Henderson v. State Farm Fire and Cas. Co.

• Decision Date: 08 July 1999
• Docket Number: Docket No. 110822, Calendar No. 10.
• Citation: 460 Mich. 348,596 N.W.2d 190
• Parties: Daniel HENDERSON, Assignee of Dawn Mysierowicz, Plaintiff-Appellee, v. STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Insurance Corporation, Defendant-Appellant.
• Court: Michigan Supreme Court

596 N.W.2d 190

460 Mich. 348

Daniel HENDERSON, Assignee of Dawn Mysierowicz, Plaintiff-Appellee, v. STATE FARM FIRE AND CASUALTY COMPANY, an Illinois Insurance Corporation, Defendant-Appellant.

Docket No. 110822, Calendar No. 10.

Supreme Court of Michigan.

Argued March 10, 1999.

Decided July 8, 1999.

Sarvis & Herrmann, P.C. (by J. Steven Sarvis ), Bingham Farms, for plaintiff-appellee.

Draugelis & Ashton, L.L.P. (by Floyd C. Virant ), Plymouth, for defendant-appellant.

Charters, Heck, O'Donnell, Petrulis & Zorza, P.C. (by Eric S. Goldstein ), Troy, for amici curiae Michigan Trial Lawyers Association.

Dykema, Gossett, P.L.L.C. (by Lori M. Silsbury ), Lansing, for amici curiae Insurance Information Association of Michigan.

Opinion

TAYLOR, J.

We granted leave to appeal in this case to review the Court of Appeals first impression construction of the phrase "in the care of" in a homeowner's insurance policy. The Court of Appeals determined that the phrase was ambiguous and that there was no genuine issue of material fact that Dawn Mysierowicz, plaintiff's assignor, came within the definition of an insured¹ under defendant's insurance policy because she was "in the care of" the named insured. We find that the Court of Appeals erred in reaching this holding. Because we conclude that neither plaintiff nor defendant was entitled to summary disposition, we reverse and remand to the trial court for further proceedings.

Background Facts and Proceedings Below

In early 1993, Mysierowicz's mother was in the process of divorcing her father and was unable to provide a home for her. Bonnie Twitchell, the mother of Mysierowicz's boyfriend Travis Twitchell, agreed that Mysierowicz could stay at the Twitchell home on a temporary basis.² On June 19, 1993, plaintiff Daniel Henderson was visiting the Twitchell household. An altercation occurred with some strangers in front of the Twitchell home during which plaintiff was stabbed. Henderson subsequently filed a lawsuit alleging that Travis Twitchell and Mysierowicz had negligently provoked the strangers, resulting in his being injured.

The lawsuit was tendered to State Farm Fire and Casualty Company. State Farm assumed a defense for Travis Twitchell, but declined to provide a defense for Mysierowicz on the basis that she was not an "insured" within the meaning of the insurance policy. Plaintiff obtained a default judgment for $75,000 against Mysierowicz. In consideration of a promise by Henderson not to proceed against her personal assets, Mysierowicz assigned all rights, benefits and claims she had against State Farm to Henderson.

Henderson subsequently filed a complaint, as Mysierowicz's assignee, against State Farm alleging that it had breached its obligations when it did not defend and provide coverage to Mysierowicz under the Twitchell homeowner's policy. Plaintiff alleged that he was entitled to a judgment of $75,000 against defendant. State Farm filed an answer denying liability on the basis that Mysierowicz was not an "insured" as the term was defined in the insurance policy.

After depositions of Mysierowicz and the Twitchells were taken, plaintiff filed a motion for summary disposition under MCR 2.116(C)(9) (failure to state a valid defense) and MCR 2.116(C)(10) (no genuine issue of material fact). Plaintiff argued on the basis of deposition testimony that he filed with his motion that Mysierowicz fit within the definition of an "insured" in the insurance policy. Defendant responded by filing its own motion for summary disposition under MCR 2.116(C)(10). Defendant also cited and provided deposition testimony it said demonstrated that Mysierowicz was not an "insured" and that it had properly refused to defend or provide coverage refused to defend or provide coverage in the earlier lawsuit.

The trial court denied plaintiff's motion and granted defendant's motion. The court explained:

This Court finds that Dawn Mysierowicz was at the age of 18, [a] legal adult suffering from no physical or mental disabilities. She resided with the Twitchel[ls] and was not under the[ir] control, guidance, supervision, management or custody. As such it is clear to this Court that State Farm's policy of insurance did not provide coverage to her because she was not, "In the care of," the insureds. Thus, this Court finds no genuine issue as to any material fact.

Plaintiff filed a claim of appeal. After consulting dictionary definitions of the word "care" and some out of state cases, the Court of Appeals determined that "care" had many meanings and thus the phrase "in the care of" was ambiguous because it could also reasonably be understood to have different meanings. The Court ultimately reversed the order granting summary disposition for defendant and further found that there was no genuine issue of material fact that Mysierowicz came within the definition of "insured" because she was "in the care of" Bonnie Twitchell, the named insured under defendant's homeowner's policy. 225 Mich.App. 703, 572 N.W.2d 216 (1997). We subsequently granted defendant's application for leave to appeal. 459 Mich. 878, 586 N.W.2d 744 (1998).

Standard of Review

We review the grant or denial of a motion for summary disposition de novo. Groncki v. Detroit Edison Co., 453 Mich. 644, 649, 557 N.W.2d 289 (1996). Further, the construction and interpretation of an insurance contract is a question of law for a court to determine that this Court likewise reviews de novo. Morley v. Automobile Club of Michigan, 458 Mich. 459, 465, 581 N.W.2d 237 (1998). Whether contract language is ambiguous is also a question of law which we review de novo. Port Huron Ed. Ass'n v. Port Huron Area School Dist., 452 Mich. 309, 323, 550 N.W.2d 228 (1996)

. It is axiomatic that if a word or phrase is unambiguous and no reasonable person could differ with respect to application of the term or phrase to undisputed material facts, then the court should grant summary disposition to the proper party pursuant to MCR 2.116(C)(10). Moll v. Abbott Laboratories, 444 Mich. 1, 28, n. 36, 506 N.W.2d 816 (1993). Conversely, if reasonable minds could disagree about the conclusions to be drawn from the facts, a question for the factfinder exists. Id.

Principles Utilized in Interpreting Insurance Contracts

Initially, in reviewing an insurance policy dispute we must look to the language of the insurance policy and interpret the terms therein in accordance with Michigan's well-established principles of contract construction. Arco Industries Corp. v. American Motorists Ins. Co., 448 Mich. 395, 402, 531 N.W.2d 168 (1995).

First, an insurance contract must be enforced in accordance with its terms. Upjohn Co. v. New Hampshire Ins. Co., 438 Mich. 197, 207, 476 N.W.2d 392 (1991). A court must not hold an insurance company liable for a risk that it did not assume. Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 567, 489 N.W.2d 431 (1992). Second, a court should not create ambiguity in an insurance policy where the terms of the contract are clear and precise. Id. Thus, the terms of a contract must be enforced as written where there is no ambiguity. Stine v. Continental Casualty Co., 419 Mich. 89, 114, 349 N.W.2d 127 (1984).

While we construe the contract in favor of the insured if an ambiguity is found, Auto Club Ins. Ass'n v. DeLaGarza, 433 Mich. 208, 214, 444 N.W.2d 803 (1989), this does not mean that the plain meaning of a word or phrase should be perverted, or that a word or phrase, the meaning of which is specific and well recognized, should be given some alien construction merely for the purpose of benefitting an insured. Upjohn Co, supra at 208, n. 8, 476 N.W.2d 392. The fact that a policy does not define a relevant term does not render the policy ambiguous. Auto Club Group Ins. Co. v. Marzonie, 447 Mich. 624, 631, 527 N.W.2d 760 (1994). Rather, reviewing courts must interpret the terms of the contract in accordance with their commonly used meanings. Group Ins. Co. of Michigan v. Czopek, 440 Mich. 590, 596, 489 N.W.2d 444 (1992). Indeed, we do not ascribe ambiguity to words simply because dictionary publishers are obliged to define words differently to avoid possible plagiarism. Upjohn Co, supra at 209, n. 8, 476 N.W.2d 392.

Analysis

The Court of Appeals erred in concluding that the phrase "in the care of" was ambiguous. It is not.³ The Court of Appeals failed to recognize that this phrase is a colloquial or idiomatic phrase that is peculiar to itself and readily understood as a phrase by speakers and readers of our language.⁴

An example of a court recognizing that parsing phrases word by word may lead to an inaccurate interpretation is informative. In Nat'l Security Archive v. United States Dep't of Defense, 279 U.S. App DC 308, 310, 880 F.2d 1381 (1989), the United States Court of Appeals for the District of Columbia, in analyzing the phrase "educational institution," stated:

It is often the case that words, used in conjunction, convey a meaning different from that which they would bear if interpreted separately.[⁵]

Utilization of plain English in insurance policies and other legal instruments has been on occasion required, but in all cases encouraged, in recent years.⁶ This change requires courts to utilize less rigid methods of interpretation than the old densely written policies demand.⁷ With this in mind, when faced with plain English phrases in an insurance contract, any attempt to define each element, or word, of the phrase, as the Court of Appeals did, will almost invariably result in an inaccurate understanding of the phrase. Rather, the proper approach is to read the phrase as a whole, giving the phrase its commonly used meaning. Group Ins. Co. v. Czopek, supra at 596, 489 N.W.2d 444. This requires a court to give contextual meaning to the phrase to determine what the phrase conveys to those familiar with our language and its contemporary usage. This approach is consistent with the parallel rule for statutory construction,...