Court of Appeals finds a way to invalidate Underinsured Motoris Coverage

Twenty-five years ago, Michigan's courts, like the courts of many states, interpreted insurance policy language to conform to the "reasonable expectations" of the insured: after all, the terms were drafted by specialists for the insurance company; they are virtually un-readable by ordinary insureds; they are not subject to negotiation; and usually they arrive in the insureds' mail about 30 days after the policy is purchased by the consumer. Insurer-influenced Michigan jurists, though, have bent over backwards to conform Michigan law to the dictates of insurance companies and consumers lose virtually all interpretation-questions before the Michigan appellate courts. A good example came out on July 30.

Carol Nagy was badly hurt in a car wreck. The at-fault didn't carry adequate liability coverage, but Nagy was driving a Subaru owned by her husband's business, and the business had purchased high Underinsured Motorist (UIM) Coverage limits. Nagy filed a claim for UIM benefits but Westfield Insurance, the company's insurer, claimed that she was not covered under the UIM section of the policy.

The UIM carrier asked the trial judge to summarily dismiss Nagy's claim because, it argued, if you read through the UIM Endorsement language, the Garage Coverage Form, the Garage Declarations form and the Auto Dealers Supplementary Schedule, the insured would understand that the apparent UIM coverage did not apply to an insured driver unless it was being garaged or operated in a state where UIM coverage is mandatory.

Nagy's attorneys argued that reading through the four forms was so onerous, ambiguous and confusing that Westfield should not be allowed to enforce the exclusion to the exception to the exclusion... The trial judge agreed and denied Westfield's motion for summary disposition. The Court of Appeals overturned the ruling. It held that even though the insurance contract was "inartfully worded" or "clumsily arranged," it was possible to reconstruct the insurer's intent and therefore it was not "fatally unclear." Except to the insured's expectations. Nagy's claim was thrown out and her family was denied the coverage that they believed they had purchased.