International Harvester Credit Corp. v. Wilkie

• Decision Date: 17 December 1982
• Docket Number: No. 81-1524,81-1524
• Citation: International Harvester Credit Corp. v. Wilkie, 695 F.2d 231 (6th Cir. 1982)
• Parties: INTERNATIONAL HARVESTER CREDIT CORPORATION, Plaintiff, v. Janice WILKIE and Patrick Gibbons, Defendants and Third-party Plaintiffs/Appellants, v. AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, Third-party Defendant/Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 231

695 F.2d 231

INTERNATIONAL HARVESTER CREDIT CORPORATION, Plaintiff, v.Janice WILKIE and Patrick Gibbons, Defendants and Third-party Plaintiffs/Appellants, v.AMERICAN BANKERS INSURANCE COMPANY OF FLORIDA, Third-party

Defendant/Appellee.

No. 81-1524.

United States Court of Appeals Sixth Circuit.

Argued Oct. 28, 1982.

Decided Dec. 17, 1982.

Milton L. Mack, Jr., Detroit, Mich., for defendants and third-partyplaintiffs/appellants.

John D. Burtch, Terry Welch, Mount Clemens, Mich., for third-party defendant/appellee.

Before KENNEDY and KRUPANSKY, Circuit Judges, and WILHOIT, District Judge.^*

PER CURIAM.

PlaintiffInternational Harvester Credit Corporation(International Harvester) held a note for one 1973 International Tractor which had been purchased by defendant/appellantJanice Wilkie(Wilkie).When the vehicle was subsequently stolen, International Harvester commenced the instant action against Wilkie and secured a consent judgment in the sum of $6,500.¹This judgment is not challenged on appeal.Wilkie initiated the instant cause of action as third party-plaintiff against third-party defendant/appelleeAmerican Bankers Insurance Company of Florida (American Bankers) seeking indemnification from American Bankers for the amount owed by Wilkie to International Harvester.

The facts are undisputed.On July 8, 1976 American Bankers, through its agent Fowler Agency, Inc., issued an insurance policy (IM 357-65-56) to Wilkie covering a 1977 Peterbilt Tractor for the period May 18, 1976 to May 18, 1977.On May 31, 1977, American Bankers renewed that policy for the term May 18, 1977 to May 18, 1978(IM 357-74-96).On December 27, 1977, Fowler Agency, Inc. issued a general change endorsement to the policy adding a 1973 International tractor; the policy included $13,000 coverage for theft.

On March 10, 1978, American Bankers mailed a notice of cancellation of policy IM 357-74-96 to Wilkie who received said notification March 13, 1978.American Bankers did not notify International Harvester of the cancellation, although required to do so by the policy.The notice to Wilkie represented that the excess of paid premium would be refunded on demand.On March 13, 1978, the date of receipt of notice, Wilkie telephoned Fowler Agency, Inc. requesting return of the excess premium and advising them that said funds were necessary to purchase alternate insurance.Similar demand was made on subsequent dates.No portion of the unearned premium was remitted until July 15, 1978, upon which date $522 was forwarded by Fowler Agency, Inc.²

As aforenoted, the insurance policy by its terms was to expire on May 18, 1978.On May 27, 1978, approximately 2 1/2 months after Wilkie had received notice that the policy was cancelled, and approximately 9 days after the insurance policy would have expired on its own terms had it not been cancelled theretofore, Wilkie parked the 1973 International tractor at the Metro-Truck Stop in Dearborn Heights, Michigan, allegedly for the reason that she had no insurance on the vehicle and could afford none since the unearned premium had not been remitted.Sometime between May 27, 1978 and June 8, 1978 the vehicle was stolen from the premises of the Metro-Truck Stop and has never been recovered.

The district court concluded that no legal cognizable cause of action supported Wilkie's claim for indemnity since the vehicle was stolen after the date upon which the insurance contract would have expired on its own terms and granted American Bankers' motion for summary judgment.This appeal ensued.

Wilkie's first cause of action is predicated upon the theory that American Bankers was negligent in remitting the unearned premium thereby proximately causing the vehicle to be uninsured for lack of sufficient funds to purchase alternate insurance and proximately causing the vehicle to have been stolen since Wilkie was forced to park the vehicle for lack of insurance.Since Wilkie had affirmatively informed American Bankers that remittance of the unearned premium was necessary to purchase alternate insurance, it is alleged that the injury resulting from American Bankers' negligence was foreseeable.Since the duty to refund the unearned premium continued beyond the policy expiration date, Wilkie asserts, this tort action arising from the contractual undertaking is not limited to damages accruing within the term of the insurance policy.

The Court concludes that this cause of action is without merit.Wilkie relies upon Clark v. Dalman, 379 Mich. 251, 150 N.W.2d 755(1967) in support of the proposition that actionable negligence may arise out of a contractual relationship.In Clark, an action for personal injury rather than nonfeasance of a contract, the Supreme Court of Michigan observed that a "duty of care ... may and frequently does arise out of a contractual relationship, the theory being that accompanying every contract is a common-law duty to perform with ordinary care the thing agreed to be done."Id., 150 N.W.2d at 760.While this statement of law is accurate, it is inapplicable to the action sub judice since the duty to remit the unearned premium did not exist at common-law or otherwise exist independent of and apart from the contractual undertaking.In Clark the contract was deemed probative of "the relationship of the parties and the nature and extent of the common-law duty on which the tort is based".This presupposes the existence of a common-law basis of action independent of the contractual undertaking.

The Michigan Supreme Court has expressly recognized that a viable tort action must predicate upon a breach of duty distinct from the breach of contract and predicate upon active negligence or mis feasance; no tort action can be founded upon non feasance in the performance of a contract.Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895(1956).More specifically, the Michigan Supreme Court has recently adjudged that even a bad-faith breach of an insurance contract does not create an independent and separable tort action.Kewin v. Massachusetts Mutual Life Insurance Company, 409 Mich. 401, 295 N.W.2d 50(1980)(insured sued disability insurer seeking recovery for mental anguish, a tort, allegedly sustained as a result of a bad-faith refusal to pay disability benefits).

Wilkie secondly contends that American Bankers had breached its contract by failing to refund the unearned premium proximately resulting in a lack of sufficient funds to acquire additional insurance and resulting in the loss.Appellant observes that an insurance company is obligated to expeditiously remit unearned premiums "so that [the insured] can use it to procure other insurance before his protection ceases".6A, Appleman, Insurance Law & Practice, Sec. 4819 p. 581.

Damages resulting from a breach of an insurance contract are limited to those which "arise naturally from the breach of those that were in the contemplation of the parties at the time of the contract was made."Kewin v. Mass. Mutual Life Ins. Co., 409 Mich. 401, 295 N.W.2d 50(1980), citingHadley v. Baxendale, 9 Exch. 341, 156 Eng.Rep. 145(1854).Had the loss occurred during the term of coverage and resulted from American Bankers' failure to remit the unearned premium, such would have been a foreseeable consequence under Hadley v. Baxendale.However, it was obviously not in the contemplation of the parties at the time the contract was made that failure to promptly remit an unearned premium would foreseeably result in lack of insurance after the expiration of the insurance term.This cause of action is specious and was properly rejected by the district court.

Wilkie thirdly advances that, as a legal proposition,...