Coverage Cannot Be Created by Arguing Waiver or Estoppel

Often, Once An Insurance Company Has Denied Coverage To An Insured And Stated Its Defenses, The Company Has Waived Or Is Estopped From Raising New Defenses

After an accident involving plaintiff and non-party Michael Ragland who struck plaintiff while he was traveling through a crosswalk on an electric scooter. Plaintiff became stuck under Ragland’s vehicle, and he had to be transported by ambulance to the hospital for a number of injuries. In Christopher Carter v. Owners Insurance Company, doing business as Auto-Owners Insurance Company, No. 356556, Court of Appeals of Michigan (May 12, 2022) Carter sought no-fault benefits because of the reason used by the insurer was not effective.


Plaintiff’s father, who lives in Ohio, had an insurance policy with defendant that was sold by an Ohio-based broker. Following the accident, plaintiff notified defendant of his injuries arising from the accident.

Defendant sent plaintiff a letter stating that it was not responsible for personal injury protection (PIP) benefits to plaintiff because “[plaintiff] is not a named insured on” his father’s policy “nor is he a . . . domiciled relative of our named insured,” i.e. plaintiffs father. The letter informed plaintiff that he could still be eligible for PIP benefits from Ragland’s insurer, Farm Bureau Insurance Company, and defendant instructed plaintiff to inform it if Farm Bureau rejected his claim for benefits.

According to defendant, because plaintiffs injuries did not arise out of his use of a motor vehicle as a motor vehicle, it was not responsible for the payment of his PIP benefits. In making this argument, defendant conceded that, contrary to statements in its initial denial letter, plaintiff was a domiciled relative under his father’s policy, but argued that it was still not responsible for payment of plaintiff s PIP benefits-Farm Bureau was.

At a hearing on defendant’s motion, the trial court agreed with plaintiff and denied defendant’s motion for summary disposition. The trial court also denied the motion because plaintiff detrimentally relied on defendant’s assertion that plaintiff was not a domiciled relative of the named insured.


Defendant first argues the trial court’s ruling with respect to MCL 500.3163(1) was error. Michigan’s no-fault act articulates the priority of insurers responsible for an injured party’s PIP benefits. The parties agree that plaintiff was domiciled with his father in Ohio at the time of the accident, that his father had an Ohio-based policy with defendant, and that plaintiff was a covered party under that policy. In other words, the parties agree that plaintiff was a nonresident insured by an out-of-state insurer, defendant.

Because plaintiffs injuries did not arise from his “ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle,” defendant was not obliged under MCL 500.3163(1) to cover plaintiffs PIP expenses, and the trial court erred when it concluded differently.


Defendant alternatively contended that the trial court improperly applied the “mend-the-hold” doctrine to hold defendant liable for plaintiffs claim. The Michigan Supreme Court explained the mend-the-hold doctrine as follows:

Where a party gives a reason for his conduct and decision touching any thing involved in a controversy, he cannot, after litigation has begun, change his ground, and put his conduct upon another and a different consideration. He is not permitted thus to mend his hold. He is estopped from doing it by a settled principle of law. [CE Tackels, Inc v Fantin, 341 Mich. 119, 124; 67 N.W.2d 71 (1954) (quotation marks and citation omitted).]

The mend-the-hold doctrine has also been applied in the insurance context:

This court has many times held, and it must be accepted as the settled law of this state, that, when a loss under an insurance policy has occurred and payment refused for reasons stated, good faith requires that the company shall fully apprise the insured of all the defenses it intends to rely upon, and its failure to do so is, in legal effect, a waiver, and estops it from maintaining any defenses to an action on the policy other than those of which it has thus given notice. [Smith v Grange Mut Fire Ins Co of Mich, 234 Mich. 119, 122-123; 208 N.W. 145 (1926).]

Stated differently, “once an insurance company has denied coverage to an insured and stated its defenses, the company has waived or is estopped from raising new defenses.” South Macomb Disposal Auth v American Ins Co, 225 Mich.App. 635, 695; 572 N.W.2d 686 (1997).

Waiver and estoppel are not available where their application would result in broadening the coverage of a policy, such that it would cover a loss it never covered by its terms and create a liability contrary to the express provisions of the contract the parties did make.

The second class of cases allowing the limits of a policy to be expanded by estoppel or waiver involves instances where the inequity of forcing the insurer to pay on a risk for which it never collected premiums is outweighed by the inequity suffered by the insured because of the insurance company’s actions.

In this case, plaintiff’s requested PIP benefits would not be available under the defendant’s out-of-state policy that insures plaintiff, and the requirements of MCL 500.3163(1)-the statute that provides when an out-of-state insured can be required to pay Michigan no-fault benefits to a nonresident insured-were not met. Plaintiff is asking for defendant to be estopped from asserting a basis for nonliability other than the reason given in its initial denial letter.

This would, in effect, broaden the coverage of defendant’s policy, such that it would cover a loss it never covered by its terms and create a liability contrary to the express provisions of the contract the parties did make.

The decision to not name Farm Bureau as a defendant was plaintiff’s alone, and no act or omission by defendant induced it. Based on the above, the court concluded that this case does not present an instance in which estoppel can be used to bring within coverage risks not covered by the policy terms because defendant’s belated argument related to MCL 500.3163 did not prejudice plaintiff.

Plaintiff was prejudiced but not by defendant’s belated argument under MCL 500.3163 but by his decision to not name Farm Bureau as a defendant despite being informed by defendant that Farm Bureau was the insurer liable for his claim.

Therefore, the trial court erred as a matter of law in employing principles of waiver and estoppel to expand defendant’s insurance coverage under the policy at issue.

The trial court was ordered to enter summary disposition in favor of defendant.


Insurance is a contract. It should always be enforced as written. In this case the insurer mistakenly rejected the claim for a reason not available but learned, later, a reason that was appropriate. Because the injured party sued the wrong defendant and tried to change a policy by claiming waiver, he lost both.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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