Henderson v. Biron
| Decision Date | 07 January 1985 |
| Docket Number | Docket No. 67102 |
| Citation | 138 Mich.App. 503,360 N.W.2d 230 |
| Parties | Thomas Alan HENDERSON, Plaintiff-Appellant, v. Randy BIRON, Judy Biron, and Back Seat Saloon Country Cousin, Inc., Defendants, and Stonewall Insurance Company, Garnishee Defendant-Appellee. |
| Court | Court of Appeal of Michigan — District of US |
Otis M. Underwood, Jr., Oxford, for plaintiff-appellant.
Kaufman, Payton & Kallas by Constantine N. Kallas, Southfield, for garnishee-defendant-appellee.
Before BRONSON, P.J., and R.B. BURNS and BORSOS *, JJ.
Plaintiff commenced a garnishment action against Stonewall Insurance Company (Stonewall) on April 2, 1980, seeking to recover insurance proceeds to satisfy a default judgment entered against Back Seat Saloon Country Cousin, Inc. (Back Seat Saloon). The circuit judge ruled as follows:
"This Court finds that the garnishee defendant has been materially prejudiced by the delay of the 2 1/2 years following the incident and makes a finding of no liability in favor of garnishee defendant."
Plaintiff appeals from the order dismissing the garnishment action and we affirm.
In his November 30, 1978, complaint against Back Seat Saloon, plaintiff alleged that the bar had unlawfully served defendant Randy Biron liquor on November 30, 1977. As a result of his liquor consumption, Randy Biron was involved in an automobile accident. The accident seriously injured plaintiff. Judy Biron, the owner of the car driven by Randy Biron, was also named as a defendant. Because defendants failed to reply to plaintiff's allegations, the circuit court entered a default judgment on August 2, 1979. Stonewall became involved in the litigation after plaintiff discovered in March, 1980, that Back Seat Saloon was insured by Stonewall against dramshop liability.
Stonewall argued that the 2 1/2-year lapse between plaintiff's accident and the garnishment notice prevented Stonewall from investigating plaintiff's claim and that, since Stonewall was denied an opportunity to protect its interests, it should not be required to pay the insurance proceeds. Plaintiff's attorney agreed that Stonewall first became aware of the litigation when it received the garnishment notice. However, plaintiff's attorney argued that the purpose behind requiring a liquor retailer to have insurance is to protect innocent parties and that such purpose would not be served by allowing Stonewall to escape liability, despite the fact that the Back Seat Saloon's failure to notify Stonewall prejudiced Stonewall.
If a casualty-liability insurer can show it was prejudiced by the insured's failure to notify the insurer of a lawsuit, the insurer may use the lack of notice as a defense to a garnishment action seeking recovery of insurance proceeds to satisfy a default judgment. Wendel v. Swanberg, 384 Mich. 468, 185 N.W.2d 348 (1971). Whether a similar rule applies to dramshop-liability insurers is a question of first impression in Michigan.
Michigan's dramshop act requires that a liquor retailer obtain a bond or insurance. M.C.L. §§ 436.22, 436.22a; M.S.A. §§ 18.993, 18.993(1). This requirement provides a person injured by the unlawful sale of liquor with a source of recovery. Browder v. International Fidelity Ins. Co., 413 Mich. 603, 611-612, 321 N.W.2d 668 (1982). In order to further insure a stable source of recovery, an insurance company issuing a dramshop-liability policy cannot include any provision relieving it from liability for the payment of any claim for which the insured may be held legally liable under § 22 of the dramshop act. M.C.L. § 436.22f; M.S.A. § 18.993(6). However, we do not believe that the prohibition contained in § 22f precludes a dramshop-liability insurer from asserting a lack-of-notice defense.
Section 22 of the dramshop act, creating a cause of action against a liquor retailer and his or her bondsman, provides a two-year limitation period. This limitation period protects the person who did not commit the tort from stale claims which might be difficult to investigate. Browder v. International Fidelity Ins. Co., supra, 614, 321 N.W.2d 668. Similarly, notice provisions in casualty insurance policies are enforced by the courts because these provisions allow an insurer to make a timely investigation in order to evaluate claims and to defend against fraudulent, invalid or excessive claims. Kermans v. Pendleton, 62 Mich.App. 576, 233 N.W.2d 658 (1975). We can think of no reason why a dramshop-liability insurer should not be accorded the same protection from stale claims given dramshop bondsmen and casualty-liability insurers. Nor is such a protection unfair to plaintiff, since the insurance company still would have the burden of proving it was prejudiced by the insured's failure to notify it of the lawsuit. Burgess v. American Fidelity Fire Ins. Co., 107 Mich.App. 625, 310 N.W.2d 23 (1981).
Next, we must decide whether the trial court erroneously concluded that Stonewall was prejudiced by Back Seat Saloon's failure to inform Stonewall of plaintiff's lawsuit. The finding of prejudice is a finding of fact, which will not be set aside unless it is clearly erroneous. A trial court's finding is clearly erroneous where, although there is evidence to support it, the reviewing court on the entire evidence is left with a definite and firm conviction that a mistake has been committed. Burgess v. American Fidelity Fire Ins. Co., supra, p. 630, 310 N.W.2d 23.
Stonewall supported its claim of prejudice by arguing that it was prevented from investigating plaintiff's accident by the 2 1/2-year lapse between the accident and plaintiff's garnishment notice.
As there is no evidence that Stonewall had knowledge of plaintiff's accident prior to its receipt of the garnishment notice, we cannot conclude that the trial court's finding of prejudice is clearly erroneous.
Affirmed.
Plaintiff commenced this garnishment action against Stonewall Insurance...
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