Case Name: McMILLAN v. AUTO CLUB INSURANCE ASSOCIATION
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1994-05-16
Citations: 205 Mich. App. 273
Docket Number: Docket No. 148573
Parties: McMILLAN v AUTO CLUB INSURANCE ASSOCIATION
Judges: Before: Sawyer, P.J., and Neff and M.J. Talbot, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 205
Pages: 273–283

Head Matter:
McMILLAN v AUTO CLUB INSURANCE ASSOCIATION
Docket No. 148573.
Submitted January 4, 1994, at Grand Rapids.
Decided May 16,1994, at 9:20 a.m.
Leave to appeal sought.
Lynn McMillan brought an action in the Muskegon Circuit Court against Auto Club Insurance Association, seeking benefits under an automobile insurance policy issued by the defendant to the plaintiff. The plaintiff’s vehicle was damaged while Mervin Timmerman, with whom the plaintiff resided, was using the vehicle without the plaintiff’s permission. The policy issued to the plaintiff provided that the nonmandatory provisions of the policy, including comprehensive and collision coverage, would be void and of no effect in the event of a loss that occurred while Timmerman was driving the vehicle. The defendant had denied coverage on the basis of that named-driver exclusion. The court, R. Max Daniels, J., granted summary disposition for the plaintiff on the basis that the vehicle had been stolen by Timmerman and that the theft of the vehicle precluded application of the named-driver exclusion. The defendant appealed.
The Court of Appeals held:
Although the policy provided that coverage would not be available when the named excluded driver was driving the vehicle, the policy language did not provide specifically that coverage would not be available if a named excluded driver’s use of the vehicle was the result of the theft of the vehicle by that individual. Assuming that insurers may exclude from coverage a claim arising as the result of a theft by a named excluded driver, an excluded-driver provision to be enforceable must incorporate specifically language that notifies an insured that the exclusion applies even in the event of a theft by a named excluded driver. Because the policy at issue does not contain the necessary specific language and the defendant does not challenge the trial court’s determination that Timmerman’s use of the vehicle constituted theft, the court properly granted summary disposition for the plaintiff.
Affirmed.
References
Am Jur 2d, Automobile Insurance § 149.
See ALR Index under Automobile Insurance.
M.J. Talbot, J., dissenting, stated that the language of the policy is clear and unambiguous in its intent that coverage is not available when a loss occurs as a result of an excluded driver’s operation of the vehicle. There could be no reasonable expectation on the part of the plaintiff in this case that coverage would be available even if the excluded driver used the vehicle without permission.
Insurance — Automobiles — Excluded Drivers — Theft.
An excluded-driver provision in an automobile insurance policy is applicable where an excluded driver is using the vehicle as a result of the theft of the vehicle only where the provision incorporates specifically language that notifies the insured that the exclusion applies even in the event of theft by the named excluded driver.
Parmenter O’Toole (by Timothy G. Hicks and Linda S. Kaare), for the plaintiff.
Cunningham Dalman, P.C. (by Gordon H. Cunningham) (John A. Lydick, of Counsel), for the defendant.
Before: Sawyer, P.J., and Neff and M.J. Talbot, JJ.
Circuit judge, sitting on the Court of Appeals by assignment.

Opinion:
Sawyer, P.J.
Defendant appeals from an order of the circuit court granting summary disposition in favor of plaintiff on plaintiff's claim for benefits under an automobile insurance policy issued by defendant to plaintiff. We affirm.
Plaintiff owned a 1989 Dodge Ram van and was insured under a no-fault automobile insurance policy issued by defendant. At the time in question, plaintiff resided with Mervin Carl Timmerman, who apparently had a poor driving record and had previously been involved in an accident with one of plaintiff's vehicles. In exchange for a lower premium, plaintiff obtained a policy from defendant with a named-driver exclusion that ex plicitly excluded Timmerman as a driver of the insured vehicle. The named-driver exclusion provided that various nonmandatory coverages, including comprehensive and collision, would be void and of no effect if the vehicle were operated by the named excluded person, in this case, Timmerman.
While this insurance policy was in effect, plaintiff drove himself to the hospital, where he was admitted and treated for an apparent cardiac problem. Plaintiff called his brother to the hospital and gave him the keys to the van, requesting that the brother return the van to plaintiff's home. According to plaintiff, he instructed his brother that Timmerman was not to be allowed to drive the van or to have access to the van's keys. Nevertheless, Timmerman found the keys in a drawer at the residence, took the vehicle, and was involved in an accident with a tree, causing approximately $12,000 worth of damage to the vehicle. Plaintiff maintains, and defendant does not appear to dispute, that Timmerman had taken the vehicle without permission at the time of the accident and had, in fact, been instructed on prior occasions that he was not to drive the vehicle.
Plaintiff filed a claim with defendant, which denied the claim on the basis that the vehicle was being operated by the named excluded driver at the time of the accident. Plaintiff maintains that he is entitled to coverage under the policy because the vehicle had been stolen; defendant maintains that whether the vehicle was stolen or not is irrelevant because in either case it was being operated by a named excluded driver and, therefore, there was no coverage under either the comprehensive or collision coverages of the policy. The trial court concluded that coverage was available because the vehicle had been stolen.
While defendant's brief on appeal does note that there is some dispute whether this represents a theft case in light of the fact that Timmerman was plaintiffs roommate and that no criminal theft or joyriding charges were ever brought, defendant does not present an argument that the trial court erred in concluding that the vehicle was stolen. Rather, defendant argues that the theft issue "is a red herring," because it is irrelevant to this dispute. Rather, defendant argues that coverage is precluded because the vehicle was being operated by a named excluded driver without regard to whether the named excluded driver took the vehicle with or without permission. While we agree with defendant that it is irrelevant whether we categorize plaintiffs claim as being one seeking recovery of a loss for theft or one for collision, because both are excluded under the named excluded driver provision, we do not share defendant's conclusion that the issue of theft is irrelevant to the decision whether the provision excluding a named driver applies.
Insurance companies are specifically authorized by statute to include named-driver exclusions in their policies. MCL 500.3009(2); MSA 24.13009(2). Thus, the validity of the exclusion is not at issue, merely its scope. In interpreting an insurance contract, we must uphold the clear meaning of the insurance contract in the absence of an ambiguity if the provision does not violate public policy. Vanguard Ins Co v Clarke, 438 Mich 463, 471; 475 NW2d 48 (1991). However, where two constructions may be placed on an insurance policy, the construction most favorable to the policyholder will be adopted. Id. at 471-472. Specifically, we will strictly construe against the insurer exceptions to coverage. Id. at 472. Furthermore, there also exists a rule of reasonable expectation. Under this rule, the court will examine whether the policyholder, in reading the contract language, is led to a reasonable expectation of coverage. Id.
In the case at bar, the insurance policy provided for coverage in the event of both theft and collision. Furthermore, it contained an excluded-driver provision that did indicate that various coverages, including comprehensive (theft) and collision coverages, were void if the vehicle were operated by a named excluded driver. That provision, however, is silent on the issue of what effect, if any, theft by a named excluded driver may have on those coverages. We conclude that this silence allows for two possible interpretations of the contract: either that the provision excluding a named driver applies in all circumstances where the vehicle is being driven by a named excluded driver (defendant's interpretation) or that it applies only where the named excluded driver is operating a vehicle with the insured's permission (plaintiffs interpretation).
Which interpretation to choose, we believe, may be resolved by reliance on the rule of reasonable expectation. Further, we believe that the rule of reasonable expectation favors plaintiffs interpretation in this dispute, particularly in light of the fact that exclusionary clauses are to be construed strictly against the insurer. In reading the provisions of the policy, we believe that a reasonable insured would expect that if the named excluded driver were allowed to operate the vehicle then the various coverages would be void. However, we also believe that a reasonable insured would also expect that if the vehicle were stolen, even if stolen by a named excluded driver, then there would be coverage under the policy. To put the matter in other words, while the language of the policy puts an insured on notice that he is not to allow the named excluded driver to operate the vehicle, it does not inform him that he is without coverage if the named excluded driver should take the vehicle without permission.
Finally, we should briefly consider the effect of the recent decision in Verbison v Auto Club Ins Ass'n, 201 Mich App 635; 506 NW2d 920 (1993). Although Verbison did involve a named-driver exclusion and a taking without permission, we do not agree with defendant that it is controlling in this case. Verbison did not address the question of the application of the exclusion when a theft is involved, but rather it addressed the validity of the exclusion and the adequacy of the notice to the insured that there was no liability coverage if the vehicle was operated by the named excluded driver. Although the Verbison Court was not asked to address the effect of a theft on the excluded-driver exclusion and did not in fact address that question, we are asked to address that question.
In sum, we need not and do not determine whether either the statute or public policy allows for an insurer to exclude from coverage claims arising from a named excluded driver's theft of a vehicle. Rather, we determine that the excluded-driver provision in the policy at bar is not sufficiently broad to exclude from coverage claims arising from the theft of a vehicle by a named excluded driver, even assuming that such exclusions may be made that broad. That is, assuming that insurers may exclude from coverage claims arising from theft by named excluded drivers, the excluded-driver provision must incorporate specifically language that notifies the insured that the exclusion applies even in the event of theft by the named excluded driver. Absent such explicit language, the insured has a reasonable expectation of coverage in the event of such a theft. Accordingly, because the excluded-driver provision in the case at bar did not exclude specifically coverage where there was a theft by the named excluded driver, we conclude that the trial court correctly determined that plaintiff was entitled to coverage if the vehicle were stolen by the named excluded driver. Because defendant does not challenge the trial court's conclusion that this case represents a theft rather than a permissive operation of the vehicle, we conclude that the trial court did not err in granting summary disposition in favor of plaintiff. Affirmed. Plaintiff may tax costs.
Neff, J., concurred.
We use the word "theft" quite broadly in this context and would include, for purposes of this opinion, cases where the vehicle was taken without permission but without the intent to permanently deprive.