Case Name: RASKA v. FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1982-01-08
Citations: 412 Mich. 355
Docket Number: Docket No. 63507
Parties: RASKA v FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
Judges: Coleman, C.J., and Fitzgerald and Ryan, JJ., concurred with Kavanagh, J.
Reporter: Michigan Reports
Volume: 412
Pages: 355–384

Head Matter:
RASKA v FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN
Docket No. 63507.
Argued June 3, 1980
(Calendar No. 2).
Decided January 8, 1982.
Rehearing denied post, 1119.
Robert F. Raska and Mary L. Raska, husband and wife, claimed compensation for medical bills, disability income, and lost wages against Farm Bureau Mutual Insurance Company of Michigan for injuries Mary Raska suffered in a motor vehicle accident on March 24, 1973 (before the no-fault insurance act took effect), while she was driving a dump truck owned by Robert F. Raska Trucking, a sole proprietorship. Farm Bureau insured the trucks of Robert F. Raska Trucking under a "combination” business automobile liability policy which provided some medical benefits but no disability-income or wage-loss benefits, and insured the Raskas’ three family cars under a "family” automobile policy, which included an endorsement for disability income coverage. The insurer denied liability under the family policy because of the exclusion under that policy of coverage of a named insured occupying an automobile owned by or furnished for the regular use of the named insured, other than one defined in the policy as an "owned automobile”. The trucks did not come within the definition. The Raskas brought an action for breach of the insurance policy and for a declaratory judgment, arguing that the exclusion is void as contrary to public policy and that it should be construed against the insurer. The Macomb Circuit Court, Walter P. Cynar, J., granted summary judgment for the defendant as to the claim for lost-wage and disability-income benefits. The Court of Appeals, Danhof, C.J., and J. H. Gillis, J. (N. J. Kaufman, J., concurring), affirmed in an unpublished per curiam opinion (Docket No. 78-2). Plaintiffs appeal.
References for Points in Headnotes
[1] 43 Am Jur 2d, Insurance §§ 237, 241, 259.
Doctrine of unconscionability as applied to insurance contracts. 86 ALR3d 862.
[2, 3, 6] 43 Am Jur 2d, Insurance § 259.
Division of opinion among judges on same court or among other courts or jurisdictions considering same question, as evidence that particular clause of insurance policy is ambiguous. 4 ALR4th 1253.
[4] 43 Am Jur 2d, Insurance §§ 257, 264.
15, 8,10-12] 7 Am Jur 2d, Automobile Insurance §§ 238, 241-244.
Exclusion from "drive other cars” provision of automobile liability insurance policy of other automobile owned, hired, or regularly used by insured or member of his household. 86 ALR2d 937.
[7, 9] 43 Am Jur 2d, Insurance § 276.
[9] 43 Am Jur 2d, Insurance §§ 263, 264.
[10,11] 43 Am Jur 2d, Insurance §§ 263, 264.
In an opinion by Justice Kavanagh, joined by Chief Justice Coleman and Justices Fitzgerald and Ryan, the Supreme Court held:
The exclusionary clause in this case is not ambiguous and is enforceable.
1. Any clause in an insurance policy is valid as long as it is clear, unambiguous, and not in contravention of public policy. The plaintiffs cite no public policy touching this case, but concentrate on the obscurity of the drafting on account of the placement of the clause in the policy, and the technicality of language used. The only pertinent question, therefore, is whether the exclusionary clause in this contract is ambiguous.
2. A contract is ambiguous when its words may reasonably be understood in different ways. However, if it fairly admits of but one interpretation it may not be said to be ambiguous or, indeed, fatally unclear.
3. The plaintiffs also assert that the insurance policy did not meet their reasonable expectations. The expectation that a contract will be enforceable other than according to its terms surely may not be said to be reasonable. To allow a person who signs a contract without reading all of it or without understanding it to bind another to an obligation not covered by the contract because the first person thought the other was bound to such an obligation is neither reasonable nor just.
4. The capitalized reference on the first side of the endorsement to provisions on the second side and the capitalized heading "Exclusions” on the second side of the endorsement should leave no doubt that the use of a vehicle not named in the policy which is either owned by the insured or furnished for his or her regular use is excluded from coverage.
Justice Williams, joined by Justices Levin and Moody, dissented. He would hold that the "owned automobile” exclusion of the endorsement for disability income coverage is invalid under the traditional rule that an insurance contract, as a contract of adhesion, is construed in favor of the insured, and also under the rule that it is construed in terms of the reasonable expectations of the insured, unless it can be shown that the effect of the qualifying clauses was understood by the Raskas.
1. The traditional rule is that the policy of insurance will be construed against the drafter in case of ambiguity or contradictions because the insurance contract is not made between parties of equal bargaining strength with each side choosing the language of the agreement and understanding what it means. The rule of reasonable expectations derives from the application of the general principle that any exception to the liability of the insurer must be so stated as clearly to apprise the insured of its effect. When a standardized insurance contract is put before a consumer to take it or leave it, the doctrine of the adhesion contract has been applied, in view of the disparate bargaining status of the parties, to ascertain the meaning of the contract which the insured would reasonably expect.
2. The meaning of the owned-automobile exclusion in this case can be discovered only by construing the whole endorsement for medical payments and disability coverage, which is printed on two sides of one sheet of paper. On the first side, the policy unconditionally announces that the endorsement covers every named insured in any automobile accident. The language indicates that the insured is covered while driving the cars with respect to which the insurance was specifically purchased and every other car as well. The exclusions, which are first mentioned and described on the second page of the form, limit the coverage, and the "owned automobile” exclusion depends in part upon the definition of an owned automobile found on the first page, so that understanding of the coverage requires a search and construction back and forth between the pages. The principle is that obscurant drafting is construed against the drafting insurer. The "owned automobile” exclusion in this case is invalid because it is ambiguous, unless it can be shown that the Raskas were personally advised of the exclusion.
3. The plaintiffs reasonably expected their family policy to cover them while driving the vehicles of Robert Raska Trucking. The undertaking of the insurer in the endorsement for disability income coverage is so unrestricted that without further clarification it would lead the insureds reasonably to expect coverage in almost all vehicular accidents, and certainly in the present one. The unconditional statement of coverage on the face of the endorsement would lead the insured logically to assume that the policy provides complete portability. Such a reasonable expectation should not be defeated by the obscure drafting of the policy. The average consumer does not expect that an automobile owned by a family member or owned by an unrelated person but furnished for his regular use will be considered by the insurer not to be a "non-owned” automobile but, rather, to be the equivalent of an automobile owned by the insured for which he should obtain insurance. To make such an exclusion from the expected coverage, without explaining or offering the additional coverage the insured should purchase for protection in the excluded situation, is to set a trap for the policyholder. The average consumer does not have the skill, or may not make the attempt, to piece the statement of coverage together.
4. The policy and purpose of the "owned automobile” exclusion is to preclude, where an insured purchases more extensive protection on one of his automobiles than on another, the use of the greater protection to cover loss which occurs while the insured is occupying or driving the automobile with the lesser protection. This is, in itself, generally reasonable. Likewise, the policy behind the “furnished for regular use” exclusion is understandable, if the exclusion is made clear to the buyer. The insurer can rightfully insist on being paid an additional premium for the additional risk when the use of a non-owned automobile is not occasional but regular. However, it is not conscionable to sell non-owned automobile coverage and then to exclude the risk incurred by the policyholder while driving a regularly furnished automobile already insured for another owner without offering or, perhaps, even selling coverage for the excluded risk. If the insurer wishes to treat the automobile furnished for the regular use of the insured as an owned automobile, then it is incumbent on the insurer to offer coverage on such non-owned automobiles as it offers coverage on owned automobiles.
5. If one of the Raskas purchased both insurance policies in question after both the "owned automobile” and “furnished for regular use” exclusions had been fully explained and understood and after an opportunity to purchase special insurance to cover such exclusions had been presented, any expectation of coverage in the excluded situations would be unreasonable. However, if the Raskas honestly and reasonably believed that they had particularly chosen and paid for complete portability of coverage and the insurer had failed to inform them of the exclusions and had likewise not offered them supplementary insurance, their reliance on coverage would not be unreasonable because of the expectations created by the obscurant drafting. There is, however, no record from which to resolve the question, and therefore the case should be remanded for an evidentiary hearing on whether Mary Raska reasonably expected the endorsement of the family policy to protect her when driving another vehicle and whether she was offered or, if offered, whether she rejected, supplementary insurance for disability income coverage on vehicles owned by Raska Trucking Company.
Opinion op the Court
1. Insurance — Construction of Policy — Ambiguity — Public Policy.
Any clause in an insurance policy is valid as long as it is clear, unambiguous, and not in contravention of public policy.
2. Insurance — Construction of Policy — Ambiguity.
A contract of insurance is ambiguous and should be construed against its drafter if a fair reading of the entire contract leads to the understanding that there is coverage under particular circumstances and another fair reading of it is that there is no coverage under the same circumstances.
3. Insurance — Construction of Policy — Ambiguity.
A contract of insurance, however inartfully worded or clumsily arranged, which fairly admits of but one interpretation may not be said to be ambiguous.
4. Insurance — Construction of Policy — Reasonable Expectations.
The expectation that a contract of insurance will be enforceable other than according to its terms may not be said to be reasonable; to allow one person to bind another to an obligation not covered by the contract because the first person thought the other was bound to such an obligation is neither reasonable nor just.
5. Automobiles — Insurance — Exclusions — Owned Vehicle.
The "owned vehicle” exclusion clause in an endorsement providing disability income benefits in a family automobile liability policy which denies such coverage for injuries incurred by the named insured while occupying an automobile owned by or furnished for the regular use of the named insured or any relative is not ambiguous where a capitalized reference on the first side of the endorsement to provisions on the second side and a capitalized heading "Exclusions” on the second side of the endorsement leave no doubt that the use of a vehicle not named in the policy which is either owned by the insured or furnished for his or her regular use is excluded from coverage.
Dissenting Opinion by Williams, J.
6. Insurance — Exclusions — Construction op Policy.
The language of an insurance policy chosen by the insurer must be given the construction of which it is susceptible most favorable to the insured in case of ambiguity or contradictions; exceptions to the liability of the insurer are to be strictly construed against the insurer.
7. Insurance — Construction of Policy — Contracts op Adhesion — Reasonable Expectations.
When a standardized insurance contract is put before a consumer to take it or leave it, the doctrine of the adhesion contract has been applied, in view of the disparate bargaining status of the parties, to ascertain the meaning of the insurance contract which the insured would reasonably expect.
8. Automobiles — Insurance — Exclusions — Owned Vehicle.
The "owned vehicle’’ exclusion clause in an endorsement providing disability income beneñts in a family automobile liability policy which denies such coverage for injuries incurred by the named insured while occupying an automobile owned by the named insured or any relative other than one deñned as an owned vehicle in the policy on the second side of the endorsement, after providing apparently unlimited coverage on the ñrst side, should be construed against the insurer as ambiguous.
9. Insurance — Exclusions — Construction op Policy — Reasonable Expectations.
Not only the provisions of an insurance policy as a whole, but also the exceptions to the liability of the insurer, must be construed so as to give the insured the protection which he reasonably had a right to expect; to that end doubts, ambiguities and uncertainties arising out of the language used in the policy must be resolved in the insured’s favor.
10. Automobiles — Insurance — Exclusions — Owned Vehicle — Reasonable Expectations.
An endorsement providing disability income beneñts in a family automobile liability policy which undertakes, by an unconditional statement of coverage on the face of the endorsement, to provide coverage for the insured who sustains bodily injury while occupying or through being struck by an automobile would lead the insured logically to assume that it provides complete portability of the coverage for the named insured; such a reasonable expectation of coverage should not be defeated by the obscurant drafting of an "owned vehicle” exclusion clause on the second side of the endorsement.
11. Automobiles — Insurance — Exclusions — Regular Use — Reasonable Expectations.
The average consumer of insurance does not reasonably expect that an automobile owned by a family member or a vehicle owned by an unrelated person but furnished for his regular use would be considered by the insurer not to be a non-owned automobile, but the equivalent of an automobile owned by the insured for which he should obtain insurance, especially when he has purchased optional coverage for injuries caused by non-owned vehicles; such an exclusion from the expected coverage of the endorsement providing disability income beneñts in a family automobile liability policy, without explaining or offering the additional coverage the insured should purchase for protection in the excluded situation, is to set a trap for the policyholder.
12. Automobiles — Insurance — Exclusions — Owned Vehicle — Unconscionability.
An insurer can rightfully insist on being paid for the additional risk when the use of a non-owned automobile by the insured is , not occasional but regular, but it is unconscionable for the insurer to sell coverage for non-owned automobiles in the endorsement providing disability income benefits in a family automobile liability policy and then to exclude from coverage a vehicle "furnished for the regular use” of the insured without explanation or without offering the excepted coverage.
Jack C. Chilingirian for plaintiffs.
Glime, Daoust, Wilds, Rusing & Widlak (by James R. Daoust and Denis R. LeDuc) for defendant.

Opinion:
Kavanagh, J.
(for affirmance). This case involves the validity of an exclusionary clause in a pre-no-fault automobile insurance policy.
Any clause in an insurance policy is valid as long as it is clear, unambiguous and not in contravention of public policy.
Although plaintiffs here assert that this "owned automobile" exclusion clause violates public policy, they cite us no public policy touching the area. Their argument is concentrated on the "obscurity" of the drafting on account of the placement of the clause in the policy, and the technicality of language used — both of which touch not on public policy but rather on the clarity or ambiguity of the words.
The only pertinent question, therefore, is whether the exclusionary clause in this contract is ambiguous, for if it is not ambiguous we are constrained to enforce it.
A contract is said to be ambiguous when its words may reasonably be understood in different ways.
If a fair reading of the entire contract of insurance leads one to understand that there is coverage under particular circumstances and another fair reading of it leads one to understand there is no coverage under the same circumstances the contract is ambiguous and should be construed against its drafter and in favor of coverage.
Yet if a contract, however inartfully worded or clumsily arranged, fairly admits of but one interpretation it. may not be said to be ambiguous or, indeed, fatally unclear.
Plaintiffs also assert that as drafted the policy did not meet their "reasonable expectations". Still the expectation that a contract will be enforceable other than according to its terms surely may not be said to be reasonable. If a person signs a contract without reading all of it or without understanding it, under some circumstances that person can avoid its obligations on the theory that there was no contract at all for there was no meeting of the minds.
But to allow such a person to bind another to an obligation not covered by the contract as written because the first person thought the other was bound to such an obligation is neither reasonable nor just.
The capitalized reference at the bottom of the first page and the capitalized heading "Exclusions" on the second page of the endorsement involved here persuade me that a fair reading of the entire policy should leave no doubt that use of a vehicle not named in the policy which is either owned by the insured or furnished for his or her regular use is excluded from coverage.
I would affirm.
Coleman, C.J., and Fitzgerald and Ryan, JJ., concurred with Kavanagh, J.