Opinion ID: 1658184
Heading Depth: 1
Heading Rank: 5

Heading: introduction to issues i and ii

Text: Three of the cases we consider today, Schiebout, Deyarmond, and Nicholson, involve those sections of the subject insurance policies providing for coverage of residual tort liability. Because the other two cases, Powers and Dennison, involve different issues, we will treat those cases separately, as well as a secondary issue in Nicholson, which will be considered with the main issue in Dennison. Under the basic no-fault scheme, insurers are required to pay medical and work-loss expenses incurred by their policyholders resulting from automobile accidents without regard to fault. MCL 500.3105; MSA 24.13105. In cases of serious injury or death, however, victims of traffic accidents may still sue negligent drivers in tort for noneconomic damages. MCL 500.3135; MSA 24.13135. In consequence of this so-called residual tort liability, the no-fault act requires motor vehicle owners to maintain insurance against the possibility that they will be found liable. MCL 500.3101(1); MSA 24.13101(1). These no-fault insurance policies provide coverage for the named insured and relatives residing in the same household. The insurers intend to provide coverage for the family members' occasional use of automobiles owned by persons outside the family and outside the home, but to exclude coverage for the family members' use of automobiles owned by or furnished for the regular use of, resident members of the family, other than the car specifically insured by the policy. The insurer's understandable purpose in excluding coverage in these situations is to avoid a situation in which a person obtains a high level of liability coverage for one automobile in the family, and seeks to use that greater protection to cover liability incurred while the insured is driving a family car with a lower level of coverage or no coverage. Another purpose for the exclusion of coverage when an insured is driving a vehicle owned by another household member is to prevent stacking, that is, recovery from more than one policy in cases in which a person is insured under several family policies. The insurers here have attempted to both exclude this free-ride insurance coverage and stacking by the so-called owned-automobile exclusion method. The policies grant coverage for the named insured and for household relatives while driving an owned or a nonowned car, which, in plain English appears to be totally comprehensive coverage. Although the policy contains a section entitled Exclusions, the exclusion at issue here is not contained in that section. The insurers, however, claim exclusion is accomplished by defining the common and generally clearly understood term nonowned in such a way as to refer to less than all nonowned automobiles. The claimants argue that, because the no-fault act, MCL 500.3101 et seq.; MSA 24.13101 et seq., requires residual liability coverage, MCL 500.3131; MSA 24.13131, the exclusion is repugnant to the statute and must be struck down. Alternatively, they argue that the exclusion must be rejected because it is ambiguous and unclear and also because it defeats the policyholders' reasonable expectations.