Cavalier Mfg. Co. v. Employers Ins. of Wausau

• Decision Date: 02 June 1995
• Docket Number: Docket No. 158681
• Citation: 211 Mich.App. 330,535 N.W.2d 583
• Parties: CAVALIER MANUFACTURING COMPANY, Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU and Bituminous Casualty Company, Defendants-Appellees, and Virginia Durand, Defendant.
• Court: Court of Appeal of Michigan — District of US

Page 583

535 N.W.2d 583

211 Mich.App. 330

CAVALIER MANUFACTURING COMPANY, Plaintiff-Appellant, v. EMPLOYERS INSURANCE OF WAUSAU and Bituminous Casualty Company, Defendants-Appellees and Virginia Durand, Defendant.

Docket No. 158681.

Court of Appeals of Michigan.

Submitted Jan. 17, 1995, at Detroit.

Decided June 2, 1995, at 9:30 a.m.

Released For Publication Aug. 3, 1995.

Mark Granzotto, Detroit, and Sheldon D. Erlich, Southfield, for Cavalier Mfg. Co.

Garan, Lucow, Miller, Seward, Cooper & Becker, P.C. by Thomas L. Misuraca and Robert D. Goldstein, Detroit, for Employers Insurance of Wausau.

Lacey & Jones by Michael T. Reinholm, Birmingham, for Bituminous Cas. Co.

Before CORRIGAN, P.J., and O'CONNELL and ALLEN, ^* JJ.

O'CONNELL, Judge.

Plaintiff employer appeals as of right the trial court's grant of summary disposition in favor of defendant insurance companies. We vacate the order granting summary disposition and remand for further proceedings.

Employers Insurance of Wausau provided plaintiff with worker's compensation and employer's liability insurance, and Bituminous Casualty Company provided excess coverage. Plaintiff brought a declaratory action to determine whether defendants were liable for a judgment entered against plaintiff in favor of employee Virginia Durand under the policies they issued to plaintiff.

On July 25, 1988, Virginia Durand lost both of her hands during the course of her employment with plaintiff when an industrial press "double tripped" while Durand was removing stamped product from the press. Durand brought suit against plaintiff in the Oakland Circuit Court. In order to avoid the exclusive remedy provision of the Worker's Disability Compensation Act (WDCA), M.C.L. § 418.131(1); M.S.A. § 17.237(131)(1), Durand claimed that plaintiff's actions and knowledge constituted an intentional tort as that term is used in the WDCA. She alleged that plaintiff had previously been cited by the Department of Labor, Bureau of Safety and Regulation, for violations of the Michigan Occupational Safety and Health Act (MIOSHA), M.C.L. § 408.1001 et seq.; M.S.A. § 17.50(1) et seq., on several occasions, and that plaintiff had failed to properly instruct and train its employees not to place their hands in the die "despite having knowledge of the dangers" and having "actual knowledge of the MIOSHA statutes prohibiting hands in die operation." She further alleged that plaintiff "specifically required hands in die operation" by its employees, and that no tongs were available to Durand while she was operating the press. Finally, she claimed that plaintiff negligently welded a bolt to a sprocket that partially controlled the timing of the press, and that the bolt broke, thereby causing the press to double trip.

Durand contended that this knowledge and action by the plaintiff constituted an intentional tort within the meaning of the WDCA. Where plaintiff had "actual knowledge of the potential catastrophic injuries to employees who placed their hands in the dies of the power press" and wilfully disregarded this knowledge despite being aware of a prior injury to another employee, plaintiff was alleged to have had "actual knowledge that an injury was certain to occur." Durand's complaint concluded that the facts and circumstances established "an intentional act to injure" on plaintiff's part.

Plaintiff moved for summary disposition, contending that Durand's suit was barred by the exclusive remedy provision of the worker's compensation act. The relevant provision of the WDCA provides that "[t]he right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury.... The only exception to this exclusive remedy is an intentional tort." M.C.L. § 418.131(1); M.S.A. § 17.237(131)(1). The circuit court ruled that Durand's allegations, if proven, would establish an intentional tort on the part of plaintiff within the meaning of the WDCA, and accordingly denied plaintiff's motion. After this ruling, Wausau, plaintiff's liability insurer, terminated its defense of plaintiff on the basis of an intentional acts exclusion in its policy. ¹

Several months later, Durand and plaintiff entered into a consent judgment, ending the prosecution of that action. However, shortly before entryof the consent judgment, plaintiff filed a declaratory action to determine whether its policy with Wausau encompassed its liability to Durand. Defendants moved for summary disposition on the basis of the intentional acts exclusion. That exclusion denies coverage for "bodily injury intentionally caused or aggravated by [plaintiff]." The circuit court granted the insurance companies' motion, ruling that, where an employee alleges acts sufficient to constitute an intentional tort within the meaning of the WDCA, then, by definition, these same allegations necessarily constitute "bodily injury intentionally caused" within the meaning of the insurance policy exclusion. Plaintiff has appealed.

The issue on appeal is a narrow one. We must determine whether an intentional tort, as that term is defined in the WDCA, is identical to "bodily injury intentionally caused," ² as that term is defined in the insurance contract. We hold that it is not.

THE WAUSAU POLICY EXCLUSION

We first examine the exclusion in the Wausau policy, which, as mentioned above, states that "[t]his insurance does not cover ... bodily injury intentionally caused or aggravated by [plaintiff]." At issue in the present case is the "intentionally caused" language. ³

As summarized in Allstate Ins. Co. v. Freeman, 432 Mich. 656, 664-665, 443 N.W.2d 734 (1989) (opinion of Riley, J.), the terms of an insurance contract are interpreted according to the definitions set forth therein or, if none are provided, are given a meaning in accordance with their common usage. While ambiguities in a policy are generally construed in favor of the insured, the Court will not create ambiguities where none exist. Id.

This Court has had occasion to interpret language virtually identical to that presently in issue, and we have concluded that "such a[n exclusionary] provision 'requires both an intentional act and an intentionally caused injury,' before the insurer is relieved of its duty to defend or provide coverage." Transamerica Ins. Co. v. Anderson, 159 Mich.App. 441, 444, 407 N.W.2d 27 (1987), quoting Linebaugh v. Berdish, 144 Mich.App. 750, 755, 376 N.W.2d 400 (1985). Therefore, to fall within the exclusion of Wausau's policy, two circumstances must exist. First, the employer must intentionally commit an act, and, second, the intention underlying that act must be to cause injury.

INTENTIONAL TORTS UNDER THE WDCA

We now turn to § 131(1) of the WDCA, which provides as follows:

The right to the recovery of benefits as provided in this act shall be the employee's exclusive remedy against the employer for a personal injury or occupational disease. The only exception to this exclusive remedy is an intentional tort. An intentional tort shall exist only when an employee is injured as a result of a deliberate act of the employer and the employer specifically intended an injury. An employer shall be deemed to have intended to injure if the employer had actual knowledge that an injury was certain to occur and willfully disregarded that knowledge. The issue of whether an act was an intentional tort shall be a question of law for the court. This subsection shall not enlarge or reduce rights under law.

While it may not at first be apparent, § 131(1) recognizes two distinct types of "intentional torts." Under the third sentence of § 131(1), a plaintiff may establish what is generally regarded as a "true intentional tort," that is, one in which the employer "specifically intended an injury." Under the fourth sentence, an employee may establish an intentional tort without demonstrating an intent to injure by demonstrating instead that "the employer had actual knowledge that an injury was certain to occur and willfully disregarded that knowledge." ⁴ Since intent is not required, the denomination "intentional tort" is something of a misnomer. This alternative standard adopted by our Legislature was intended to be much closer, but not identical, to the "true intentional tort" standard than the standard adopted in Beauchamp v. Dow Chemical Co., 427 Mich. 1, 398 N.W.2d 882 (1986).

In fact, the intentional tort exception ⁵ set forth above constitutes the legislative reaction to Beauchamp. In Beauchamp, our Supreme Court held that the exclusive remedy provision of the WDCA did not bar an action by an employee against an employer for an intentional tort, and recognized the "substantial certainty" test to determine whether an employer had committed an intentional tort within the meaning of the WDCA. Agee v. Ford Motor Co., 208 Mich.App. 363, 528 N.W.2d 768 (1995); Schefsky v. Evening News Ass'n, 169 Mich.App. 223, 226, 425 N.W.2d 768 (1988).

In finding that an intentional tort situation was not covered by the exclusive remedy provision of the WDCA, Beauchamp recognized two standards for determining the existence of an intentional tort. Beauchamp rejected the "true intentional tort" standard, which limited an employee's recovery to situations where an employer truly intended the injury, as well as the act that resulted in the specific injury. Beauchamp instead adopted the "substantial certainty" standard, permitting recovery where the employer intended the act that caused the injury and knew that the injury was substantially certain to result from the act. Beauchamp did, however, stress that "substantial" certainty should not be equated with the lesser showing of substantial likelihood. Beauchamp, supra, 427 Mich. at p. 25, 398 N.W.2d 882.

The swift legislative response to Beauchamp was to require a much more rigorous standard than that of "substantial certainty." Agee, supra, 208 Mich.App. at p. 365, 528 N.W.2d 768; Schefsky, supra, ...