DANIEL SCOTT V FARMERS INS EXCHANGE
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STATE OF MICHIGAN
COURT OF APPEALS
DANIEL SCOTT,
FOR PUBLICATION
May 26, 2005
9:05 a.m.
Plaintiff-Appellant,
v
No. 251559
Oakland Circuit Court
LC No. 2003-046603-NI
FARMERS INSURANCE EXCHANGE,
Defendant-Appellee.
Official Reported Version
Before: O'Connell, P.J., and Markey and Talbot, JJ.
PER CURIAM.
Plaintiff appeals as of right the trial court's order granting plaintiff 's insurance company's
motion for summary disposition on his claim for "uninsured motorist" benefits. We reverse.
The underlying facts are largely undisputed.
On November 11, 1999, David Steele was driving a car owned by Noah Beatte. Plaintiff
rode in the back seat and Beatte rode in the front passenger seat. Steele drove Beatte's vehicle
into a tree, and plaintiff was injured in the accident. Beatte's insurance policy on the vehicle had
lapsed, but Steele was the named insured on a Titan Insurance no-fault automobile insurance
policy. Plaintiff resided with his mother, who was the named insured on a no-fault policy issued
by defendant. His mother's policy provided "uninsured motorist" coverage for injuries arising
from the use, ownership, or maintenance of an uninsured or underinsured vehicle.
Plaintiff made a claim for uninsured motorist benefits under his mother's policy. On
March 14, 2002, plaintiff initiated negotiations with defendant in a letter demanding arbitration
if the policy required it. While plaintiff 's claim was pending, defendant contacted plaintiff 's
counsel to request documentation that Beatte's vehicle was uninsured and explain that arbitration
was not mandatory. Defendant stated in this correspondence:
Prior to entertaining an Uninsured Motorist Claim, we trust that you will
file litigation against the wrongdoer in order to properly protect your client's
statute of limitations in the event that insurance is found at some later date. If
insurance is not found, and we become obligated under the Uninsured Motorist
provision of our policy, then we would have the opportunity to exercise our
subrogation rights which are set forth in your client's policy of insurance.
-1-
On October 18, 2002, plaintiff 's counsel notified defendant that if defendant did not
acknowledge that plaintiff was eligible for uninsured motorist benefits by the end of the month,
plaintiff would file suit against the driver and the owner. Defendant offered to settle plaintiff 's
claim for $11,000 on December 9, 2002, after the three-year limitations period for any claim
against Steele had expired. Plaintiff rejected the offer as inadequate. Defendant failed to pay
plaintiff 's claim, and plaintiff brought this action to recover "uninsured motorist benefits" under
his mother's policy. Plaintiff filed a separate action against Steele after the expiration of the
three-year limitations period, and Steele defaulted.
Defendant moved for summary disposition pursuant to MCR 2.116(C)(10), raising two
defenses. First, defendant claimed that plaintiff did not have a viable claim for uninsured
motorist benefits because Steele, the driver of the vehicle, was insured. Second, defendant
claimed that by failing to file a timely action against Steele contrary to the policy requirements,
plaintiff prejudiced defendant's subrogation rights so it should be relieved of any obligation to
pay benefits. In response to the second argument, plaintiff asserted that the action against Steele
was still viable because of tolling principles. Plaintiff also argued that defendant could not raise
a policy defense for the first time in a summary disposition motion when the insurance claim had
been pending for years. Plaintiff also argued that Beatte's vehicle was an uninsured vehicle for
the purpose of the policy's coverage, notwithstanding any insurance policy covering Steele's
liability, so, according to the policy's plain terms, he was entitled to uninsured motorist benefits.1
The trial court rejected defendant's argument that the policy obligated plaintiff to file a
lawsuit against Beatte or Steele in order to preserve defendant's subrogation rights because the
contract's language did not support a finding that recovery was conditioned on plaintiff 's filing
suit against the owner and the driver. However, the trial court agreed that plaintiff failed to
present a valid uninsured motorist claim because Steele, the driver of the automobile, was
insured.2
1
All parties agree that Beatte failed to insure his motor vehicle at the time of the accident. A
disagreement exists concerning whether Steele, the driver of the vehicle, was insured at the time
of the accident. There is also an issue concerning whether Steele's insurer will deny coverage for
this accident. If coverage is denied, then it may be an uninsured vehicle. Defendant's insurance
policy reads in part as follows:
3. Uninsured motor vehicle means a motor vehicle which is:
* * *
d. Insured by a bodily injury liability bond or policy at the time of the
accident but the Company denies coverage or is or becomes insolvent.
2
The trial court concluded that Steele was covered under a separate policy and, therefore,
Beatte's vehicle was not an uninsured motor vehicle. However, the lower court record is unclear
regarding Steele's coverage.
-2-
We review de novo a trial court's resolution of a motion for summary disposition.
Veenstra v Washtenaw Country Club, 466 Mich 155, 159; 645 NW2d 643 (2002). Summary
disposition should be granted if there is no genuine issue of any material fact and the moving
party is entitled to judgment as a matter of law. MCR 2.116(C)(10).
Uninsured motorist coverage is optional and is not mandated by the no-fault act.
Rohlman v Hawkeye-Security Ins Co, 442 Mich 520, 525; 502 NW2d 310 (1993). Accordingly,
the policy language governs the coverage and is subject to the rules of contract interpretation.
Id. at 525. We read insurance contracts as a whole and accord their terms their plain and
ordinary meaning. Auto-Owners Ins Co v Churchman, 440 Mich 560, 566; 489 NW2d 431
(1992). We will not strain to find ambiguity, id. at 567, but we ultimately strive to enforce the
agreement intended by the parties. Engle v Zurich-American Ins Group (On Remand), 230 Mich
App 105, 107; 583 NW2d 484 (1998). A contract is ambiguous when its words may be
reasonably understood in different ways. Raska v Farm Bureau Mut Ins Co of Michigan, 412
Mich 355, 362; 314 NW2d 440 (1982) (opinion of Coleman, C.J.). If an ambiguous term exists
in the contract, courts should generally construe the term against the contract's drafter, unless the
drafter presents persuasive extrinsic evidence that the parties intended a contrary result. Id.;
Klapp v United Ins Group Agency, Inc, 468 Mich 459, 470-471; 663 NW2d 447 (2003).
Defendant's insurance policy contained the following pertinent provisions for "uninsured
motorist" coverage:
PART II—UNINSURED MOTORIST
Coverage C—Uninsured Motorist Coverage
We will pay all sums which an insured person is legally entitled to recover
as damages from the owner or operator of an uninsured motor vehicle because of
bodily injury sustained by the insured person. The bodily injury must be caused
by accident and arise out of the ownership, maintenance or use of the uninsured
motor vehicle.
* * *
3. Uninsured motor vehicle means a motor vehicle which is:
a. Not insured by a bodily injury liability bond or policy at the time of the
accident.
* * *
d. Insured by a bodily injury liability bond or policy at the time of the
accident but the Company denies coverage or is or becomes insolvent.
-3-
The provision's title, "Uninsured Motorist," suggests that the section deals with the
actions of an "uninsured motorist." Nevertheless, the substantive language focuses exclusively
and unambiguously on whether the vehicle was insured at the time of the accident.3 While the
title gives no guidance, the substantive portion of the provision contains a seemingly exhaustive
explanation of what that portion of the policy does and does not cover. Under the circumstances,
we will not assume that the parties agreed to make plaintiff 's recovery contingent on the lack of
any relevant insurance simply because defendant assigned a common name to its provision and
now insists that the parties understood all the substantive nuances of that heading. Rather, the
heading creates a tenuous, but plausible, ambiguity that will likely be resolved against the
drafter. Klapp, supra at 470-471.
Our Supreme Court has cautioned us against reading provisions or undocumented intent
into a contract or statute simply because we are tempted by politically charged "policy"
preferences or our own personal distaste for a case's outcome. See Terrien v Zwit, 467 Mich 56,
65-72; 648 NW2d 602 (2002); Mayor of Lansing v Pub Service Comm, 470 Mich 154, 164-166;
680 NW2d 840 (2004). Therefore, we will not follow the example of the trial court and several
appellate panels and hold, contrary to the express terms of the contract, that the existence of any
other insurance coverage suffices to render the "vehicle" insured. See, e.g., Citizens Ins Co of
America v Povey, 114 Mich App 395; 319 NW2d 341 (1982). Rather, we strive to apply the
language that the parties originally agreed upon. The plain language of the "uninsured motorist"
provision makes coverage contingent on whether the vehicle is insured, not on whether the
driver is insured. Therefore, we will not insert the contingency on the insurance company's
behalf. The trial court erred when it ruled that the contract did not cover accidents in which the
driver was insured and granted defendant's motion for summary disposition on these grounds.
Nonetheless, we acknowledge that some car insurance policies are designed to cover a
vehicle when, as here, the person they insure does not own it, but is merely driving it with the
permission of the owner. Under these circumstances, the vehicle is insured under the driver's
policy at the time of the accident, and defendant would be entitled to summary disposition if the
driver's insurer pays plaintiff 's claims. Other policies only insure the driver, however, and if
Steele were covered by such a policy here, then defendant would be bound by the contract's
terms to pay plaintiff 's claim and could pursue Steele under a subrogation theory. We mention
this because a considerable dispute existed below regarding which of two potential car insurance
policies covered Steele at the time of the accident, and the policies differ in their approach to
special trips taken with the owner's permission.4 Moreover, we note that, according to the
3
The substantive portion of this clause focuses on the motor vehicle. Plainly speaking, if the
motor vehicle is not insured, it is an uninsured motor vehicle and the provision applies.
However, the section is entitled "Uninsured Motorist." The trial court will have to resolve the
discrepancy in this language on remand.
4
In fact, plaintiff advanced, but did not support with evidence, the theory that Steele's coverage
under either of the policies was questionable because he may have sold his own car, which was
the car that the policies potentially insured. Policy exclusions may also have applied to preclude
coverage. All these issues should be fully developed on remand.
-4-
policy's plain language, defendant is presumably liable if Steele's insurance company denies
coverage.
The trial court's decision to grant defendant summary judgment preempted resolution of
these and other factual issues. After removing the legal misunderstanding that the existence of
any other insurance coverage absolutely negated defendant's liability for benefits, we can see
many issues of material fact that render the grant or affirmation of summary disposition
inappropriate. MCR 2.116(C)(10). Because some of these factual disputes relate to the parties'
other arguments on appeal, our resolution of those issues is also unwarranted.5 We recommend,
however, that the trial court and the parties look closely at the contract's arbitration provision on
remand, as it appears to require arbitration to resolve such disputes. But because we do not have
the benefit of briefing and developed argument on this issue, we merely note our impressions on
this point.6
Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction.
/s/ Peter D. O'Connell
/s/ Jane E. Markey
/s/ Michael J. Talbot
5
For example, defendant argues that plaintiff failed to preserve its subrogation claim against
Steele, but this argument depends on the unresolved issue whether it can recover from Steele.
Likewise, plaintiff 's argument that defendant should be estopped from denying coverage also
depends, in part, on the undeveloped factual question of prejudice—another issue contingent on
plaintiff 's ultimate success in its suit against Steele. It is clear from the record that the trial court
only granted summary disposition because of its mistaken legal conclusion that evidence of
Steele's insurance precluded coverage. Having dispelled this notion, any further action by us
would be presumptuous. We also note that defendant delayed paying its claim for a period of
three years which may, in part, be the reason that the statute of limitations now jeopardizes
defendant's subrogation claim.
6
We note that defendant's policy states, "Determination as to whether an insured person is
legally entitled to recover damages or the amount of damages shall be made by agreement
between the insured person and us. If no agreement is reached, the decision will be made by
arbitration."
-5-
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