Opinion
Docket No. 94011.
Decided March 14, 1988.
Rickel, Earle, Neaton, Baun Fenner, P.C. (by Mark A. Baun), for plaintiff.
Brandt, Hanlon, Becker, Lanctot, McCutcheon, Martin Schoolmaster (by Dennis M. Killeen), and MacArthur, Cheatham, Ackers Smith, P.C. (by James G. Gross), for defendant.
This appeal raises the issue whether the loss payable clause of a comprehensive automobile insurance policy protects the interest of a secured lienholder when the owner/debtor is alleged to have deliberately destroyed the insured automobile. The district court held that the interest of the secured lienholder was protected, and it granted summary disposition to General Motors Acceptance Corporation. We hold that the secured lienholder is not protected if the automobile was intentionally destroyed. We reverse the order granting summary disposition, and we remand for further proceedings to determine whether the automobile was intentionally destroyed by the owner/debtor.
Margaret and Darius Smith entered into a retail installment sale contract with GMAC on November 9, 1981. GMAC perfected a security interest in the automobile that was the subject of the contract. Pursuant to the terms of the retail installment sale contract, the Smiths obtained a policy of insurance from Auto Club Insurance Association that protected GMAC as the loss payee/security interest holder. The loss payable clause provided in part as follows:
Loss or damage, if any, under the policy shall be payable as interest may appear to . . . [Lienholder] and this insurance as to the interest of . . . [Lienholder] shall not be invalidated by any act or neglect of the . . . [Owner/Debtor] . . . provided, however, that the conversion, embezzlement or secretion by the . . . debtor in possession of the property insured under a bailment lease. . . or other security agreement is not covered under such policy unless specifically insured against and premium paid therefor. . . .
On September 2, 1983, the insured automobile was reported stolen and was later found completely destroyed by fire. ACIA refused to make payment to either the Smiths or to GMAC because its investigation revealed that the Smiths intentionally destroyed the automobile. The trial court held that the loss payable clause entitled GMAC to payment regardless of whether the automobile was intentionally destroyed. The circuit court affirmed and we granted leave to consider the issue of whether the loss payable clause protected GMAC.
While the present case was pending, another panel of this Court decided Boyd v GMAC, 162 Mich. App. 446; 413 N.W.2d 683 (1987). In Boyd, this Court held that a loss payable clause identical to the loss payable clause in the present case did not protect the interest of a secured lienholder if the automobile was intentionally destroyed by the owner/debtor. The Boyd panel noted that the underlying policy restricted coverage to accidental loss, while the loss payable clause provided that "this insurance . . . shall not be invalidated by any act or neglect of the . . . owner." Boyd, supra, p 453. However, this Court determined that intentional destruction did not invalidate the coverage under the loss payable clause, but was simply not a risk insured against.
In the present case, GMAC argues that the loss payable clause provides greater coverage than the underlying policy. However, we agree with the Boyd panel's conclusion that ACIA did not undertake the risk of intentional destruction by the owner/debtor. Therefore, we reverse the order of the circuit court that affirms the order granting summary disposition to GMAC. Should ACIA succeed in proving its claim that the owner/debtor intentionally destroyed the automobile, then it would not be liable to GMAC.
Reversed and remanded.