Auto-Owners second attempt to limit garage liability to 20/40 coverage is rejectedAuto-Owners sells to auto service garages and car dealers commercial liability policies that attempt to provide adequate liability coverage to the garage, but only statutory-minimum coverage to customer drivers of the garage/dealer's vehicles. It does that through an exclusion for customers that attempts to make the customer's policy first priority and to make Auto-Owners responsible only for $20,000.00 in liability coverage after the driver's coverage is exhausted. In 2009, the Michigan Supreme Court held that Auto-Owners' exclusion language violated the Michigan No Fault law, as clearly established under a 1995 decision. Auto-Owners attempted a third bite at the apple this year in a case entitled Auto-Owners v. Andrea Dee Large and Citizens Insurance Company.
Mrs. Large badly injured another woman in a car accident, while driving a loaner vehicle from Bollinger's, Inc., a car dealer in Kent County. She was insured with Citizens, but Auto-Owners had sold liability coverage with $500,000.00 limits to Bollinger's. Despite the 1995 and 2009 decisions, Auto-Owners again argued that Citizens should have primary liability coverage for Large's negligence. Under the no fault law, however, primary insurance coverage rests with the owner of a vehicle, and a valid Michigan insurance policy cannot exclude from coverage an entire class of operators (in this case "customers"). The insurer of a vehicle licensed in Michigan MUST provide primary liability coverage for all permissive users of the vehicle, and an insurer may not unilaterally change the statutory language governing insurer priority.
On this basis, the Court once again rejected Auto-Owners' attempt to limit its exposure to $20,000.00. (That is the maximum liabilty of a rental company owner under 1980s "tort reform"---apparently car rental agencies must have been leaving the state because of liability issues...and required special protection different than all other owners of motor vehicles.) The Court once again reaffirmed that Auto-Owners' attempted exclusion was void under Michigan law and taxed costs in favor of Large and Citizens.
On its surface, this case was simply a fight between two insurers, Citizens and Auto-Owners, over who would pay for Large's mistake. Immediately beneath the surface, however, the impact of the decision is to comport with the original policy of the no fault act, requiring a vehicle's insurers to provide equal coverage to, and protection of, both drivers and victims, when a car is placed on the road: thereby refusing to sanction, at least in this circumstance, "classes" of coverage under which some individuals receive only minimal, inadequate protection. The statutory minimum coverage of $20,000.00 per individual/$40,000.00 per incident was only marginally adequate in 1974. Today it is a joke, but Republicans in the State Legislature won't even consider this aspect of "reform." Allowing insurers to unilaterally expand the situations in which it provides only this minimal coverage would be criminal.