Federoff v. Ewing
| Decision Date | 21 December 1971 |
| Docket Number | 24,Nos. 23,s. 23 |
| Parties | Jack FEDEROFF, Plaintiff-Appellee, v. William J. EWING, d/b/a Ewing Roofing and Sheet Metal Company, Defendant-Appellee, and John F. Bolton, Jr., Liquidator of the Highway Insurance Company, et al., and Peerless Insurance Company, Defendants-Appellants. John H. SHANNON, Plaintiff-Appellee, v. STAR WRECKING COMPANY, Inc., a Michigan corporation, Defendant and Third-Party Plaintiff-Appellee, v. John F. BOLTON, Jr., Director of the Department of Insurance of the State of Illinois and Liquidator of Highway Insurance Company, an Illinois corporation, et al., Third-Party Defendants- Appellants. |
| Court | Michigan Supreme Court |
Liss & Newman, Southfield, for plaintiff-appellee, Jack federoff.
Seymour Mandell, Detroit, for defendant-appellee, William Ewing; Paul B. Newman, Southfield, of counsel.
E. R. Whinham, Jr., Detroit, for Peerless Inc. Co., Jack Norman Cresswell and Excess Inc. Co., Ltd.
Honigman, Miller, Schwartz & Cohn, Detroit, for appellant James Baylor, Director of the Dept. of Insurance for the State of Illinois; John Sklar and Asher Rabinowitz, Detroit, of counsel.
John W. Simpson, Jr., for Kelman, Loria, Downing & Schneider, Detroit, for plaintiff-appellee, John H. Shannon.
Before the Entire Bench.
By these separately reviewed and appellate-consolidated proceedings each plaintiff seeks to obtain continued payment of his adjudicated right to workmen's compensation. Each is totally, permanently and tragically disabled as a result of work-connected accidental injuries occurring in 1959 and 1960. Different employers are liable respectively for payment of such benefits. We surmise both are now uncollectible. Each carried direct coverage under Part IV of the workmen's compensation act with Highway Insurance Company. There is no question of the right of either plaintiff to benefits overdue and to become due. The question is who if at all is to pay, and if so, Starting when.
Payment of benefits to each plaintiff duly commenced. Highway became insolvent and was so adjudged by an Illinois judgment. By that judgment, entered in 1967, the Director of Illinois' Department of Insurance was appointed as Highway's statutory liquidator. Later, proceeding Ex parte, the Illinois court entered an order enjoining actions 'to contest or interfere with the liquidator's exclusive right, title and interest to funds recoverable under treaties and agreements of insurance heretofore entered into by Highway Insurance Company as the ceding insurer.'
Highway was and is reinsured by defendant Peerless Insurance Company and Peerless in turn was and is reinsured by third-party defendant Excess Insurance Company. Highway in here represented by the appointed liquidator. He contends that the sole remedy of each plaintiff, for continued payment of benefits as ordered, lies with and in the Illinois court of liquidation; his claim being that 'Michigan employers and employees do not have a direct right of action under the workmen's compensation act upon a reinsurance agreement that indemnifies against loss and requires payment to the liquidator in the event of insolvency of the insurer.' The liquidator, allied with and supporting Peerless and Excess, directs our attention to a long list of decisions which the Louisiana Supreme Court cited and followed, May 4 last, in Fontenot v. Marquette Casualty Co. (1971), 258 La. 671, 247 So.2d 572. 1
The stated contention turns particularly upon the applicable validity of the Whole of the first paragraph of Article III of the reinsurance contract which, as noted, was entered into between Highway as primary carrier and Peerless as reinsurer. The first paragraph:
'Liability Reinsured:
'The actual payment in cash by the (Highway Insurance) Company of any loss shall be a condition precedent to any recovery under this agreement, and subject to such condition, the liability of the Reinsurer shall follow that of the company and shall be subject within the applicable policy limits in all respects to all the general and special stipulations, clauses, waivers an modifications of the Company's (Highway Insurance) policy, binder or other undertaking, and any endorsements thereon.'
When plaintiff Shannon sought, in the Wayne circuit, mandatory enforcement of his award, that court granted summary judgment for the defendant reinsurers. Shannon appealed to the Court of Appeals, which affirmed this way (29 Mich.App. (116, 185 N.W.2d 79, 86):
'The decision of the circuit court granting summary judgment to third-parties defendant is affirmed, but without prejudice to the right of plaintiff Shannon to proceed with an appropriate action before the workmen's compensation department for a determination, pursuant to findings made a part of the record, of the rights and obligations of Star Wrecking Company, Inc., together with those of the reinsurers.'
Federoff's separate proceeding was simply that of presenting a statutory claim for compensation arising out of his compensable accident. The Workmen's Compensation Department granted him benefits as claimed. On review Division 1 affirmed, this way (29 Mich.App. 16, 185 N.W.2d 86):
'The Federoff case is remanded to workmen's compensation department for proceedings consistent with this opinion; the Shannon case is affirmed, but without prejudice to plaintiff to pursue relief before the workmen's compensation department.'
Leave to review was granted February 19, 1971 (384 Mich. 808). The appeal was submitted November 2. The ensuing opinion for vacation of judgments and specific remand has been prepared by the assignee Justice. Recognizing both the clear rights and the pressing needs of the 2 plaintiffs, it is submitted to the other Justices this 19th day of November.
This Highway-Peerless reinsurance contract, unlike in distinctive respect the contracts of reinsurance which the respective courts considered in Fontenot's list, is governed by and subject to judicial enforcement in strict accord with the purpose, the declared public policy, and the express language of 3 original and long standing sections of the Michigan workmen's compensation act (§§ 1, 2 and 3 of Part IV, M.C.L.A §§ 414.1, 414.2, 414.3); in particular one precise sentence which pertinently appears--as it did from 1912 to 1969--as a part of said section 3. 2 That sentence by operation of law is read into this Highway-Peerless contract and automatically nullifies those identifiable words of 'exculpatory' non-liability (for instance as in Feldman v. Stein Bldg. & Lumber Co. (1967), 6 Mich.App. 180, 148 N.W.2d 544).
Section 3 reads in full, with the sentence referred to set forth in italics:
For the purposes of present decision the quoted contractual provision will be read on remand with the policy-subversive words
--'The actual payment in cash by the company of any loss shall be a condition precedent to any recovery under this agreement, and subject to such condition'--
fully stricken therefrom, leaving the remainder of the paragraph intact and applicable to the prompt enforcement of plaintiffs' rights. In sum, the direct liability of Peerless and Excess to plaintiffs will be enforced as if the first paragraph of the reinsurance contract, under heading of 'Liability Reinsured,' had...
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