THOMPSON CLAY V FERGUSON CLINICAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
July 31, 1998
FERGUSON CLINIC FOR DIGESTIVE
DISEASES, a/k/a FERGUSON CLINIC, P.C., and
MANUEL M. CAMPOS,
Kent Circuit Court
LC No. 92-076500
AMERICAN CONTINENTAL INSURANCE
Before: Doctoroff, P.J., and Fitzgerald and Talbot, JJ.
Plaintiff appeals as of right the order granting summary disposition in favor of garnishee
defendant American Continental Insurance Company pursuant to MR 2.116(C)(8) and (10). We
The facts and procedural history of the underlying medical malpractice action that culminated in
the present garnishment action are succinctly set forth in Clay v American Continental Ins Co, 209
Mich App 644; 531 NW2d 829 (1995). In April 1992, plaintiff filed a medical malpractice action
against defendants Ferguson Clinic and Manuel Campos, M.D. Both Ferguson Clinic and Dr. Campos
were insured under a professional liability policy issued by Michigan Physicians Mutual Liability
Company; the policy limits were $200,000. Ferguson Clinic and Dr. Campos subsequently offered to
settle the case for the policy limits. In May 1993, Dr. Campos and Ferguson Clinic executed a consent
judgment in plaintiff’s favor for $1,200,000. The judgment was conditioned on plaintiff pursuing
enforcement of the consent judgment in excess of $200,000 only from American Continental, which
insured Ferguson Clinic under a hospital liability insurance policy.
It is uncontroverted that American Continental had notice of plaintiff’s cause of action as of
March 1993. In May 1993, plaintiff filed a writ of garnishment based upon the consent judgment
against American Continental. In October 1993, the trial court granted American Continental’s motion
for summary disposition on the ground that the covenant-not-to-collect contained within the consent
judgment negated American Continental’s obligation to satisfy the balance of the judgment. However,
this Court reversed and remanded. See Clay, supra.
On remand, the trial court granted American Continental’s amended motion for summary
disposition on the ground that coverage was precluded by an exclusionary provision contained in
Endorsement No. 5, which became effective on May 15, 1992, and covered the policy period of May
15, 1992, to May 15, 1993.1 We affirm, albeit on different grounds.
This Court reviews summary disposition decisions de novo. Omnicom of Mich v Giannetti
Investment Co, 221 Mich App 341, 344; 561 NW2d 138 (1997). The construction of insurance
policies containing clear language presents a question of law that is reviewed de novo. Auto Club Ins
Ass’n v Lozanis, 215 Mich App 415, 418-419; 546 NW2d 648 (1996). The court determines
whether the policy is clear and unambiguous on its face. Upjohn Co v New Hampshire Ins Co, 438
Mich 197, 206; 476 NW2d 392 (1991).
An insurance policy is a contract, and the court must determine what the parties agreed to in the
policy in order to determine if a policy covers a particular occurrence. Fire Ins Exchange v Diehl,
450 Mich 678, 683; 545 NW2d 602 (1996); Vanguard Ins Co v Racine, 224 Mich App 229, 232;
568 NW2d 156 (1997). Where policy language is clear, courts are bound by the specific language set
forth in the policy. Fire Ins Exchange, supra.
American Continental’s contractual obligation to Ferguson Clinic was governed by Hospital
Liability Insurance Policy No. AU10034 (Ed. 1/88) (hereinafter the policy). Within the policy, the
“coverage” section contained the following notice:
This is a claims made Policy. Coverages A, B, C, & D apply only to claims
arising out of occurrences taking place subsequent to the retroactive date stated in the
Declarations for the particular coverage involved and for which claim is first made
against the insured and reported to us during this policy period (emphasis added).
The same requirement of reporting a claim to American Continental during the applicable policy
period appears in the insuring agreement for Coverage C, which provided coverage for damage
resulting because of:
bodily injury or personal injury to any person arising out of an occurrence resulting from
a negligent act, error or omission in rendering or failing to render Professional Services
subsequent to the retroactive date2 stated in the Declarations for Coverage C, and for
which claim is first made against the insured and reported to us during this policy
period (emphasis added).
“Policy period” is defined in the policy as “the period from the inception date of this policy to
the policy expiration date as set forth in the Declarations or its earlier termination date, whichever occurs
first.” The Declaration defined the policy period as May 15, 1991, to May 15, 1992.
As a general proposition, a pure “claims made” policy is one in which indemnity is provided no
matter when the alleged error or omission or act of negligence occurred, provided the misdeed
complained of is discovered and the claim for indemnity is made against the insurer during the policy
period. Stine v Continental Casualty Co, 419 Mich 89, 97; 349 NW2d 127 (1984).3 In essence, in
a “claims made policy,” the event causing liability is a third party making a claim upon an insured. Id. at
105. Thus, in the “claims made” situation, notice to the insurer by the insured that a claim has been
made against him is often required to be given during the policy period or within a specified amount of
time after the period. Id. at 106. In Stine, the Court upheld both the validity of “claims made” policies
and the requirement that notice of a claim be given by the insured to the insurer during the policy period.
Here, American Continental’s “claims made” policy applied only to claims “for which claim is
first made against the insured and reported to us during this policy period (emphasis added).”4 This
language clearly required Ferguson Clinic to report to American Continental during the policy period
any claim made against it during the same policy period. Thus, the policy is more restrictive than a pure
“claims made” policy in that the insured must notify the insurer of a claim made against the insured
during the policy period in which the claim is made. In Stine, the Court upheld the validity of more
restrictive “claims made” policies, concluding that “simply because the policy cannot be simplistically
categorized as a pure “claims made policy” . .. does not render its meaning vague, obscure, uncertain or
indefinite.” Id. at 114. The policy language clearly states that coverage is provided for a claim first
made against the insured and reported to the insurer during the same policy period. “Simply because
the insurance contract is a "hybrid" does not mean that its meaning is unclear or ambiguous.” Id. at 114.
There is no dispute that plaintiff filed a claim against Dr. Campos and Ferguson Clinic on April 17,
1992. However, Ferguson Clinic failed to notify American Continental of the claim during the same
policy period5 as required by the plain language of the policy.6 See Schubiner v New England Ins Co,
207 Mich App 330, 331; 523 NW2d 635 (1994). Thus, the trial court properly granted summary
disposition on the facts presented.
Because of our resolution of this issue, we need not address plaintiff’s second asserted claim of
/s/ Martin M. Doctoroff
/s/ E. Thomas Fitzgerald
/s/ Michael J. Talbot
Endorsement No. 5, which amended exclusion 6 of the policy, provided that the policy did not apply:
To liability of the INSURED for damages resulting from an injury, harm, or loss
if, prior to the inception of this POLICY PERIOD, any CLAIM has been made against
the INSURED by anyone for such damages or if the INSURED could have reasonably
foreseen that such injury, harm, or loss might result in a CLAIM for such damages.
In light of our conclusion that Ferguson Clinic failed to comply with the notice and reporting provisions
of the policy in effect at the time that the claim was made against it, we need not consider any issues
raised with respect to Endorsement No. 5, which became effective with the policy period commencing
on May 15, 1992.
The retroactive date was established as May 15, 1986.
Stine provides a clear discussion of “claims made” policies.
This language is consistent with the condition in the policy that provides in part: “If claim is made
against the insured, the insured shall immediately forward to us every demand, notice, summons or
other process received by him or his representatives.”
As earlier stated, the relevant policy period is May 15, 1991, through May 15, 1992.
This is not a case in which a claim was made against the insured during the policy period, but notice
could not reasonably have been given to the insurer during the policy period. The claim against the
insured was made no less than twenty days before the policy expired.