Allstate Insurance v. Keillor

537 N.W.2d 589, 450 Mich. 412

• Court: Michigan Supreme Court
• Decided: August 22, 1995
• Docket: 98957, (Calendar No. 11)
• Status: Published

Opinions

AFTER REMAND

Cavanagh, J.

We affirm the decision of the Court of Appeals in part. The homeowner’s insuranee policy issued by plaintiff does not provide liability coverage for personal injuries arising out of the ownership, maintenance, use, loading, or unloading of any motorized vehicle. Therefore, the personal injuries forming the basis of this case, arising out of an automobile accident, are excluded from the scope of the plaintiff’s policy.

i¹

On March 8, 1986, one week before Daniel Hayes’ entry into the United States Air Force, he gave himself a going away party at a friend’s home. He bought two kegs of beer and charged each guest a dollar to cover costs. Eighteen-year-old Scott Koppelberger attended the party and was allegedly intoxicated when he left early the next morning. Susan Keillor was on her way to work that morning when her car was involved in a head-on collision with Koppelberger’s car. Ms. Keillor was killed.

William Keillor, individually and as personal representative of the estate of his wife, filed an action against Koppelberger, Hayes, and others, alleging negligence, wrongful death, and violations of the dramshop act.

Hayes, who lived with his father at the time, tendered the defense of the action to his father’s homeowner’s insurer, Allstate. Hayes answered the complaint, and, two months later, Allstate sent Hayes a reservation of rights letter.² Allstate then filed this action, seeking a declaration that its policy did not provide liability coverage for Hayes’ alleged actions.

Allstate brought a motion for summary disposition arguing, among other things, that defendant lacked standing to contest coverage and that, even if he did, both the criminal acts and motor vehicle exclusions precluded coverage. The trial court granted the motion, finding that defendant lacked standing and that both the criminal acts and motor vehicle exclusions applied. The Court of Appeals upheld the trial court’s ruling on the standing issue. 190 Mich App 499; 476 NW2d 453 (1991). This Court reversed, holding that defendant did have standing and remanded the case to the Court of Appeals to decide whether the exclusions applied. 442 Mich 56; 499 NW2d 743 (1993).

On remand, the Court of Appeals held that coverage is precluded by both the criminal acts and motor vehicle exclusions. 203 Mich App 36, 40-41; 511 NW2d 702 (1993). It is from that decision that the defendant now appeals.

ii

Allstate does not dispute coverage, so the only issue before this Court is whether that coverage is precluded by an exclusion.³ This, of course, means that the primary issue before this Court is one of policy interpretation. When interpreting insurance policies, a number of well-established rules guide the analysis. Those relevant here are succinctly recounted in Auto-Owners Ins Co v Churchman, 440 Mich 560, 566-567; 489 NW2d 431 (1992):

An insurance policy is much the same as any other contract. It is ¿n agreement between the parties in which a court will determine what the agreement was and effectuate the intent of the parties. Accordingly, the court must look at the contract as a whole and give meaning to all terms. Further, "[a]ny clause in an insurance policy is valid as long as it is clear, unambiguous and not in contravention of public policy.” This Court cannot create ambiguity where none exists.

Exclusionary clauses in insurance policies are strictly construed in favor of the insured. However, coverage under a policy is lost if any exclusion within the policy applies to an insured’s particular claims. Clear and specific exclusions must be given effect. It is impossible to hold an insurance company liable for a risk it did not assume. [Citations omitted.]

The inquiry does not necessarily end, however, with the rules of construction. A court may also consider the reasonable expectations of the insured. Vanguard Ins Co v Clarke, 438 Mich 463, 472; 475 NW2d 48 (1991). A court must look at the policy language from an objective standpoint and determine whether an insured could have reasonably expected coverage. In Vanguard, we held that the policy unambiguously excluded liability for personal injuries arising out of the ownership, maintenance, operation, use, loading or unloading of any motor vehicle owned or operated by, or rented or loaned to, any insured. Id. at 474.

The Court recognized that the accident was a risk that the insurer did not assume.

In drafting an insurance policy, the drafters calculate the probability of risk in setting the price paid by the insured. Here, a specific excluded risk comprised part of that calculus. Because the tragic event at issue here clearly "arose out” of the operation and use of an automobile, and it cannot be said that the insured had been led to reasonably expect coverage under the policy, the exclusion stands. [Vanguard at 475.]

Similarly, in Farm Bureau Mut Ins Co of Michigan v Stark, 437 Mich 175; 468 NW2d 498 (1991), we held that the motor vehicle exception was unambiguous and that a moped was a motor vehicle under the terms of the policy. Id. at 185. We also held that allowing injuries resulting from motor vehicle accidents to be compensable under a homeowner’s policy would expand the liability of insurers in ways not anticipated when the policy was drafted.

Generally speaking, a homeowner’s policy is designed to protect against losses arising out of the ownership or use of a particular residential building and its appurtenant structures, not liability connected to the operation of motor vehicles on public highways. Motor vehicle exclusions, such as the one in the instant case, are commonly included in homeowner’s policies. The basis for the motor vehicle exclusion is evident: using a motor vehicle designed for travel on public roads greatly increases the risk of bodily injury and property damage, and such liability is not within the risk which homeowner’s contracts are designed to cover or for which premiums are charged. The risk of liability from the use of a motor vehicle is traditionally and properly covered by motor vehicle policies, not by homeowner’s insurance. We conclude that the plaintiff’s policy unambiguously excludes such a motor vehicle, the moped, from its coverage. [Id]

ill

The relevant exclusion in this policy provides that Allstate does "not cover bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of any motorized land vehicle or trailer.”⁴ As we held in Churchman, any clause in an insurance policy is valid as long as it is clear, unambiguous, and does not contravene public policy. This Court will not create ambiguity where none exists._

We find that this provision is unambiguous.⁵ It plainly states that homeowner’s coverage does not extend to personal injury or property damage arising out of the use or operation of any motor vehicle. .Furthermore, defendant has not shown us how this exclusion contravenes public policy.

Having concluded that there is no ambiguity in this exclusion, it must be enforced as written. Coverage under a policy is lost if any exclusion within the policy applies to a particular claim. "[A]ny motorized land vehicle” means just that. Koppelberger was operating a "motorized land vehicle,” more specifically, a car, when he struck and killed Keillor. The exclusion applies, and coverage for Hayes under this homeowner’s policy is correspondingly lost.

This holding does not conflict with reasonable expectations of the insured. When viewed objectively, a person reading this unambiguous exclusion would reasonably expect that it means what it says: coverage does not exist for personal injuries arising out of the use of any motor vehicle. Thus, it cannot be said that the insured had been led to reasonably expect coverage.

iv

The decisions of the trial court and the Court of Appeals are affirmed only insofar as they hold that coverage is precluded by the motor vehicle' exclusion. Having found that the motor vehicle exclusion precludes coverage, there is no need to discuss the criminal acts exclusion.

Brickley, C.J., and Boyle and Mallett, JJ., concurred with Cavanagh, J.

1 These facts are largely taken from our opinion in Allstate Ins Co v Hayes, 442 Mich 56, 58-61; 499 NW2d 743 (1993). Those desiring a more developed factual or procedural background may find it there.

2 The defendant makes much of the fact that this reservation of rights letter did not mention plaintiff’s reliance on the motor vehicle exclusion. The defendant claims that because the automobile exclusion was not raised in Allstate’s reservation of rights letter, Allstate should be estopped from raising it. It should be noted, however, that Allstate did assert the exclusion in its second amended complaint. We hold that Allstate is not estopped from raising the motor vehicle exclusion because Allstate did not delay unreasonably in asserting the exclusion and the defendant has suffered no prejudice from the short delay.

3 See Allstate Ins Co v Freeman, 432 Mich 656, 661; 443 NW2d 734 (1989).

4 In its entirety, the motor vehicle exclusion provides:

We do not cover bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of any motorized land vehicle or trailer. However, this exclusion does not apply to:

(a) a motorized land vehicle in dead storage or used exclusively on the residence premises;

(b) any motorized land vehicle designed principally for recreational use off public roads, unless that vehicle is owned by an insured person and is being used away from the residence premises;

(c) a golf cart owned by an insured person when used for golfing purposes;

(d) a trailer of the boat, camp, home or utility type unless it is being towed or carried by a motorized land vehicle;

(e) bodily injury to a residence employee.

5 The only difference between this exclusion and the exclusion in Vanguard Ins Co v Clarke, supra at 473, is that the exclusion in Vanguard included the words "owned or operated by . . . any Insured.” Id. at 468. It, therefore, provides a narrower exclusion than the exclusion in this case because this exclusion is not contingent on the ownership or use of the motor vehicle by an insured. It applies to any motor vehicle. We refuse to accept the proposition that the deletion of the language referring to the ownership or use of the insured somehow transforms this unambiguous provision into an ambiguous one.