Amerisure Mut. Ins. Co. v. Carey Transp., Inc.
| Decision Date | 26 September 2008 |
| Docket Number | No. 1:06-CV-892.,1:06-CV-892. |
| Citation | 578 F.Supp.2d 888 |
| Parties | AMERISURE MUTUAL INSURANCE COMPANY, Plaintiff, v. CAREY TRANSPORTATION, INC., a Florida corporation, and Great West Casualty Co., as subrogee of February Fourteen, Inc., Defendants. Carey Transportation, Inc., Counterclaim-Plaintiff, v. Amerisure Mutual Insurance Company, Counterclaim-Defendant. Carey Transportation, Inc., Third-Party Plaintiff, v. Adriatic Insurance Company, Third-Party Defendant. |
| Court | U.S. District Court — Western District of Michigan |
Constantine N. Kallas, Michele Leigh Riker-Semon, Kallas & Henk PC, Bloomfield Hills, MI, for Plaintiff/Counterclaim-Defendant.
Thomas R. Termaat, Siebers Mohney PLC, Grand Rapids, MI, for Defendants/Counterclaim-Plaintiff/Third-Party Plaintiff.
Michael J. Tauscher, Frederick R. Damm, Scopelitis Garvin Light Feary PC, Detroit, MI, for Defendants.
Gary A. Maximiuk, Wheeler Upham PC, Grand Rapids, MI, for Third-Party Defendant.
Granting in Part & Denying in Part Amerisure's Motion for Summary Judgment;
Granting in Part & Denying in Part Carey Transport's Motion for Summary Judgment;
Granting Adriatic's Motion for Summary Judgment on Carey's Third-Party Complaint;
This is a diversity insurance coverage dispute governed by Michigan state law. Plaintiff Amerisure Mutual Insurance Company ("Amerisure") issued a commercial trucker's insurance policy to defendant Carey Transportation, Inc. ("Carey"). Non-party February Fourteen, Inc. ("FFI") hired Carey to transport goods to Florida. Carey did so in May 2005, using its own tractor to pull an attached trailer owned by FFI. A fire broke out which damaged Carey's tractor, FFI's attached trailer, and cargo inside the trailer.
Defendant Great West Casualty Company ("Great West") provided coverage to FFI. In early 2006, Great West (as subrogee of FFI) sued Carey in this court, Civil Case No. 1:2006-cv-106 ("the underlying action"). Great West asserted claims for breach of contract, negligence, and strict liability under the federal statutory provision known as the Carmack Amendment. In early 2006, Amerisure sent a letter to Carey entitled "Reservation of Rights", advising that it believed that policy exclusion number 6 precluded coverage, that it reserved its right and defenses, and that it would investigate further. Exclusion 6 (hereinafter the "care, custody or control" exclusion) excludes coverage for "`property damage' to or `covered pollution cost or expense' involving property owned or transported by the `insured' or in the `insured's' care, custody or control."
In November 2006, Amerisure sent a second letter to Carey entitled "Reservation of Rights", this time advising that it believed policy exclusion number 2 and policy exclusion number 6 precluded coverage, and again reserving its rights and defenses and promising further investigation. Exclusion 2 (hereinafter "the contractual liability exclusion") excludes coverage for liabilities "assumed in a contract or agreement that is an `insured contract' [as defined elsewhere in the policy,] provided that the `bodily injury' or `property damage' occurs subsequent to the execution of the contract or agreement." Exclusion 2 states that it admits two exceptions, which will be discussed below. About that same time, in late 2006, about six months after Great West v. Carey was instituted, Amerisure assumed Carey's defense. That action was stayed pending resolution of the instant action.
In this action, Amerisure asserts claims for declaratory relief under the federal Declaratory Judgment Act, and for restitution and unjust enrichment under Michigan common law. Amerisure seeks a declaration that it has no duty to indemnify Carey or Great West because the Amerisure-Carey policy's exclusions 2 and 6 each eliminate coverage for all types of damages sought in the underlying action. Amerisure also seeks a declaration that it has no duty to defend Carey in the underlying action, and that it is therefore entitled to recoup the expenses it has incurred defending Carey in the underlying action. Amerisure and Carey have cross-moved for summary judgment on the entire amended complaint. For the reasons that follow, the court will grant summary judgment to Amerisure.
Carey first contends that Amerisure's March 2006 letter to Carey, although entitled "Reservation of Rights", constituted a final denial of coverage, and Carey was obligated to raise all potential grounds for denial of coverage at that time. Therefore, Carey contends, Amerisure waived or is estopped from invoking Exclusion 2, because its March 2006 letter failed to mention it as a basis for denying coverage. The court rejects Carey's arguments on this score: the court determines that Amerisure's March 2006 letter was not a final or conclusive denial of coverage and could not reasonably have been perceived as such. Therefore, Amerisure's invocation of Exclusion 2 in its November 2006 letter was sufficient to permit Amerisure to rely on Exclusion 2 now as a basis for denying coverage. As a matter of law, the court also holds that, under these circumstances, the Michigan Supreme Court would adhere to the general rule announced in Ruddock (Mich.1920) that waiver or estoppel will not operate against an insurer where doing so would require coverage that is not-provided by the policy or is expressly excluded by the policy. Based on the Michigan Court of Appeals decisions in Lee (1995) and Smit (1995) and the decisions discussed therein, the Michigan Supreme Court might recognize the Lee-Smit exceptions to the Ruddock rule, but the exceptions would not apply here.
As for Exclusion 6, the court determines that it is not so broad or ambiguous as to violate federal or Michigan public policy as suggested by Carey. Nor is exclusion 6's phrase "care, custody or control" ambiguous so as to require a jury to decide, as a matter of fact, what Amerisure and Carey intended those words to mean. Rather, exclusion 6 is sufficiently clear that its interpretation is a question of law for the court, aided greatly by Arrigo's (Mich.App.1974)'s detailed explanation of what the phrase means and when it should be found to apply. The court then determines that Exclusion 6 applies and excludes coverage for all the damages at issue. The facts of this case satisfy both independent criteria for application of Exclusion 6. First, the tractor, the attached trailer, and the cargo were all being "transported" by the insured (Carey); the tractor is doubly excluded under the first part of Exclusion 6 because it was "owned" by the insured (Carey). Second, the tractor, the attached trailer, and the cargo were all within "the care, custody, or control" of the insured (Carey).
The court next considers Exclusion 2, which excludes coverage for "liability assumed by the insured [(Carey)] under any contract or agreement." Exception "a" provides that Exclusion 2 does not apply to liability for damages that the insured (Carey) "[a]ssumed in a contract or agreement that is an `insured contract' [as defined elsewhere in the policy,] provided that the `bodily injury' or `property damage' occurs subsequent to the execution of the contract or agreement." Exception "b" provides that Exclusion 2 does not apply to liability for damages "[t]hat the `insured' would have in the absence of the contract or agreement." The court determines that Exception 2 applies, as Great West's complaint in the underlying action seeks to impose liability on Carey independent of any contract or agreement, namely liability for negligence under Michigan common law (count one in the underlying action) and strict liability under federal statute (count two in the underlying action). Because Exception "b" applies, Exclusion 2 does not apply. There is no need to determine whether Exception "a" might also apply.
Finally, Carey contends that Amerisure has a duty to defend it in the underlying action. Following Michigan authority that the duty to defend is broader than the duty to indemnify, the court holds that Amerisure does have a duty to defend Carey in the underlying action.
Amerisure issued a commercial automobile insurance policy # CA-1307-5620-30004, to Carey effective July 20, 2004 through July 20, 2005. See Am Comp ¶ 8 and Ex. G; Carey Ans ¶ 8; Great West Ans ¶ 8.1 In May 2005, FFI hired Carey to transport goods from Michigan to three Walgreen's retail stores in Florida. Carey made the first two deliveries without incident. While Carey was transporting the remaining goods to the third and final destination, the vehicle's front steer bearings failed, causing a fire that spread and destroyed Carey's tractor (referred to in the policy as a "power unit"), FFI's attached trailer, and FFI's cargo were destroyed. Deposition of Carey truck driver Derek Fowler ("Fowler Dep"), P's MSJ Ex D 74:20-25 and 75:1-10. Great West paid FFI $74,392.63 (the value of the entire cargo minus FFI's deductible). See Amerisure MSJ, Ex (Deposition of Steven Carey ("Carey Dep")) 86:2-7. (Carey has filed a third-party complaint contending that the cargo loss is covered by its policy with Adriatic, but Adriatic refuses coverage and has moved for summary judgment on the third-party complaint.)
The Underlying Action: Great West (subrogee of FFI) v. Carey (Amerisure's Insured)
Great West, as subrogee of FFI, sued Carey in this court, alleging that the fire was caused by Carey's negligent failure to maintain its tractor. See Am Comp., Ex. F (Great West's Comp. filed Feb. 10, 2006 in underlying action) ¶¶ 7-15.2
Amerisure first learned of the underlying action—Great West v. Carey Transportation, No. 1:2006-cv-106 (W.D.Mich.)—on February 15, 2006, when it received a copy of the complaint from Great West.3 On March 10, 2006, Amerisure received another copy of the complaint in the...
To continue reading
Request your trial
-
Leys v. Lowe's Home Centers, Inc.
...the choice-of-law rules and, if applicable, the substantive law of the forum State, Michigan. Amerisure Mut. Ins. Co. v. Carey Transp., Inc., 578 F.Supp.2d 888, 897 (W.D.Mich.2008) (Maloney, C.J.) (citing CenTra, Inc. v. Estrin, 538 F.3d 402, 409-10 (6th Cir.2008) (citing Himmel v. Ford Mot......
-
Lakeland Regional Health System v. Whi
...to a federal claim—federal courts generally enforce the parties' contractual choice of law. Amerisure Mut. Ins. Co. v. Carey Transp., Inc., 578 F.Supp.2d 888, 897 (W.D.Mich. 2008) (Maloney, C.J.) (citing Savedoff v. Access Group, Inc., 524 F.3d 754, 762 (6th Cir.2008) (citing Carnival Cruis......
-
Mid–century Ins. Co. A/K/A Farmers Ins. Co. v. Fish
...choice-of-law rules and, if applicable, the substantive law of the forum State, Michigan. Amerisure Mut. Ins. Co. v. Carey Transp., Inc., 578 F.Supp.2d 888, 897 (W.D.Mich.2008) (Paul L. Maloney, C.J.) (citing CenTra, Inc. v. Estrin, 538 F.3d 402, 409–10 (6th Cir.2008) (citing Himmel v. Ford......
-
State Farm Fire and Casualty Co. v. Liberty Ins. Underwriters, Inc.
...choice-of-law rules and, if applicable, the substantive law of the forum State, Michigan. Amerisure Mut. Ins. Co. v. Carey Transp., Inc., 578 F.Supp.2d 888, 897 (W.D.Mich.2008) (Paul L. Maloney, C.J.) (citing CenTra, Inc. v. Estrin, 538 F.3d 402, 409-10 (6th Cir.2008) (citing Himmel v. Ford......
-
Chapter 3
...Keely v. Fire Insurance Exchange, 833 F. Supp.2d 722 (E.D. Mich. 2011); Amerisure Mutual Insurance Co. v. Carey Transportation, Inc., 578 F. Supp.2d 888 (W.D. Mich. 2008). Seventh Circuit: Archer-Daniels-Midland Co. v. Phoenix Assurance Company of New York, 975 F. Supp. 1129 (S.D. Ill. 1997......
-
CHAPTER 3 The Insurance Contract
...Keely v. Fire Insurance Exchange, 833 F. Supp.2d 722 (E.D. Mich. 2011); Amerisure Mutual Insurance Co. v. Carey Transportation, Inc., 578 F. Supp.2d 888 (W.D. Mich. 2008). Seventh Circuit: Archer-Daniels-Midland Co. v. Phoenix Assurance Company of New York, 975 F. Supp. 1129 (S.D. Ill. 1997......