FARMERS INS. EXCH. v. KURZMANN Docket Nos. 238008, 239778.
668 N.W.2d 199 (2003)
257 Mich. App. 412
FARMERS INSURANCE EXCHANGE, Plaintiff-Appellant, v. Christopher KURZMANN and Christopher Kurzmann, Jr., Defendants, and Kathryn Kurzmann, Conservator of the Estate of Blane Kurzmann Defendant-Appellee.
Court of Appeals of Michigan.
Released for Publication August 20, 2003.
Foster, Swift, Collins & Smith, P.C. (by William R. Schulz), Lansing, for Farmers Insurance Exchange.
Miller, Johnson, Snell & Cummiskey, P.L.C. (by Stephen R. Ryan and D. Andrew Portinga), Grand Rapids, for Kathryn Kurzmann.
Before: SMOLENSKI, P.J., and COOPER and FORT HOOD, JJ.
In Docket No. 238008, plaintiff Farmers Insurance Exchange appeals as of right from the trial court's November 13, 2001, order denying its motion for summary disposition and granting defendant Kathryn Kurzmann's motion for a declaratory judgment and summary disposition, pursuant to MCR 2.116(C)(8) and (10). Farmers also appeals the trial court's February 5, 2002, order granting Kathryn Kurzmann's motion for attorney fees and costs in Docket No. 239778. These cases were consolidated for purposes of appeal. We affirm.
I. Background Facts and Procedural History
The instant case arises out of an automobile accident that occurred on April 12, 1999. On that date, Blane Kurzmann was seriously injured while a passenger in an automobile that was being operated by his brother, Christopher Kurzmann, Jr. Blane was fourteen years old and Christopher was eighteen years old at the time of the accident. As a result of the accident, Blane endured numerous surgeries and continues to undergo rehabilitation therapy. By fall of 2001, the medical bills associated with Blane's care and treatment exceeded $150,000.
The automobile involved in the accident was owned by Christopher Kurzmann, the
The declarations portion of the insurance policy clearly sets the limits of insurance applicable to bodily injury claims at $250,000 per person and $500,000 per accident. In the policy, Farmers agrees to defend its insureds against any claim or suit asking for damages arising out of the ownership, maintenance, or use of the vehicle. However, the exclusions section further states that Farmers is not liable "for bodily injury to an insured person." (Emphasis added.) An insured person is defined in part as "you or any family member." According to the policy, a "family member" is any "person related to you by blood, marriage or adoption who is a resident of your household."
After the accident, Kathryn Kurzmann advised Farmers that she intended to pursue a claim on behalf of Blane against Christopher Kurzmann and Christopher Kurzmann, Jr. In response, Farmers filed a complaint against defendants seeking a declaratory judgment to determine its responsibilities. In its complaint, Farmers claimed that because Blane was considered an "insured person," Christopher Kurzmann and Christopher Kurzmann, Jr., were not entitled to the coverage otherwise provided in the policy. Michigan has long declared such exclusions void as against public policy. In its complaint, Farmers admitted a responsibility to defend Christopher Kurzmann and Christopher Kurzmann, Jr. However, Farmers requested a ruling from the trial court limiting its indemnification obligation to the statutory minimum of $20,000, as opposed to the $250,000 limit provided in the policy.
Farmers subsequently moved for summary disposition pursuant to MCR 2.116(C)(10). In its motion, Farmers argued that while its exclusionary provision is void, any reinstated coverage should be limited to the minimum amount required by statute. Farmers further argued that the rule of reasonable expectation was inapplicable in this case because the language excluding defendants from coverage was unambiguous. Kathryn Kurzmann responded by moving for a declaratory judgment and summary disposition pursuant to MCR 2.116(C)(8) and (10). Her position was that Farmers was bound by the liability limits expressed in the policy because the language was ambiguous and the exclusionary provision violated public policy. She further alleged that the rule of reasonable expectation required Farmers to abide by the coverage limits stated in the policy.
In a written opinion, the trial court denied plaintiff's motion for summary disposition and granted defendant's motion for a declaratory judgment and summary disposition. The trial court determined that the insurance policy was ambiguous because it specifically stated that it was in compliance with financial-responsibility laws and yet included an invalid limitation on bodilyinjury
II. Household Exclusion Provision
Farmers initially contends that the trial court erroneously granted defendants' motion for summary disposition. According to Farmers, because the policy language was unambiguous, the appropriate remedy in this case was to limit the coverage in the policy to the minimum required by statute. We disagree. A trial court's decision on a motion for summary disposition in an action for a declaratory judgment is subject to review de novo. Breighner v. Michigan High School Athletic Ass'n, Inc.,
A motion for summary disposition under MCR 2.116(C)(8) tests the legal sufficiency of a complaint. Beaudrie v. Henderson,
However, a motion pursuant to MCR 2.116(C)(10) tests the factual support of a plaintiff's claim and is only appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Auto-Owners Ins. Co. v. Allied Adjusters & Appraisers, Inc.,
An insurance policy is construed in accordance with well-settled principles of contract construction. McKusick v. Travelers Indemnity Co.,
For more than twenty years, it has been against the public policy of this state to include a provision in an insurance policy that excludes coverage for bodily injury to any insured or a member of the insured's family. State Farm Mut. Automobile Ins. Co. v. Sivey,
The Michigan no-fault act, M.C.L. § 500.3101 et seq., similarly requires that an automobile insurance policy provide for residual liability. Thus, it is clear from the pleadings alone that Farmers' exclusionary clause was void as against public policy.
A review of the record further supports defendant's claim that Farmers' position regarding the applicability of the statutory minimums lacks merit. We initially note that the argument presented by Farmers was addressed by this Court in DAIIE v. Parmelee,
Farmers, however, maintains that Parmelee was wrongly decided and that defendants are entitled only to the statutory
For instance, Farmers cites Shelly, supra at 449-450,
Likewise, a review of Nikkel, supra, fails to support Farmers' argument that Parmelee is no longer valid law. In Nikkel, our Supreme Court held that the rule of reasonable expectations is inapplicable where "no ambiguity exists in the nonowned automobile clause and the insured could have discovered the clause on examination of the contract." Nikkel, supra at 569,
Once again, we specifically find that the "insured person" exclusion in this case is ambiguous and void as against public policy. Farmers allowed defendants to purchase liability benefits that were significantly higher than the statutory minimum. If defendants assumed that the terms of the insurance contract were in accordance with the laws of this state, as represented by Farmers, they could have reasonably concluded that they were insured for the stated coverage of $250,000/$500,000. Indeed, we note that an insurance agent for Farmers who assisted defendants expressed her understanding that Farmers was obligated to provide the stated coverage. Accordingly, we find that the trial court properly granted Kathryn Kurzmann's motion for summary disposition.
We see no reason why Farmers should benefit from the statutory minimums when they knowingly placed invalid exclusionary provisions in their policy and then allowed their insureds to purchase increased coverage.
III. Attorney Fees
Farmers also claims that the trial court's award of attorney fees was inappropriate. We disagree.
A trial court's decision to award attorney fees is reviewed for an abuse of discretion. In re Attorney Fees & Costs,
Sanctions for bringing a frivolous action are warranted where the plaintiff, on the basis of a ruling in another case, has reason to believe that an action against the defendant lacks merit. See Vermilya v. Dunham,
We further find that the amount of attorney fees awarded in this case was within the trial court's discretion. Farmers claims that the trial court abused its discretion because it awarded attorney fees and costs that were incurred before the instant suit commenced. However, M.C.L. § 600.2591(1) states that
A review of the record indicates that while some of the fees and costs were incurred before Farmers actually filed its complaint, they were all incurred after the date that Farmers improperly denied defendants' insurance claim. Accordingly, we find that the trial court acted within its discretion in awarding defendants the full amount of the attorney fees that they incurred in connection with this action.
Because we find that the trial court properly awarded attorney fees and costs due to the frivolous nature of Farmers' action, we need not address Farmers' alternative claim that the trial court abused its discretion in assessing sanctions for Farmers' failure to comply with discovery orders. However, we note that Farmers does not dispute these violations. According to the court rules, a court shall require a party who disobeys an order compelling discovery to pay the reasonable expenses associated with that failure. MCR 2.313(B)(2). Indeed, "a trial court
In this case, Farmers filed a clearly frivolous claim that was exacerbated by its failure to comply with discovery orders. On this record, we cannot find that the trial court's award of attorney fees and costs amounted to an abuse of discretion.
- No Cases Found