Comerica Bank v. Lexington Ins. Co.

Citation3 F.3d 939
Decision Date02 July 1993
Docket NumberNo. 92-1576,92-1576
PartiesCOMERICA BANK, Plaintiff-Appellant, v. LEXINGTON INSURANCE COMPANY, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (6th Circuit)

Eric A. Linden (argued), Susan M. Bakst (briefed), Jaffe, Raitt, Heuer & Weiss, Detroit, MI, for plaintiff-appellant.

Kenneth M. Zorn (argued & briefed), Michael C. McKinnon, Reynolds, Beeby, Magnuson & Kenny, Detroit, MI, for defendant-appellee.

Before: KENNEDY and SILER, Circuit Judges, and CONTIE, Senior Circuit Judge.

CONTIE, Senior Circuit Judge.

Plaintiff-appellant, Comerica Bank, appeals the district court's grant of summary judgment to defendant-appellee, Lexington Insurance Co., in this diversity insurance contract case.

I.

This case involves an insurance coverage dispute between plaintiff Comerica and defendant Lexington Insurance Co. On January 1, 1984, Comerica purchased a Trust Department Errors and Omissions Policy issued by Lexington (hereinafter, "the insurance policy"). The policy covered claims made against the bank from January 1, 1984 until January 1, 1987.

The actions taken by the bank's trust department relating to this lawsuit are as follows: On May 6, 1976, C. Carlton Prichard, the sole owner and shareholder of Earl C. Smith, Inc. (hereinafter, "the company"), died testate. His will provided that his employee, Ronald C. Murrell, 1 would have the right of first refusal to purchase all of the capital stock of the company. Detroit Bank & Trust which is now Comerica Bank (hereinafter, "the bank") was appointed executor of Prichard's estate.

The bank recognized the right of first refusal in Mr. Murrell, and in order to establish the fair market value of the Smith company stock, solicited bids. The highest bid ($2,850,000) was received from Paragon Transport, Inc. (hereinafter, "Paragon"). In a letter of November 17, 1976, Detroit Bank & Trust advised Mr. Murrell that he had until December 15, 1976 to purchase the stock for $2,850,000 and Murrell exercised his right of first refusal by tendering a $50,000 deposit.

On January 21, 1977, Murrell notified the executor of the trust that Manufacturer's National Bank, one of the banks from which he had been seeking financing, had rejected his loan application. On January 21, 1977, Paragon increased its offer. On January 24, 1977, Detroit Bank & Trust advised Murrell in writing that his right to consummate the stock purchase had been terminated.

Although not objecting immediately to the termination of his right of first refusal, two days later, on January 26, 1977, Mr. Murrell wrote to the executor of the trust asserting the continued existence of his right to the stock. He continued to assert his right to purchase the stock and made efforts to obtain financing from both Michigan and out-of-state banks. A loan application was already before the Central Loan Committee of Michigan National Bank of Port Huron and was approved on February 2, 1977.

However, in the meantime on January 24, 1977 the bank had accepted the Paragon offer without any condition concerning Mr. Murrell's right of first refusal. On January 28, 1977, Murrell initiated an action in St Clair County Probate Court to prevent the sale of the stock to Paragon and to require sale to himself.

On February 28, 1977, the St. Clair County Probate Court ruled that the bank, as executor of the estate, had improperly terminated Murrell's right of first refusal and issued a preliminary injunction, enjoining the sale of stock to anyone other than Murrell. 2 On March 10, 1977, the bank entered into an agreement concerning the sale of the stock to Murrell. At this point, the bank had entered into two legally enforceable contracts for the sale of the same stock with two different parties--Murrell and Paragon.

On July 27, 1977, Paragon filed suit in the St. Clair County Circuit Court against Detroit Bank & Trust as executor of the estate of C. Carlton Prichard. The complaint alleged that the bank had breached its contract to sell the stock to Paragon and sought specific performance or money damages. The litigation was stayed pending the appeal of the St. Clair County Probate Court injunction prohibiting the sale of the stock to anyone but Murrell. After the 1981 Michigan Supreme Court decision, ordering the sale of the stock to Murrell, Paragon's action for breach of contract proceeded to trial. Ultimately, a judgment of approximately $2,700,000 against the bank as executor of the estate was entered in July 1986. After Paragon had been awarded over 2.7 million in money damages in its action against the estate for Comerica's breach of its contract to sell the Smith company stock to Paragon, there was approximately only $600,000 left in the estate to satisfy the judgment.

On October 10, 1986, the beneficiaries of the Prichard estate filed a petition in St. Clair County Probate Court to surcharge and remove the bank as executor of the estate due to alleged mishandling of the estate. The petition alleged that the bank acted wrongfully in accepting the offer of Paragon to purchase the Smith company stock while Murrell's right of first refusal was in effect. It also alleged that as a result of the actions of the bank, the estate was embroiled in litigation instituted by Murrell and Paragon. 3 The petition demanded surcharge against Comerica of all judgments, legal fees, and expert witness fees resulting from the litigation, and all executor fees paid by the estate to Comerica.

In 1984, plaintiff Comerica had acquired a Trust Department Errors and Omissions Policy from defendant Lexington Insurance Company. As required by the terms of the policy, Comerica notified Lexington of the surcharge action as soon as it became aware of the asserted claims. Lexington refused to defend or indemnify Comerica in this action, taking the position that certain exclusions in the insurance policy barred coverage.

In September 1990, Comerica settled the surcharge action with the beneficiaries of the Prichard estate, and in a settlement agreement agreed to defend and indemnify the beneficiaries against certain other claims which might be brought. Pursuant to the insurance policy, Comerica then demanded payment from Lexington both for the amount it contributed towards the settlement and for attorneys' fees incurred in defending the surcharge action. It also demanded that Lexington honor the settlement indemnification provision. Lexington refused to honor these demands.

On September 11, 1990, Comerica filed a complaint in the United States District Court for the Eastern District of Michigan, seeking damages in the amount Comerica had paid pursuant to its settlement agreement with the beneficiaries ($1,200,000), all defense costs associated with the surcharge action ($29,000), and a declaratory judgment requiring Lexington to defend and indemnify the estate's beneficiaries in accordance with the settlement agreement. On April 2, 1992, the district court granted defendant's motion for summary judgment. This timely appeal followed.

II.

In the present case, the district court ruled that the exclusionary language in the insurance policy exempted defendant from providing insurance for the litigation at issue. The court held that summary judgment should be granted to defendant because defendant's interpretation of the exclusionary language of the policy was the only reasonable interpretation and the policy was not susceptible to two different interpretations.

A motion for summary judgment under Fed.R.Civ.P. 56 may be granted if there is no genuine issue of material fact that remains to be decided and the moving party is entitled to judgment as a matter of law. In re Atlas Concrete Pipe, Inc., 668 F.2d 905 (6th Cir.1982); Blakeman v. Mead Containers, 779 F.2d 1146 (6th Cir.1985). Under Michigan law, which governs this diversity action, the rules for construction of an insurance contract are the same as for any other written contract. Hall v. Equitable Life Assurance Society, 295 Mich. 404, 295 N.W. 204 (1940). Policy language in an insurance contract is to be given its ordinary meaning unless it is apparent from a reading of the whole instrument that a different or special meaning was intended. Sump v. St. Paul Fire & Marine Ins. Co., 21 Mich.App. 160, 175 N.W.2d 44 (1970); Ford Motor Credit Co. v. Aetna Casualty & Surety Co., 717 F.2d 959 (6th Cir.1983). If the insurance contract is deemed ambiguous and susceptible to two different interpretations, the interpretation that is most favorable to the insured must be adopted. Century Boat Co. v. Midland Ins. Co., 604 F.Supp. 472 (W.D.Mich.1985). An insurance policy is ambiguous if it is susceptible to two different reasonable interpretations. Arrigo's Fleet Service, Inc. v. Aetna Life and Casualty Co., 54 Mich.App. 482, 221 N.W.2d 206 (1974).

III.

Plaintiff Comerica contends that the district court improperly granted defendant's motion for summary judgment because the exclusionary language of Endorsement II of the policy is ambiguous and does not bar coverage of the surcharge action brought by the beneficiaries of the estate against the bank in 1986.

The insuring agreement at issue provided coverage to Comerica from January 1, 1984 to January 1, 1987, for $10,000,000 with a $100,000 deductible, for wrongful acts resulting:

from the rendering of or failure to render services solely in the Insured's capacity as: ... [e]xecutor or administrator of estates....

The insuring agreement required that the claim be made against Comerica during the policy period, that the claim be reported to the insurance company during the policy period, and that the wrongful act occur during the policy period. The policy also included an exclusion contained in Endorsement II, which provides:

In consideration of the premium charged, it is understood and agreed that this policy excludes all claims arising from all pending and/or prior litigation as well as all future claims arising...

To continue reading

Request your trial
56 cases
  • AT&T Corp. v. Clarendon America Insurance Co., C.A. No. 04C-11-167 (JRJ) (DE 4/13/2006)
    • United States
    • United States State Supreme Court of Delaware
    • 13 Abril 2006
    ...exclusion to apply.'"). See also Nat'l Union Fire Ins. Co. v. Willis, 296 F.3d 336, 341-42 (5th Cir. 2002); Comerica Bank v. Lexington Ins. Co., 3 F.3d 939, 942-44 (6th Cir. 1993). Accord ML Direct, Inc., 93 Cal. Rptr 2d 846, 852-53 (Cal. Ct. App. 215. Juszkiewicz, 1999 WL 1044330, at *2 (9......
  • HOME INS. CO. OF IL (NH) v. Spectrum Info. Tech.
    • United States
    • U.S. District Court — Eastern District of New York
    • 15 Julio 1996
    ...nexus for the exclusion to apply and, accordingly, are consistent with the Court's conclusions. For example, in Comerica Bank v. Lexington Ins. Co., 3 F.3d 939 (6th Cir.1993), the court concluded that subsequent litigation was excluded under the prior and pending litigation provision becaus......
  • Aetna Cas. & Sur. Co. v. Dow Chemical Co., 93-73601.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • 29 Octubre 1998
    ...The rules of construction for insurance contracts are the same as those for any other written contract. Comerica Bank v. Lexington Ins. Co., 3 F.3d 939, 942 (6th Cir.1993). The question of whether a contract is ambiguous is a question of law for the court. Steinmetz Elec. Contractors v. Loc......
  • 51382 Gratiot Ave. Holdings, LLC v. Chesterfield Dev. Co.
    • United States
    • U.S. District Court — Eastern District of Michigan
    • 12 Diciembre 2011
    ...the Loan Agreement from its assets as the same shall become due.” This, of course, is an untenable result. See Comerica Bank v. Lexington Ins. Co., 3 F.3d 939, 944 (6th Cir.1993) (“Under Michigan law, ‘the office of interpretation or construction is to ascertain the intention of the parties......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT