Powers v. Detroit Auto. Inter-Insurance Exchange
| Decision Date | 30 December 1986 |
| Docket Number | 76427,74136,76091,Docket Nos. 73156,73691,INTER-INSURANCE |
| Citation | 427 Mich. 602,398 N.W.2d 411 |
| Parties | Wanda M. POWERS, Plaintiff-Appellee, v. DETROIT AUTOMOBILEEXCHANGE, Defendant-Appellant. Ester DEYARMOND, Plaintiff-Appellant, v. COMMUNITY SERVICE INSURANCE COMPANY, Defendant-Appellee. AUTO CLUB INSURANCE ASSOCIATION, Plaintiff-Appellee, v. William D. NICHOLSON, Personal Representative of the Estate of Paul D. Nicholson, Deceased, Defendant-Appellant. Herman James SCHIEBOUT, Plaintiff-Appellee, v. CITIZENS INSURANCE COMPANY OF AMERICA, Defendant-Appellant. Robert DENNISON, b/h/n/f Alana Dennison, and Alana Dennison, Individually, Plaintiffs-Appellees, v. Myron WISNIEWSKI, Principal Defendant, and Auto Club Insurance Association, Garnishee-Defendant-Appellant. |
| Court | Michigan Supreme Court |
William J. DeBiasi, P.C. by William M. DeBiasi, Taylor, for plaintiff-appellee in Docket No. 73156.
Dickinson, Brandt, Hanlon, Becker & Lanctot by Cynthia L. Geller, Detroit (Gromek, Bendure & Thomas by Daniel J. Wright, of counsel, Detroit) for defendant-appellant in Docket No. 73156.
William E. Goggin, Alma, for plaintiff-appellant in Docket No. 73691.
Nelson & Kreuger, P.C. by Steven L. Kreuger, Grand Rapids, for defendant/appellee in Docket No. 73691.
Dickinson, Brandt, Hanlon, Becker & Lanctot by Ronald R. Hanlon, Detroit (Gromek, Bendure & Thomas by Nancy L. Bosh, of counsel, Detroit), for plaintiff-appellee in Docket No. 74136.
York & Dolan, P.C. by John A. Dolan, Mt. Clemens, for defendant-appellant in Docket No. 74136.
Schenk, Boncher & Prasher, Grand Rapids, by Frederick J. Boncher, Dan E. Bylenga, Jr., for plaintiff-appellee in Docket No. 76091.
Bremer, Wade, Nelson & Alt, Grand Rapids, by Michael D. Wade, Phillip J. Nelson, for defendant-appellant in Docket No. 76091.
Bockoff & Zamler, P.C., Southfield by Daryl Royal, Thomas C. Miller, for plaintiffs-appellees in Docket No. 76427.
Dickinson, Brandt, Hanlon, Becker & Lanctot, Detroit, by Eugene R. Hom, (Gromek, Bendure & Thomas, Detroit by John A. Lydick, of counsel) for principal defendant and garnishee-defendant-appellant in Docket No. 76427.
Before the Entire Bench.
In these five cases we again consider the validity of the so-called "owned vehicle" exclusion in policies of no-fault automobile insurance.
The claimants in these cases are all insureds under the terms of the policies at issue, in one case because the claimant is the named policyholder and in the remaining cases because the policies cover the claimants as relatives residing in the same household as the policyholder.
The policies state that coverage is provided to insured persons while driving "the owned automobile" and also while driving "a nonowned automobile." The claimants contend that they were each involved in an automobile accident while occupying a nonowned automobile, specifically one owned by a relative residing in the household which was not the vehicle described in the policy in question. The sole exception is the Schiebout case, in which the accident vehicle was owned by a nonresident brother-in-law.
The insurance companies refuse to pay benefits because they claim that the policy definitions of the terms "owned automobile" and "nonowned automobile" exclude insured persons from coverage under the above circumstances. While the policies cover both owned and nonowned automobiles, the insurers state that the cars involved in these accidents do not fit in either category, according to the policy definitions.
These cases present an interesting problem. The opposing parties, in effect, claim to construe as clear and unambiguous the insurance policies containing the so-called owned-automobile exclusion provisions, with dramatically different results. What is so interesting is that from the perspective of each party, there is demonstrable justification for its position. The claimants argue, somewhat paradoxically, that the exclusion is ambiguous--and therefore void--for the very reason that there are two viable interpretations.
The two viable interpretations are as follows: First, the claimants contend they are entitled to understand plain and common English for its normal and regular meaning. 1 Second, the insurers claim that, if the insurance policy is read in its entirety and construed with understanding, the words are subject to clear and unambiguous definitions which give them a meaning other than the normal and regular meaning perceived by the claimants.
This Court, in approaching the problem, must recognize an insurance contract for what it is. It is not a hard-bargained contract drafted after mutual consideration of the positions of two negotiators with equal or substantially equal skills and resources. What is involved is a contract of adhesion, a take-it-or-leave-it insurance policy not drafted by the buyer or even by the seller of the policy, but by insurance and legal experts of a state, national, or international organization, hundreds and maybe thousands of miles away. It is fatuous to suppose the policy owner had any part in the language of the policy besides filling in the blanks, and the problem in question involves not the blanks, but the established text of the printed form.
The common wisdom is that very few insurance policy purchasers read all or even substantially all of the purchased contract, and it is not guaranteeable that they would understand it if they did. That is not to say that most reasonably competent lawyers with sufficient time, or "insurance specialist" lawyers in shorter time, couldn't read and understand the policy. However, we do not believe that it is being argued that it would be in the public or any special interest to assume that the purchase of liability insurance for an automobile should require the assistance and cost of an attorney.
The contentions of the two parties ultimately boil down to this. The claimant says, the policy in question provides that I am an insured, that the accident is the kind of accident covered, that coverage is provided for such an accident occurring in an owned vehicle or in a nonowned vehicle, and that since "owned" and "nonowned" are common and well-understood English terms, a vehicle must be either owned or nonowned and therefore I am covered.
Not so, says the insurance company. It is true the claimant is an insured and the kind of accident is the type covered, but it is not true that every vehicle is an owned vehicle or a nonowned vehicle. The insurance company then points out that if the policy is carefully read, it will be discovered that in the definitions section of the policy there is a special definition for "nonowned automobile" that reads as follows:
" '[N]on-owned automobile' means an automobile or trailer not owned by or furnished for the regular use of either the named insured or any relative." 2
The insurance company states that if this definition is carefully read and then read in connection with the definition of "relative," it will be seen that indeed there is another category-beyond owned and nonowned automobiles. The claimants in these cases were not in either an owned or a nonowned automobile, but were in a different category of automobile altogether, and thus insurance coverage was excluded.
It is difficult to deny that both parties make a persuasive case from their particular perspectives. Further, it should be noted that there is no argument that, if properly drafted, some or all of the owned-automobile exclusion isn't reasonable public policy. For example, there is no good reason why the insurance industry shouldn't protect itself and its insureds against higher rates by avoiding such risks as policyholders who knowingly try to make a policy intended to cover one car cover two, or a low-risk policy cover a low- and a high-risk as well. 3 Protecting against such unpaid-for risks is undoubtedly in the public interest, but that still doesn't justify such exclusions if they are not clear and properly brought to the policy buyer's attention. It becomes the Court's duty, therefore, to determine what the law, justice, and public policy requires.
The issues we decide today are:
I. Under the no-fault statute, may an insurance policy exclude residual liability coverage for an insured driving a vehicle not named in the policy which is owned by a resident family member?
II. Is the owned-vehicle exclusion in these cases (a) ambiguous, (b) made clear, (c) a technical construction, and (d) contrary to the insured's reasonable expectations?
III. If the owned-vehicle exclusion is invalid, should the insurer be liable for only the amount of residual liability coverage required by law, or for the amount provided for in the insurance contract?
We would hold:
I. The owned-automobile exclusion is not repugnant per se to the no-fault act, and that insurance policies may therefore exclude residual liability coverage for otherwise-insured resident family members when they drive vehicles owned by other resident family members and not described in the policy.
II. In these cases, the insurers' method of exclusion--by the definition of terms at variance with their common meaning, which most policyholders would consider clear without definition--renders it invalid as (a) ambiguous, (b) not made clear, (c) a technical construction, and (d) contrary to the reasonable expectations of the insured reading the insurance contract.
III. The liability coverage to be applied is the amount contracted for, and is not limited to the minimum coverage required by law.
Three of the cases we consider today, Schiebout, Deyarmond, and Nicholson, involve those sections of the subject insurance policies providing for coverage of "residual tort liability." Because the other two cases, Powers and Dennison, involve different issues, we will treat those cases...
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