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AutoOwners' subsidiary HomeOwners Insurance loses attempt to deny benefits based on fine print

Sharen Wellman bought auto and motorcycle insurance from HomeOwners Insurance Company, a subsidiary of AutoOwners.  She paid for Underinsured Motorist Coverage on her car, but it was not included in the terms of the associated bike coverage.  Sharen was hurt on her motorcycle when another motorist ran a stop sign and struck her.  HomeOwners refused to pay under the UIM coverage on the integrated policy, however, and she filed suit.

The trial judge examined the policy and noted that while Wellman could have specifically bought an additional UIM coverage on the bike, under the specific language of the policy, it appeared that she had UIM coverage so long as she was not operating an owned, insured "automobile" that did not have UIM.  While the pre-amble to the policy suggested that any vehicle specifically identified in the policy must purchase UIM separately, this language appeared to contradict the specific definitions in the policy:  they defined an "automobile" as a land motor vehicle with more than two wheels and they excluded from coverage only owned, uninsured "automobiles" from the UIM coverage.

The Court of Appeals noted that under the strict construction rules adopted at the insurance industry's demand by the Engler Supreme Court majority, the strict definition of "automobile" must be applied to the fact situation and the Court was not free to attempt to "interpret" the policy according to the parties' presumed intent.  On that basis, the lower court was correct in denying summary disposition to HomeOwners, but in the absence of extrinsic evidence, it should have granted summary disposition to the insured.  Under the circumstances, the insurer was "hoisted by its own petard."

Thompson O’Neil, P.C.
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Traverse City, Michigan 49684
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