Berkeypile v. Westfield Ins. Co.

Decision Date12 August 2008
Docket NumberDocket No. 274177.
Citation280 Mich. App. 172,760 N.W.2d 624
CourtCourt of Appeal of Michigan — District of US
PartiesBERKEYPILE v. WESTFIELD INSURANCE COMPANY.

Donald M. Fulkerson, Westland, for Mary I. Berkeypile.

Collins, Einhorn, Farrell & Ulanoff, P.C. (by Deborah A. Hebert), Southfield, for Westfield Insurance Company.

Before: DAVIS, P.J., and MURPHY and WHITE, JJ.

MURPHY, J.

Plaintiff Mary I. Berkeypile appeals by leave granted the trial court's order granting summary disposition in favor of defendant Westfield Insurance Company pursuant to MCR 2.116(C)(10) in this action involving the interpretation of an insurance policy issued by Westfield. Plaintiff was injured in a multiple-vehicle accident. The chief question posed to us is whether, under the pertinent language of the policy, plaintiff still has the potential right to recover uninsured motorist (UM) benefits from Westfield even though plaintiff previously received, through separate litigation against three of the drivers involved in the accident, settlement proceeds exceeding the $300,000 policy limit set forth in the UM endorsement of the Westfield policy. Stated another way, the issue is whether the settlement proceeds should be offset against the total amount of damages, not yet determined, or offset against the UM policy limit of $300,000 without any consideration of possible damages, which, given the amounts of the policy limit and the settlement proceeds, would eliminate any liability on Westfield's part under the policy. The trial court ruled, as a matter of law, that the policy limit must be reduced by the aggregate of the settlements, leaving Westfield with no obligation to pay plaintiff UM benefits. We reverse and remand, holding that there is no language in the policy supporting the trial court's benefits-reduction ruling and that the language in the UM endorsement dictates that any offset pertains only to duplicate payments for the same noneconomic and excess economic losses. Westfield would be liable for UM benefits equal to the difference by which any overall damages award exceeds the sum of the settlement proceeds, subject to the policy limit and any allocation of fault made by the trier of fact. Because plaintiff's entitlement to coverage and damages has not yet been decided, nor have damages been assessed, and because she could conceivably receive damages exceeding the amount of the settlement proceeds, the trial court erred in granting summary disposition. We additionally reject Westfield's arguments concerning notice of and consent to the settlements.

I. FACTUAL BACKGROUND AND PROCEDURAL HISTORY

Plaintiff sustained various injuries in a multiple-vehicle accident while riding in a company vehicle insured by Westfield under a commercial automobile policy that included an endorsement providing for UM coverage in the amount of $300,000 for each accident.1 Plaintiff first filed a tort action against three of the drivers involved in the accident. As a result of facilitation one of the drivers, who had $300,000 in liability coverage, settled with plaintiff for $290,000, another driver, who had $100,000 in liability coverage, settled with plaintiff for $37,500, and the third driver, who also had $100,000 in liability coverage, settled with plaintiff for $5,000. The sum of the three settlements is $332,500—$32,500 over the UM coverage limit. The UM endorsement defines an "uninsured motor vehicle" as including, in part, an under insured motor vehicle and a hit-and-run vehicle for which the driver and owner cannot be identified. With respect to the earlier litigation, it is undisputed that two of the three drivers sued by plaintiff, those with $100,000 in liability coverage on their vehicles, are considered to have been driving underinsured vehicles under the definition of "underinsured vehicle" in the UM endorsement. These vehicles would therefore qualify as uninsured motor vehicles, falling under the umbrella of the UM endorsement. Two other vehicles involved in the accident that were not the subject of the prior lawsuit constituted, according to plaintiff, hit-and-run vehicles operated and owned by unknown persons, thereby also falling within the scope of the UM endorsement.2

Plaintiff thereafter filed this action against Westfield and Allied Property and Casualty Insurance Company to recover UM benefits.3 We note, however, that the complaint made no claim of negligence or liability with respect to the two underinsured motorists. Therefore, the demand for UM benefits is not predicated on any alleged liability of the underinsured drivers. Rather, the complaint extensively outlined the alleged negligence and liability of the two unidentified hit-and-run drivers, which allegations form the basis of the claims for UM benefits against Westfield and Allied. Additionally, plaintiff's complaint alleged that the negligence of the two unidentified motorists caused her to suffer serious physical injuries, resulting in noneconomic and economic losses. Westfield filed a counterclaim, seeking a declaratory judgment that plaintiff is not entitled to any UM benefits.

Westfield moved for summary disposition under MCR 2.116(C)(10), arguing that plaintiff received well over $300,000 in settlement payments; therefore, because she had already recovered more than the policy limit for her injuries, she was no longer entitled to any UM benefits. Westfield's position was that the UM coverage guaranteed an injured insured coverage for losses of up to $300,000 when injured by an uninsured motorist and that this included any payments received from legally responsible parties.4 According to Westfield, the settlements reduced the $300,000 in available UM coverage, with the benefits acting as a gap filler, although there was no gap here, given that the settlements exceeded $300,000.5 Westfield additionally contended that plaintiff had settled with the three drivers in the previous litigation without giving Westfield written notice and without obtaining its consent to settle, thereby violating the policy and depriving plaintiff of any coverage.

In response, plaintiff maintained that the policy language allows her to recover UM benefits from Westfield for the difference between the aggregate of the third-party settlements and the total amount of her damages as determined by the jury, should they exceed the settlement proceeds, up to the $300,000 policy limit. In this way, plaintiff could be made whole. Plaintiff contended that the policy merely precludes a double recovery for the same losses and that if a jury were to find damages in excess of the settlement amounts and Westfield were to pay that difference to plaintiff, there would be no duplicate recovery or payment. Plaintiff further argued that the notice and consent provisions cited by Westfield were inapplicable. The trial court accepted Westfield's position and granted the motion for summary disposition under MCR 2.116(C)(10) without reaching the issues of notice and consent concerning the three settlements. This Court subsequently granted plaintiff's application for leave to appeal.

II. ANALYSIS
A. STANDARD OF REVIEW AND SUMMARY DISPOSITION PRINCIPLES UNDER MCR 2.116(C)(10)

This Court reviews de novo a trial court's decision on a motion for summary disposition. Kreiner v. Fischer, 471 Mich. 109, 129, 683 N.W.2d 611 (2004). The proper interpretation of a contract, such as an insurance policy, is a question of law and likewise subject to review de novo on appeal. Archambo v. Lawyers Title Ins. Corp., 466 Mich. 402, 408, 646 N.W.2d 170 (2002).

MCR 2.116(C)(10) provides for summary disposition when there is no genuine issue regarding any material fact and the moving party is entitled to judgment or partial judgment as a matter of law. A trial court may grant a motion for summary disposition under MCR 2.116(C)(10) if the pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to the nonmovant, show that there is no genuine issue with respect to any material fact. Quinto v. Cross & Peters Co., 451 Mich. 358, 362, 547 N.W.2d 314 (1996), citing MCR 2.116(G)(5). Initially, the moving party has the burden of supporting its position with documentary evidence, and, if the moving party does so, the burden then shifts to the opposing party to establish the existence of a genuine issue of disputed fact. Quinto, 451 Mich. at 362, 547 N.W.2d 314; see also MCR 2.116(G)(3) and (4). "Where the burden of proof at trial on a dispositive issue rests on a nonmoving party, the nonmoving party may not rely on mere allegations or denials in [the] pleadings, but must go beyond the pleadings to set forth specific facts showing that a genuine issue of material fact exists." Quinto, 451 Mich. at 362, 547 N.W.2d 314. If the opposing party fails to present documentary evidence establishing the existence of a material factual dispute, the motion is properly granted. Id. at 363, 547 N.W.2d 314. "A genuine issue of material fact exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open an issue upon which reasonable minds might differ." West v. Gen. Motors Corp., 469 Mich. 177, 183, 665 N.W.2d 468 (2003). A court may only consider substantively admissible evidence actually proffered when deciding a motion for summary disposition under MCR 2.116(C)(10). Maiden v. Rozwood, 461 Mich. 109, 121, 597 N.W.2d 817 (1999).

B. PRINCIPLES GOVERNING INSURANCE CONTRACT INTERPRETATION AND UNINSURED MOTORIST BENEFITS

An insurance policy is subject to the same contract interpretation principles applicable to any other species of contract. Rory v. Continental Ins. Co., 473 Mich. 457, 461, 703 N.W.2d 23 (2005). Except when an insurance policy provision violates the law or succumbs to a defense traditionally applicable under general contract law, courts "must construe and apply unambiguous contract provisions as...

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