Ile v. Foremost Insurance
293 Mich. App. 309
| Mich. Ct. App. | 2011Background
- Foremost issued a motorcycle policy with bundled UM/UIM coverage of $20,000/$40,000 for 2006–2007, with a single unallocated premium of $26.
- Decedent died in a June 18, 2006 collision; estate recovered $20,000 from Titan Insurance (parked vehicle insurer).
- Ile sought an additional $20,000 from Foremost; trial court granted summary disposition for Ile after finding UIM illusory.
- Policy definitions tied UIM to an underinsured vehicle; since Michigan minimum is $20,000/$40,000, no vehicle could qualify as underinsured under the policy.
- Court reviewed de novo, incorporating extrinsic evidence and concluding the UIM provision was illusory and unenforceable.
- Remand proceedings involved evaluating amicus arguments, with the court ultimately affirming an award up to $20,000 for underinsurance.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Is Foremost's UIM coverage illusory? | Ile contends the UIM is illusory because no scenario yields UIM payment under the policy language. | Foremost argues UIM is not illusory and that bundled UM/UIM with a single premium can still pay under certain circumstances. | Yes; UIM is illusory under the contract language. |
| Does bundling UM/UIM defeat illusory status? | Ile asserts bundling does not prevent illusory coverage since premiums and language still preclude UIM payments. | Foremost maintains bundling does not negate potential UIM payments and the policy is enforceable as written. | Bundling did not cure the illusory nature of UIM. |
| Should recovery be limited to $20,000 UIM (excess over Titan’s $20,000 paid)? | Ile argues Foremost should pay up to the $20,000 UIM limit for excess damages. | Foremost contends the policy does not permit additional UIM payments due to lack of excess coverage. | Yes; damages up to $20,000 are payable under UIM to compensate excess damages. |
| May extrinsic evidence be used to invalidate an unambiguous contract based on illusory defense? | Ile relies on contract language and extrinsic evidence to show illusory terms. | Foremost argues extrinsic evidence should be limited and not override unambiguous language. | Yes; traditional contract defenses may be used to avoid enforcing an unambiguous contract when illusory. |
| Does Michigan law permit a court to reform or override an unambiguous insurance contract on illusory grounds? | Ile seeks enforcement consistent with insured reasonable expectations in light of illusory terms. | Foremost argues courts should enforce unambiguous contracts as written and defer to executive-branch reasonableness review. | Affirmed; contract illusory defense permitted; not required to reform contract; enforce as written except where illusory. |
Key Cases Cited
- Wilkie v Auto-Owners Ins Co, 469 Mich 41 (Michigan Supreme Court, 2003) (public policy and contract interpretation principles shaping UIM; limits on duplicative payments)
- Rory v Continental Ins Co, 473 Mich 457 (Michigan Supreme Court, 2005) (reasonableness and enforceability of insurance-contract provisions under policy defenses)
- Ellifson v West Bend Mut Ins Co, 312 Wis 2d 664 (Wisconsin Supreme Court, 2008) (illusory UIM coverage when policy mirrors statutory minimums)
- Taylor v Greatway Ins Co, 233 Wis 2d 703 (Wisconsin Appellate Court, 2000) (definitional schemes for UIM with statutory minimums and public policy concerns)
- Jostens, Inc v Northfield Ins Co, 527 N.W.2d 116 (Minn. App., 1995) (persuasive authority on contract interpretation and insurance policies)