Dispute over failure to list child as driver of insured vehicle is decided on procedural grounds
Pioneer State Mutual insured a vehicle that was involved in a collision while being operated by a driver insured by State Farm. When the victim of the injury sued the driver and owners, Pioneer provided a defense to the owners but not to the driver. At the same time, Pioneer filed a declaratory judgment action against its insureds and the driver, claiming that it should be entitled to void its policy because the owners had not listed their son as a potential driver. The son had allowed a friend to borrow the car when the collision occurred.The underlying injury claim was settled for $335,000.00 and the declaratory judgment action wasthen dismissed by stipulation. State Farm then sued Pioneer to recapture its defense costs from the original action. The Court held that the dismissal of the Declaratory Judgment action--to which State Farm's insured was a named and consenting party--precluded State Farm's subsequent action for costs. As a subrogee of the driver, State Farm was bound by the dismissal of the "dec" action.
The case stands as a warning to insureds, however, with regard to the potential that failing to update insurance records may result in the cancellation of coverage when it is ultimately needed. Even though Pioneer's insureds' son was not even driving when the collision occurred, the fact that the family's insurance records were not up-dated to include him as a potential driver provided an excuse for Pioneer to attempt to void its coverage. Given the composition of the Michigan appellate courts and the influence which Michigan insurers hold over judicial nominees and elections, no insured wants to be in a position of allowing his or her insurer an excuse to deny coverage.