Opinion ID: 2973017
Heading Depth: 3
Heading Rank: 2

Heading: Actual Cash Benefits

Text: Melson also asserts that the coinsurance clause violates Michigan public policy insofar as coinsurance policies are inconsistent with Michigan statutory law regulating the contents of fire insurance policies. M.C.L. § 500.2833(1)(a) requires fire insurance policies to pay a minimum of actual cash value upon a loss. It provides: “Each fire insurance policy issued or delivered in this state shall contain the following provisions: That the policy shall provide, at a minimum, coverage for actual cash value of the property at the time of the loss, subject to all other provisions contained herein.” § 500.2833(1)(a). Melson contrasts § 500.2833 with M.C.L. § 500.2832, the former Michigan Standard Fire Policy, which was repealed by Public Act 1990, No. 305. Melson argues that M.C.L. § 500.2832, which set forth the form of a standard policy and provided coverage to the extent of actual cash value of the property at the time of loss, but not exceeding the amount it would cost to repair or replace the property, was an implicit endorsement of coinsurance clauses. Melson argues that in recodifying Michigan fire insurance law in the form of M.C.L. § 500.2833 so as to require coverage for actual cash value of the property, the Michigan legislature intended to prohibit coinsurance provisions. Coupled with the already-discussed repeal of what Melson takes to be the authorizing statute for coinsurance provisions, she argues that coinsurance provisions are against Michigan public policy. First, as discussed supra, Melson’s argument is premised on an erroneous assumption that coinsurance policies were authorized by statute, such that the repeal of a statute could effectuate the prohibition of coinsurance clauses. Second, in reading § 500.2833(1)(a) as prohibiting coinsurance provisions, Melson focuses on only a subsection of that statute, and ignores other relevant provisions. Although § 500.2833(1)(a) requires that a fire policy provide coverage for the actual cash value at the time of the loss, § 500.2833(1)(f) requires a fire insurance policy to include “[t]hose conditions which result in the suspension or restriction of insurance.” M.C.L. § 500.2833(1)(f). Given that coinsurance policies do not, as a general rule, violate Michigan public policy, it is consistent with § 500.2833 to include coinsurance provisions in fire insurance policies, because failure to obtain sufficient insurance is a condition that will result in the restriction of insurance. Like the repeal of § 500.2840, the repeal of § 500.2832 and the codification of § 500.2833 fail to provide a definite indication that this Court should strike the insurance contract as invalid because it is contrary to public policy. There is no indication that the Michigan Supreme Court would rule differently than did the appellate court in the issue of coinsurance clauses; therefore, this Court will follow Royal Property. of four-fifths of the actual cash value thereof, and that, failing so to do, the assured shall be a co-insurer to the extent of such deficit, and in that event shall bear his, her, or their proportion of any loss. It is, however, mutually understood and agreed that in case the total insurance shall exceed four-fifths of the actual cash value of the property insured by this policy the assured shall not recover from this company more than its pro rata share of the whole actual cash value of such property. Cheesebrough, at 110. No. 03-1914 Melson v. Prime Insurance Syndicate Page 7