Opinion
File No. 1:18-CV-262
11-05-2019
David BOGI et al., Plaintiffs, v. CITIZENS INSURANCE COMPANY OF THE MIDWEST, Defendant.
Daniel Johnson James, Jon J. Schrotenboer, Wheeler Upham PC, Grand Rapids, MI, for Plaintiffs. Andrew Ellis Barrett, Brian Victor Boehne, Donald C. Brownell, Vandeveer Garzia PC, Troy, MI, for Defendant.
Daniel Johnson James, Jon J. Schrotenboer, Wheeler Upham PC, Grand Rapids, MI, for Plaintiffs.
Andrew Ellis Barrett, Brian Victor Boehne, Donald C. Brownell, Vandeveer Garzia PC, Troy, MI, for Defendant.
OPINION AND ORDER
Janet T. Neff, United States District Judge
This is an action to recover benefits under an insurance policy. Plaintiffs David, Karen, and Michelle Bogi were injured when their automobile struck a vehicle driven by Patricia Robinson. Robinson's insurance policy, issued by Liberty Mutual Insurance Company ("Liberty Mutual"), covered her liability for bodily injury, up to $100,000 per person, $300,000 per occurrence. Liberty Mutual paid $100,000 to each of the Bogis to settle their claims against Robinson.
The Bogis were covered by an underinsured motorist policy ("the Policy") from Defendant Citizens Insurance Company of the Midwest ("Citizens"). Citizens' Policy covers damages for bodily injury up to $500,000 per person, $500,000 per accident. But it also contains a setoff provision that reduces Citizens' limit on liability when others pay money for those damages, as when Liberty Mutual paid the Bogis. The parties disagree on how to interpret and apply the setoff provision in the Policy, and the Bogis brought this action against Citizens to recover benefits. In response, Citizens filed a counterclaim for declaratory relief.
Before the Court are Plaintiffs' and Defendant's respective motions for partial summary judgment on the available limits of coverage under the Policy. (ECF Nos. 21, 22.) For the reasons herein, the Court finds in favor Plaintiffs.
I. Summary Judgment Standard
Summary judgment is proper "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The court must consider the evidence and all reasonable inferences in favor of the nonmoving party. Burgess v. Fischer , 735 F.3d 462, 471 (6th Cir. 2013). The moving party has the initial burden of showing the absence of a genuine issue of material fact. Jakubowski v. Christ Hosp., Inc. , 627 F.3d 195, 200 (6th Cir. 2010). The burden then "shifts to the nonmoving party, who must present some ‘specific facts showing that there is a genuine issue for trial.’ " Id. (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ).
The function of the Court is "not ... to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Anderson , 477 U.S. at 249, 106 S.Ct. 2505. "A dispute is genuine if there is evidence ‘upon which a reasonable jury could return a verdict in favor of the non-moving party.’ A factual dispute is material only if it could affect the outcome of the suit under the governing law." Smith v. Erie Cty. Sheriff's Dep't , 603 F. App'x 414, 418 (6th Cir. 2015) (quoting Tysinger v. Police Dep't of City of Zanesville , 463 F.3d 569, 572 (6th Cir. 2006) ). "The ultimate question is ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’ " Back v. Nestlé USA, Inc. , 694 F.3d 571, 575 (6th Cir. 2012) (quoting Anderson , 477 U.S. at 251-52, 106 S.Ct. 2505 ).
II. Standards for Interpretation of Insurance Contracts
The parties agree that Michigan law governs the interpretation of the Policy, and that the terms of the Policy are controlling. See Berry v. State Farm Mut. Auto. Ins. Co. , 219 Mich.App. 340, 556 N.W.2d 207, 210 (1996) ("Because uninsured motorist benefits are not required by statute, the contract of insurance determines under what circumstances such benefits will be awarded."). Under Michigan law, the Court must examine the terms of the Policy to ascertain the parties' intent. Id. "Courts should construe contracts ‘so as to give effect to every word or phrase as far as practicable.’ " Barton-Spencer v. Farm Bureau Life Ins. Co. of Mich. , 500 Mich. 32, 892 N.W.2d 794, 798 (2017). "Doubtful or ambiguous terms must be construed in favor of the insured and against the insurer, the drafter of the policy." Berry , 556 N.W.2d at 210. "A contractual term is ambiguous on its face only if it is equally susceptible to more than a single meaning." Barton-Spencer , 892 N.W.2d at 798.
The proper interpretation of a contract is a question of law, as is the question of whether the contract is ambiguous. Wilkie v. Auto-Owners Ins. Co. , 469 Mich. 41, 664 N.W.2d 776, 780 (2003).
III. Analysis
The parties agree that the Policy provides the following terms with regard to the limit of liability for bodily injury sustained by an insured from the operation of an uninsured or underinsured motor vehicle:
A. The limit of Bodily Injury Liability shown in the Schedule or in the Declarations for each person for Uninsured/Underinsured Motorists Coverage is our maximum limit of liability for all damages, including damages for care, loss of services or death, arising out of "bodily injury" sustained by any one person in any one accident. Subject to this limit for each person, the limit of Bodily Injury Liability shown in the Schedule or in the Declarations for each accident for Uninsured/Underinsured Motorists Coverage is our maximum limit of liability for all damages for "bodily injury" resulting from any one accident.
This is the most we will pay regardless of the number of:
1. "Insureds";
2. Claims made;
3. Vehicles or premiums shown in the Declarations; or
4. Vehicles involved in the accident.
* * *
G. The limit of liability for this coverage shall be reduced by all sums paid or payable because of the "bodily injury" by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid or payable under Part A – Liability Coverage of this policy.
(Policy, ECF No. 1, PageID.27-28.)
The parties also agree that the limits shown in the declarations are $500,000 for each individual, and $500,000 for any one accident, and that David, Karen, and Michelle each received $100,000 from Liberty Mutual.
The parties disagree about how to interpret the setoff provision in Paragraph G. Which "limit of liability" does that provision reduce? The limit for each person or the limit for each accident? Put another way, how should the Court allocate the "sums paid" to the Bogis by Liberty Mutual? Liberty Mutual paid $100,000 to each of them. Does that mean the per-person limit of the Policy is reduced by $100,000 for each individual claimant? Or does that mean the per-accident limit is reduced by $300,000?
Plaintiffs advocate for the first interpretation, meaning that the setoff provision reduces each of the $500,000 per-person limits for David, Karen, and Michelle by $100,000 to account for the "sums paid" to each of them, but the $500,000 per-accident limit remains the same. In their view, Citizens is liable for $500,000. David Bogi can claim up to $400,000 for his own injuries, leaving $100,000 to cover the injuries of Karen and Michelle.
Citizens advocates for the second interpretation, meaning that the setoff provision reduces the $500,000 per-accident limit by $300,000 to account for all the "sums paid" to the Bogis. In its view, Citizens is liable for no more than $200,000.
In support of their interpretation, Plaintiffs rely on an unpublished Michigan Court of Appeals case interpreting policy provisions almost identical to the ones in the Policy. See Long v. Pioneer State Mut. Ins. Co. , Nos. 293556, 293569, 2010 WL 4866804 (Mich. Ct. App. Nov. 30, 2010). In Long , the two plaintiffs were injured when their vehicle collided with a pickup truck. They received a total of $100,000 from the insurer of the pickup truck, to be shared equally between them. The plaintiffs' insurance policy, issued by Pioneer Mutual Insurance, included an endorsement for underinsured motorist benefits in the amounts of $100,000 per person and $300,000 per occurrence. Like the parties in the instant case, the parties in Long disagreed about how to apply the setoff provision in Pioneer's policy. The relevant portion of the policy provided the following:
A. The limit of liability shown in the Schedule or in the Declarations for each person for Underinsured Motorists Coverage is our maximum limit of liability for all damages ... arising out of "bodily injury" sustained by any one person in any one accident. Subject to this limit for each person, the limit of liability shown in the Schedule or in the Declarations for each accident for Underinsured Motorists Coverage is our maximum limit of liability for all damages for "bodily injury" resulting from any one accident.
* * *
B. The limit of liability shall be reduced by all sums paid because of the "bodily injury" by or on behalf of persons or organizations who may be legally responsible. This includes all sums paid under Part A of this policy.
Long , 2010 WL 4866804, at *2-3.
Pioneer took a slightly different position than the one that Citizens takes in the instant case. Pioneer argued that per-person limit for both plaintiffs should be reduced by the total amount that the two of them received from the insurer of the pickup truck. The Michigan Court of Appeals disagreed, adopting a position like the one favored by the Bogis.
Here, Pioneer's policy describes a two-step process for ascertaining the limit of available UM coverage. First, ¶ A of the limitation of liability portion of the Pioneer policy's UM endorsement establishes the frame of reference for calculating UM benefits. Paragraph A specifically identifies as the relevant guidepost for further calculations the policy limit available "for each person" making a UM claim: "Subject to this limit for each person, the limit of liability shown in the Schedule or in the Declarations for each accident for Underinsured Motorists Coverage is our maximum limit of liability for all damages for ‘bodily injury’ resulting from any one accident." (Emphasis added). Next, ¶ B of the UM endorsement limitation instructs that the "limit of liability shall be reduced by all sums paid" by the legally responsible person....
Pioneer maintains that because ¶ B limits its liability to the extent of "all sums paid" by the underinsured driver, it is entitled to reduce the UM coverage available to each claimant in this case by $100,000, the settlement amount paid by Lowry. In Pioneer's view, "the effect of this reduction is that Pioneer's per person limit is reduced to $0, which means that neither Plaintiff Maloney nor Plaintiff Long is entitled to any recovery under Pioneer's policy." Pioneer's argument depends on reading in isolation ¶ B's pronouncement that "[t]he limit of liability shall be reduced by all sums paid" on behalf of a legally responsible party. But "[w]e read contracts as a whole, giving harmonious effect, if possible, to each word and phrase." [ Wilkie , 664 N.W.2d at 781 n.11 ]. Consequently, we reject Pioneer's interpretation of the UM limitation of liability provision, for the simple reason that the policy's UM limitation of liability language as a whole clearly and unambiguously demands a reduction in the limits of Pioneer's UM liability "for each person" making a claim for UM benefits. Pioneer's interpretation of the policy terms would eliminate the meaning and effect of ¶ A, violating the cardinal rule that we must
construe an insurance contract so as to give effect to every word, clause, and phrase, and should avoid a construction that would render any part of the contract surplusage or nugatory. Klapp v. United Ins. Group Agency, Inc. , 468 Mich. 459, 467, 468, 663 N.W.2d 447 (2003). Maloney's policy with Pioneer afforded $100,000 in UM coverage to each person. Paragraph A posits that UM coverage limitations must be calculated "[s]ubject to [the policy limit] for each person." Read in context, the policy's UM liability limitation terms required a reduction of the per person policy limit by the amount each person recovered from the underinsured motorist. Given that each plaintiff has received $50,000 from Lowry's insurer, Pioneer was entitled to deduct $50,000 from the $100,000 in UM benefits available to each claimant....
Long , 2010 WL 4866804, at *4.
In short, according to three judges of the Michigan Court of Appeals, Pioneer's policy "clearly and unambiguously" required that the payment the plaintiffs received from the other insurer would reduce the per-person limit in the policy "by the amount each person recovered from the underinsured motorist." Id. Long is an unpublished decision and is not binding on this Court. Nevertheless, it offers a sensible and plausible reading of the terms at issue.
Citizens attempts to distinguish Long by noting two insignificant differences between Pioneer's policy and its own policy. First, Pioneer's policy provided different dollar amounts of coverage than the Policy. However, those amounts are irrelevant to the dispute at hand. They do not impact how to apply the setoff provision.
Second, the setoff provision in Pioneer's policy applied to all sums "paid," whereas the setoff provision in Citizens' policy applies to all sums "paid or payable." That distinction is also irrelevant to the analysis in Long. Accordingly, Long is not distinguishable. Its reasoning applies to this case.
It is also irrelevant for summary judgment purposes in this case because there is no genuine dispute about the amount of the setoff. The parties agree on the amount that Liberty Mutual paid to the Bogis, and there is no genuine dispute that Liberty Mutual paid the full limit of its policy. Consequently, there is nothing more that could be "payable" by Liberty Mutual. Thus, the total sum "paid or payable" by Liberty Mutual is $300,000.
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Unlike the court in Long , however, this Court is not convinced that the terms of the Policy are clear and unambiguous. The Policy sets forth two limits on liability—one that applies "for each person" and one that applies for all injuries "from any one accident"—yet the setoff provision does not specify which of those two limits is reduced by the "sums paid." It simply refers to "the limit of liability for this coverage."
The court in Long reasonably rejected Pioneer's position, which would have reduced the amount available to all claimants simply because that amount was "available" to one of them. Under that logic, if only one of the plaintiffs in Long had received payment from the underinsured motorist equal to the per-person limit of $100,000, then no other covered individual would be entitled to any benefits. That cannot be the right result because it would render the per-accident limit of $300,000 meaningless. A driver with $300,000 in total coverage for herself and her passengers would be left with only $100,000 in total compensation for everyone. Paradoxically, the covered individuals would be better off (i.e., entitled to more benefits) if they received no payment at all from the other motorist. That does not make sense in light of the contract as a whole. The general purpose of underinsured motorist coverage is to "supplement insurance proceeds received by the insured from the tortfeasor had the tortfeasor not been underinsured." Wilkie , 664 N.W.2d at 778 (emphasis added). Under Pioneer's interpretation, however, the insured would lose benefits by accepting payment from the underinsured motorist.
But even accepting that Pioneer's position is incorrect, it does not necessarily follow that the only plausible alternative is to reduce the per-person limit for each individual according to the amount received by that individual. The court in Long apparently did not consider the position offered by Citizens, which is to reduce the per-accident limit. Looking at the terms of the Policy, Citizens' position seems equally plausible to the one adopted in Long. Both are consistent with those terms. And neither position would have the absurd results of Pioneer's preferred interpretation. They would not penalize the group of covered individuals for receiving payment from the underinsured motorist, leaving the group with total compensation that is less than the face value of the policy.
For instance, if the Court adopts Citizens' interpretation, Plaintiffs would receive $500,000 in total compensation ($300,000 from Liberty Mutual and $200,000 from Citizens), an amount that is equal to the face value of the Policy. Alternatively, if the Court adopts Plaintiffs' position, Plaintiffs would be eligible to receive more than $500,000 in total compensation ($300,000 from Liberty Mutual and $500,000 from Citizens), but Citizens would be liable for no more than the face value of its Policy. Thus, in both scenarios, the Policy would truly supplement the proceeds that Plaintiffs received from the underinsured motorist, and Plaintiffs would never receive less, and Citizens would never pay more, than the face value of the Policy.
Plaintiffs, like the court in Long , focus on the fact that the per-accident limit is "subject to" the per-person limit to argue that their position is unambiguously correct, but that language does not settle the dispute at hand because the two limits clearly work in tandem with one another. No one here contends the per-accident limit is "subject to" the per-person limit in the sense that every injured individual is entitled to the full amount of the per-person limit, regardless of the per-accident limit. Moreover, the notion that the per-person limit takes precedence, as Plaintiffs argue, or is the "frame of reference" for the policy limit, as the Michigan Court of Appeals contended, see Long , 2010 WL 4866804, at *4, does not necessarily mean that the "the limit of liability" referenced in the setoff provision is the per-person limit rather than the per-accident limit. Indeed, one could just as easily argue that the setoff provision refers to the per-accident limit because the latter is the end point, or boundary, for all claims, and in that sense it is the more general of the two limits of liability in Paragraph A. Thus, the "subject to" language does not meaningfully help determine whether the setoff provision refers to the per-person limit or the per-accident limit.
Citizens insists that Long cannot be correct because the setoff provision in that case and this one reduces the limit of liability by "all sums" paid, whereas the court in Long reduced the limit in portions according to what each of the covered individuals received from the other insurer. However, the Court discerns no problem with the approach in Long . Applying Long to this case, the Court would reduce the per-person limits for David, Karen, and Michelle by $100,000 each. Thus, in aggregate, the per-person limits would be reduced by $300,000, which is equal to "all sums" paid by Liberty Mutual. That result is consistent with the Policy. Notably, the setoff provision refers to "all sums" (plural), not the "total sum." Thus, the Policy does not require reducing the limit applicable to a single claim by the total sum received by all claimants.
Citizens relies on Wilkie to argue that the setoff provision unambiguously reduces the per-accident limit, but the holding in Wilkie is inapposite because the policy in that case was different. The underinsurance policy in Wilkie provided coverage of $100,000 to each person, up to a total of $300,000 per occurrence. Wilkie , 664 N.W.2d at 780. The setoff provision restricted those liability limits to the amounts by which they exceeded "the total limits ... available to the owner or operator of the underinsured automobile[.]" Id. at 781 (emphasis in original). The court in Wilkie rejected the argument that this provision was ambiguous and held that it reduced the policy limits by the total amount "available" to the underinsured motorist, not by the amounts "actually received" by each of the covered individuals from the underinsured motorist. Id. The analysis in Wilkie is specific to the terms of the policy in that case. It has little bearing on the terms of the Policy here, which are completely different.
For example, the setoff provision in Wilkie reduced the plaintiffs' coverage by the limits "available" to the owner of the underinsured vehicle. Id. It focused on the limits stated in the underinsured motorist's policy. In contrast, the setoff provision in the Policy focuses on the "sums paid or payable" to the insured. In other words, unlike the policy in Wilkie , Citizens' Policy expressly takes into account the amounts that each of the individual Plaintiffs actually received, or are due to receive, from the underinsured motorist.
In addition, the policy in Wilkie provided that "the amounts to be paid will not be increased because of claims made, suits brought, or persons injured." Id. The court of appeals reasoned that looking at the amounts actually received by the claimants, rather than the limit "available" to the underinsured motorist, could increase the insurer's liability based on the number of claims brought or persons injured, contrary to the policy. Id. In contrast, Plaintiffs' position faces no such conflict with the Policy, which states that the limits provided in Paragraph A are the "most [Citizens] will pay," regardless of the number of insureds, claims, or vehicles. (Policy, PageID.27 (emphasis added).) In other words, the limits are the same regardless of the circumstances of the accident or claim. Plaintiffs' position is not inconsistent with that provision. Of course Citizens' liability could increase or decrease depending on the number of claims or insureds, but the Policy does not prohibit that so long as Citizens' total liability is within the limits of the Policy. Plaintiffs do not contend otherwise. Thus, Citizens' arguments are not persuasive.
IV. Conclusion
For the reasons herein, the Court finds as a matter of law that the Policy is ambiguous. It is equally susceptible to the two different interpretations offered by Plaintiffs and Defendant. That being the case, the Court must construe the terms of the Policy against the insurer and in favor of Plaintiffs. See Berry , 556 N.W.2d at 210. Therefore, as a matter of law, Plaintiffs' interpretation prevails.
Applying Plaintiffs' interpretation, the Court finds that the amounts Plaintiffs received from Liberty Mutual reduce the $500,000 per-person limits of David, Karen, and Michelle by $100,000 each, with no change in the $500,000 per-accident limit. Plaintiffs specifically ask the Court to find that David Bogi is entitled to $400,000 in coverage, leaving $100,000 in coverage to resolve the claims of Karen and Michelle. Defendant offers no reason to find otherwise.
Accordingly,
IT IS HEREBY ORDERED that Plaintiffs' motion for partial summary judgment (ECF No. 21) is GRANTED and Defendant's motion for partial summary judgment (ECF No. 22) is DENIED.
IT IS FURTHER ORDERED that, after applying the setoff in the Policy, the per-person limit applicable to David Bogi's claim is $400,000, leaving $100,000 in coverage to resolve the claims of Karen and Michelle.