Auto Club Ins. Ass'n v. DeLaGarza

• Decision Date: 22 August 1989
• Docket Number: Docket No. 82113
• Citation: 433 Mich. 208,444 N.W.2d 803
• Parties: AUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellant, v. Mary A. DeLaGARZA, Defendant-Appellee.
• Court: Michigan Supreme Court

Page 803

444 N.W.2d 803

433 Mich. 208

AUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellant, v. Mary A. DeLaGARZA, Defendant-Appellee.

Docket No. 82113.

Supreme Court of Michigan.

Argued Nov. 3, 1988.

Decided Aug. 22, 1989.

[433 Mich. 210] Willingham, Cote, Hanslovsky, Griffith & Foresman, P.C. by Thomas C. Lefler, Jr., East Lansing, for plaintiff-appellant; Nancy L. Bosh, Detroit, of counsel.

Abood, Abood & Rheaume, P.C. by Michael J. Otis, Debra S. Hirsch, Lansing, for defendant-appellee.

OPINION

CAVANAGH, Justice.

We granted leave to consider whether, under the terms of the automobile insurance policy issued by plaintiff, the defendant insured is entitled to recover uninsured motorist benefits for the death of her spouse. To the extent that the defendant is entitled to recover for bodily injury to her spouse from the driver of the uninsured motor vehicle under the wrongful death act, ¹ we agree with the Court of Appeals that she is entitled to benefits under the terms of the uninsured motorist portion of the insurance contract.

I

The dispute between these parties arises from an automobile accident which occurred on September 2, 1984. The defendant's spouse, Manuel S. DeLaGarza, was struck and killed by an uninsured motor vehicle while he was changing a tire on another uninsured vehicle alongside the highway. The defendant and her husband did not reside in the same household at the time of the accident, and they had lived apart for several years prior to that time.

The defendant sought benefits under the uninsured motorist portion of her insurance policy with plaintiff Auto Club Insurance Association. Auto Club denied the claim on the ground that it was not obligated to provide coverage because Mr. DeLaGarza was neither an insured person nor an occupant of an insured vehicle at the time of the accident.

After defendant filed a claim for arbitration, Auto Club filed the present declaratory judgment action, claiming that the applicable policy of insurance does not provide for uninsured motorist coverage for a nonresident spouse. Auto Club moved for summary disposition, pursuant to MCR 2.116(C)(10). Following a hearing on June 3, 1986, the trial court ruled that the insurance policy provides coverage even though the decedent was not a resident of defendant's household. The court denied Auto Club's motion for summary disposition and granted summary disposition in favor of defendant.

Plaintiff appealed in the Court of Appeals. The Court disagreed with the trial court and found that the policy language clearly excludes a nonresident spouse from coverage. The decision of the trial court was affirmed, however, on the ground that the defendant is an insured person and that the uninsured motorist coverage provided for in plaintiff's policy does not require that the insured person seeking benefits be the one who sustained the bodily injury.

We granted plaintiff's application for leave to appeal ² to consider whether or not the Court of Appeals correctly interpreted the uninsured motorist provision of the insurance contract.

II

Defendant Mary DeLaGarza purchased an automobile insurance policy from Auto Club and paid an additional premium for uninsured motorist coverage. The uninsured motorist portion of the insurance contract provides:

"We will pay damages for bodily injury which an insured person is legally entitled to recover from the owner or operator of an uninsured motor vehicle. Bodily injury must be caused by accident and arise out of the ownership, operation, maintenance or use of the uninsured motor vehicle."

The Court of Appeals agreed with the defendant that she is entitled to benefits under this provision because she is an insured person who is entitled to recover for bodily injury to her spouse from the driver of the uninsured motor vehicle under the wrongful death act. The Court explained:

"Although when drafting this provision, plaintiff may have intended that the insured person seeking benefits under the policy be the one who sustained the bodily injury, plaintiff failed to include such limiting language. Thus, although plaintiff argues that the contract read as an entire instrument suggests that an insured may recover for only his or her own injuries, the language of the provision does not lend itself to such an interpretation."

Auto Club contends that the Court of Appeals gave a strained and forced construction to the terms of the policy, extending them beyond their plain meaning and ignoring the obvious intent of the policy language. According to Auto Club's analysis, the policy, when read as a whole, only provides uninsured motorist coverage for injuries sustained by an insured person. Auto Club argues that the decedent cannot be considered an insured person because the general definition section of the policy requires a "spouse" to reside in the same household as the named insured.

Although we do not disagree with Auto Club's claim that the decedent cannot be considered an insured person under the policy, our decision rests on the conclusion that defendant, the named insured, is entitled to coverage under the uninsured motorist provision as drafted by Auto Club. The appropriate construction of the terms of an automobile insurance policy was addressed in Raska v. Farm Bureau Ins. Co., 412 Mich. 355, 362, 314 N.W.2d 440 (1982):

"A contract is said to be ambiguous when its words may reasonably be understood in different ways.

"If a fair reading of the entire contract of insurance leads one to understand that there is coverage under particular circumstances and another fair reading of it leads one to understand there is no coverage under the same circumstances the contract is ambiguous and should be construed against its drafter and in favor of coverage.

"Yet if a contract, however inartfully worded or clumsily arranged, fairly admits of but one interpretation it may not be said to be ambiguous or, indeed, fatally unclear."

There can be no doubt that Mary DeLaGarza is an "insured person" under the terms of the policy. The death of DeLaGarza's husband is within the policy's definition of "bodily injury," which includes the "death of any person." Thus, the policy does not explicitly limit recovery for bodily injury to those injuries sustained by insured persons. Because defendant would have a cause of action for the wrongful death of her husband, ³ she claims that she is entitled to coverage under the language of the policy as an insured person legally entitled to recover damages from the owner or operator of an uninsured motor vehicle.

We broadly define an ambiguity in an insurance policy to include contract provisions capable of conflicting interpretations, ⁴ and we agree with the Court of Appeals that the contract of insurance at issue here is, at best, ambiguous. When an insurance contract is determined to be ambiguous and the rules of construction outlined by this Court in Raska are applied, the terms of the contract are construed against its drafter and in favor of coverage. ⁵

Auto Club claims that it did not intend to contract for uninsured motorist coverage for the death of a nonresident spouse. Insurers may limit the risks they choose to assume and fix premiums accordingly. Lehr v. Professional Underwriters, 296 Mich. 693, 696, 296 N.W. 843 (1941). It is the insurer's responsibility, however, to clearly express the insurance policy's limitations on coverage. ⁶

When, as in the present case, an insurer has failed to clearly express a limitation on coverage so as to fairly apprise the insured of the extent of the coverage purchased, it is appropriate to construe the provision under consideration against its drafter. ⁷ This Court discussed this principle in Pietrantonio v. Travelers Ins. Co., 282 Mich. 111, 116, 275 N.W. 786 (1937), stating:

"It is a principle of law too well established in this jurisdiction and others to need discussion or citation of authorities, that a policy of insurance couched in language chosen by the insurer must be given the construction of which it is susceptible most favorable to the insured; that technical constructions of policies of insurance are not favored; and that exceptions in an insurance policy to the general liability provided for are to be strictly construed against the insurer." (Citation omitted.)

Although Auto Club claims that its policy clearly excludes coverage under the circumstances of this case, we cannot agree. It is appropriate for the insurer to bear the burden of any confusion which arises due to its failure to clearly state the limitations of the coverage purchased. If Auto Club intended to except wrongful death damages or to limit coverage to bodily injury sustained only by an insured person, it could have included limiting language in its policy of insurance.

We are not persuaded that our decision in Bradley v. Mid-Century Ins. Co., 409 Mich. 1, 294 N.W.2d 141 (1980), requires a contrary result. In Ruesing v. Aetna Casualty & Surety Co., a case consolidated with Bradley, we considered a claim for uninsured motorist coverage similar to the claim presented here. Ruesing claimed that he was entitled to recover uninsured motorist benefits for the death of his son. His son had taken his automobile and had allowed a friend to drive. Due to the friend's negligence, Ruesing's vehicle was involved in an accident, and Ruesing's son was killed. Because the liability portion of the automobile insurance policy did not provide coverage when Ruesing's automobile was being driven without his permission, Ruesing sought benefits under the uninsured motorist portion of his policy. Ruesing argued that because he would be entitled to maintain a wrongful death action for the friend's negligence, he was eligible for coverage. This Court denied coverage, reasoning:

"Were we to accept this argument, we would attribute to the Legislature an intent to mandate coverage in all cases where a liability insured has a relative whose death...