In a published opinion issued on March 10, 2011, the Michigan Court of Appeals applied the "Koski" rule to hold that an insurer must show actual prejudice from an insured's failure to give prompt notice of the accident underlying a claim for underinsured motorist (UIM) benefits in order to enforce the policy provision requiring such notice. DeFrain v State Farm Mutual Automobile Insurance Company, __ Mich App __; __ NW2d __ (2011) (No. 294505).
Plaintiff (a pedestrian) was struck by a hit-and-run driver in May 2008. He notified State Farm, with whom he had UIM coverage, in August. He died from his injuries in November.
State Farm denied the claim and suit was filed. State Farm defended on the basis that its policy required notice as soon as reasonably possible. The trial court denied State Farm's motion for summary disposition on the basis that State Farm did not show actual prejudice from the delay, and State Farm appealed.
The Court of Appeals affirmed, unanimously holding that Koski v Allstate Ins Co, 456 Mich 439; 572 NW2d 636 (1998), was controlling. In Koski, the Michigan Supreme Court held that an insurer must establish actual prejudice before it is relieved from contractual liability under an insurance policy where the insured failed to timely comply with a notice provision contained in the policy.
Koski, however, has not been the only time that the Supreme Court has addressed the issue. In Jackson v State Farm Mut Automobile Ins Co, 472 Mich 942; 698 NW2d 400 (2005), the Supreme Court vacated a judgment entered by the Court of Appeals and reinstated an order of summary dismissal entered by the trial court, explicitly adopting the reasoning in the Court of Appeals dissent that prejudice did not have to be established.
After acknowledging that Jackson and Koski were in direct conflict, the Court of Appeals explained that, whereas Jackson was an Order, Koski was a comprehensive statement that could not be ignored: "In sum, we hold that, regardless of the order in Jackson, Koski demands that we affirm the trial court’s order denying State Farm’s motion for summary disposition."
This case is important because it applies a 1998 opinion to the rules for interpreting a contract despite the contrary statement in Jackson in 2005.
It is unknown at this time whether an Application will be submitted to the Michigan Supreme Court for Leave to Appeal.