No consequences for Foremost Insurance Company selling completely worthless, illusory underinsured motorist coverage, even though benefits ‘not possible’ under its policy language
One of the real tragedies about having elected judges and justices in Michigan is that people vote for them not really understanding how qualified – or unqualified – these people may be to protect the people of this state. In a year of terrible Supreme Court decisions (unless you are an insurance company, that is) in which an activist Republican majority of the Michigan Supreme Court that has ruled lockstep for the insurance companies, this one stands out.
In my opinion, it may very well be the worst judicial decision in Michigan in 2012. It kills any reasonable expectation that Michigan citizens have to be treated fairly by insurance companies, and it opens up the floodgates to insurance companies putting any term, no matter how unfair, into its policies and being able to get away with it.
In Ile v. Foremost Insurance Company, Foremost Insurance Company sold Darryl Ile a completely worthless, “something for nothing” underinsured motorist (UIM) policy.
Foremost admitted UIM coverage could not exist under such a policy as the one Foremost offered, but they sold it to Ile anyways, and Ile paid for it.
A trial judge in the lower court, and then three Michigan Court of Appeals judges all concluded that the UIM coverage that Foremost offered and sold to Ile was, in fact, “illusory.” Illusory is a legal term that basically means worthless. Insurance companies aren’t supposed to be able to sell completely worthless coverage to people.
Yet, despite all of that, the pro-insurance company and unfortunately very activist wing of the Michigan Supreme Court decided to overturn the trial judge and the three appellate judges who found what Foremost Insurance Company did improper. These justices (Robert P. Young, Jr., Stephen J. Markman, Mary Beth Kelly and Brain K. Zahra) decided it was okay for Foremost Insurance Company to sell worthless insurance coverage to people.
Indeed, in a recent two-paragraph, summary order in Ile v. Foremost Insurance Company, these four justices who comprise the court’s activist Republican majority undid the punishment meted out by the lower courts, reversing their orders that Foremost be required to provide underinsurance coverage.
Remarkably, in doing so, the activist Republican justices essentially conceded the point made by the trial and appellate judges:
“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 no sooner did the justices make that surprising acknowledgement than they explained why it did not matter that Ile was paying for UIM benefits it would be impossible for him to collect:
“We have expressly rejected the notion that the perceived expectations of a party may override the clear language of a contract.”
In other words, the non-existence of UIM coverage for Ile was dictated by the terms of Foremost’s UIM policy, and Ile, at least in the eyes of the law as it was being interpreted by the Supreme Court’s activist Republican justices, agreed to those terms when he purchased his UIM policy from Foremost.
You need to put this in context for a moment. I am a lawyer that reads insurance contracts for a living. Yet probably not a week goes by when I don’t get at least one or two other Michigan personal injury attorneys calling me asking me questions about these things. These are people that went to law school, took contracts and insurance law classes, took and passed the bar, and actually practice in a field where they have more knowledge than all other lawyers and they still get confused and call or email me asking for help. ‘
But these four justices have said that lay people should have the same legal sophistication and knowledge of insurance law and contract law as me. They have no reasonable expectation of getting the protection of what they pay money for if the insurance company makes promises it will never keep, and writes one-sided and incredibly unfair language that is then specifically meant to rob these people of the insurance benefits they are promised in onerous and unreadable insurance contracts.
Way to protect the people of this state, Justices.
Worthless, ‘something for nothing’ UIM coverage
Ile’s UIM coverage under Foremost’s policy was textbook “something for nothing”: Ile paid for UIM benefits that he could never collect.
Yet, the most galling thing of all is that Foremost knew it, but offered and sold the policy to Ile anyway.
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.”
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“[U]nder no circumstances would Foremost have to pay underinsured motorists coverage under the Policy.”
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“[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.”
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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.”
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“UIM coverage was illusory …”
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“[U]nder this policy the decedent could not ever have received or collected UIM benefits.”
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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.
Remedy proposed, remedy rejected
Both the trial court and the Court of Appeals determined the solution to the non-existent UIM coverage problem that Foremost created for Ile and his estate was to order Foremost to nevertheless provide coverage.
But, the Michigan Supreme Court disagreed, reversing the Court of Appeals ruling which had affirmed the trial court’s ordered remedy:
“[An] award to Ile of an unspecified amount to a maximum of $20,000 of underinsurance for damages incurred exceeding the $20,000 already received from [the tortfeasor’s] insurer.”