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Ambiguous Policy Language Forces Insurer to Pay Losses It Did not Intend\\n to Cover\\n\\nINSURER HOIST ON ITS OWN PETARD\\n\\nInsurers often complain that their insureds do not read the insurance \\npolicy and compel them to fulfill all policy terms or receive nothing. \\nIn my experience almost no one reads an insurance policy until there is a\\n dispute over a claim. In Michigan an insurer did not read the policy it\\n issued.\\n\\n\\nIn Village Of Kalkaska v. Michigan Municipal League Liability And \\nProperty Pool, No. 359267, Court of Appeals of Michigan (August 31, \\n2023) a policy was issued to the Village that provided - by fairly clear\\n language - coverage the insurer did not intend to provide and as a \\nresult found it obligated to pay claims for millions of dollars.\\n\\nMichigan Municipal League Liability and Property Pool appealed the trial\\n court\'s order denying its motion for summary disposition claiming that \\nits intent was to exclude coverage for the losses claimed by the \\nVillage.\\n\\nFACTS\\n\\nIn 1996, plaintiff, Village of Kalkaska, contracted with certain of its \\nemployees to provide lifetime retirement health benefits. In 2014, \\nplaintiff determined that the obligation to provide lifetime retirement \\nhealth benefits to the employees was prohibitively expensive. Plaintiff \\ntherefore adopted a resolution ending its agreement to pay the employees\\n lifetime retirement health benefits.\\n\\nFour of the affected employees sued plaintiff for breach of contract. In\\n one of the lawsuits, a jury awarded the employee present and future \\ndamages. Plaintiff thereafter settled the lawsuits with the other three \\nemployees for present and future damages. Plaintiff asserts that thus \\nfar the cost of resolving the lawsuits is nearly $2,000,000.\\n\\nDefendant is "a non-profit self-insurance pool owned and governed by its\\n members" that provides liability insurance to numerous Michigan \\nmunicipalities. The policy provided plaintiff with various types of \\ncoverage, including coverage for liability in the administration of its \\nemployee benefits program.\\n\\n\\nDISCUSSION\\n\\nAn insurance policy provision is valid if it is clear, unambiguous, and \\nnot in contravention of public policy. If a contract does not violate \\nthe law or a traditional defense to enforceability, a court is required \\nto apply the unambiguous provisions of the contract as written because \\nan unambiguous contract reflects the intent of the parties as a matter \\nof law.\\n\\nTHE TRIAL COURT\'S DECISION\\n\\nThe trial court concluded that no exclusions from coverage applied, but \\nbecause it was a close question it was therefore ambiguous.\\n\\nPUBLIC POLICY\\n\\nThe claim in this case allows plaintiff intentionally to shift its \\ncontractual obligation to defendant. By so doing it provides an \\nunreasonable result not intended by defendant. But the intent of the \\nparties is determined by the unambiguous policy language as a matter of \\nlaw and a court may not fail to enforce a contract on the basis of \\nreasonableness.\\n\\nTherefore, the trial court erred by finding an issue of material fact \\nfor the jury; the trial court should have found that the policy provides\\n coverage and granted summary disposition for the plaintiff and the \\nCourt of Appeals reversed and remanded for entry of judgment for \\nplaintiff.\\n\\nZALMA OPINION\\n\\nThe greatest sin that an insurer can commit is to write an insurance \\npolicy that is ambiguous and that, as a result, provides a coverage it \\ndid not intend. In this case, because of the weakness of the policy \\nlanguage the insurer finds itself obligated to pay for a run-of-the-mill\\n breach of contract, something no insurance company would intentionally \\ncover. Insurers who usually insist on its insureds reading the policy as\\n issued should not complain when it failed to read the policy it \\ndelivered to the insured in a manner understandable and unambiguous.\\n\\n(c) 2023 Barry Zalma & ClaimSchool, Inc.\\n