Insurance interests were 3 for 3 and injury victims 0 for 3 in today's Michigan appeals courts, including upholding USAA family injury limitation
Cynthia Ruzak and her husband have maintained auto insurance with USAA since Jay served in the military in 1966. USAA likes to market its coverage to military families, claiming special expertise and interest in their needs. Originally, the Ruzak's policy apparently did not contain any provision limiting liability if one family member negligently injured another. According to USAA, however, around 1999, the policy was amended to exclude any liability coverage for injured family members. Such an exclusion is illegal in Wisconsin where the couple lived in 2002, but legal where they subsequently lived in Indiana. The exclusion is enforceable in Michigan as a $20,000.00 limitation on damages, rather than the full $300,000.00 in liability coverage that the couple had purchased and maintained. In 2004, when Jay lost control of his truck and hit a tree, severely injuring Cynthia, USAA argued that it owed only $20,000.00 in coverage to Cynthia.
Cynthia sued USAA, arguing that under Michigan's "renewal rule," USAA could not limit her coverage to $20,000.00 because it had not specifically told the couple that in Michigan it would not provide the coverage it was previously obligated to provide in Wisconsin. Michigan requires an insured to read his or her policy and to know the fine print. The state allows one exception, however, where the policy is later changed to provide more limted coverage: in that situation, the insurer must give the insured actual notice of the reduction in coverage. In other words, the insured is only required to read the renewed policy once: after that, the insured can trust that it will be informed of reductions in coverage.
The trial court looked at a substantial history of enforcement of this rule in Michigan and gave judgment to Ms. Ruzak. After numerous appeals, two judges of the Court of Appeals threw out Ruzak's judgment this week and held that when the Ruzaks changed residence, USAA was relieved of its obligation to give actual notice of a reduction of coverage under the renewal rule.
Dissenting, Judge Murphy observed that it is not unreasonable for an insured to believe that his or her coverage remains the same if he keeps the same limitations and coverages with the same company: where, as here, policies are marketed on a nationwide basis, loyal customers should not bear the obligation of independently researching reductions in coverage that occur "automatically." Rather, large national insurers are in a much better position to efficiently identify "automatic" coverage reductions and keep their loyal customers informed. Needless to say, this more consumer-friendly approach is not the law in our judiciary any longer.