CCC alleges that Great American rejected the advice of its attorney to accept Ford's tender. This allegation stems from two letters written by Sanford N. Lakin, a Southfield, Michigan lawyer whom Great American consulted shortly after Ford tendered defense of the Denlar suit for the first time. Lakin's first letter, dated February 16, 1976, discusses three issues: whether the Michigan Statute of Limitations barred Denlar's claims, whether Levy was obliged to accept Ford's tender, and whether Great American had to defend Levy. Lakin answered "no" to the first question. As to the second, Lakin suggested that Denlar's complaint set forth a cause of action imputing negligence to Levy, which could result in liability for Levy by operation of its indemnity contract with Ford. Lakin withheld comment as to the last question, whether Great American had a duty to defend Levy, as he had not reviewed Levy's policy with Great American.
Lakin wrote his next letter to Great American on August 5, 1976. Lakin noted that he still had not received a copy of the Levy policies from Great American. Lakin wrote, however, that "there is no obligation of Levy to take over Ford's defense at this time." This was because Denlar had not stated a claim directly against Levy. Lakin conceded, however, that "eventually somewhere down the road I can forsee either a Third Party Action over, or a Declaratory Judgment for indemnification which can be brought by Ford." For this reason, Lakin assumed that his law firm eventually would be involved in the Denlar matter and take over Levy's defense. Lakin urged the company to make it clear to him on what basis his firm would assume the defense.
Contrary to CCC's allegations, Lakin never "advised" Great American to accept Ford's tender in either of these letters. At most, Lakin expressed speculations that Ford would sue Levy and that Great American might choose to defend Levy. Lakin, however, pointed out that a court would have to find negligence on the part of Levy before Levy's contract with Ford exposed Levy to liability, and that any obligation which Great American owed to Levy stemmed from whatever Great American provided in its policies with Levy -- policies that Lakin had not seen when writing either of his letters. Since CCC has put forth no facts indicating that Lakin advised Great American any differently, this court will grant Great American summary judgment on the question of whether it ignored Lakin's advice to accept Ford's tender. See Rule 56(e), Fed.R.Civ.P. (adverse party must respond with "specific facts showing that there is a genuine issue for trial;" failure to respond shall result in summary judgment, if appropriate).
CCC next alleges in the Complaint that Great American "controlled" the litigation of and settlement discussions in the Denlar matter. Pressed by Great American's present motion, CCC has submitted no evidence that this was the case. In fact, CCC acknowledges elsewhere that Great American did not conduct the defense of Ford in Denlar's suit. As for settlement, Great American has submitted excerpts from a deposition of Stanley Schwartz, Denlar's attorney, where Schwartz states that Great American's sole power in settlement -- its ability to waive its worker's compensation lien -- was not instrumental. Rather, settlement foundered because Ford refused to meet Schwartz's demand of $ 350,000. CCC has not submitted any evidence of Great American's greater control over the settlement negotiations, and thus Great American is entitled to summary judgment on the issue.
Great American next attacks CCC's contention that it pressured CCC to sign an affidavit of written recognizance with respect to the judgment against Levy. Great American claims that Richard Hore, CCC's claims supervisor, states in his deposition that CCC freely signed the affidavit. Great American has submitted Hore's deposition, but fails to indicate where in its sixty-five pages Hore makes this statement. Great American further asserts that "the record will show" that the law required CCC to sign the affidavit, and that CCC did not raise the issue of Great American's bad faith until it had to "make good" on its excess coverage in favor of Levy.
This court will not grant summary judgment on the basis of assertions like these. What Great American attempts to do here is similar to what occurred in Friedel v. City of Madison, 832 F.2d 965 (7th Cir. 1987), where three police cadets sued the City of Madison, the head of the police division which supervised the City's police academy, and the City's insurer for discrimination on the basis of race and sex. The defendants moved for summary judgment, and submitted affidavits. It then became incumbent upon the cadets, under Rule 56(e) and local rules which are similar to those of this district, to set forth specific facts demonstrating that there was a genuine issue for trial. Instead, the cadets proposed "findings of fact" in opposition to the defendants' statement of undisputed facts, and failed to cite portions of the record which supported their assertions to the court.
The district court granted summary judgment to the defendants, in part because of the cadets' inadequate response to the defendants' statement of uncontested facts. The Seventh Circuit affirmed this decision, noting Rule 56(e)'s command that the party opposing summary judgment must respond by setting "forth specific facts showing that there is a genuine issue for trial." The court noted several other deficiencies in the cadets' opposition to the motion, including their failure to submit admissible and competent evidence. See id. at 968-71.
Friedel differs in two respects from this case. First, the Friedel plaintiffs submitted evidence which was largely inadmissible. Second, the posture of these cases differs. In Friedel, the plaintiffs opposed a motion for summary judgment, while here Great American proposes the motion.
Nevertheless, the court may not grant summary judgment unless the movant establishes that he or she is entitled to it, both as a matter of law and of fact. See Rule 56(c). This court cannot conclude on the basis of cursory allusions to "the record" or references to an entire deposition that certain facts could exist, much less look undisputed. For this reason, the court finds that Great American has not shown that it is entitled to summary judgment on the issue of whether CCC signed an affidavit of written recognizance willingly.
The court now turns to Great American's contentions that some of the acts alleged in the Complaint are insufficient to establish Great American's fault. Under Michigan law,
"bad faith" in the insurance setting is arbitrary, reckless, indifferent or intentional disregard of a person owed a duty. As the court in Commercial Union Ins. Co. v. Liberty Mut. Ins., 426 Mich. 127, 393 N.W.2d 161, 164 (1986), put it, an insurer's bad faith is a "state of mind," a reflection of its selfish purposes or its "desire to protect its own interests at the expense of the insured's . . . ." The Commercial Union court went on to list twelve "factors" which a trier of fact can consider in deciding whether bad faith exists. The court noted that its list was not exclusive, and that no single factor was decisive. See id. at 165-66.
Great American asks this court to weigh several of the acts alleged in the Complaint against what it sees as Commercial Union's standard of liability. The company contends first that it could not have acted in bad faith towards Levy and CCC in failing to inform them of Schwartz's settlement demand. Great American points out that Denlar's suit was against Ford, not Levy, and since Great American had no obligation to settle on behalf of Ford, it had no duty to inform Levy of Schwartz's demand to Ford. As for CCC, Great American argues that it had no duty to inform CCC of Schwartz's demand as long as it fell within the limits of Great American's contractual bodily injury endorsement.
The problem with Great American's arguments on these scores is that, as Commercial Union instructs, bad faith is a question of motives, and motives are questions of fact. CCC has offered evidence that Great American was aware of the strong likelihood that Ford would seek indemnification from Levy. Such indemnification certainly could have affected Levy's interests. CCC also has submitted evidence that suggests that Great American was aware of the possibility that a verdict in the Denlar suit could exceed its policy limits, which surely would have affected Levy and CCC's interests. Whether Great American's disregard of these probabilities and its subsequent failure to notify Levy and CCC of Schwartz's offer amount to bad faith is for the jury to decide. See id. at 165 (decision as to whether acts amount to bad faith is the factfinder's).
Great American next attacks CCC's suggestion that its refusal to waive its worker's compensation lien, as Schwartz had demanded, amounted to bad faith. Great American also assails CCC's claim that its refusal to waive the lien derailed a settlement with Schwartz. Great American's arguments have some force. As noted above, Schwartz testified in a deposition that even if Great American had waived its lien, settlement still would have been unlikely. Nevertheless, Great American will not receive summary judgment on the issue of whether its refusal to waive its lien amounted to bad faith. As the Commercial Union court noted, a jury can find that a party has acted in bad faith even if the action itself was not harmful.
CCC contends that Great American's "dogged" efforts to recover on its lien indicate a preference of its interest over Levy's -- something which is impermissible under Michigan law. See Harrison v. Ford Motor Company, 370 Mich. 683, 122 N.W.2d 680 (1963) (holder of worker's compensation lien may not seek to recover on lien from a party whom the lienholder insures). Great American suggests that there was no violation akin to that in Harrison in this case, as it sought to recover on its worker's compensation lien from Ford, not Levy. If Great American was aware of the strong possibility that Ford would seek to recover from Levy, or was aware of the possibility that Denlar could receive a verdict in excess of Great American's policy limits, a jury could reasonably infer from Great American's effort to recover on its lien that it was acting in bad faith toward Levy and/or CCC. To this extent, the actual effect of Great American's refusal to settle, while relevant as to whether Great American acted in good faith, does not decide the issue.
Great American's request for summary judgment on the issues of whether it acted in bad faith in failing to defend Ford in the Denlar suit, refusing to settle the suit, or not entering into settlement discussions exhibits the same misapprehension of Commercial Union as the arguments made above. It is true that Great American was not contractually obliged to defend Ford, discuss settlement with persons suing Ford, or settle cases involving Ford. Great American also was not contractually obliged to defend Levy. On the other hand, given Great American's obligations to insure Levy, Levy's indemnity agreement with Ford, the circumstances surrounding the Denlar matter, and particularly Great American's estimate of the risks of liability in that suit, at some point Great American may have had a good faith duty to enter the fray and prevent things from resulting in a large verdict.
Both Lakin and one of Great American's assistant vice presidents, John Bickley, were aware of the possibilities of being dragged into the Denlar suit. Joseph Aubin, a former claims manager for Great American, stated in his deposition that Great American sometimes chose to involve itself in a defense and settlement even where contractual duties were absent; whether the company's actions in the Denlar matter represent a bad faith departure from Great American or industry custom is something for the jury to decide.
CCC's Amended Motion for Summary Judgment
In contrast to Great American's motion, CCC's motion seeks resolution of legal issues, not factual ones. CCC concedes that even if it prevailed on these issues, there would remain genuine issues of material fact preventing it from receiving summary judgment on its entire Complaint. Recognizing this, the court will turn to CCC's motion.
CCC first contends that Great American wrongfully denied coverage under its employer's liability policy when Levy had to indemnify Ford. Great American concedes that, had Levy's sole coverage been its employer's liability policy with Great American, Great American would have had to pay Ford pursuant to this policy. Great American contends that it discharged its obligation to Levy and Ford, however, by tendering the highest of its policy limits applicable to the indemnity action, that of $ 1 million for contractual bodily injury liability. CCC responds that Great American was obliged to tender both policy limits.
Under Michigan law, an insured can recover under separate endorsements or policies if he or she has paid separate premiums for each endorsement or policy. See Bradley v. Mid-Century Ins. Co., 409 Mich. 1, 294 N.W.2d 141 (1980); Allstate Ins. Co. v. Riverside Ins. Co. of America, 509 F. Supp. 43 (E.D. Mich. 1981); Detroit Auto. Inter-Ins. Exchange v. Joseph, 67 Mich. App. 393, 241 N.W.2d 221 (1976). Persons are free, of course, to promise not to seek multiple recoveries or "stack" coverages. See Bradley, 294 N.W.2d at 157 (automobile policy's "other insurance" clause enforceable, absent conflict with Michigan statutes; clause worked to prevent stacking of separate policies issued to single insured); Detroit Auto. Inter-Ins. Exchange v. Gavin, 416 Mich. 407, 418, 331 N.W.2d 418, 424 (1982) ("other insurance" clauses enforceable, and can prevent stacking); Auto Club Ins. Ass'n v. Hill, 431 Mich. 449, 459, 430 N.W.2d 636, 640 (1988) (same holding).
Great American does not dispute that Levy paid separate premiums for its contractual bodily injury liability and employer's liability coverages. In fact, its coverages were contained in separately numbered policies. Nevertheless, Levy effectively contracted to recover only on the higher of these two limits, as the policy which contains the contractual bodily injury liability endorsement contains an "other insurance" clause:
If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss. . . .
If Great American had tendered its limit under its employer's liability policy, there would have been a dollar-for-dollar reduction in its tender under the contractual bodily injury liability endorsement of its general liability policy. CCC thus cannot complain that Great American did not tender its employer's liability limit.
CCC's next assertion is that, properly construed, the coverage limit of Great American's general liability policy is $ 2 million, not $ 1 million. As noted earlier, Great American covered Levy's bodily injury liabilities up to $ 1 million per occurrence (under its "Coverage A") and contractual bodily injury liabilities up to $ 1 million (under its "Coverage Y"). Great American tendered its limit under Coverage Y, but not Coverage A. CCC contends that Great American should have tendered both.
CCC directs the court to Exclusion (g) of Great American's general liability policy. That exclusion states that the policy does not apply
under Coverage A, except with respect to liability assumed by [Levy] under a contract as defined herein, to bodily injury to or sickness, disease, or death of any employee of [Levy] arising out of and in the course of his employment by [Levy]. . . .
In industry parlance this clause once was known as the "employer's liability exclusion." Such exclusions forced companies such as Levy to seek separate coverage for employer's liability. The clause was ambiguous, however, as to whether it covered an obligation of the insured to indemnify another for injuries to which the exclusion would otherwise apply. Recognizing this ambiguity, companies such as Great American amended the clause to exclude coverage of indemnification contracts specifically.
CCC asks this court to hold that the Michigan courts would follow the lead of the courts of five other states in determining that, prior to the amendment of the standard employer's liability exclusion, endorsements such as Great American's Coverage A applied to contracts to indemnify another for employment injury liabilities. See Home Ins. Co. v. Southport Terminals, Inc., 240 So. 2d 525 (Fla.App. 1970) (employer's liability exclusion does not apply to stevedore's action under admiralty law against shipowner for indemnification; underlying liabilities stemmed from workplace injuries to stevedore's employees); U.S. Fidelity & Guar. v. Globe Indem., 60 Ill. 2d 295, 327 N.E.2d 321 (1975) (exclusion does not apply to employee's action against employer named additional insured by operation of contract between insured and employer); Zenti v. Home Ins. Co., 262 N.W.2d 588 (Iowa 1978) (same); Royal Globe Ins. Co. v. Poirier, 120 N.H. 422, 415 A.2d 882 (1980) (exclusion does not apply to insured's obligation to indemnify contractor for employment-related injuries); Ins. Co. of North America v. Dayton Tool & Die Works, Inc., 57 N.Y.2d 489, 443 N.E.2d 457, 457 N.Y.S.2d 209 (1982) (exclusion does not apply to action for contribution resulting from workplace liabilities). CCC asserts that the Michigan courts would adopt the view of these courts since Michigan shares their law on the scope of exclusions in insurance contracts, see, for example, Century Indemnity Co. v. Schmick, 351 Mich. 622, 88 N.W.2d 622 (1958) (insurer must draft exclusions to make scope of its non-liability clear); Detroit Automobile Inter-Insurance Exch. v. Bishop, 24 Mich. App. 90, 180 N.W.2d 35 (1970) (same holding), and the proper way to construe ambiguous exclusions, see, for example, McNally v. American States Insurance Company, 308 F.2d 438, 445 (6th Cir. 1962) (applying Michigan law -- exclusions that are of uncertain applicability construed against insurer).
Great American chooses not to contest CCC's argument as to how the Michigan courts would construe the employer's liability exclusion in Great American's general liability policy with Levy. After all, how the Michigan courts would construe the exclusion does not determine whether Great American is liable to CCC in this suit: the issue here is whether Great American has acted arbitrarily, recklessly, indifferently or intentionally in disregarding a duty to tender to Levy its limit under Coverage A. This court's view of how the Michigan courts would construe the exclusion is pertinent to the ultimate issue, but it does not decide it.
All of this understood, this court holds that the Michigan courts would construe the employer's liability exclusion contained in Levy's policy with Great American so as not to exclude coverage of liabilities resulting from indemnification contracts -- even if the liability being indemnified stemmed from an employment-related accident. What CCC gets as a result of this ruling is not clear -- perhaps it only prevents Great American from arguing to a jury that there was no argument for liability under Coverage A. Nevertheless, CCC has asked for this ruling; Great American has raised no arguments as to why this court should not grant CCC's request, and so the court will so rule.
CCC argues further that, given that Coverages A and Y applied to Ford's demand for indemnity, Levy should have received the benefit of both coverages. As noted above, under Michigan law the general rule is that an insured can recover under separate endorsements which carry separate premiums, unless the parties agree otherwise. Great American has not directed this court to any provision in its policy suggesting that Levy could not have recovered under both coverages. Again, Great American seems to rest on a position that even if a court could hold it liable under both coverages, its denials of coverage were not in bad faith. The court will not disturb Great American's choice of tactics, but by the same token this court will rule when a party so requests. This court thus holds that Levy was entitled to receive the benefit of Coverages A and Y.
CCC's last contention is that Great American is liable for all of the interest accrued after the date of the Denlar verdict, and not just a pro rata share of the interest accrued since the judgment against Levy. CCC's argument rests on two propositions: first, that Great American contracted to assume all post-judgment interest, and second, that the pertinent judgment is that rendered in the Denlar suit, not the indemnity action against Levy.
Great American's obligation to Levy for interest stems from the following clause in Great American's general liability policy:
With respect to such insurance as afforded by this policy, [Great American] shall:
* * * *