Insurer is not responsible for coverage despite issuing erroneous change order
Continuing the Michigan Courts' long run of interpreting insurance contracts to deny coverage, despite "reasonable expectations," this week the Court of Appeals ruled that Secura did not owe liability coverage that it had memorialized in a change order. A landscaping company regularly stored vehicles during the winter and reduced the insurance coverage on them while stored. It dropped liability coverage and maintained only comprehensive.
In 2010, the office manager and the local agent met to review coverages and to reinstate liability coverage for vehicles that would be placed on the road. They reviewed the coverage changes instituted by SECURA the previous fall and did not change liability coverage on one dump truck because the change endorsement on that truck confirmed that it had liability coverage. After the truck was involved in a wreck, it was determined that Secura had made an error on the endorsement, and that liability coverage was "eliminated" rather than being preserved.
The parties ended up in litigation over whether Secura had to provide liability coverage that it hadn't been paid to provide. The truck owner, the accident victims, the victims' insurer, and the independent agent all argued that the mistaken endorsement rendered the coverage situation ambiguous, and since they had relied upon the mistaken endorsement issued by Secura, Secura should be "estopped" from denying coverage on the truck.
The Court of Appeals panel rejected this common sense conclusion. It held that the parties' mutual intent in the fall was to eliminate liability coverage--and therefore their contractual intent would be enforced--even though Secura's erroneous endorsement prevented the insureds from buying the coverage they wanted (and had bought each spring for a decade) during the work season.
The Court's ruling also denied the truck owner and the victims the benefit of the owner's purchased umbrella liability policy, since it became operative only if there was underlying liability coverage on the involved vehicle.