Cherry v. Am. Country Ins. Co.

• Decision Date: 27 March 2020
• Docket Number: Case Number 18-13883
• Citation: 449 F.Supp.3d 701
• Parties: Christopher Lee CHERRY, Plaintiff, v. AMERICAN COUNTRY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

449 F.Supp.3d 701

Christopher Lee CHERRY, Plaintiff,

v.AMERICAN COUNTRY INSURANCE COMPANY, Defendant.

Case Number 18-13883

United States District Court, E.D. Michigan, Southern Division.

Signed March 27, 2020

Joseph Dedvukaj, Bloomfield Hills, MI, for Plaintiff.

Andrew P. Rice, Sanchez Daniels & Hoffman, LLP, Chicago, IL, for Defendant.

AMENDED OPINION AND ORDER GRANTING IN PART AND DENYING IN PART PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT, AND DENYING MOTION TO STAY

DAVID M. LAWSON, United States District Judge

This insurance coverage dispute has its beginnings in an automobile accident. Defendant American Country Insurance Company insured the owners and driver of a vehicle that collided with a car driven by plaintiff Christopher Cherry. Cherry, seriously injured, sued in state court and recovered a $1.25 million default judgment. In this case, he asks for a declaration that American Country must satisfy that judgment up to its policy limits of a million dollars. American Country says it should not have to pay because its insureds never told it about the lawsuit or asked it to defend them. Cherry says a provision in Michigan's driver financial responsibility law prevents American Country from asserting that defense. It does not. But American Country personnel had plenty of notice that the lawsuit was filed and that Cherry would be asking for a default judgment. It chose to remain silent and do nothing to make its concerns known to the state court. Because American Country cannot show prejudice, which it must do under Michigan law to avail itself of its notice-of-suit requirement, it must indemnify the owners and driver for the judgment in favor of Cherry.

I.

The facts of the case are unremarkable and undisputed. On January 29, 2014, Cherry was driving westbound on Manning Street toward Hickory Street in Detroit, Michigan, when a Chrysler Town & Country minivan operated by Ruby Charlene Jones struck him at the intersection. The plaintiff sustained injuries to his head

, neck, back, and extremities, and was diagnosed with disc herniation, cervical and lumbar radiculopathy, and adjustment disorder with permanent residual impairment. At the time of the accident, Jones was an insured driver under a commercial automobile liability policy issued by defendant American Country to Thomas Armstrong doing business as ATA Transportation. Armstrong also was insured under the policy, which stated that American Country would pay up to $1 million for any accident or loss.

The policy imposed several conditions precedent to American Country's duty to provide coverage in response to a lawsuit. Among other things, the insureds were required to "immediately send [American Country] copies of any request, demand, order, notice, summons or legal paper received concerning the claim or ‘suit’ " and "cooperate with [American Country] in the investigation or settlement of the claim or defense against the ‘suit’." The policy warned that "[n]o one may bring a legal action against [American Country] under this coverage form until ... [t]here has been full compliance with all the terms of this coverage form."

On January 26, 2017, Cherry filed a negligence action against Jones and Armstrong in the Wayne County, Michigan circuit court. On February 15, 2017, he filed an amended complaint, adding Patty Darlene Carswell as a defendant based on her co-ownership of the offending vehicle.

On July 21, 2017, the Clerk filed an entry of default as to Armstrong and Carswell, who failed to answer or otherwise respond to the plaintiff's amended complaint. The same was entered against Jones on July 25, 2017.

On September 16, 2017, the plaintiff filed a motion for default judgment against Armstrong, Carswell, and Jones, who were served a copy of the motion, the exhibits attached thereto, and notice of hearing on the motion. On October 13, 2017, Judge David J. Allen conducted an evidentiary hearing and concluded that, based on the proofs presented, the plaintiff was entitled to a final judgment in the amount of $1,250,000. Judge Allen entered a default judgment against the three defendants, jointly and severally.

Jones, Armstrong, and Carswell apparently never took part in any of the proceedings and never informed American Country of the lawsuit. Joseph Onofrio, an assistant vice president responsible for managing American Country's claims, stated in an affidavit that Armstrong, Jones, and Carswell "did not provide notice of the underlying suit to American Country," nor did they "send American Country the complaint, summons or any other legal papers relating to the underlying suit." Onofrio added that Armstrong, Jones, and Carswell "did not request America Country to provide a defense to any of them in the underlying suit."

But American Country was not left totally in the dark. For starters, the defendant knew about the accident well before the lawsuit against its insureds was instituted. On February 5, 2014, American Country received a letter via facsimile from plaintiff's counsel, Joseph Dedvukaj, advising that he had been retained to represent the plaintiff in regard to the accident that occurred on January 29 involving the defendant's "insured vehicle." Dedvukaj wrote that he was "formally submit[ting] a mini tort claim on [his] client's behalf for [Cherry's] collision deductible." American Country's claims records include an entry from February 11 indicating that Cherry was contacted and informed that "[American Country was] paying his mini-tort" claim and that Cherry "has obtained legal counsel for injuries obtained during the loss."

After Cherry filed his negligence action in the Wayne County court, plaintiff's counsel faxed copies of the summons and complaint to American Country on March 14, 2017. The cover sheet for the fax included the claim number assigned to Cherry. On May 10, 2017, counsel for Ms. Jones apparently exchanged emails with American Country's claims department, although the substance of those communications has been redacted.

On July 20, 2017, Dedvukaj contacted Eva Soto at American Country, informing her that its insureds were in default. The email mentioned that "according to your insureds they have sent the complaint over to you and you have failed to answer on there [sic] behalf." A copy of the complaint and Judge Allen's scheduling order was attached to the email. On July 24, in what appears to be an internal email, Sue Palda, a claims supervisor at American Country, acknowledged receipt of Cherry's complaint and Dedvukaj's email. Another email was included in the exchange in which "Suit is scanned to MV, File trans to RM, and Legal flag open" was communicated to several of American Country's employees.

American Country's claim file reflects that on July 25, Joseph Onofrio and a few other American Country employees received via email a "service of process notification" in the action titled "Christopher Lee Cherry v. Ruby Charles Jones, Thomas Amstrong (DBA ATA Transportation)." The email indicated that the "attached item(s), received today, requires your immediate attention."

On August 3, Dedvukaj contacted Ms. Soto at American Country via email, noting that he had sent her the complaint and had yet to hear from anyone. He also contacted Sue Palda and told her that Thomas Armstrong, the policy holder, acknowledged receiving the lawsuit papers and said that he had forwarded them to American Country. Palda, in an affidavit, says that she emailed Armstrong's insurance agent, who denied having a record of the summons and complaint. She also said that she left voicemail messages for Armstrong, which were not answered. And her file notes reflect that she told Dedvukaj "numerous times" that American Country would not take up the case until the insureds "tender the filing."

On September 16, 2017, Dedvukaj emailed two individuals at American Country a copy of the motion for default judgment that had been filed against Jones, Armstrong, and Carswell.

American Country does not contest that it received notice of the lawsuit from plaintiff's counsel, or that Armstrong and Jones (but not Carswell) are insureds under the policy. It acknowledges that before the default judgment was entered, it received notice of the plaintiff's lawsuit and the plaintiff's motion for default judgment. American Country also admitted that "Lupo & Koczkur, P.C. was retained as counsel for American Country to provide legal services regarding insurance coverage matters," although not expressly specifying which matters in particular.

On October 27, 2018, the plaintiff filed his original complaint in this Court seeking a declaration that the defendant is obligated to pay the final judgment entered against Armstrong, Jones, and Carswell in the Wayne County action. On November 29, 2018, the Court dismissed the complaint without prejudice because the plaintiff failed to plead sufficient facts to establish any basis for federal jurisdiction.

The plaintiff filed the same complaint in the Macomb County, Michigan circuit court on December 5, 2018. American Country removed the case to this Court based on diversity jurisdiction. After discovery closed, both parties filed motions for summary judgment.

II.

The fact that the parties have filed cross-motions does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records , 329 F.3d 437, 444 (6th Cir. 2003) ("The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate."). Instead, the Court must apply the well-recognized summary judgment standard when deciding such cross motions: the Court "must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the nonmoving party." Westfield Ins. Co. v. Tech Dry, Inc. , 336 F.3d 503, 506 (6th Cir. 2003).

Summary judgment is appropriate "if the movant shows that...