Cleveland Indians Baseball Co. v. New Hampshire Ins. Co.

• Decision Date: 23 December 2013
• Docket Number: No. 12–1589.,12–1589.
• Citation: 727 F.3d 633
• Parties: CLEVELAND INDIANS BASEBALL COMPANY, L.P., Fourth–Party Plaintiff–Appellant, v. NEW HAMPSHIRE INSURANCE COMPANY, Defendant–Appellee, CSI Insurance Group, Fourth–Party Defendant–Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

727 F.3d 633

CLEVELAND INDIANS BASEBALL COMPANY, L.P., Fourth–Party Plaintiff–Appellant,

v.NEW HAMPSHIRE INSURANCE COMPANY, Defendant–Appellee,CSI Insurance Group, Fourth–Party Defendant–Appellee.

No. 12–1589.

United States Court of Appeals,Sixth Circuit.

Argued: April 30, 2013.

Decided and Filed: Aug. 23, 2013.

Rehearing and Rehearing En Banc Denied Dec. 23, 2013.^*

ARGUED:Michelle A. Thomas, Thomas, DeGrood & Witenoff, P.C., Southfield, Michigan, for Appellant. Trent B. Collier, Collins, Einhorn, Farrell & Ulanoff, P.C., Southfield, Michigan, for Appellee CSI. ON BRIEF:Michelle A. Thomas, Thomas, DeGrood & Witenoff, P.C., Southfield, Michigan, for Appellant. Trent B. Collier, Collins, Einhorn, Farrell & Ulanoff, P.C., Southfield, Michigan, for Appellee CSI. Jeffrey C. Gerish, New Hampshire Insurance Company, Bloomfield Hills, Michigan, for Appellee New Hampshire Insurance.

Before: MERRITT, CLAY, and DONALD, Circuit Judges.

MERRITT, J., delivered the opinion of the court, in which DONALD, J., joined. CLAY, J. (pp. 643–45), delivered a separate dissenting opinion.

OPINION

MERRITT, Circuit Judge.

In this diversity case, an accident occurred at a “Kids Fun Day” event before a Cleveland Indians baseball game on June 12, 2010. Douglas Johnson and David Brown were attending the game as spectators. They were looking at an exhibit outside the Kids Zone when a large inflatable slide collapsed on them. Mr. Johnson died nine days later. This insurance dispute arises out of a lawsuit filed against the Cleveland Indians and other parties by Mr. Brown and the estate of Mr. Johnson in an Ohio state court for punitive and compensatory damages. The question is whether the district court erred when it concluded that the insurance broker, defendant CSI Insurance Group, who mistakenly failed to obtain the insurance that would cover the accident, could not be liable in negligence. For the reasons that follow, we affirm the judgment in favor of New Hampshire Insurance Company but reverse the judgment in favor of CSI Insurance Group and remand for further proceedings.

I.

Four parties were involved in a series of transactions to obtain the inflatable slide and the insurance coverage on it: Cleveland Indians Baseball Company, L.P., National Pastime Sports, LLC, CSI Insurance Group and New Hampshire Insurance Company. National Pastime Sports, not a party to this appeal, entered into a contract with plaintiff Cleveland Indians Baseball Company to produce “Kids Fun Day” events before several Cleveland Indians games during the summer of 2010. As part of the entertainment, National Pastime agreed to provide the inflatable slide that collapsed. Also in accordance with the agreement, National Pastime was required to purchase a comprehensive general liability insurance policy naming the Cleveland Indians as an additional named insured. “Production Agreement” dated Jan. 4, 2010, at ¶ 6. National Pastime engaged an independent insurance broker, defendant CSI Insurance Group, to procure the required policy. See Annual Events Application, dated Mar. 2, 2010. On the first page of the Application sent to the insurance broker, under the heading “Qualification Questions,” the box is checked to indicate that the events will have “bounce houses or inflatables.” Id. The insurance broker, CSI, subsequently provided National Pastime with a proposal for a policy from defendant New Hampshire Insurance Company for a premium of $2,590, which was accepted. A “Certificate of Liability Insurance” was issued on April 27, 2010, more than six weeks before the accident occurred. It named the insured as “National Pastime Sports LLC” and the Certificate Holder as “Cleveland Indians Baseball Company LP.” It is undisputed that neither National Pastime nor the Indians had received a copy of the full policy at the time of the accident that killed Mr. Johnson and underlies this insurance dispute.

Shortly after the accident, National Pastime contacted the insurance broker, CSI, to notify it of the accident. It was then that National Pastime learned that, despite its specific request on the application for insurance sent to CSI, that CSI had mistakenly failed to procure a comprehensive liability policy that expressly covered inflatables. In an email exchange between CSI and National Pastime on June 22, 2010, National Pastime points out that it checked the box on the cover page of the application that inflatables would be used at the event. In response, an employee of CSI emailed back, “Oh, ok. Sorry, I guess I missed it. I'm so used to quoting up your events I think I hardly look a anything but the dates and the details of the event.” The next email to National Pastime goes on to say that CSI will submit the claim to the carrier [New Hampshire Insurance] but seems to begin to deny any fault: “however, inflatable's [sic] are excluded on the policy you purchase[d] from us. Whoever own the inflatable's [sic] are [sic] to carry insurance on them and name you as Additional Insured's [sic] on their policy.¹ I don't believe I've ever seen you indicate on your applications that inflatable's [sic] are at your events, but please note, the exclusion is listed on the quotes we sent over to you.” See Email exchange between Lori Nelson of CSI Insurance Group and Jason Hockman of National Pastime, dated June 22, 2010.

The underlying suit by Johnson and Brown was submitted to New Hampshire Insurance, which denied any responsibility to defend or indemnify National Pastime or the Cleveland Indians based on the “amusement device” exclusion in the policy. Letter from York Services Group, the claim administrator for New Hampshire Insurance, dated Aug. 11, 2010. National Pastime filed a complaint against New Hampshire Insurance seeking a declaration that it defend and indemnify National Pastime in the underlying wrongful death suit.² New Hampshire Insurance subsequently filed a counterclaim against National Pastime and a third-party complaint against the Indians stating that it was not required to defend or indemnify under the terms of the policy. The Indians then filed a counterclaim against New Hampshire Insurance for a declaratory judgment seeking coverage under the policy and filed a complaint against CSI, the insurance broker that failed to procure the insurance as requested.

CSI moved for summary judgment on the Indians' claims pertaining to CSI's failure to procure the proper insurance, which the district court granted on November 17, 2011. The district court held that “any duty owed to them [Cleveland Indians] by CSI must lie in statute or contract” and ruled out any negligence claim. Nat'l Pastime Sports, LLC v. CSI Ins. Group, 830 F.Supp.2d 348, 354 (E.D.Mich.2011). The district court denied the Indians' Motion for Reconsideration. Opinion and Order, Mar. 29, 2012.

New Hampshire Insurance filed a Motion for Judgment on the Pleadings pertaining to the claims to defend and indemnify brought by National Pastime and the Indians. The district court granted New Hampshire Insurance's motion on the pleadings, finding that the insurance policy was unambiguous in its exclusion of coverage for injuries arising out of the inflatable slide. Amended Opinion and Order, dated Apr. 18, 2012. In a previous decision, this Court agreed with the district court that the policy excluded coverage for the inflatable slide.³ For the reasons given in our opinion in Nat'l Pastime Sports, LLC v. New Hampshire Ins. Co., No. 12–1588, we affirm the judgment of the district court as to the Cleveland Indians' appeal against New Hampshire Insurance Company.

The district court entered a final judgment on all claims on April 18, 2012. The Indians filed a timely appeal to this Court alleging error in the November 17, 2011, Order Granting Summary Judgment to CSI, the March 12, 2012, Order Denying Reconsideration of the November 17, 2011, Opinion and Order, and the April 18, 2012, Amended Opinion and Order Granting New Hampshire Insurance Company's Motion for Judgment on the Pleadings.

II.

The Indians filed a complaint against the insurance broker, CSI Insurance Group, claiming tort injury due to CSI's negligent failure to procure the insurance requested by National Pastime Sports for the “Kids Fun Day” events, as well as the Indians' reliance on a Certificate of Insurance they received from CSI as notice that the requested coverage was in place. The Indians raise two arguments in this appeal: (1) the district court erred in granting summary judgment to CSI on the Indians' claims of negligence; and (2) the district court erred in holding that the Indians did not bring a claim of negligent misrepresentation or in not allowing them to amend their complaint and further holding that, in any event, such a claim would fail on the merits even if properly raised.⁴

The Indians set forth in their complaint several claims based on various negligence theories based on CSI's failure to procure the requested insurance and the Indians' reliance on the Certificate of Insurance they received from CSI, which caused the Indians to proceed with the “Kids Fun Day” under the false belief that they were covered by the insurance they had requested and for which they had paid. The district court found that, as a matter of law, CSI did not owe a duty of care to the Indians because (1) CSI's professional relationship was with National Pastime only; (2) no privity of contract existed between the Indians and CSI and, in any event, the Indians' negligence claims were not “separate and distinct” from National Pastime's contract claims; ⁵ and (3) the Indians cannot recover for economic loss from CSI's negligence.

The district court acknowledges, and we agree, that there is no Michigan case law directly on the issue of an insurance broker's duty to an additional insured. Hence, we are left to examine the Michigan case law and decide what we think the Michigan Supreme Court would hold in this circumstance. Erie R.R. Co. v. Tompkins, 304 U.S....