The Insurance & Risk Report
August 2014
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 I Can Buy Insurance For That?
Wedding Insurance
Wedding days can be stressful.  When something goes wrong there can also be financial losses. 
According to one recent study, the average cost of a wedding in 2013 was $28,858. This kind of investment in the big day has risks.
From illnesses to wildfires -  from hall closings to landscape damage, from lost rings to no show musicians, you can buy insurance for lost deposits, damage to property and other financial mishaps.  Click here for more information on one program.
Our Experts Have Been Published In The Following:
  • Insurance Law & Practice (ICLE)
  • Michigan Lawyers Weekly
  • The Michigan Bar Journal
  • The CPCU Journal
  • The Michigan Agent Magazine
Looking to Assess a Claim Denial?
Commercial or personal lines claim denial or reservation of rights?  We can help assess the viability of the insurer's decision and provide input on the claims process.  Call us at 248-321-8941 for additional information.
How Clairmont Can Help You
  • Expert help from seasoned insurance attorneys who are also insurance brokers.
  • Checklists on commercial and personal key coverage provisions.
  • Best practices from our how-to guides on handling errors and omissions cases.
  • Time-saving sample insurance requirements provisions and waivers of subrogation.
  • Review of insurance programs and broker selection / oversight.
  • Insurance pricing reduction consultation.
  • Risk management services including contract and lease review.
  • Review of insurance requirements provisions in lender / bank relationships.
Michael S. Hale, J.D., CPCU, AAI
We have often talked about lease agreements as posing considerable risk management and insurance issues.  In this Issue we cite a recent Michigan case which determined that the language of a commercial lease was to be construed against the landlord which drafted the lease.
We also include sample language that, from the perspective of the landlord, should be considered for all leases.
We are starting a monthly column:  "I Can Buy Insurance For That?" which presents both unique types of insurance as well as coverage you might not be aware is available.
Scooters, mopeds and golf cart / GEM cars pose unique insurance issues and we include an article on insurance requirements in light of a recent case.
Insurance for high rise building tenants and proof of loss issues are also addressed this month.
Our articles are all individually written by us and are not purchased.  They are designed to address developments in insurance and risk management.  If you have any topics you would like addressed, let us know.

We hope that you find these articles of interest. If we can be of assistance to you, please contact us.

   Conflicting Terms  in Lease Construed Against Landlord Drafter
Court Examines Conflicting Provisions Under "Repairs" and "Fire" Sections of Lease 
A recent unpublished decision out of the Michigan Court of Appeals suggests that commercial landlords are vulnerable to ambiguous provisions in leases they draft.
There, a portion of the building adjacent to a tenant space collapsed.  About five weeks later, a further collapse occurred in an area where a repair contractor was working, resulting in flooding and damage to the office tenant's space.
The lease provided in one section that the landlord had 60 days to repair the space before the tenant could terminate the lease.  However, in another section of the lease it provided that the tenant could terminate if the repairs prevented the tenant from using the premises for 30 consecutive days.
After the tenant attempted to terminate the lease, the landlord sued.  The tenant counter-sued for higher utility costs and increased rent and asserted that the landlord did not properly assess the scope of the roof repairs.
The court of appeals affirmed the lower court's decision that the lease's conflicting sections should be interpreted against the landlord which drafted it
It also found that although the law in Michigan is that a person who hires an independent contractor is not liable for injuries caused by the contractor, the landlord in this case was liable for negligence regardless of the lease agreement.  The evidence showed that the landlord was significantly involved in the actions of the contractor including directing the removal of trusses and in other areas.
  1. Be especially cautious in drafting lease agreements where the tenant is not involved in the negotiating of language.  In Michigan, ambiguous language in contracts is construed against the drafter (called contra proferentem).
  2. Consider adding a provision to the lease that the parties disclaim the contra proferentem doctrine as relates to the interpretation of the lease. This is particularly important if the landlord or its counsel drafted it.
  3. Utilize indemnification language in agreements with contractors and do not limit it to bodily injury.  In the above case, there was potential negligence of both the landlord and the contractor it hired.  The jury ultimately determined that the contractor was not liable. Most states prohibit indemnity by a contractor where the owner was solely negligent. Using words like "actual or alleged" can sometimes trigger the indemnity clause as to defense costs and should be considered as part of indemnification provisions.
    Landlords Look Here - 
Does Your Lease Contain This Language? 
We recently were involved in a case where a landlord sued a tenant for causing a fire.  The court dismissed the count for negligence indicating that for a tenant to be liable for damaging the space, the law required the lease to have express language transferring the liability for fire to the tenant.  Most leases we see do not have provisions such as the following:
Liability for Fire
The use of the premises involves risk of loss and damage by fire and other casualties.  Lessee hereby assumes all risk of loss and damage by fire and other casualties caused by it and agrees to protect, save harmless, defend and indemnify Lessor for all claims of third parties arising by reason of any loss or damage to property of others due to the negligence of Lessee.
The above provision would be important where is no coverage on the building such as where the tenant in a triple net lease does not maintain proper coverage or voids coverage (we have a case involving this issue currently) or 2) there is a high deductible which the landlord is subject to, or 3) if the building insurer denies coverage for some reason such as an improper proof of loss.
In our opinion, a waiver of subrogation should be limited to claims covered by insurance and the lease should include specific language, such as the above, which gives the landlord specific rights to pursue the tenant for for negligence in causing a fire or other casualty.
Motorized Wheelchairs Must Buy Michigan
No-Fault Coverage? 
We were recently asked by a major law firm to comment on a position being taken by a national insurer that an electric wheelchair scooter was a motor vehicle and thus required the purchase of Michigan no-fault coverage.  Click here to review this article.
The owner of a motor vehicle required to be registered in Michigan shall maintain no-fault insurance during the period the vehicle is driven or moved on a highway. MCL 500.3101(1). With few exceptions, every motor vehicle which is driven or moved upon a highway must be registered.  An exception to the registration requirement is for a vehicle driven on a highway only for the purpose of crossing that highway from one property to another. MCL 257.216(b).
This matter will be decided by the Michigan courts but it does raise interesting issues related to buying no-fault coverage for go-carts, mopeds and low speed electric cars.
Go-Carts. Per a 1990 Michigan appellate decision, a go-cart must be registered and insured or no-fault benefits will not be available.
Mopeds. Michigan law (Section 257.32b) says that a moped is a unit that meets all of the following:
  • The engine does not exceed 50 cc's piston displacement;
  • The engine is rated at 2.0 horsepower or less;
  • The power drive system does not require the operator to shift gears; and
  • The top speed is 30 miles per hour or less on a level surface.
If the unit exceeds the above, it is a motorcycle and must be insured.  If it does not, its occupant would not be disqualified for no-fault benefits.  See article.
Electric / GEM Cars.  Electric cars are low speed vehicles often used in resort communities on residential roads where the speed limit does not exceed 35 mph.  They are required to maintain Michigan no-fault coverage. See Michigan regulations.
High Rises Immune to Damage?  Think Again.
Residents or commercial tenants in high rise buildings sometimes believe that they do not need windstorm or flood coverage because nothing can happen to units that are high up. 
We are currently involved in a case where a 42 story high rise was decimated by  two hurricanes - three weeks apart.  The complex was rendered uninhabitable with over $100,000,000 in damage.
Regardless of size, most buildings can be destroyed or damaged by fire, tornados, hurricanes or terrorism and appropriate property insurance, business interruption and debris removal coverage should be carefully considered. 
Extreme Disparity
Between Proof of Loss and Actual Loss
Could be Basis to Deny Fire Claim
Be careful with proof of loss forms.  In a May 2014 case, the Michigan Court of Appeals held that there was a fact question for the jury on whether the disparity between the numbers on the proof of loss and what the actual loss turned out to be constituted a basis upon which to deny coverage.  

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