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Hanback v MemberSelect Ins Co (COA – UNP 3/24/2022; RB #4397)  

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Michigan Court of Appeals; Docket #355098; Unpublished  
Judges Cavanagh, Markey, and Servitto; Per Curiam 
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING: 
Not Applicable

TOPICAL INDEXING: 
Exclusions from Underinsured Motorist Benefits


SUMMARY: 
In this unanimous, unpublished, per curiam decision, the Court of Appeals reversed the trial court’s denial of Defendant MemberSelect Insurance Company’s (“MemberSelect”) motion for summary disposition—in which MemberSelect sought dismissal of Plaintiff Brittney Hanback’s action against it for underinsured motorist (UIM) coverage—and remanded for entry of summary disposition in MemberSelect’s favor.  The Court of Appeals held that Hanback could not pursue UIM coverage under her policy with MemberSelect because she failed to comply with the controlling provisions of the policy: specifically, that which required her to obtain MemberSelect’s consent before settling her auto-negligence claim against the at-fault driver.  In so holding, the Court concluded that a letter MemberSelect wrote to Hanback—in which it informed her that UIM coverage under her policy “would not come into play until all underlying policies had been exhausted through either a judgment or a settlement”—did not operate as a waiver of the consent provision.

Brittney Hanback was injured as a result of her vehicle being rear-ended by a vehicle driven by Sidy Mbaye, and thereafter filed a third-party auto-negligence claim against Mbaye.  Mbaye had only $20,000 in liability coverage, and thus Hanback sent a letter to her own automobile insurer, MemberSelect, informing it that she intended to pursue a claim for UIM coverage under her policy.  Approximately one month after the collision, on July 27, 2018, MemberSelect sent Hanback a letter providing that “(1) [MemberSelect’s] coverage would not come into play until all underlying policies had been exhausted through either a judgment or a settlement and that (2) ‘[t]he proof of loss is subject to all policy provisions and insuring agreements contained within [the] policy.’ ”  Hanback ultimately settled her claim against Mbaye for $20,000, after which she sent a demand for UIM coverage to MemberSelect.  MemberSelect rejected the demand, asserting that Hanback failed to comply with the provision in her policy which required that she obtain MemberSelect’s consent to settle with Mbaye before doing so and then pursuing UIM coverage under her policy. MemberSelect moved for summary disposition in Hanback’s resultant lawsuit against it based that same argument, and Hanback argued, in response, that the July 27, 2018 letter constituted a waiver of the consent requirement in her policy.  The trial court agreed with Hanback and denied MemberSelect’s motion.

The Court of Appeals reversed the trial court’s denial of MemberSelect’s motion, holding that the July 27, 2018 letter did not constitute a waiver of the consent requirement in Hanback’s policy.  Rather, the Court described the letter as “merely a vehicle for conveying facts already in the insurance policy.”  As for Hanback’s contention that the letter’s “[recitation of the fact that MemberSelect’s] coverage would not come into play until all underlying policies had been exhausted” meant that a settlement or judgment for Mbaye’s policy’s limits would trigger UIM entitlement under her own policy, the Court noted that:

“[t]here is no language in the insurance policy . . . stating a judgment or settlement obviates the consent requirement, nor is there anything in the letter stating or implying that plaintiff’s compliance with the letter would allow them to bypass the consent requirement.” 

In total, the Court’s holding read as follows:

“Contrary to plaintiff’s argument, there is no evidence of ‘intentional relinquishment’ on the part of defendant. The letter at issue contains no “express declarations” or other statements suggesting an intent to waive the consent requirement. On the contrary, the letter was merely a vehicle for conveying facts already in the insurance policy. Specifically, it conveyed that (1) defendant’s coverage would not come into play until all underlying policies had been exhausted through either a judgment or a settlement and that (2) ‘[t]he proof of loss is subject to all policy provisions and insuring agreements contained within your policy.’ This is nothing more than a recitation of certain provisions contained in the policy. 

Plaintiff seems to believe that the reiteration of the first principle that defendant’s coverage would not come into play until all underlying policies had been exhausted through either a judgment or a settlement essentially removed the consent requirement. There is no language in the insurance policy, however, stating a judgment or settlement obviates the consent requirement, nor is there anything in the letter stating or implying that plaintiff’s compliance with the letter would allow them to bypass the consent requirement. Notably, Michigan courts have held that mere silence cannot be the basis for waiver and that there must be clear and convincing evidence of a mutual agreement to a waiver. Quality Prod and Concepts Co v Nagel Precision, Inc, 469 Mich 362, 372, 377-378; 666 NW2d 251 (2003). Where, as here, the letter is silent with respect to the specific policy provision requiring written consent to settle, a waiver of that provision cannot be found.” 

The Court also rejected Hanback’s additional argument, “that if [MemberSelect] wanted to preserve its right to be included in settlement negotiations, it should have stated so in its correspondence with [Hanback’s] counsel,” and that, because it did not so state, it waived its right to invoke the consent requirement.

“In addition, plaintiff argues that if defendant wanted to preserve its right to be included in settlement negotiations, it should have stated so in its correspondence with plaintiff’s counsel. This argument is misleading in two ways. First, defendant has no need to preserve the consent requirement because it is already in the insurance contract. Second, plaintiff suggests and/or assumes defendant desired to be involved in the settlement negotiations. Defendant’s policy states only that an insured must obtain defendant’s written consent if they desire to settle—not that an insured must involve defendant in the negotiations. 

Plaintiff’s claim that the insurance adjuster orally indicated, on several occasions, that plaintiff must settle for the $20,000 policy limit leads to no different result. While the adjuster may have relayed to plaintiff the requirement that she exhaust all applicable policies before defendant’s coverage would apply—information that was already in the insurance policy—that does not mean the consent requirement suddenly disappeared. Rather, a logical interpretation of the letter and the adjuster’s comments would be that, if, in the process of exhausting all applicable underlying policies, the insured decides to settle, the remaining provisions of the policy still apply. Furthermore, the policy provides: 

This policy form, the Declaration Certificate and all endorsements include all agreements between the principal named insured and us. No change or waiver may be effected in this policy except by endorsement issued by us. 

The above explicitly requires an endorsement issued by defendant in order to change any policy provision. There is no claimed endorsement issued by defendant which waives the consent to settle provision.” 

Lastly, the Court held that Hanback’s failure to obtain MemberSelect’s consent to settle did, in fact, prejudice MemberSelect—because it destroyed MemberSelect’s subrogation rights against Mbaye—and thus remanded the case for entry of summary disposition in MemberSelect’s favor.

"Finally, plaintiff’s failure to obtain defendant’s consent to settle with Mbaye’s insurer was prejudicial to defendant. We have repeatedly stated that prejudice occurs whenever an insurer’s subrogation rights are destroyed. Smith v MEEMIC Ins Co, 285 Mich App 529, 533-534; 776 NW2d 408 (2009). ‘A plaintiff[‘]s settlement with a negligent motorist or other responsible party destroys the insurance company’s subrogation rights under the policy and bars plaintiff[‘]s action for uninsured motorist benefits unless the insurer somehow waives the breach of the policy conditions.’ Lee at 675 (internal citations omitted). Because no waiver occurred in this case, plaintiff’s breach of the insurance contract prejudiced defendant and bars recovery by plaintiff. Thus, the trial court erred in denying defendant’s motion for summary disposition."


Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit SinasDramis.com.

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