Schiebout v. Citizens Ins. Co. of America, Docket No. 74599

• Decision Date: 24 April 1985
• Docket Number: Docket No. 74599
• Citation: 366 N.W.2d 45,140 Mich.App. 804
• Parties: Herman James SCHIEBOUT, Plaintiff-Appellee/Cross-Appellant, v. CITIZENS INSURANCE COMPANY OF AMERICA, Defendant-Appellant/Cross-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 45

366 N.W.2d 45

140 Mich.App. 804

Herman James SCHIEBOUT, Plaintiff-Appellee/Cross-Appellant, v. CITIZENS INSURANCE COMPANY OF AMERICA Defendant-Appellant/Cross-Appellee.

Docket No. 74599.

Court of Appeals of Michigan.

Submitted Nov. 14, 1984.

Decided Feb. 19, 1985.

Released for Publication April 24, 1985.

Ward, Schenk, Boncher & Prasher, Grand Rapids by Dan E. Bylenga, Jr., Grand Rapids, for plaintiff-appellee/cross-appellant.

Baxter & Hammond, Grand Rapids by Michael D. Wade, Grand Rapids, for defendant-appellant/cross-appellee.

Before MacKENZIE, P.J., and V.J. BRENNAN and ROBINSON, ^* JJ.

V.J. BRENNAN, Judge.

Defendant appeals as of right from an order entered October 7, 1983, granting to plaintiff a declaratory judgment of coverage under an automobile insurance policy which plaintiff held with defendant. This case was submitted to the circuit court on June 3, 1983, without a jury, on deposition testimony, briefs and oral argument.

Plaintiff, Herman James Schiebout, was involved in an auto accident on May 21, 1981, while driving a 1960 Chevrolet dump truck owned by the Recreational Center of Kent, Inc., which was owned and operated by Jon Good, plaintiff's brother-in-law. The 1960 Chevy truck was never insured by the Recreational Center. Good testified that he allowed plaintiff to use the 1960 Chevy truck anytime that he wanted to use it. Schiebout testified that the truck was not driven with much regularity--only when necessary.

During the winter of 1980, plaintiff used the 1960 Chevy truck to move a house on his property and he then let the truck sit on his property throughout the remainder of the winter. On the day of the accident, plaintiff started the truck and took it for a test drive to see if it would run properly after having been idle for the entire winter.

On May 21, 1981, plaintiff held two policies for auto insurance with defendant. Policy G 837650 (hereinafter referred to as policy G) insured a 1975 Chevrolet Monte Carlo and a 1971 Ford 3/4-ton pickup truck, both owned by plaintiff. Policy CVC 395899 (hereinafter referred to as policy CVC) insured a 1966 Chevrolet dump truck. Plaintiff testified that, at the time he drove the 1960 Chevy truck, he thought he was insured under these two policies.

When suit was commenced against plaintiff because of the underlying accident on May 21, 1981, defendant refused to defend plaintiff. Roberta Poynter, a claims specialist for defendant, testified that both policy G and policy CVC were in full force and effect on May 21, 1981. Defendant's reasons for not defending plaintiff are as follows. Under policy G, plaintiff's use of the 1960 Chevy truck did not come within the policy's definition of a "non-owned automobile"; thus this policy did not apply. Under policy CVC, plaintiff had not purchased the additional rider to cover him while driving a non-owned automobile. Policy CVC did not automatically include coverage while driving a non-owned auto.

In an opinion rendered August 18, 1983, the circuit court held that plaintiff was not covered under the policy CVC for the May 21, 1981, accident because plaintiff had not purchased the non-owned automobile rider. The court did find coverage under policy G after finding that the definitional exclusion of "non-owned automobile" contained in policy G was repugnant to the no-fault insurance act. Defendant appeals the court's findings of coverage under policy G. Plaintiff cross- appeals the court's findings of noncoverage under policy CVC, and the court's action in failing to grant plaintiff his reasonable attorney fees incurred for his defense of the underlying action and those fees incurred while bringing the action for declaratory judgment.

The first issue for our consideration is whether the trial court erred in invalidating the definitional exclusion of a "non-owned automobile" contained in plaintiff's auto insurance policy G.

Under § 2, of policy G, entitled "Automobile Liability" the following is stated:

"The Company will pay on behalf of the Assured all sums which the Assured shall become legally obligated to pay as damages because of,

"Coverage C. Bodily Injury or

"Coverage D. Property Damage

"To which this insurance applies, caused by an occurrence and arising out of the ownership, maintenance or use, including loading and unloading of the owned automobile or a non-owned automobile and the company shall have the right and duty to defend * * * any suit against the Assured seeking damages * * *."

Persons insured under § 2 include,

"1. The name Assured with respect to the owned automobile;

"2. If the named Assured is an individual, or husband or wife * * *

(a) The named Assured with respect to a non-owned Automobile."

In the Definitional portion of § 2,

"Non-owned Automobile" is defined as,

"(a) a private passenger automobile or trailer not owned by the named Assured or any relative or (b) any other automobile not owned by or furnished to or available for the regular use of either the named Assured or any resident of the same household. 'Non-owned automobile' does not include a temporary substitute automobile;"

Under the exclusions listed in § 2 are the following:

"3. A non-owned automobile while (a) used in the automobile business by the Assured, or (b) in any other business or occupation of the Assured, * * * [the exceptions here do not apply to this case].

"4. A non-owned automobile (a) furnished for the regular use of the named Assured by the employer of such named Assured while being used in the business of such employer, or (b) rented to or leased by the named Assured or relative for a consecutive period of more than thirty days, or (c) unless the person using the automobile has received permission of its owner.

* * *

* * *

"10. Bodily injury or property damage arising out of the operation of farm machinery."

The testimony of plaintiff and Good showed that the 1960 Chevy truck was owned by the Recreational Center of Kent. Therefore, the question is whether plaintiff's use of the 1960 Chevy truck fell within the policy coverage as use of a non-owned automobile.

In State Farm Mutual Automobile Ins Co v. Ruuska, 412 Mich. 321, 314 N.W.2d 184 (1982), the Supreme Court considered whether a definition of a non-owned automobile found in an insurance policy was repugnant to the no-fault act. The insurance policy in Ruuska contained a provision very similar to that found in the instant case. The policy in Ruuska excluded from coverage a non-owned auto that was,

" * * * furnished or available for the frequent or regular use of the named insured, his spouse, or any relative of either residing in the same household, other than a temporary substitute automobile." Ruuska, supra, p. 332, 314 N.W.2d 184. (Emphasis omitted.)

The parties involved were a daughter and father who resided in the same household. The defendant insurance company sought to deny coverage to the daughter under the definitional exclusion of a non-owned automobile because both parties resided in the same home.

Writing the lead opinion, Justice Williams found the exclusion for a non-owned automobile used by a relative residing in the same household to be repugnant to the directive of the no-fault act which required that an auto insurance policy provide residual liability coverage for the use of a motor vehicle. The Court stated that there was no provision within the no-fault act which allowed such an exclusion and that the insurance company could not thwart the legislative intent behind the act by way of the policy's exclusion. Ruuska, supra, p. 336, 314 N.W.2d 184.

Though the particular facts of Ruuska dealt with a father and daughter residing within the same home and, according to the lead opinion, the decision was limited to the facts of the Ruuska case, the Court did address the validity of a provision almost identical to the one in question in the instant case. In Ruuska, the defendant insurance company also sought to exclude coverage for a non-owned automobile which was "furnished or available for the frequent or regular use of the named insured". The Court did not decide as a factual matter whether the daughter's access to her father's car was or was not on a frequent or regular basis. Instead, it decided as a matter of law that that particular phrase of the exclusionary clause was also repugnant to the no-fault act. Ruuska, supra, p. 337, 314 N.W.2d 184. Justice Williams's analysis and conclusion was supported by Justice Fitzgerald and Justice Moody.

In a separate concurrance, Justice Levin agreed with the conclusion of the lead opinion but not with its reasoning. Justice Levin found the exclusion unenforceable because it was not contained in the policy's list of exclusions but was rather embedded in the definitional section of the policy. Ruuska, supra, p. 347-348, 314 N.W.2d 184.

In the instant case, in our opinion, the definitional exclusion of a non-owned automobile is unenforceable regardless of whether we use the rationale of the lead opinion or the rationale of Justice Levin's concurring opinion. As can be seen from the definition of a non-owned automobile found in policy G and from the definition of a non-owned automobile that was found in the policy in Ruuska, the two definitions are almost identical.

Defendant contends that the Ruuska decision is not authoritative because of the difference in rationale applied by the lead opinion and Justice Levin's opinion. However, under the rationale of either opinion we, by analogy to Ruuska, find that the exclusionary definition in the instant case is invalid.

The trial court was correct in...