AutoOwners avoids paying its insureds for injuries excluded in umbrella policy
April Leikert was badly hurt when her husband struck the rear-end of a Ford Expedition with their Harley-Davidson. April was a passenger and was violently thrown from the bike. The couple had purchased a liability policy on the bike through Progressive and an umbrella liability policy on Howard through AutoOwners. Progressive paid over its $250,000.00 in coverage to April, but AutoOwners claimed that its umbrella policy did not apply to injuries to April. It filed a Declaratory Judgment action against the Howards, arguing that it owed no coverage for April's damages.
As with many umbrella policies, the AutoOwners policy fine print excluded any coverage for any family member of the insured. The policy limited this exclusion, though, to cases where no underlying coverage was purchased by the insured and listed in Schedule A. The Leikerts argued that if the exclusion were fairly applied, it should not apply in this case because Leikert had purchased significant underlying liability coverage through Progressive. The trial court and appeals court disagreed and held that under the precise language of the exclusion, since the Progressive policy on the bike wasn't listed in AutoOwners' Schedule A (which presumably listed only the underlying AutoOwners' liability coverage on the couple's four-wheeled vehicles), the umbrella policy did not apply to April's injuries. Several years ago, the so-called Engler Majority on Michigan's Supreme Court rejected the "reasonable insured" interpretation of insurance policies and announced it would enforce the exact language of the policy contract--regardless of what an insured might have expected when he or she bought the policy.