Pacific Employers Ins. Co. v. Michigan Mut. Ins. Co.

Decision Date09 July 1996
Docket NumberDocket No. 99285,No. 1,1
Citation452 Mich. 218,549 N.W.2d 872
Parties, 110 Ed. Law Rep. 840 PACIFIC EMPLOYERS INSURANCE COMPANY, Plaintiff-Appellee, v. MICHIGAN MUTUAL INSURANCE COMPANY, Defendant-Appellant, and State Farm Mutual Insurance Company, Defendant-Appellee, and West Ottawa Public Schools and Gertrude Witteveen, Defendants. Calendar
CourtMichigan Supreme Court

Cholette, Perkins & Buchanan by Robert E. Attmore, Grand Rapids, for plaintiff.

Allaben, Massie, Vander Weyden & Timmer by Sam F. Massie, Jr., Grand Rapids, for Michigan Mutual Insurance Company.

Linsey, Strain & Worsfold, P.C. by Joseph P. VanderVeen, Grand Rapids, for State Farm Mutual Automobile Insurance Company.

Opinion

LEVIN, Justice.

The question presented is whether a school district's general liability insurer or its automobile liability insurer is subject to liability for injuries suffered by a child returning from her first day of kindergarten, who was disembarked by a school bus driver at the wrong stop, and who, trying to find her way to her destination, was injured crossing a street at an unfamiliar location.

The general liability insurer asserts that the injury arose out of the "use" of the school bus, while the automobile insurer asserts that the injury did not arise out of the "use" of the school bus, but rather was the result of the separate and personal negligent act of the school bus driver.

We hold that "use" of a school bus, as stated in these policies of insurance, includes disembarkation of a kindergartener at a place other than the predetermined bus stop, and that an injury that is foreseeably identifiable with the disembarkation at a place other than the predetermined location, arises out of the "use" of the school bus.

I

Five-and-one-half-year-old Amy Doolaard was returning on September 8, 1982, from her first day of kindergarten in the West Ottawa Public Schools on a school bus driven by school system employee Gertrude Witteveen. Amy was wearing a tag on her clothes supplied by the school indicating that she was to be let off the bus at the corner of 156th and Lakewood. Witteveen had been furnished with a list of the students and the locations where they were to be dropped off. She was to check by radio with the school if a tag did not correspond with the list. She did not do so, and mistakenly dropped Amy off at 160th and Perry.

Amy, in an effort to reach her babysitter's house on her own, walked about half a mile along 160th Street to Lakewood Boulevard. When Amy reached Lakewood, she attempted to cross the street, but was struck by an oncoming car. Amy sustained serious and permanent disabling injuries.

A

West Ottawa had insurance coverage through three carriers. Appellant Michigan Mutual Insurance Company was the general liability carrier providing primary coverage up to one million dollars. The policy was subject to the following exclusions:

Transportation of Pupils: With respect to the transportation of students or pupils, exclusions (b) and (e) of the policy are replaced by the following:

The insurance does not apply to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of any ... automobile ... owned, operated or hired by or for the insured.... [Emphasis added.]

The automobile liability carrier was appellee State Farm Mutual Insurance Company, which provided primary coverage up to $500,000. The policy provided that the insurer agrees:

To pay on behalf of the insured all sums which the insured shall be legally obligated to pay as damages because of

(A) bodily injury sustained by other persons, and

(B) property damage,

caused by accident arising out of the ownership, maintenance or use, including loading or unloading, of the owned motor vehicle.... [Emphasis added.]

School Bus, Church and Other Approved Bus Use

The coverage applies only while the motor vehicle is used for a "use" shown in the exceptions space on the declarations page and during maintenance, inspection, testing or renovation, subject to:

Use

Bus uses are:

A. School Bus Use.

School Bus Use--means the carrying of persons in connection with school attendance or any school activity of your school or school district. [Emphasis added.]

Appellee Pacific Employers Insurance Company was the umbrella carrier, providing coverage up to five million dollars applicable when the primary coverage provided by State Farm or Michigan Mutual is exhausted.

B

Johannes Doolaard, Amy's father and conservator of her estate, brought suit in May 1985 against West Ottawa Public Schools and school bus driver Witteveen for damages resulting from Amy's injuries.

The excess carrier, Pacific, filed this action seeking a declaratory judgment concerning the liabilities of the insurers. Pacific contended that the general liability insurer, Michigan Mutual, rather than the automobile insurer, State Farm, was the primary insurer. While this action was pending, the underlying law suit was settled.

The circuit judge ruled, in the present action, that Michigan Mutual was primarily liable for costs incurred in the settlement of the underlying suit. The Court of Appeals affirmed. 1 The Court concluded that "use" should be defined narrowly "to encompass only those injuries arising from the carrying of persons aboard the bus." 2 Because Amy's injuries occurred five to ten minutes after and about half a mile away from where she alighted from the bus, the Court reasoned that the injuries and damages were not covered by the State Farm policy. The Court drew a distinction between Witteveen's driving of the school bus, which it said involved the "use" of the bus, and her "separate, personal act of discharging Amy Doolaard at the wrong stop." 3

II

The parties agree that one or the other of the two primary insurers, Michigan Mutual or State Farm, is subject to liability. It is not claimed that neither primary insurer is subject to liability with the result that only the excess carrier provides coverage.

The question is whether the accident that injured Amy arose, as stated in the State Farm policy, "out of the ownership, maintenance or use" of the school bus or whether, as stated in the Michigan Mutual Policy, coverage is excluded because the accident arose "out of the ownership, maintenance, operation, use, loading or unloading" of the school bus.

Because the language in the State Farm policy describing the coverage and the language in the Michigan Mutual Policy describing the exclusion from coverage is essentially parallel, the general rules of construction are of little assistance in resolving this controversy between two (or three) insurers in which the insured has no direct interest. We, nevertheless, note that, in general, exclusionary clauses are construed against the insurer. 4 But, "[t]his Court cannot create ambiguity where none exists.... Clear and specific exclusions must be given effect." 5 We also review an exclusion from coverage, bearing in mind that an insurance contract should be read as a whole to effectuate the overall intent of the parties. 6

III

We turn to a consideration of whether Amy's injury "arose from" the "use" of the school bus.

The school bus was "used" to transport Amy until shortly before the accident. She was injured after disembarking the bus.

The tort standard of causation is not determinative of causation in an insurance case. 7 The insured must show more than the minimal "but for" causation. See Thornton v. Allstate Ins. Co., 425 Mich. 643, 650, 391 N.W.2d 320 (1986), in which this Court adopted a causation standard set forth in Kangas v. Aetna Casualty & Surety Co., 64 Mich.App. 1, 17, 235 N.W.2d 42 (1975), that stated:

[W]hile the automobile need not be the proximate cause of the injury, there still must be a causal connection between the injury sustained and the ownership, maintenance or use of the automobile and which causal connection is more than incidental, fortuitous or but for. The injury must be foreseeably identifiable with the normal use, maintenance and ownership of the vehicle.

Other states and commentators have stated essentially comparable standards. 8

IV

The Court of Appeals concluded that " '[u]se' is narrowly defined to encompass only those injuries arising from the carrying of persons aboard the bus." 9 While this definition may suffice for a public transit bus that transports passengers from embarkation to disembarkation, the Court of Appeals definition ignores a major aspect of the particular "use" to which a school bus is put. A school bus driver is charged both with physically carrying passengers on the bus and with assuring that each child is delivered to a predetermined bus stop. When this driver failed to disembark the child at the correct location, she "misused" the bus. The injuries that followed were foreseeably identifiable with the negligent decision to disembark the child at the wrong bus stop.

The Court of Appeals failed to recognize the scope of the term "use" when it held that school bus use under the State Farm policy was limited to the carrying of persons in connection with school attendance. 10 "Use" is defined more broadly than the mere carrying of persons and, while it encompasses the "operation" of the bus, it may also include a range of activity unrelated to actual driving. 11

A

Although the State Farm policy does not include the term "operation," "use" as "the carrying of persons" under the State Farm policy includes at least the operation of school buses. If we were to construe the policy otherwise, even the most obvious negligent driving would not be covered by the State Farm policy, such as where a school bus driver negligently decides to pass despite a double yellow line and that decision results in injuries to persons aboard the school bus.

The "use" of a school bus, even when limited by the State Farm policy to "carrying of persons in connection with school...

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