Zurich Insurance Co. v. Rombough

173 N.W.2d 221, 19 Mich. App. 606

• Court: Michigan Court of Appeals
• Decided: January 21, 1970
• Docket: Docket 4,909
• Status: Published

Opinions

R. B. Burns, J.

Ricbard J. Latz is suing defendant Harry Eombough under the Michigan “owner-liability” statute, MCLA § 257.401 (Stat Ann 1968 Rev § 9.2101) alleging that an automobile owned by defendant and driven with his knowledge and consent was involved in an accident. Plaintiff Zurich Insurance Company, defendant’s insurance carrier, obtained a declaratory judgment that it was not required to defend the defendant in the pending suit by Latz and defendant Eombough appeals.

At the time of the accident, December 20, 1963, defendant was insured by plaintiff under a policy which covered any vehicle owned by defendant, including the vehicle involved in the accident. Defendant raised the defense in the Latz case that he was not the owner of the vehicle nor was the vehicle driven with his consent or knowledge. On December 3, 1963, 17 days before the accident, defendant had transferred title of the vehicle and had removed his license plates. The plates were subsequently stolen from the defendant and replaced on the vehicle. The title transfer had not been completed by the secretary of state’s office at the time of the accident.

The insurance contract between plaintiff and defendant obligated plaintiff to pay on behalf of defendant all sums which defendant shall be legally obligated to pay for bodily injuries and for property damages. Other pertinent provisions are:

“II, Defense, Settlement, Supplementary Payments. With respect to such insurance as is afforded by this policy for bodily injury liability and for property damage liability, the company shall:

“(a) Defend any suit against the insured alleging such injury, sickness, disease or destruction and seeking damages on account thereof, even if such suit is groundless, false, or fraudulent; but the company may make such investigation, negotiation, and settlement of any claim or suit as it deems expedient

The policy carried an endorsement which provided the policy did not apply “(b) while the automobile or any trailer attached thereto is used to carry property in any business.”

Plaintiff conducted an investigation and discovered that at the time of the accident the vehicle was driven by Eugene Willhite who was engaged in the business of hauling a trailer which contained barrels of Phillips Degreasing Fluid. Plaintiff claims under the exclusion clause (b) in the contract there was no coverage, consequently it does not have any duty to represent the defendant.

The defendant asserts that under section 11(a) of the contract the plaintiff has the duty to represent the defendant in the Latz case irrespective of the coverage stated in the policy.

Michigan authorities hold that an insurer must defend suits against the insured when pleadings show the cause of action to be within policy coverage, although City Poultry & Egg Co. v. Hawkeye Casualty Co. (1941), 297 Mich 509, would appear to hold the company responsible for the defense any time the policy provided for a defense. In the Hawkeye case, the Court held the undertaking to defend and the undertaking for payment of damages were severable and independent. In Duval v. Aetna Casualty & Surety Co. (1943), 304 Mich 397, the policy provided coverage during the installation of beating equipment. Subsequently the insured was sued for negligent installation after the completion of the work. The Court held that the insurer was not required to defend the insured against claims excluded from coverage in the policy and that the provision in the policy for defense of the suit and the duty to pay damages were not separable. The Court distinguished the Hawkeye case:

“In the Hawkeye case the insurance coverage was in effect but subject to defeat by extrinsic evidence of noncoverage, while in the case at bar the policy itself expressly excluded coverage beyond a specified time and place.”

Burton v. Travelers Insurance Company (1954), 341 Mich 30, involved a policy of insurance issued to a bar owner which expressly excluded coverage for assault and battery by the insured. The insured was sued for assault and battery and the company refused to defend the action on the ground that the complaint stated a cause of action outside tbe scope of coverage. The Court cited the Duval case and held that tbhinsured against claims expressly excluded from coverage in the policy.

The latest case by the Michigan Supreme Court concerning our present question was Guerdon Industries, Inc., v. Fidelity & Casualty Company of New York (1963), 371 Mich 12, where the Court stated:

“It is settled that tbe insurer’s duty to defend tbe insured is measured by tbe allegation in plaintiff’s pleading. Tbe duty to defend does not depend upon insurer’s liability to pay.”

Turning to the present case, Latz instituted his action against Rombough, alleging that Rombough was the owner of a vehicle driven with his knowledge and consent, and that therefore he was liable for the driver’s negligence under the statute. The complaint sets forth allegations which, if true, would subject Rombough to liability covered by the policy. It is only by the introduction of extrinsic evidence showing that the driver was hauling a trailer with goods, that coverage might be defeated. The plaintiff has a duty to represent the defendant in the original action.

Reversed. Costs to defendant.

V. J. Brennan, J., concurred.