OAI: Mich. Court Ruling Shows Weight of Auto Insurance Contract Terms

A recent Michigan Supreme Court decision ruled that State Farm does not have to compensate a man for his claim because he did not file it in the required time period defined in his contract, highlighting the importance of the language set forth in such contracts and the possible ramifications of not adhering to them, according to Online Auto Insurance.

The common price-minded consumer focuses on questions like "how much does car insurance cost" when shopping for policies, but this recent ruling should push those shoppers to read the fine print of policies. There are dozens of policy types, each with their own unique features that can differ from insurer-to-insurer and state-to-state, so staying informed can keep policyholders out of an uncertain position that sometimes forces them to seek damages in court.

William DeFrain was hospitalized after sustaining severe head injuries from a hit-and-run incident on May 31, 2008, but State Farm did not receive notice about the injury until Aug. 25 of that year, after the 30-day requirement in Defrain's uninsured motorist (UM) policy.

DeFrain succumbed to his injuries on Nov. 11, 2008, a little more than a month after he went to court seeking compensation from State Farm. Executors of his estate carried on the lawsuit, arguing that another portion of the UM policy that required details about injuries be submitted "as soon as reasonably possible" exempted the severely injured DeFrain from the 30-day deadline.

The first trial court and state Court of Appeals sided with DeFrain, but the split 4-3 decision from the Michigan Supreme Court overturned those rulings.

In the court's majority opinion, Justice Brian K. Zahra wrote that the UM policy's language "unambiguously required" that DeFrain or someone on his behalf notify State Farm about the hit-and-run within 30 days. Zahra emphasized the specificity of language used in DeFrain's UM insurance policy.

"Because providing UM coverage is optional and not statutorily mandated under the no-fault act, the policy language alone controls the circumstances entitling a claimant to an award of benefits," he said.

Dissenting justices countered, saying that ruling against DeFrain supports "the fiction that the contractual term was truly bargained for."

Writing the dissenting opinion, Justice Michael F. Cavanagh said holding DeFrain explicitly to the language written into the terms of his contract "ignores the reality of how insurance policies normally come into existence."

"I would not turn a blind eye to the manner in which the insurance industry operates and discount the effects of encouraging insurers to include technical escape hatches to preclude coverage at the expense of unwary injured citizens," Cavanagh said.

For more on this and related issues, head to http://www.onlineautoinsurance.com/quotes/how-much-car-insurance-costs.htm for access to an easy-to-use quote-comparison generator and informative resource pages.