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Michigan Court of Appeals Holds that a No-Fault Insurer had Duty to Defend, Not Necessarily to Indemnify, Driver of Another's Car

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Joseph E. Kozely
Foster Swift No-Fault E-News
May 21, 2008

On May 15, 2008, the Michigan Court of Appeals held in a published opinion that the insurer of an automobile that was allegedly borrowed from another and involved in fatal accident owed the driver a duty to defend but not necessarily to indemnify pending jury resolution of whether the owner consented to the use. Citizens Insurance v Secura Insurance, et al (Docket No. 274751).

Gillespie was driving a car that belonged to his mother, Geraldine Irving, when he got into a serious accident. Citizens insured Gillespie and Secura insured Irving. The Citizens policy provided that it was excess when Gillespie was driving someone else’s car. Citizens notified Secura that Secura owed a duty to defend Gillespie, and Secura responded that the question of Irving’s consent for Gillespie’s use of the vehicle was a question of fact for the jury, and since trial was still pending, it did not owe a duty to defend Gillespie. Citizens brought a declaratory action against Secura, and the trial court granted summary disposition in favor of Citizens, holding that Secura owed a duty to defend and indemnify.

The Court of Appeals affirmed on the duty to defend and reversed on the duty to indemnify. It cited MCL 257.401(1) for a rebuttable presumption that a car is driven with the owner’s consent, and held that the rebuttable presumption was sufficient to create a duty on the part of Secura to defend Gillespie. The Court reversed on the duty to indemnify, holding that the jury should be allowed to determine whether Irving had in fact consented to Gillespie’s use.

This case is important because of the ruling that the rebuttable presumption of consent created by MCL 257.401(1) is sufficient to obligate a No Fault insurer to provide a defense to the driver of a borrowed car.

It is unknown at this time whether Secura will apply for leave to appeal to the Michigan Supreme Court. In the absence of leave granted, the Court of Appeals decision is precedential.