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CONTINENTAL CAS. CO. v. GREAT AMERICAN INS. CO.

April 27, 1989

CONTINENTAL CASUALTY COMPANY, an Illinois Corp., in its own right and as Subrogee of EDWARD C. LEVY COMPANY, a Michigan Corp., Plaintiffs,
v.
GREAT AMERICAN INSURANCE COMPANY, an Ohio Corp., Defendant



The opinion of the court was delivered by: DUFF

 BRIAN BARNETT DUFF, UNITED STATES DISTRICT JUDGE

 Continental Casualty Company ("CCC") and Great American Insurance Company have filed peculiar cross-motions for summary judgment. *fn1" For the reasons stated below, this court grants each party summary judgment on some of the issues raised in CCC's First Amended Complaint (hereinafter "Complaint"), but not others.

 The undisputed facts are as follows. *fn2" CCC is an Illinois-based insurance company. It was an insurer of Edward C. Levy Company, a Michigan corporation, under an excess umbrella liability policy. Underneath CCC's policy were two policies of Great American, an Ohio-based insurer. Great American's policies had limits of $ 1 million per person for bodily injury liability, $ 1 million per person for contractual bodily injury liability, and $ 100,000 per person for employer's liability.

 The genesis of the present dispute is an accident that occurred on February 22, 1969. Levy had a contract with Ford Motor Company to remove slag and other debris from a Ford mill operation in Dearborn, Michigan. Since the debris was valuable, Levy used a truck scale to weigh it before hauling it away from the plant. While using the scale on February 22, a Levy employee, Frederick Denlar, fell from it. The accident rendered Denlar a quadriplegic, and ultimately resulted in his death.

 Denlar's estate sued Ford in 1974 for wrongful death, alleging that Ford and the Buffalo Scale Company were negligent and had breached warranties to Denlar. On January 5, 1976, Ford tendered its defense of this action to Levy, based on its belief that Levy was at fault for not having corrected dangerous and unsafe conditions at the truck scale. Ford may have thought that Levy would take the defense because of this provision in its contract with Levy:

 
Levy agrees that it shall be responsible for any and all injuries to persons . . . which occur as a result of the fault or negligence of Levy, its agents, servants, or employees, or the joint negligence of the agents, servants, or employees of Ford and Levy, in connection with the performance on Ford's premises of work contemplated by this Agreement, and that Levy shall save harmless and indemnify Ford from and against any liability for such injury or damage. . . .

 Ten days later Levy notified Great American of Ford's tender. Neither Levy nor Great American accepted it. Ford renewed its demand on March 31, 1976. It got no response. Later on November 15, 1978, Ford made yet another demand that Great American assume Ford's defense, negotiate a settlement, and satisfy any judgment owed to Denlar's estate. Ford also informed Great American that the attorney for Denlar's estate, Stanley Schwartz, had asked for $ 350,000, plus waiver of Great American's worker's compensation lien of $ 125,000, to settle Denlar's claim. Great American refused once again to defend Ford, and did not pursue Schwartz's offer.

 The case of Gage, As Administrator of the Estate of Frederick Denlar v. Ford Motor Company proceeded to trial and resulted in a verdict in favor of Denlar's estate of $ 1.5 million. Ford appealed unsuccessfully, adding costs and interest to the judgment. See Gage v. Ford Motor Co., 102 Mich. App. 310, 301 N.W.2d 517 (1980). Ford paid this sum to Denlar's estate, then sued Levy in Wayne County Circuit Court. Ford's suit sounded in four theories of liability: contractual indemnity, common-law indemnity, implied indemnity, and breach of warranty. On May 6, 1983 Judge Joseph B. Sullivan granted Ford summary judgment in the case of Ford Motor Company v. Edward C. Levy Company on all four theories of liability, finding that Levy had to indemnify Ford for $ 2,351,628.29 plus costs and interest.

 Great American appealed on behalf of Levy to the Michigan Court of Appeals. That court affirmed the lower court's holding on the issue of contractual indemnity, but did not address the issues of common-law indemnity, implied indemnity, or breach of warranty. See Ford Motor Company v. Edward C. Levy Company, No. 71584 (Mich.App. July 23, 1985) (per curiam). The Michigan Supreme Court denied Levy's application for leave to appeal. Thereafter, pursuant to affidavits of written recognizance, Great American and CCC satisfied Levy's obligations to Ford, with Great American paying $ 1,644,638.05 and CCC paying $ 2,254,948.32.

 CCC brought suit in this court on June 2, 1986 to recover all sums it had paid to Ford. CCC amended its complaint on July 11, 1986. In that complaint, CCC charges that Great American breached its duty of good faith towards CCC and its duty of good faith towards Levy, for whom CCC is a subrogee. CCC has set forth twelve acts in its complaint, one or more of which CCC alleges amounts to a breach of Great American's respective duties. Great American has moved for summary judgment as to some of these alleged acts, arguing that some of them never occurred or, even if they occurred, they do not amount to a breach of duty. *fn3"

 Great American's Motion For Summary Judgment

 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 ...


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