Farm Bureau Mut. Ins. Co. of Michigan v. Hoag

• Decision Date: 19 October 1984
• Docket Number: Docket No. 71828
• Citation: 356 N.W.2d 630,136 Mich.App. 326
• Parties: FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Plaintiff, v. A. Eugene HOAG; Richard Morris; County of Eaton, Michigan; Eaton County Sheriff and Eaton County Sheriff Department; National Sheriff Association; Appalachian Insurance Company; Royal Globe Insurance Company; Central Mutual Insurance Company of Ohio; And the Ohio Casualty Insurance Company, Defendants. Richard MORRIS, Cross-Plaintiff-Appellant, v. ROYAL GLOBE INSURANCE COMPANY, Cross-Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 630

356 N.W.2d 630

136 Mich.App. 326

FARM BUREAU MUTUAL INSURANCE COMPANY OF MICHIGAN, Plaintiff, v. A. Eugene HOAG; Richard Morris; County of Eaton, Michigan;

Eaton County Sheriff and Eaton County Sheriff Department;

National Sheriff Association; Appalachian Insurance

Company; Royal Globe Insurance Company; Central Mutual

Insurance Company of Ohio; And the Ohio Casualty Insurance

Company, Defendants.

Richard MORRIS, Cross-Plaintiff-Appellant, v. ROYAL GLOBE INSURANCE COMPANY, Cross-Defendant-Appellee.

Docket No. 71828.

Court of Appeals of Michigan.

Submitted May 10, 1984.

Decided July 16, 1984.

Released for Publication Oct. 19, 1984.

Charles E. Kovsky, Detroit, for Richard Morris.

Smith & Brooker, P.C. by Thomas A. Connolly, Saginaw, for Royal Globe Ins. Co.

Before V.J. BRENNAN, P.J., and R.B. BURNS and C.R. COLEMAN, ^* JJ.

V.J. BRENNAN, Presiding Judge.

Richard Morris, appeals from a May 19, 1983, order dismissing with prejudice his cross-claim against Royal Globe Insurance Company (Royal Globe), following a hearing on his motion for summary judgment pursuant to GCR 1963, 117.2(3). This appeal is timely and as of right.

This case involves construing a policy of insurance issued by Royal Globe to Eaton County. The factual background is based upon the findings of the circuit court.

The original action was one for declaratory judgment instituted by Farm Bureau Mutual Insurance Company (Farm Bureau), seeking a determination of its liability under a policy of insurance issued to the County of Eaton. Named as defendants in Farm Bureau's complaint, among others, were A. Eugene Hoag, former Sheriff of Eaton County, Morris, and six insurance carriers.

Morris was arrested and charged with murder in Eaton County on June 23, 1971. At that time, Hoag was a lieutenant in the sheriff's department and was placed in charge of the investigation of that homicide. Morris was conflicted, following a jury trial, of first-degree murder on April 12, 1972. This Court in an unpublished per curiam opinion, reversed the conviction and remanded the case to the circuit court for a new trial on the charge of second-degree murder. People v. Morris (Docket No. 14273, decided December 4, 1974 [unreported] ).

The attempted retrial of Morris resulted in mistrial due to the alleged misconduct of the investigating officer, Hoag. Morris subsequently moved for dismissal of all charges because of the misconduct of Hoag. A three judge panel of the circuit court heard this motion and, on May 13, 1976, concluded that Hoag had been derelict in his duty and supplied false evidence to the prosecutor. Therefore, the panel dismissed the charges. This dismissal of Morris's charges was affirmed by this Court on August 22, 1977. See People v. Morris, 77 Mich.App. 561, 258 N.W.2d 559 (1977).

Morris subsequently brought suit on July 10, 1978, in the United States District Court for the Western District of Michigan naming Hoag and Ohio Casualty Insurance Company in a complaint, alleging denial of Morris's civil rights and other theories of recovery. While the federal suit was pending, Farm Bureau filed this suit for declaratory judgment naming as defendants Hoag, Morris and all the insurance carriers who carried insurance or bonds on the county. Thereafter, Farm Bureau and all of the insurance carriers, with the exception of Royal Globe, had settled their claims with Morris in the federal court action.

Royal Globe was the county's liability insurer for the period running from July 22, 1970, until July 22, 1973. It was notified of the suit against Hoag in federal court on September 24, 1980, and again on December 19, 1980. However, Royal Globe denied liability and refused to defend Hoag in the federal court action. Royal Globe claimed that Hoag was not an insured under the policy and asserted that Hoag's actions were excluded from coverage by the policy issued to the county.

Morris filed a cross-claim against Royal Globe asking the court to declare that Royal Globe was obligated to defend Hoag in the federal court action. Morris thereafter moved for summary judgment on his cross-claim against Royal Globe. This motion was argued on January 19, 1983.

The circuit court's opinion, issued May 5, 1983, found that Hoag was an insured under the Royal Globe policy. The court, however, found that a common sense construction of the term "bodily injury" as used in the Royal Globe policy did not include those injuries described in Morris's suit in federal court against Hoag and held, therefore, that Royal Globe's policy did not insure Hoag for purposes of the suit in federal court. Finally, the circuit court determined that Morris had standing to prosecute the suit against Royal Globe for purposes of determining whether Hoag was a named insured under the Royal Globe policy. The circuit court, finding that its opinion was dispositive of the rights of the parties, dismissed Morris's action with prejudice.

The issue for determination is whether Royal Globe's liability policy issued to the county covers any of the claims asserted by Morris against Hoag in the federal court suit.

The liability and comprehensive insurance portions of the policy both provide:

"The Company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage to which this insurance applied, * * *." (Emphasis added.)

This issue requires application of two basic and well-established areas of insurance law: an insurer's duty to defend and judicial construction of an insurance contract. In Iacobelli Construction Co., Inc. v. The Western Casualty & Surety Co., 130 Mich.App. 255, 264-265, 343 N.W.2d 517 (1983), the following passage is quoted regarding an insurer's duty to defend the insured:

" 'The duty of the insurer to defend the insured depends upon the allegations in the complaint of the third party in his or her action against the insured. This duty is not limited to meritorious suits and may even extend to actions which are groundless, false, or fraudulent, so long as the allegations against the insured even arguably come within the policy coverage. An insurer has a duty to defend, despite theories of liability asserted against any insured which are not covered under the policy, if there are any theories of recovery that fall within the policy. * * * In a case of doubt as to whether or not the complaint against the insured alleges a liability of the insurer under the policy, the doubt must be resolved in the insured's favor.' (Emphasis in original. Citations omitted.) Detroit Edison Co v Michigan Mutual Ins Co, 102 Mich App 136, 141-142; 301 NW2d 832 (1980)." See also Reurink Brothers Star Silo, Inc. v. Maryland Casualty Co., 131 Mich.App. 139, 143, 345 N.W.2d 659 (1983).

Ambiguities in insurance contracts are to be liberally construed in favor of the insured. As a general rule, it is the court's duty to ascertain the meaning which the insured would reasonably expect from the language of the contract. If the language is clear and unequivocal, the court will enforce its terms and will not rewrite the contract. Further, an insured must be held to knowledge of the terms and conditions contained within the insurance policy, even though he may not have read them. Usher v. St. Paul Fire & Marine Ins. Co., 126 Mich.App. 443, 447, 337 N.W.2d 351 (1983); Herring v. Golden State Mutual Life Ins. Co., 114 Mich.App. 148, 152, 318 N.W.2d 641 (1982); Foremost Life Ins. Co. v. Waters, 88 Mich.App. 599, 604, 278 N.W.2d 688 (1979); see also Zurich Ins. Co. v. Rombough, 384 Mich. 228, 232-233, 180 N.W.2d 775 (1970).

While the rules covering both the insurer's duty to defend and the interpretation of insurance contracts require favoring the insured, it is our opinion that the express language of the insurance contract requires us to uphold the decision of the trial court. In the federal court action, Morris alleged his damages as follows:

"14. As a...