Underinsured motorist benefits; Whether the insurance policy was ambiguous

Finding no errors warranting reversal, the court affirmed the trial court’s grant of summary disposition to defendant-insurer under MCR 2.116(C)(10) on “the issue of whether plaintiffs were entitled to underinsured motorist benefits under their policy” issued by defendant. Plaintiffs were involved in an auto accident. They argued that “the insurance policy at issue was ambiguous as it related to the scope of coverage for underinsured motorist benefits.” They asserted “the policy states that defendant would become liable to pay if the at-fault party’s limits of liability become exhausted because of judgment or settlement.” Plaintiffs contended “this provision is in ‘disharmony’ with the provision only requiring defendant to pay if plaintiffs are ‘legally entitled’ to recovery.” They claimed the policy was “ambiguous because it only obligates defendant to pay underinsured motorist benefits that plaintiffs are ‘legally entitled to recover,’ but at the same time requires payment even when there is a settlement or judgment.” The court disagreed. “The two provisions do not present any ambiguity; rather, the operation of the two ‘disharmonious’ provisions simply left plaintiffs without the additional coverage when viewed in light of the stipulated order.” Their fundamental problem was “that they do not read the two provisions together, as the language of the policy itself directs.” While the limits of liability of the individual they claimed was at fault (M) “were exhausted, thus satisfying the first condition of the second provision, plaintiffs were not ‘legally entitled’ to any additional damages from [M] under the stipulated order, which stated that plaintiffs ‘will cap their recovery, including costs, interest, and attorney fees, at Defendant’s $20,000 per person, $40,000 per accident policy limits in exchange for acceptance of the Summons and Complaint by State Farm Mutual Automobile Insurance Company.’ And because defendant’s liability under the underinsured motorist coverage provision flowed from [M’s] ultimate liability, the underinsured motorist provision did not apply.” The court found that while “plaintiffs may be dissatisfied with the agreement they made and believe the benefit was not worth the cost, the agreement—i.e., the stipulated order—is clear that [they] traded a limitation on their damages in exchange for acceptance of service of the complaint. The legal effect of that bargain also meant that plaintiffs could not avail themselves of the additional coverage provided by defendant’s insurance policy, because [they] were no longer legally entitled to recover more from” M.