Auto Club Ins. Ass'n v. Lozanis

Decision Date09 February 1996
Docket NumberDocket No. 165231
Citation215 Mich.App. 415,546 N.W.2d 648
PartiesAUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellant/Cross-Appellee, v. George LOZANIS, Defendant-Appellee/Cross-Appellant.
CourtCourt of Appeal of Michigan — District of US

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. by Daniel S. Saylor and Lloyd G. Johnson, Detroit, for plaintiff.

Simon, Korachis & Stella, P.C. by Peter N. Zingas, Detroit (Bendure & Thomas by Sidney A. Klingler, Detroit, of counsel), for defendant.

Before: CORRIGAN, P.J., and HOEKSTRA and DEEGAN, * JJ.

CORRIGAN, Presiding Judge.

In this conflicts of law action involving the interpretation of an uninsured motorist benefit provision in a no-fault automobile insurance policy, plaintiff Auto Club Insurance Association (ACIA) appeals as of right an order of declaratory judgment. Defendant George Lozanis cross appeals the order compelling arbitration of all remaining arbitrable issues and the injunction prohibiting him from continuing his Ontario litigation. We affirm.

In January, 1989, a semi trailer truck struck defendant's vehicle while defendant, a Macomb County resident, traveled on a highway outside London, Ontario, Canada. Because the driver of the truck was unidentified, defendant sought uninsured motorist benefits for his injuries. ACIA provided insurance coverage to defendant; the policy permitted a maximum of $20,000 for uninsured motorist coverage.

Ontario law, however, requires insurance carriers to provide at least $200,000 of coverage for uninsured motorist benefits. Ontario Insurance Act, OntRevStat1980, ch 218, § 219(1). ACIA refused to pay defendant more than the $20,000 policy limit. Defendant thereafter initiated suit in Ontario, despite the policy's arbitration clause governing dispute resolution. ACIA sued defendant in Macomb County, then moved for summary disposition, for declaratory relief, and to enjoin defendant's Ontario suit.

The circuit court determined that the parties' remaining claims should be arbitrated under Michigan law and the policy itself. The court then declared as a matter of law that the uninsured motorist coverage was $200,000 in Canadian currency. The circuit court dismissed plaintiff's Macomb action and enjoined defendant from pursuing his Ontario case and from interfering with, or enjoining, the arbitration or ACIA's suit.

The circuit court correctly applied Michigan law when interpreting the parties' insurance contract. The instant controversy sounds in contract, not in tort. Michigan courts interpreting contract provisions should employ the law of the state in which the parties entered the contract. Jones v. State Farm Mutual Automobile Ins. Co., 202 Mich.App. 393, 398, 509 N.W.2d 829 (1993). Because defendant contracted with ACIA in Michigan, the law of our state governs their insurance agreement.

Under Michigan law, defendant should have exhausted his remedies under the policy before bringing suit in Ontario. M.C.L. § 500.2254; M.S.A. § 24.12254 provides that "any reasonable remedy for adjudicating claims established by [an insurance company] shall first be exhausted by the claimant before commencing suit...." The insurance contract between the parties provided for arbitration of disputes. Thus, defendant should have arbitrated his claims against ACIA before filing his complaint in Ontario. The circuit court properly ordered arbitration and enjoined defendant from pursuing his Ontario cause of action. 1

ACIA next argues that the circuit court should not have determined that the policy limit for uninsured motorist coverage was $200,000. The court decided that the amount of uninsured motorist coverage was not arbitrable on the basis of the policy's arbitration provision, which reads:

Unless otherwise agreed by express written consent of both parties, disagreements concerning insurance coverage, insurance afforded by the coverage, or whether or not a motor vehicle is an uninsured motor vehicle are not subject to arbitration and suit must be filed within 3 years from the date of the accident.

The above language prohibits the parties from arbitrating insurance coverage disputes, which presumably include the amount of uninsured motorist coverage.

Because the amount of insurance coverage was not arbitrable, the circuit court next examined the contract itself and decided as a matter of law that ACIA was bound to provide at least $200,000 in uninsured motorists coverage. The construction of a contract with clear language is a question of law. G & A, Inc. v. Nahra, 204 Mich.App. 329, 330, 514 N.W.2d 255 (1994). We review questions of law de novo. Cardinal Mooney High School v. Michigan High School Athletic Ass'n, 437 Mich. 75, 80, 467 N.W.2d 21 (1991).

Courts view insurance contracts similarly to other contracts, as agreements between the parties, and will determine the terms of the agreement and enforce them accordingly. Whitaker v. Citizens Ins. Co. of America, 190 Mich.App. 436, 439, 476 N.W.2d 161 (1991). Insurance contracts are typically interpreted as a whole, and courts are to give the words within the contract their commonly understood meaning. Parker v. Nationwide Mutual Ins. Co., 188 Mich.App. 354, 355, 470 N.W.2d 416 (1991). If a contract is clear, a court will enforce its terms and will not rewrite it. Id.

The circuit court examined the Power of Attorney and Undertaking, a document filed by ACIA with the Canadian government, which provides that ACIA will

[n]ot ... set up any defence to any claim, action, or proceeding, under a motor-vehicle liability insurance contract entered into by it, which might not be set up if the contract had been entered into in, and in accordance with the law relating to motor-vehicle liability insurance contracts of the Province or Territory of Canada in which such action or proceedings may be instituted, and to satisfy any final judgment rendered against it or its insured by a Court in such Province or Territory, in the claim, action, or proceeding, up to

(1) the limit or limits of liability provided in the contract; but

(2) in any event an amount not less than the limit or limits fixed as the minimum for which a contract of motor-vehicle liability insurance may be entered into in such Province or Territory of Canada, exclusive of interest and costs and subject to any priorities as to bodily injury or property damage with respect to such minimum limit or limits as may be fixed by the Province or Territory.

This provision means that an insurer of a nonresident motorist injured in an Ontario accident may not assert uninsured motorist policy limits lower than $200,000 as a defense. Schrader v. United States Fidelity & Guaranty Co., 37...

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