and there could be no coverage under the State Farm policy.

The parties and the trial court all relied on Clevenger v. Allstate Ins. Co., 443 Mich. 646, 505 N.W.2d 553 (1993). In Clevenger, JoAnn Williams sold a car to her nephew, Douglas Preece. Preece paid Williams for the car, and Williams signed the title over to Preece. However, Williams allowed Preece to drive the car away with her license plate still attached, and with her registration and certificate of insurance in the glove box. Williams had insured the car through Allstate under a no-fault insurance policy. On his way home, Preece was involved in a head-on collision in which the plaintiff, Clifford Clevenger, was injured. Preece had not yet obtained his own insurance. Clevenger eventually filed an action seeking a declaratory judgment that Allstate had a duty to defend and indemnify Williams and Preece under Williams' no-fault policy. Id. at 648-649, 505 N.W.2d 553.

In Clevenger, the Supreme Court began by reviewing the language of Williams' no-fault policy, eventually concluding that, under the express terms of the policy, Allstate was obligated to defend and indemnify both Williams and Preece. Id. at 652-656, 505 N.W.2d 553. The Court then went on to address the question whether Williams had an insurable interest in the vehicle at the time of the accident. The Court found that, because Williams had left her license plate on the car, and because she had left the registration and certificate of insurance in the glove box, she remained the registrant of the vehicle. After noting that Michigan law imposes a duty on a registrant to maintain statutorily required insurance, the Court concluded that Williams had an insurable interest in the vehicle. Id. at 656-661, 505 N.W.2d 553. The Supreme Court did not discuss the underlying rationale for the insurable interest requirement, nor did it cite any authority on the topic. Id. However, it appears that the Court held that an insurable interest is necessary to support a valid automobile liability insurance policy. It also appears that the Supreme Court held that the insurable interest must belong to a "named insured." We base our interpretation ofClevenger on the fact that (1) the Supreme Court addressed the defendant's "insurable interest" argument on the merits, rather than simply stating that there is no such requirement for automobile liability insurance, and (2) the Supreme Court only addressed the question whether the named insured, Williams, had an insurable interest, when it was clear that Preece had an insurable interest. 2

We note that the Supreme Court's holdings do not represent forgone conclusions. There is a legitimate question whether liability insurance requires an "insurable interest." See Hall v. Weston, 323 S.W.2d 673, 678-680 (Mo., 1959). Indeed, the "insurable interest" doctrine seems to find its origin in public policy concerns. 3 Among those concerns is a desire to prohibit the use of insurance as a form of wagering, 4 and a desire to prevent the creation of socially undesirable interests, such as where a creditor buys insurance on the life of a debtor for an amount greatly exceeding the amount of the debt, such that the creditor "might be [tempted] to bring the debtor's life to an unnatural end." Lakin v. Postal Life & Casualty Ins. Co., 316 S.W.2d 542, 551 (Mo., 1958). These public policy concerns are not implicated in the case of liability insurance, because the holder of the insurance cannot collect cash on the policy. 5 We also note that the no-fault automobile liability insurance required in Michigan is not simply for the benefit of the policy holder or other insured. Rather, it is intended " 'to protect the members of the public at large from the ravages of automobile accidents." ' Clevenger, supra at 651, 505 N.W.2d 553, quoting Coburn v. Fox, 425 Mich. 300, 309, 389 N.W.2d 424 (1986). Thus, in the case of automobile liability insurance, the insurable interest appears to lie, at least to some degree, with an injured party rather than an insured.

While we have failed to discover any underlying rationale for application of the insurable interest requirement to liability insurance, we recognize that many jurisdictions observe such a requirement. See 1 A.L.R.3d 1193, § 2, pp. 1195-1196, and cases cited therein. In this case, the parties both appear to assume the applicability of the insurable interest requirement. Because Clevenger supports such a requirement, we conclude that, under Michigan law, an insured must have an "insurable interest" to support the existence of a valid automobile liability insurance policy.

Next, we consider whether the required insurable interest must belong to some particular "insured" under the policy. As noted above, the Court in Clevenger appeared to hold that a "named insured" must have an insurable interest. Again, the reasoning behind this conclusion is unclear, 6 and, once again, the parties have not addressed the issue. However, with Clevenger as our only guide, we conclude that a "named insured" must have an insurable interest to support a valid automobile liability insurance policy.

The only remaining question is whether Hinton had an insurable interest sufficient to support a valid automobile liability insurance policy. We conclude, pursuant to Clevenger, that he did not. In Clevenger, the seller of the vehicle had an insurable interest only because, by leaving the license plate on the car, and by leaving the registration and certificate of insurance in the car, she ...

To continue reading

Request your trial
9 cases
  • MemberSelect Ins. Co. v. Flesher
    • United States
    • Court of Appeal of Michigan — District of US
    • 23 April 2020
    ... ... Id. , citing 332 Mich.App. 222 Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co. , 230 Mich ... ...
  • Corwin v. Daimlerchrysler Ins. Co.
    • United States
    • Court of Appeal of Michigan — District of US
    • 17 April 2012
    ... ... Harding) and John A. Lydick for Auto Club Insurance Association. Law Offices of Thomas R ... Compass] including insurance that was required by the state. John was never informed what portion of his monthly ... State Farm [ Fire ] and Cas. Co. v. Old Republic Ins. Co., 466 ... Cruz v. State Farm Mut. Auto. Ins. Co., 466 Mich. 588, 599, 648 N.W.2d 591 ... 569, 572, 781 N.W.2d 151 (2009), quoting Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 230 Mich.App ... ...
  • Universal Underwriters Group v. Allstate Ins. Co.
    • United States
    • Court of Appeal of Michigan — District of US
    • 9 October 2001
    ... ... for summary disposition pursuant to MCR 2.116(C)(9), for failure to state a valid defense, relying on the insurance binder defendant issued April ... 82-83, citing cases including State Automobile Mut. Ins. Co. v. Babcock, 54 Mich.App. 194, 220 N.W.2d 717 (1974) ... "[W]here ... Co. v. State Farm Mut. Automobile Ins. Co., 230 Mich.App. 434, 584 N.W.2d 355 (1998), but ... Co., 152 Mich.App. 734, 394 N.W.2d 90 (1986) ; Cason v. Auto" Owners Ins. Co., 181 Mich. App. 600, 450 N.W.2d 6 (1989) ...     \xC2" ... ...
  • A.B. Petro Mart, Inc. v. Ali T. Beydoun Ins. Agency, Inc.
    • United States
    • Court of Appeal of Michigan — District of US
    • 15 September 2016
    ... ... Joseph v. Auto. Club. Ins. Ass'n, 491 Mich. 200, 206, 815 N.W.2d 412 ... insurance policy." Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co., 230 Mich.App ... ...
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT