Summary
holding that the insurer could not be estopped from asserting its exclusions because there was no unreasonable delay, where the insurer asserted two exclusions one year after the complaint was filed in the underlying case and an additional exclusion was identified six months later
Summary of this case from LCC v. National Union Fire Ins. Co. of Pittsburgh, Pa.Opinion
Docket No. 165157.
Submitted June 9, 1993, at Lansing.
Decided December 20, 1993, at 9:10 A.M. Leave to appeal sought.
Chasnis, Dogger Grierson, P.C. (by John A. Chasnis), for the plaintiff.
Kalo, Zilinski Swann, P.C. (by Philip D. Swann), for the defendant.
Before: HOOD, P.J., and JANSEN and BRENNAN, JJ.
ON REMAND
This case is before us on remand from the Supreme Court for consideration of the remaining issues. Allstate Ins Co v Hayes, 442 Mich. 56; 499 N.W.2d 743 (1993). We again affirm the trial court's grant of summary disposition pursuant to MCR 2.116(C)(10) in favor of Allstate in this action for a declaratory judgment.
The facts of this case have been set forth in the Supreme Court's opinion, and we see no need to restate them here.
We first must consider whether Allstate is estopped from asserting the exclusions in its policy. An insurer that undertakes the defense of an insured while having actual or constructive knowledge of facts that would allow avoidance of liability will be deemed to have waived its right to avoid coverage unless reasonable notice of the possible disclaimer is served to the insured. Meirthew v Last, 376 Mich. 33; 135 N.W.2d 353 (1965); Fire Ins Exchange v Fox, 167 Mich. App. 710, 713-714; 423 N.W.2d 325 (1988).
Keillor filed his complaint against Hayes and others on June 30, 1986. Hayes filed an answer to the complaint on April 8, 1987. On June 15, 1987, Allstate sent a reservation of rights letter to Hayes, citing reservations under two exclusions to the liability coverage, including the exclusion for intentional and criminal acts. On November 4, 1987, Allstate filed its complaint for declaratory judgment. On December 18, 1987, Allstate filed its second amended complaint, adding a claim that the exclusion for motor vehicles also precluded coverage.
We hold that Allstate is not estopped from asserting its exclusions because there was no unreasonable delay in asserting them. This is not a situation where Allstate defended the action without reserving its right to later assert its exclusions. Cf. Meirthew, supra. Further, Allstate's assertion of the exclusions was not unreasonably delayed. The exclusion for intentional and criminal acts was asserted two months after Hayes filed his answer to the complaint and before Allstate's filing of its action for a declaratory judgment. The exclusion for motor vehicles was asserted in the second amended complaint in this action. Because this case involves an action for a declaratory judgment specifically seeking to determine whether Allstate must defend Hayes, we do not find that there was any unreasonable delay in asserting the exclusions and that, therefore, Keillor has suffered no prejudice. Fire Ins Exchange, supra, p 714; Security Ins Co of Hartford v Daniels, 70 Mich. App. 100, 116; 245 N.W.2d 418 (1976).
Next, we must determine if the exclusion for intentional and criminal acts applies to preclude coverage in this case. That exclusion provides:
We do not cover any bodily injury or property damage which may reasonably be expected to result from the intentional or criminal acts of an insured person or which is in fact intended by an insured person.
Contrary to defendant Keillor's argument, we do not find this exclusion to be ambiguous. See Allstate Ins Co v Freeman, 432 Mich. 656, 686; 443 N.W.2d 734 (1989). Further, we find that the exclusion for criminal acts applies in this case in which Hayes served alcohol to a minor. Such an act constitutes a criminal act causing this exclusion to apply.
The statute prohibiting the furnishing of alcohol to a minor, MCL 436.33; MSA 18.1004, provides that a person who knowingly furnishes alcohol to a minor is guilty of a misdemeanor. In Longstreth v Gensel, 423 Mich. 675, 692; 377 N.W.2d 804 (1985), our Supreme Court considered this statute to be a penal statute. Although "penal" does not necessarily relate to acts delineated as criminal, id., n 9, it would be an overly technical and strained construction not to consider the act of furnishing alcohol to a minor as a criminal act within the meaning of the exclusion. Accordingly, the act of furnishing alcohol to a minor is a criminal act within the meaning of the exclusionary clause.
We next must determine whether the exclusion for intentional and criminal acts is applicable to the facts of this case. The exclusionary clause is applicable if the insured acted either intentionally or criminally and the resulting injury was reasonably expected or actually intended to result from such intentional or criminal act. Freeman, supra, p 685; Buczkowski v Allstate Ins Co (On Rehearing), 198 Mich. App. 276, 278; 502 N.W.2d 343 (1993). Injury is reasonably expected to occur where it is the natural, foreseeable, expected, and anticipated consequence of the intentional or criminal act. Freeman, supra, pp 687-688; State Farm Fire Casualty Co v Fisher, 192 Mich. App. 371, 375; 481 N.W.2d 743 (1991).
We find that where, as here, an insured knowingly furnishes alcohol to a minor and the minor, after drinking all night, gets into an automobile to drive home, injury reasonably can be expected to occur. A minor's driving of a car while intoxicated and causing an accident is the natural, foreseeable, expected, and anticipated consequence of alcohol knowingly being furnished to the minor who proceeds to take the opportunity actually to drink all night at a party. Accordingly, the trial court did not err in granting summary disposition on the basis that the exclusion for intentional and criminal acts applies to preclude coverage.
In addition to finding that the exclusion for intentional and criminal acts applied, the trial court also found that the exclusion for motor vehicles precluded coverage. We agree.
The exclusion for motor vehicles provides:
We do not cover bodily injury or property damage arising out of the ownership, maintenance, use, loading or unloading of any motorized land vehicle or trailer. However, this exclusion does not apply to:
a) a motorized land vehicle in dead storage or used exclusively on the residence premises;
b) any motorized land vehicle designed principally for recreational use off public roads, unless that vehicle is owned by an insured person and is being used away from the residence premises;
c) a golf cart owned by an insured person when used for golfing purposes;
d) a trailer of the boat, camp, home or utility type unless it is being towed or carried by a motorized land vehicle;
e) bodily injury to a residence employee.
This exclusion also applies in this case because the underlying injury arose out of the use of a motorized land vehicle. We disagree with defendant Keillor that in order for this exclusion to apply, ownership or use by the insured is necessary to trigger the exclusion. A plain reading of the exclusionary clause does not compel that result. Rather, the clause unambiguously states that Allstate will not cover bodily injury or property damage arising out of the use of any motorized land vehicle.
We believe that our holding in this regard is supported by the Supreme Court's statement in Farm Bureau Mutual Ins Co of Michigan v Stark, 437 Mich. 175, 185; 468 N.W.2d 498 (1991):
Generally speaking, a homeowner's insurance policy is designed to protect against losses arising out of the ownership or use of a particular residential building and its appurtenant structures, not liability connected to the operation of motor vehicles on public highways. Motor vehicle exclusions. . . are commonly included in homeowner's policies. The basis for the motor vehicle exclusion is evident: using a motor vehicle designed for travel on public roads greatly increases the risk of bodily injury and property damage, and such liability is not within the risk which homeowner's contracts are designed to cover or for which premiums are charged. The risk of liability from the use of a motor vehicle is traditionally and properly covered by motor vehicle policies, not by homeowner's insurance.
For the above reasons, the trial court's grant of summary disposition in favor of Allstate is affirmed because the exclusions preclude coverage in this case.
Affirmed.