Nat'l Cont'l Ins. Co. v. Aiazbekov
| Decision Date | 23 June 2020 |
| Docket Number | No. 19-1926,19-1926 |
| Parties | NATIONAL CONTINENTAL INSURANCE COMPANY, Plaintiff-Appellee, v. NURBEK AIAZBEKOV; ROAD CARRIERS, INC., Defendants, ZEF LJAJCAJ, Defendant-Appellant. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR PUBLICATION
MURPHY, Circuit Judge. Zef Ljajcaj was injured in a trucking accident and sued the other driver, Nurbek Aiazbekov, along with Aiazbekov's trucking company, Road Carriers, Inc., in state court. While that suit was pending, Aiazbekov fled the country. After Ljajcaj settled with Road Carriers, he obtained a $2.6 million default judgment against the missing Aiazbekov. This federal diversity case asks whether Road Carriers' insurer, National Continental Insurance Company, must pay that state-court judgment. National Continental says it need not pay because Aiazbekov, by fleeing the country, breached a provision in Road Carriers' insurance policy that required him to cooperate in the defense. The district court agreed, and we affirm.
Around 2:00 a.m. on October 19, 2016, Ljajcaj was driving his semitruck across Indiana's border into Michigan in the middle lane of Interstate 94. At the same time, Aiazbekov, driving a load of watermelons in another semi, attempted to merge onto the interstate from Michigan's Welcome Center. Aiazbekov suddenly stalled and "jackknifed" into the middle lane. He also did not have his lights on. While Ljajcaj saw Aiazbekov's truck jackknife, he could not avoid hitting the back of Aiazbekov's trailer. Ljajcaj says that he suffered head, back, and shoulder injuries that required multiple surgeries and caused lasting physical and mental harms. In July 2017, he brought a negligence suit against Aiazbekov and Road Carriers (the Illinois company that owned the truck) in Michigan state court.
National Continental, Road Carriers' liability insurer, paid for separate counsel to defend both Road Carriers and Aiazbekov. By January 2018, however, Aiazbekov had disappeared. His counsel made many efforts to reach him, including through a private investigator, but learned that Aiazbekov had fled to "Asia or Russia." Counsel moved to withdraw from the case in late May, which the state court allowed after a hearing. Two weeks later, Ljajcaj agreed to a $500,000 settlement with Road Carriers (which was half of the $1,000,000 coverage limit under National Continental's insurance policy). While Aiazbekov had disappeared by the time of this settlement (and likely would not pay any judgment), the settlement agreement did not release Ljajcaj's claims against Aiazbekov. Given Aiazbekov's absence (and his lack of counsel), Ljajcaj later obtained a default judgment of roughly $2.6 million against Aiazbekov.
Eighteen days after Aiazbekov's counsel withdrew and several weeks before Ljajcaj moved for a default judgment against Aiazbekov in the state-court case, National Continental brought this diversity action against Aiazbekov, Ljajcaj, and Road Carriers. National Continental sought adeclaratory judgment that, under the terms of its insurance policy with Road Carriers, it had no duty to defend or indemnify Aiazbekov in connection with Ljajcaj's pending state-court claims. That insurance policy, which otherwise covered Aiazbekov, states that National Continental "ha[s] no duty to provide coverage under this policy unless there has been full compliance with" certain duties in the event of a lawsuit—including a duty to "[c]ooperate with [National Continental] in the investigation or settlement of the claim or defense against the 'suit.'" National Continental argued that Aiazbekov had violated this "cooperation" provision by fleeing the country. Aiazbekov and Road Carriers both failed to answer the complaint. Ljajcaj counterclaimed, asserting that the cooperation provision was unenforceable under Michigan law and that National Continental must provide coverage for his state-court judgment against Aiazbekov.
At the summary-judgment stage, the district court first held that Illinois law, not Michigan law, applied to Road Carriers' insurance policy with National Continental. See Nat'l Cont'l Ins. Co. v. Aiazbekov, 2019 WL 2717221, at *2 (W.D. Mich. June 28, 2019). Applying Illinois law, the court next decided that Aiazbekov breached the insurance policy's cooperation provision because he did not cooperate even after National Continental took reasonable steps to locate him. Id. at *2-3. And the court found that his failure to cooperate prejudiced National Continental's defense. Id. at *3. It thus held that National Continental need not indemnify Aiazbekov for Ljajcaj's judgment against him. Ljajcaj now appeals, and we review the district court's decision de novo. See Miller v. State Farm Mut. Auto Ins. Co., 87 F.3d 822, 824 (6th Cir. 1996).
Ljajcaj argues (1) that a Michigan law invalidates the cooperation provision on which National Continental relies to avoid its duty to indemnify Aiazbekov, (2) that, even under Illinois law, National Continental failed to prove that Aiazbekov breached this cooperation clause, and (3) thatNational Continental should be estopped from raising this argument. Ljajcaj may have forfeited these arguments, but they fail on their merits in any event.
Ljajcaj asserts that a provision in Michigan's Financial Responsibility Act bars us from enforcing the cooperation clause in Road Carriers' insurance policy with National Continental. The provision states that "no failure of the insured to give any notice, forward any paper or otherwise cooperate with the insurance carrier, shall constitute a defense as against" a judgment creditor like Ljajcaj. Mich. Comp. Laws § 257.520(f)(1). The Michigan Supreme Court recently held that § 257.520 applies only to a subset of liability insurance policies. Titan Ins. Co. v. Hyten, 817 N.W.2d 562, 569-70 (Mich. 2012). We need not decide whether that subset would include Road Carriers' insurance policy because Illinois law—not Michigan law—governs this dispute.
To identify the state law that applies in a diversity case, we look to the choice-of-law rules of the state in which the district court sits—here, Michigan. See Mill's Pride, Inc. v. Cont'l Ins. Co., 300 F.3d 701, 704 (6th Cir. 2002). The district court predicted that Michigan courts would apply Illinois law to decide whether Aiazbekov breached the cooperation clause in Road Carriers' insurance policy. See Nat'l Cont'l, 2019 WL 2717221, at *2. Yet Ljajcaj "barely mentions" this preliminary choice-of-law question in his opening brief, relegating it to a footnote at the end. United States v. Johnson, 440 F.3d 832, 845 (6th Cir. 2006). Even after National Continental highlighted the choice-of-law question in its response brief, Ljajcaj's reply said nothing more on the topic. Ljajcaj's lone footnote might not preserve any choice-of-law argument. See id. at 845-46; cf. In re Anheuser-Busch Beer Labeling Mktg. & Sales Practices Litig., 644 F. App'x 515, 529 (6th Cir. 2016); Nicholson v. City of Clarksville, 530 F. App'x 434, 445 (6th Cir. 2013).
Regardless, we agree with the district court that Michigan courts would apply Illinois law under Michigan's choice-of-law rules. The Michigan Supreme Court follows the Restatement (Second) of Conflicts for contract cases like this one. See Chrysler Corp. v. Skyline Indus. Servs., Inc., 528 N.W.2d 698, 703 (Mich. 1995). Where, as here, the relevant contract contains no choice-of-law provision, the Restatement tells courts to ask which state "has the most significant relationship to the transaction and the parties under" the generic choice-of-law rules that apply in all suits. Restatement (Second) of Conflicts § 188(1) (1988). Those general rules direct courts to consider, among other things, the policies of the forum state and of other interested states, the expectations of the parties, and the need for predictability and uniformity. See id. § 6. The Restatement next identifies five factors for courts to consider specifically in contract disputes: "the place of contracting," "the place of negotiation," "the place of performance," "the location of the subject matter of the contract," and "the domicil, residence, nationality, place of incorporation and place of business of the parties." Id. § 188(2); Mill's Pride, 300 F.3d at 708-09.
Two cases—one from the Michigan Court of Appeals, the other from our court—show how these factors play out in insurance cases like this one. We begin with the Michigan case: Farm Bureau Insurance Co. v. Abalos, 742 N.W.2d 624 (Mich. Ct. App. 2007) (per curiam). There, a Michigan driver hit an Ohio driver while traveling on Ohio's roads, and the Ohioan responded with an Ohio tort suit. Id. at 625. The Michigan driver's insurer then sued both sides of this Ohio dispute in Michigan, claiming that the Michigander's failure to cooperate with the insurer eliminated the insurer's duty to indemnify that driver from all tort liability. Id. at 625-26. After recognizing that the case triggered contract (not tort) choice-of-law rules, the Michigan court explained that it must balance the expectations of the contracting parties (the insured and insurer) and of the two states. Id. at 626-27. When doing so it found that the "happenstance" that theaccident occurred in Ohio did not overcome the contractually rooted factors favoring Michigan law—namely, that the vehicle "was insured under a policy issued" in Michigan to Michigan residents. Id.
We turn to our case: Mill's Pride. There, a company brought a diversity suit against its insurer claiming that the insurer failed to indemnify it against business-tort claims. 300 F.3d at 703. The insurer responded that it had no duty to indemnify the company because the company had breached the contractual provision requiring both cooperation with the insurer and notice before a settlement. Id. The...
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