Act-1 Grp., Inc. v. Alt. Care Staffing, Inc., Case No. 13-cv-13397
| Decision Date | 20 August 2015 |
| Docket Number | Case No. 13-cv-13397 |
| Parties | The ACT-1 Group, Inc. d/b/a ACT-1 Personnel Services, Plaintiff, v. Alternative Care Staffing, Inc.; Evanston Insurance Company, and Markel Corp. d/b/a Markel Shand Corp., Defendants. |
| Court | U.S. District Court — Eastern District of Michigan |
Hon. Judith E. Levy
This is an insurance contract case. Pending is defendants Evanston Insurance Company ("Evanston") and Markel Corporation's ("Markel") motion for summary judgment. (Dkt. 18.)
On March 6, 2007, Gloria Brown died at the Henry Ford Hospital in Detroit, Michigan while being treated by Alisha Noel, a nurse employed by defendant Alternative Care Systems ("ACS"). The HenryFord Health System ("HFHS") contracted with plaintiff, ACT-1 Group, Inc. ("ACT-1"), a staffing company, to provide nursing staff for HFHS hospitals. (Dkt. 28-4 at 2.) ACT-1 then subcontracted with ACS to provide the Henry Ford Hospital with nurses. (Id.)
On August 21, 2008, the estate of Gloria Brown sued HFHS for medical malpractice, alleging that Noel was negligent in treating Brown ("the Brown litigation"). (Dkt. 28-4 at 4.) The Estate of Gloria Brown did not name ACS or Evanston as defendants in that lawsuit. (Id.)
At some time between January and March of 2010, the Brown litigation settled for $877,243.03. (Id.) Neither ACS nor Evanston participated in that lawsuit or settlement. (Id.)
On September 10, 2010, HFHS sued ACT-1 and ACS in Michigan state court for indemnification in the Brown lawsuit. (Dkt. 1-2 at 147.) The court entered judgment against ACT-1 and ACS in that suit for $877,247.03. (Dkt. 1-2 at 159.)
ACS purchased medical malpractice insurance through Evanston from May 28, 2008 to May 28, 2009. (Dkt. 28-5 at 2.) Evanston is asubsidiary of Markel. (Dkt. 28-17 at 3.) ACS' 2008-2009 policy with Evanston had a retroactive date of May 28, 2003, meaning that the policy would cover incidents occurring between May 28, 2003 and May 28, 2009. The retroactive date applied because ACS had maintained continuous coverage with Evanston from May 28, 2003, until May 28, 2009.
However, ACS financed its insurance premiums through loans from the National Premium Budget Plan (NPBP), and the NPBP cancelled ACS' insurance policy when ACS failed to make its monthly payments on the loan. (Dkt. 28-2 at 3.) ACS' policy was cancelled effective March 25, 2009. (Id.) Between March 25, 2009 and June 24, 2009, ACS did not have medical malpractice insurance coverage through Evanston. (See id.)
On June 23, 2009, as a part of the process required to secure coverage through Evanston again, ACS' office manager, Raquel Corner, filled out and signed Evanston's Application for General Liability Insurance and verified that no "claim or suit [had] been brought against [ACS] and/or any of [ACS'] employees" at that time. (Dkt. 28-8 at 6.) In the application, she also confirmed that she was unaware of "anycircumstances which may [have] result[ed] in a malpractice claim or suit being made or brought against [ACS] or any of [ACS'] employees." (Id.) As a result of the application, ACS began a new Evanston insurance policy on June 24, 2009, with no retroactive coverage. (Dkts. 28-17 at 8; 28-2 at 4.) That policy lasted until June 24, 2010. (Dkt. 28-2 at 4.)
On September 2, 2008, Elizabeth Amaru, an associate of HFHS' attorney, Anthony Paradiso, called ACS regarding Alisha Noel. (Dkt. 28-20 at 4; see Dkt. 28-9.) Amaru does not remember the exact communication, but she believes that she contacted ACS to explain the significance of the Brown litigation and tell ACS that they were being sued. (Id. at 4-5.) On September 9, 2008, Paradiso sent a letter to Corner asking her to tell ACS about the Brown litigation. (Dkt. 28-9.) In his deposition, Paradiso referred to this letter as a "notification letter" that contained "no claim request." (Dkt. 28-19 at 7.) Corner testified that she cannot remember exactly what she did with the letter after receiving it, but that she likely passed it on to Tabitha Magotti,the owner of ACS, to give to Evanston because that is what she normally would have done with such a letter. (Dkt. 28-18 at 5-6, 12.)
No one at Evanston or on behalf of Evanston had any discussion with the owners of ACS or Corner until Fall 2009. (Dkts. 28-2 at 7; 28-17 at 10-11, 12.) On September 15, 2009, an insurance broker forwarded the Brown litigation papers, including the May 11, 2009 claim from Paradiso, and a copy of an email from ACT-1's attorney to the claims services manager at Markel. (Dkt. 28-2 at 7.) Two days later, John Foley, the claims manager for Evanston, contacted ACT-1's attorney for additional information. (Dkts. 28-17 at 14, 15; 18-12.) Foley then assigned the claim to Jagady Blue, senior claims manager for Markel, for handling. (Dkts. 28-17 at 15; 28-14 at 2.) Blue searched the record and concluded that no claim was made against ACS during ACS' policy period that would have triggered coverage. (Dkt. 28-2 at 6.) ACS' policy through Evanston expired on June 24, 2010.
On September 10, 2010, HFHS sued ACT-1 and ACS in Michigan state court for its settlement costs, plus additional costs and fees. (Dkt. 1-2 at 147.) On August 5, 2011, that court ordered ACT-1 to indemnifyHFHS and entered judgment against ACT-1 for $877,243.03. (Id. at 159.)
ACT-1 sued ACS, Evanston, and Markel on July 15, 2013, claiming that ACS breached its subcontracting agreement by failing to indemnify ACT-1 in the Brown litigation. (Id. at 4.) ACT-1 also sued Evanston and Markel as a third-party beneficiary under MCL § 600.1405, claiming that Evanston breached its 2008 insurance agreement with ACS by failing to indemnify ACS in the Brown litigation. (Id. at 5; Dkt. 18-4 at 4-5.) ACT-1 alleges that since Evanston could have indemnified ACS in the Brown lawsuit, ACT-1 is now entitled to sue Evanston as a third-party beneficiary to enforce the ACS-Evanston insurance contract. (Dkt. 28 at 4.)
ACT-1 has been unable to serve ACS, and ACS has never made an appearance in this lawsuit.
On September 26, 2014, defendants filed a motion for summary judgment on two issues: (1) whether plaintiff ACT-1 properly filed an insurance claim with defendant ACS during the period of ACS' insurance coverage, and (2) whether Markel is an insurer. (Dkt. 18.)
Summary judgment is proper where "the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). The Court may not grant summary judgment if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248. The Court "views the evidence, all facts, and any inferences that may be drawn from the facts in the light most favorable to the nonmoving party." Pure Tech Sys., Inc. v. Mt. Hawley, Ins. Co., 95 F. App'x 132, 135 (6th Cir. 2004) (citing Skousen v. Brighton High Sch., 305 F.3d 520, 526 (6th Cir. 2002)).
Plaintiff argues that it provided proper notice to ACS and Evanston under the contract. It argues that it notified ACS of a claim directly by virtue of phone calls on September 2, October 17, and October 20, 2008, and a letter dated September 9, 2008. (Dkt. 30 at 4, 5, 8, 12.) Plaintiff argues that it notified Evanston indirectly as a result of those same communications with ACS. (Id. at 5, 12.)
Defendant moves for summary judgment on two grounds: (1) that ACT-1 failed to file a claim with ACS or Evanston during the period of ACS' insurance coverage and (2) that Markel Corporation is not an insurer.
Under Michigan law, which governs this contract, when a contract involves "plain and unambiguous contract terms," those terms must be interpreted in their "ordinary and common meaning without further construction." Mich. Chem. Corp. v Am. Home Assurance Co., 728 F.2d 374, 377 (6th Cir. 1984). The General Liability portion of ACS' insurance contract defines a claim as a "notice received by the [i]nsured of an intention to hold the [i]nsured responsible for: (1) a [b]odily [i]njury." (Dkt. 28-9 at 17.) The Professional Liability portion of that contract defines a claim as "a demand received by the [i]nsured for monetary damages or services." (Id. at 8.)
In Michigan, an insurance claim must convey an intention to hold responsible the entity against whom the claim was filed. See Continental Cas. Co. v. ENCO Assocs., Inc., 66 Mich. App. 46 (1975); Central Wholesale Co. v. Chesapeake & O.R. Co., 366 Mich. 138 (1962). In Central Wholesale Co., a produce buyer and a railroad inspector fileda joint report indicating that a shipment of fruits and vegetables the buyer had ordered had arrived damaged and spoiled. Central Wholesale Co., 366 Mich. at 142-43. Although the joint report notified the seller that the buyer had suffered harm, the Court held that the joint report did not constitute a valid insurance claim because the report did not formally or informally demand payment from the shipper. Id. at 149. In contrast, in Continental Cas. Co., when the plaintiff's architect notified the defendants' representative that design faults had been discovered and expressly stated that plaintiffs would be holding defendants liable for the cost to repair the harm, the notification constituted a valid insurance claim. Continental Cas. Co., 66 Mich. App. at 50-51.
ACS' insurance contract provides claims-made coverage, which means that only claims first made during the policy period will be covered. (Dkts. 28-10.) ACS was covered by Evanston insurance from May 28, 2003 to March 25, 2009, under a policy with a retroactive date of May 28, 2003, and from June 24, 2009 to June 24, 2010, with a retroactive date of June 24,...
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