Murphy v. Seed-Roberts Agency, Inc.

• Decision Date: 10 October 1977
• Docket Number: SEED-ROBERTS,Docket No. 27987
• Citation: 99 A.L.R.3d 457,79 Mich.App. 1,261 N.W.2d 198
• Parties: John W. MURPHY et al., Plaintiffs-Appellants, v.AGENCY, INC., a Michigan Corporation, and Commercial Insurance Services of America, a Foreign Corporation, Defendants, and California Union Insurance Company, a Foreign Corporation, jointly and severally, Defendant-Appellee. 79 Mich.App. 1, 261 N.W.2d 198, 99 A.L.R.3d 457
• Court: Court of Appeal of Michigan — District of US

Page 198

261 N.W.2d 198

John W. MURPHY et al., Plaintiffs-Appellants, v. SEED-ROBERTS AGENCY, INC., a Michigan Corporation, and Commercial Insurance Services of America, a Foreign Corporation, Defendants and California Union Insurance Company, a Foreign Corporation jointly and severally, Defendant-Appellee.

Docket No. 27987.

79 Mich.App. 1, 261 N.W.2d 198, 99 A.L.R.3d 457

Court of Appeals of Michigan.

Oct. 10, 1977.

Released for Publication Jan. 12, 1978.

[79 MICHAPP 3] Dahlberg, Mallender & Gwane by Robert W. Appleford, Birmingham, for plaintiffs-appellants.

Alexander, Buchanan & Seavitt by G. Cameron Buchanan, Detroit, for Cal. Union Ins. Co.

Sommers, Schwartz, Silver, Schwartz & Tyler by Stanley S. Schwartz, Southfield, for Commercial Ins.

Davidson, Gothshall, Kohl, Nelson, Secrest, Wardle & Lynch by Roger F. Wardle, Farmington Hills, Martin, Bohall, Joselyn, Halsey, Rowe & Jamieson by William H. Joselyn, Kerr, Wattles & Russell by Robert G. Russell, Detroit, for Seed-Roberts.

Frank J. Kelley, Atty. Gen., Robert A. Derengoski, Sol. Gen., by Frederick H. Hoffecker, Asst. Atty. Gen., Lansing, amicus curiae.

Before T. M. BURNS, P. J., and BRONSON and SIMON, ^* JJ.

BRONSON, Judge.

Plaintiffs, some 78 licensed physicians engaged in the practice of medicine in Oakland County, appeal from a March 19, 1976, judgment denying their motion for partial summary judgment and dismissing their complaint against defendant California Union Insurance Company for failure to state a claim upon which relief can be granted. GCR 1963, 117.2(1). For the reasons developed in this opinion we reverse the grant of summary judgment in favor of defendant California Union Insurance Company, affirm the denial of plaintiffs' motion for summary judgment, and remand the case for trial.

The complaint alleges that each plaintiff holds an individual certificate of malpractice liability insurance issued by defendant California Union under and pursuant to a single master policy issued by California Union to the William Beaumont doctors' association. The master policy states [79 MICHAPP 4] the policy period to be from June 26, 1974, to June 26, 1977.

The individual insurance certificates also include the following cancellation clause, which is required by M.C.L.A. § 500.3020; M.S.A. § 24.13020:

"This certificate may be cancelled by the Named Insured by surrender thereof to the Company or any of its authorized representatives or by mailing to the Company written notice stating when thereafter the cancellation shall be effective. This certificate may be cancelled by the Company by mailing to the Named Insured at the address shown in this certificate, written notice stating when not less than 90 days thereafter such cancellation shall be effective. The mailing of notice as aforesaid shall be sufficient proof of notice. The time of surrender or the effective date and hour of cancellation stated in the notice shall become the end of the certificate period. Delivery of such written notice either by the Named Insured or by the Company shall be equivalent to mailing."

Sometime in 1973, representatives of William Beaumont Hospital began negotiating for a group malpractice insurance program under which the hospital and its staff could obtain malpractice insurance coverage in a single program from one insurance company. Negotiations were undertaken with California Union through its agents, Commercial Insurance Services and the Seed-Roberts Agency. It is claimed that California Union, and/or its agents, offered plaintiffs a program which would provide such insurance with a three-year term, a single premium to be paid in advance with no annual or periodic premium increase, and termination of any individual doctor's insurance only upon cause attributable to the individual.

It is alleged that shortly after individual certificates of insurance were delivered to plaintiffs in [79 MICHAPP 5] late 1974, the defendants first attempted to amend those certificates so as to provide only one year of coverage at an increased premium, then sent cancellation notices to each plaintiff pursuant to the 90-day cancellation clause. The cancellation notices included an offer to reinstate the insurance for one year only upon payment of a new, much higher premium.

The complaint contains four separate counts. Count 1 asserts that the attempted cancellations would breach the agreements between plaintiffs and defendants and seeks declaratory relief.

Count 2, pled alternatively, asks for reformation of the contract on the basis of fraud in the event the contract as written is interpreted as permitting the attempted cancellations absent cause attributable to the individual doctors.

Count 3 of the complaint seeks monetary damages on the basis of fraud as an alternative to the relief requested in Counts 1 and 2, and Count 4 seeks monetary damages on a negligence theory.

On October 6, 1975, defendant California Union filed a motion for summary judgment pursuant to GCR 1963, 117.2(1), on the ground that plaintiffs' complaint failed to state a claim upon which relief could be granted. The motion referred to the inclusion of the 90-day cancellation clause in the contracts of insurance and to an integration clause. The motion also stated that the issuance of such a contract of insurance without a cancellation clause would have been in violation of Michigan law. M.C.L.A. § 500.3020; M.S.A. § 24.13020.

On January 28, 1976, plaintiffs filed a motion for summary judgment against defendant California Union pursuant to GCR 1963, 117.2(3). Plaintiffs asserted that there was no genuine issue as to any material fact inasmuch as one of defendant's officers,[79 MICHAPP 6] upon being deposed, had admitted that California Union had decided to amend or cancel plaintiffs' policies in order to obtain higher premiums for the sole reason that plaintiffs' premiums were lower than premiums being charged by other companies. Plaintiffs claimed that cancellation of plaintiffs' coverage for such a reason was contrary to public policy and prohibited. Plaintiffs therefore requested summary judgment on their request in Count 1 for declaratory relief. Plaintiffs argued that inasmuch as defendant California Union had admitted cancellation of the certificates of insurance without cause attributable to plaintiffs and for the reason of raising premiums and shortening the terms of coverage, there was no dispute as to any facts material to a decision on whether such use of the cancellation clause was contrary to public policy and a breach of contract.

After hearing arguments on the motions, the trial court denied plaintiffs' motion for summary judgment and granted defendant California Union's motion. An order was entered on March 19, 1976, dismissing plaintiffs' complaint as to defendant California Union with prejudice. Plaintiffs now appeal.

I.

As noted, Count 1 of plaintiffs' complaint requested a declaratory judgment that the contracts of insurance could be cancelled by the company only for cause and for injunctive relief restraining defendant California Union from carrying out threatened cancellations.

Plaintiffs' motion for summary judgment on Count 1 pursuant to GCR 1963, 117.2(3), also requests, in the first instance, a purely legal determination that cancellation of malpractice insurance [79 MICHAPP 7] absent cause attributable to the insured violates public policy. Under plaintiffs' theory, plaintiffs would be entitled to summary injunctive and declaratory relief because of the alleged deposed admissions by defendant California Union as to the reasons for the threatened cancellations.

The theory behind defendant's summary judgment motion is that the contract's cancellation clause plainly and unambiguously gives defendant the right to cancel the malpractice insurance at any time for any or no reason, that M.C.L.A. § 500.3020; M.S.A. § 24.13020 requires such a construction of the clause and precludes any conclusion that such a clause could be against public policy, and that the merger clause prohibits reference to any prior negotiations or agreements of the parties leading up to their entering into this contract.

Essentially then, the opposing motions for summary judgment on Count 1 asked for a summary declaratory determination whether the contract could be cancelled at any time for any reason or whether the contract could be cancelled only for cause.

To begin with defendant's motion for summary judgment, we are not of the opinion that the previously quoted cancellation clause unequivocally and unambiguously grants defendant the right to cancel plaintiffs' insurance at any time for no reason so as to justify summary judgment for defendant on Count 1.

Policies of insurance are much the same as other contracts; they are matters of agreement by the parties and the job of the courts is to determine what that agreement was and enforce it accordingly. Eghotz v. Creech, 365 Mich. 527, 530, 113 N.W.2d 815 (1962). If the terms of that contract are plain and unambiguous, their plain meaning [79 MICHAPP 8] should be given effect. Wozniak v. John Hancock Mutual Life Insurance Co., 288 Mich. 612, 286 N.W. 99 (1939). An ambiguous policy, however, is open to construction and questions of interpretation may well present jury questions. Clark v. Hacker,345 Mich. 751, 76 N.W.2d 806 (1956).

Insurance policies must be interpreted by reading them as a whole. Sloan v. Phoenix of Hartford Insurance Co., 46 Mich.App. 46, 207 N.W.2d 434 (1973). Courts should attempt to harmonize all parts of a contract of insurance so as to give effect to each clause contained therein. Jackson v. British America Assurance Co., 106 Mich. 47, 63 N.W. 899 (1895). Such a reading of the contract as a whole may be necessary to determine whether ambiguity exists in particular clauses. Insurance Co. of North America v. L. C. Young Painting & Decorating Co., 11 Mich.App. 304, 161 N.W.2d 24 (1968). Cf. DeLand v. Fidelity Health &...