Michigan law requires courts to construe insurance policies as a whole, giving effect to any unambiguous language. These principles are often easier to state than to apply. The Michigan Supreme Court’s recent opinion in Hunt v. Drielick is a case in point.
In Hunt, the Court addressed a “business-use” exclusion in a “Insurance for Non-Trucking Use” policy that Empire Fire and Marine Insurance Company extended to Roger Drielick Trucking. An exclusion provided that the insurance policy did not apply “[1] whilea covered ‘auto’ is used to carry property in any business or [2] while a covered ‘auto’ is used in the business of anyone to whom the ‘auto’ is leased or rented.”
Hunt arose out of an accident that occurred when a Roger Drielick Trucking employee was driving a semi-tractor without an attached trailer. Great Lakes Carriers Corporation owned the semi-tractor. The driver had picked up his girlfriend and was on his way to pick up and deliver a trailer of goods at the time of the accident.
The Court of Appeals concluded that the business-use exclusion did apply. It relied on the first clause of the business-use exclusion, which excluded coverage “while a covered ‘auto’ is used to carry property in any business ….” But the Michigan Supreme Court disagreed and reversed in a June 26, 2014 opinion.
The Court held that the first clause of the business-use exclusion applied only when “a semi-tractor is physically attached to property and the property is carried in a business.” This clause didn’t apply in Hunt because there was no property attached to the semi-tractor at the time of the accident.
So how did the Court of Appeals get it wrong?
The Supreme Court noted that the Court of Appeals placed too much emphasis on “is used” in the first clause and too little on “carry property.” “Carry property” had to mean carrying property at the time of the accident. A construction that excluded coverage if a semi-tractor was used to carry property in general would essentially void the policy:
The Court of Appeals [sic] interpretation of the first clause, which essentially defines the clause by whether a semi-tractor is driven in the business of carrying property, is too broad because in the commercial-trucking industry, semi-tractors are intended and designed precisely to carry property and, therefore, would always be used for the purpose of carrying property when used in any business. Because it was undisputed that at the time of the accident, the semi-tractor was driven without attached property, the first clause of the business-use exclusion did not preclude coverage in this case.
The Court’s conclusion about the first clause didn’t mean that Empire’s policy applied to the accident, though. The business-use exclusion included another clause, one that excluded coverage “while a covered ‘auto’ is used in the business of anyone to whom the ‘auto’ is leased or rented.” It wasn’t clear whether there was a lease agreement between Drielick Trucking and Great Lakes Carriers.
Consequently, the Supreme Court remanded the case for the trial court to make findings of fact about whether there was a lease agreement as contemplated by the business-use exclusion’s leasing clause. Depending on the trial court’s findings, the second clause of the business-use exclusion might apply.