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Insurers 2 for 2 today in denying homeowners' coverage, winning dispute

Fremont Insurance Company and IDS Property Casualty Insurance Company each avoided insurance coverage to an insured this week.  Fremont ducked coverage for an ATV injury caused by its insured Nathan Kadau, while IDS avoided paying for a theft from its insureds, Steven and Helen McGuinness.

Nathan Kadau was sponsoring a batchelor party at his cottage and took Michael Izenbaard for a ride on his 4-wheel ATV.  He attempted to turn the vehicle uphill on adjacent land owned by Consumers Power, the vehicle overturned, and Izenbaard was injured.  The homeowner's insurer denied coverage and sought a declaratory judgment that it had excluded coverage for this incident.

Kadau noted that while the coverage excluded motor vehicle injuries, it had an "exception to the exclusion" for insureds' negligently caused injuries involving "motorized land conveyances," if an accident occurred on "any premises used by you in connection with [an insured premises]."  The trial judge ruled that there was no question of fact to resolve here:  the insurer had used an ambiguous term, "premises," and clearly the power company land where the accident occurred was  "used in connection with" Kadau's cottage.  (Since the insurer wrote the policy, any ambiguity must be resolved against it, under Michigan law.) 

The Court of Appeals overturned this outcome and dismissed the claim against the insurer.  It held that the term "premises" is not ambiguous, because in dictionary use it requires the presence of "a building or part of a building."  I'm sure that the Kadau's fully understood that when they read the policy.

In the McGuiness case, the insured's son from a prior marriage came to live with the insureds on a half-time basis after encountering disciplinary problems with his mother.  He then began stealing comic books from McGuinness' collection and conspired with his mother to sell them.  McGuinness turned in a claim against his insurer, noting that the policy expressly covered "theft, or attempted theft, including loss of property from a known place if it is likely that a theft has occurred."

The insurer denied coverage because McGuinness had not purchased a rider for collectible property and because the theft by an "insured person" was not covered.  Although the son wasn't listed as an "insured person," the policy definition included "any relative residing in the household, or... any other person under 21 who is residing in the household and under your care."  The Court held that the latter provision excluded this theft from coverage and thus it did not need to address the former exclusion.  McGuinness needed to hire a superhero to read his policy when it arrived in the mail.

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