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Insurance contract interpreted to deny coverage

In one of several 4-3 decisions handed down by Michigan's Supreme Court at the end of Justice Taylor's term, the Engler majority gifted Farm Bureau Insurance Company an escape from insurance coverage it had writtten.  In Ellis v. Farm Bureau, the insured had purchased homeowners coverage on a rental property which the insured was in the process of refurbishing.  Farm Bureau and its agent knew the property would not have a tenant until it had been renovated.  When the property was damaged, Farm Bureau refused to fulfill its contract obligations, claiming that coverage was excluded because the property was "unoccupied" for sixty days.

The dissenting judges noted that the term "unoccupied" was not defined in the policy and that the term was susceptible of several different meanings, particularly where the owners were in the process of renovating it at the time they purchased insurance coverage from the Defendant.  The dissenting judges concluded that the insurer may be "estopped" from denying coverage, since it was written by Farm Bureau knowing that the rental would not be "lived in" for several months.  The dissenters also noted that it is the insurer's obligation to define this type of "exclusionary" term--particularly where a premium has been collected with full knowledge of the circumstances of "occupancy".

Nevertheless, Justice Taylor was able to make one more gift to his constituency prior to departing from the bench.  Ordinary citizens of Michigan will not miss him.

Thompson O’Neil, P.C.
309 East Front Street
Traverse City, Michigan 49684
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