Lattimore-Wiegand v. State Farm Mut. Auto. Ins. Co.

Decision Date10 October 2013
Docket NumberCase No. 13-12194
CourtU.S. District Court — Eastern District of Michigan


This is an insurance fraud case. Plaintiff Wendy Lattimore-Wiegand (Plaintiff) is suing Defendant State Farm Mutual Automobile Insurance Company (Defendant) over a provision in her automobile insurance policy providing underinsured motorist (UIM) coverage. Plaintiff says that, although she pays a premium to Defendant for UIM coverage, her insurance policy's insuring agreement and limiting clauses render the UIM coverage illusory, and that the same is true as to all of Defendant's minimum liability coverage policies. In addition to raising her own claim, Plaintiff seeks to certify a class for a class action lawsuit.

Plaintiff's complaint is in seven counts, phrased by her as follows:

Count I Fraud and Misrepresentation

Count II Violations of RICO

Count III Constructive or Silent Fraud

Count IV Unjust Enrichment

Count V Breach of Contract

Count VI Class Action Allegations

Count VII Violation of Public Policy

Now before the Court is Defendant's motion to dismiss (Doc. 9). The Court held a hearing on October 2, 2013; the motion is ready for decision. For the reasons that follow, the motion will be granted.


Plaintiff purchased an automobile insurance policy from the Defendant. (Doc. 1-1, Ins. Policy). Under the policy, the bodily injury limits per occurrence for "Each Person" is $20,000 and "Each Accident" is $40,000. This is the minimum required amount of liability insurance coverage under Michigan law. See Mich. Comp. Laws § 500.3009.

For a premium of $1.87 paid every six-month policy term, Plaintiff opted for UIM coverage. UIM coverage applies when Plaintiff is involved in an accident and the driver at fault does not have enough insurance coverage, in the aggregate, to adequately compensate her for her injuries. In these instances, UIM coverage allows her to receive compensation from Defendant up to the policy's $20,000 limits to cover the at-fault driver's shortfall.1 UIM coverage is not mandated by Michigan No-Fault Automobile law but instead is an optional coverage. Dawson v. Farm Bureau Mut Ins. Co. of Mich., 293 Mich. App. 563, 568 (2011).

Here, the policy defines UIM coverage:

Underinsured Motor Vehicle means a land motor vehicle or motorcycle:
1. The ownership, maintenance, and use of which is either:
a. insured or bonded for bodily injury liability at the time of the accident; or
b. self-insured under any motor vehicle financial responsibility law, any motor carrier law, or any similar law, and
2. for which the total limits of insurance, bonds, and self-insurance for bodily injury liability from all sources:
a. are less than the Underinsured Motor Vehicle Coverage limits of this policy; or
b. have been reduced by payments to persons other than you and resident relatives to less than the Underinsured Motor Vehicle limits of this policy.

(Doc. 1-1 at 20).

In addition, the UIM coverage insuring agreement states:

We will pay only if the full amount of all available limits of all bodily injury liability bonds, policies, and self-insurance plans that apply to the insured's bodily injury have been used up by payment of judgments or settlements, or have been offered to the insured in writing.


Finally, the policy places limits on UIM coverage:

1. The Underinsured Motor Vehicle Coverage limits are shown on the Declarations Page under "Underinsured Motor Vehicle Coverage - Bodily Injury Limits - Each Person, Each Accident"
a. The most we will pay for all damages resulting from bodily injury to any one insured injured in any one accident, including all damages sustained by other insureds as a result of that bodily injury, is the lesser of:
(1) the limit shown under "Each Person" reduced by the sum of all payments for damages resulting from that bodily injury made by or on behalf of any person or organization who is or may beheld legally liable for that bodily injury, or
(2) the amount of all damages resulting from that bodily injury reduced by the sum of all payments for damages resulting from that bodily injury made by or on behalf of any person or organization who is or may be held legally liable for that bodily injury.
b. Subject to a. above, the most we will pay for all damages resulting from bodily injury to two or more insureds injured in the same accident is the limit shown under "Each Accident" reduced by the sum of all payments for bodily injury made to all insureds by or on behalf of any person or organization who is or may be held legally liable for the bodily injury.

(Id. at 21).

Under the policy, Plaintiff also has uninsured motor vehicle (UI) coverage. (Doc. 1-1 at 16-17). UI coverage applies if Plaintiff was involved in an accident with a driverwho did not maintain any insurance, or did maintain insurance but below the statutory minimum under Michigan law. Plaintiff is not challenging the UI coverage as illusory.


A motion to dismiss under Fed. R. Civ. P. 12(b)(6) tests the sufficiency of a complaint. To survive a Rule 12(b)(6) motion to dismiss, the complaint's "factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the allegations in the complaint are true." Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545 (2007). See also Ass'n of Cleveland Fire Fighters v. City of Cleveland, Ohio, 502 F.3d 545, 548 (6th Cir. 2007). The Court is "not bound to accept as true a legal conclusion couched as a factual allegation." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (internal quotation marks and citation omitted). Moreover, "[o]nly a complaint that states a plausible claim for relief survives a motion to dismiss." Id. at 679. Thus, "acourt considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Id. "While legal conclusions can provide the framework of a complaint, they must be supported by factual allegations. When there are well-pleaded factual allegations, a court should assume their veracity and then determine whether they plausibly give rise to an entitlement to relief." Id. In sum, "[t]o survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Id. at 678 (internal quotation marks and citation omitted).


The question presented is straightforward: Is UIM coverage in Defendant's minimum liability coverage insurance policies ($20,000 per person/$40,000 per accident) illusory? As long as there is "any manner in which the policy could be interpreted to provide coverage," the challenged policy provision is not illusory. See Cincinnati Ins. Co. v. Hall, No. 308002, 2013 WL 3107640, at *5 (Mich. Ct. App. June 20, 2013) (per curiam).2 As Defendant explained at the hearing, and as will be explained further below, there are three situations in which UIM coverage is available in Plaintiff's policy. Consequently, the UIM coverage provision in Defendant's automobile insurance policies is not illusory. Plaintiff therefore fails to state a claim upon which relief can be granted.

In reaching this conclusion, the Court is cognizant that UIM coverage "is not mandated by statute," and therefore, "the scope, coverage, and limitations of underinsurance protection are governed by the insurance contract and the law pertaining to contracts." Mate v. Wolverine Mut. Ins. Co., 233 Mich. App. 14, 19 (1998) (citing Auto-Owners Ins. Co. v. Leefers, 203 Mich. App. 5, 10-11 (1993)). Insurance contracts are interpreted "in accordance with Michigan's well-established principles of contract construction." Henderson v. State Farm Fire and Cas. Co., 460 Mich. 348, 353 (1999) (citing Arco Indus. Corp. v. Am. Motorists Ins. Co., 448 Mich. 395, 402 (1995)). This requires insurance contracts to be enforced according to their terms, and courts should not create an ambiguity when the policy is clear and precise. Id. at 354 (citations omitted). The insurance contract must "be read and interpreted as a whole." Taylor v. Blue Cross/Blue Shield of Mich., 205 Mich. App. 644,649 (1994) (citing Fragnerv. Am. Comm. Mut. Ins. Co., 199 Mich. App. 537, 540 (1993)). "Exclusions are to be read with the insuring agreement and independent of other exclusions." Id. (citation omitted).

Where an insurance policy is clear, i.e. "if it fairly admits of but one interpretation," its "construction is a question of law for the court." Id. (citation omitted). However, if a contract is ambiguous, i.e. "after reading the entire contract, its language reasonably can be understood in differing ways," it must "be construed against the insurer and in favor of the insured." Id. (citation omitted).

A. Three Scenarios Providing for UIM Coverage

Plaintiff's entire complaint is based on her assertion that the UIM coverage in her policy is illusory. However, there are at least three scenarios in which UIM coverage can be triggered under the policy. Therefore, Plaintiff's complaint is without merit.

1. Scenario #1

The first scenario, depicted in attached Exhibit A, involves a two-car accident. Car #1 is the at-fault motor vehicle and has three occupants, none of which are Defendant's insured. The at-fault driver has minimum liability coverage of $20,000/$40,000. Car#2 has three occupants, including Plaintiff, who is driving. Plaintiff has $20,000/$40,000 coverage. Because Plaintiff is driving her vehicle, all of her occupants are defined as "insured" under her policy. All six people involved in the accident are injured and each sustains $10,000 in damages. The at-fault driver's insurance proceeds are used as follows: first, $30,000...

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