## Facts

- Craig A. Klapp worked as an insurance agent for United Insurance Group Agency, Inc. beginning in 1990 under written materials including an Agent’s Agreement and an Agent’s Manual.
- Klapp’s compensation consisted of commissions on initial policy sales and renewal commissions tied to continuing premium payments by insured clients.
- Klapp permanently stopped working for United in 1997 and claimed entitlement to “retirement renewal commissions” on policies he had sold.
- Klapp relied on a vesting schedule stating that an agent with seven years of service is “entitled to the vesting of 100 percent of his renewals,” and he asserted he had completed seven years.
- United contended the documents, read together, required an agent to be at least age 65 and to have at least ten years of service to receive retirement renewal commissions.
- The trial court denied United’s summary-disposition motion, found the contract ambiguous, and permitted the jury to consider extrinsic evidence regarding the parties’ intent and United’s practices.
- The jury returned a verdict for Klapp and awarded renewal commissions.
- The Michigan Court of Appeals reversed, holding the contract unambiguously required age 65 and ten years of service.
- The Michigan Supreme Court granted leave to decide whether the contract was ambiguous and whether interpretation was for the court or the jury.

## Issues

1. Whether the integrated written materials were ambiguous as to eligibility for retirement renewal commissions, making interpretation a fact question for the jury rather than a law question for the court.
2. Whether, once ambiguity existed, the jury could consider extrinsic evidence and be instructed on interpretive rules such as construing ambiguities against the drafter.

## Decision

- The Michigan Supreme Court reversed the Court of Appeals.
- The Court held the contract was ambiguous because the integrated documents were reasonably susceptible to more than one meaning regarding eligibility for retirement renewal commissions.
- The Court held that, after a court finds genuine ambiguity, determining the contract’s meaning becomes a question of fact for the jury.
- The Court held the jury may consider relevant extrinsic evidence of the parties’ intent, including conduct and past payment practices.
- The Court held the jury may also use established rules of contract construction, including construing ambiguous terms against the drafter, as aids in determining intent.
- The Court reinstated the jury verdict for Klapp and remanded for consideration of remaining appellate issues and a cross-appeal not resolved by the Court of Appeals.

## Legal Principles

- Whether contractual language is ambiguous is a question of law; ambiguity exists when language is equally susceptible to more than one reasonable meaning.
- When an integrated set of documents defines the parties’ rights and duties, the documents must be read together to determine meaning and whether the agreement is internally consistent.
- If a contract is ambiguous and reasonable minds could differ about its meaning, interpretation is a question of fact for the jury.
- In resolving ambiguity, the factfinder may consider extrinsic evidence bearing on intent, including the parties’ conduct, course of performance, and surrounding circumstances.
- Rules of contract construction (including construing ambiguity against the drafter) may be given to the jury as interpretive aids in determining the parties’ intent in an ambiguous contract.

## Conclusion

The Michigan Supreme Court held that the governing compensation documents were ambiguous as to post-termination retirement renewal commissions, so the jury properly determined their meaning using extrinsic evidence and standard construction rules; the Court reinstated the verdict for the agent and remanded for further appellate proceedings on remaining issues.


Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459, 663 N.W.2d 447 (Mich. 2003)