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Ile v. Foremost Insurance Company

Michigan Supreme Court ruling allows insurance company to sell worthless uninsured motorist coverage

Ile v. Foremost Insurance Company (Michigan Court of Appeals 2011; Michigan Supreme Court 2012)

Case impact

No consequences for Foremost Insurance Company selling completely worthless, illusory underinsured motorist coverage, even though benefits are ‘not possible’ under its policy language.

For more information, take a look at our blog on Ile v. Foremost.

Here’s the official Michigan Supreme Court order on Ile v. Foremost.

Below is our analysis and review of Ile:

In Ile v. Foremost Insurance Company, a trial judge and three Michigan Court of Appeals judges concluded that the “underinsured motorist” (UIM) coverage that Foremost offered and sold to Darryl Ile was “illusory.”

And, even though Foremost conceded that UIM coverage does not exist under such a policy as the one Foremost offered and sold to Ile, the Michigan Supreme Court did not believe that was a good enough reason to affirm the lower courts’ orders directing Foremost to provide coverage under Mr. Ile’s policy.

Indeed, the Supreme Court appeared to agree with the lower court judge’s regarding the “illusory” nature of Foremost’s UIM coverage:

“Ile could reasonably believe that his insurance premium payment included some charge for underinsurance when there are no circumstances in which Ile could recover underinsured motorist benefits given the policy limits Ile selected.”

But, ultimately, the Supreme Court concluded that Foremost had done nothing wrong because the non-existence of UIM coverage for Ile was dictated by the terms of Foremost’s UIM policy which Ile had agreed to when he purchased his UIM policy from Foremost:

“We have expressly rejected the notion that the perceived expectations of a party may override the clear language of a contract.”

Rulings by the trial court and Michigan Court of Appeals: ‘illusory’ UIM coverage

In a lawsuit filed by Ile’s estate after he was killed in a motorcycle-motor vehicle accident, a Wayne County Circuit Court judge in Ile v. Foremost Insurance Company recognized the “something for nothing” nature of Foremost’s worthless UIM policy with Ile:

“[T]he underinsured motorists … coverage under the Policy is illusory inasmuch as it provides no coverage whatsoever.”

“[U]nder no circumstances would Foremost have to pay underinsured motorists coverage under the Policy.”

“[D]ecedent paid a premium for underinsured motorists coverage purporting to provide him with underinsured motorists coverage of $20,000/$40,000, which … could never be paid.”

The Michigan Court of Appeals agreed with the trial court:

“[T]here exists no possibility for decedent to collect UIM benefits at the selected level of coverage.”

“UIM coverage was illusory…”

“[U]nder this policy the decedent could not ever have received or collected UIM benefits.”

Foremost admits UIM coverage ‘not possible’

Foremost Insurance Company essentially agreed with both the trial court and the Court of Appeals.

In its brief to the Michigan Supreme Court, Foremost admitted:

“[B]ecause of the Policy’s definitions, when the policyholder [such as Ile] selects $20,000/$40,000 UM/UIM coverage limits [as Ile did after being offered and sold those limits by Foremost], it is not possible for another vehicle to be defined as ‘underinsured.'”

This was confirmed by Foremost’s Senior Product Manager who, according to material quoted and referenced in the Court of Appeals written opinion, admitted in a deposition that there was no possibility for a person such as Mr. Ile to recover under a Foremost UIM policy such as the one offered and sold by Foremost to Mr. Ile.