Transportation Law Hub

The Michigan Court of Appeals recently addressed in an unpublished decision critical principles of insurance policy interpretation.

The court affirmed that policyholders who contractually limit their recovery in a personal injury case cannot later seek Underinsured Motorist (UIM) benefits when that cap falls below their actual damages.

In Al-Mutawakel v Am Select Ins Co, unpublished opinion of the Court of Appeals, issued June 9, 2025 (Docket No. 370741), 2025 WL 1638264, the plaintiffs were injured in a 2020 motor vehicle accident. They filed suit against the at-fault driver, Samuel Montague, and agreed to limit their damages to the State Farm liability coverage of $20,000/$40,000 in exchange for acceptance of service of the complaint. The plaintiffs then sought UIM benefits from American Select Insurance Company to supplement the shortfall.

American Select denied the claim, arguing that the plaintiffs were not legally entitled to recover additional compensation due to their own stipulation in which they agreed to limit their damages. The trial court granted summary disposition in favor of American Select, and the appellate court affirmed the decision.

The appellate court addressed the plaintiffs’ stipulation on damages and how it interacts with UIM policy language. The appellate court first noted the policy language required that the plaintiff be “legally entitled to recover damages from underinsured motorists.” In this instance, the plaintiffs contractually barred themselves when they stipulated to “cap their recovery” at the State Farm policy limits.

Based on this appellate opinion, insurers should take note of how judicially recognized stipulations, especially those limiting recoverable amounts, can directly impact the enforceability and applicability of coverage provisions.

The appellate court, further, rejected the plaintiffs’ argument that the policy wording was ambiguous and determined the policy was enforceable as written. This decision highlights the importance of clearly drafting UIM provisions and maintaining a vigilant claims review process.