Safety Specialty Ins. Co. v. Cnty. of Genesee By Its Bd. of Commissioners

• Decision Date: 08 February 2022
• Docket Number: Case No. 1:20-cv-13290
• Citation: 584 F.Supp.3d 430
• Parties: SAFETY SPECIALTY INSURANCE COMPANY and Safety National Casualty Company, Plaintiffs, v. COUNTY OF GENESEE BY its BOARD OF COMMISSIONERS, et al., Defendants.
• Court: U.S. District Court — Eastern District of Michigan

584 F.Supp.3d 430

SAFETY SPECIALTY INSURANCE COMPANY and Safety National Casualty Company, Plaintiffs,

v.COUNTY OF GENESEE BY its BOARD OF COMMISSIONERS, et al., Defendants.

Case No. 1:20-cv-13290

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

Signed February 8, 2022

Adam H. McCabe, Christopher Charles Cassidy, John David Hackett, Cassiday Schade LLP, Chicago, IL, Richard Rezie, Gallagher, Sharp, Cleveland, OH, Adam P. Sadowski, Gallagher Sharp, LLP, Detroit, MI, for Plaintiffs.

Kenneth C. Newa, Plunkett & Cooney, Detroit, MI, Tanya Marie Murray, Jeffrey C. Gerish, Plunkett & Cooney, Bloomfield Hills, MI, for Defendants Board of Commissione Genesee, County of, Deborah Cherry.

Philip L. Ellison, Outside Legal Counsel PLC, Hemlock, MI, for Defendants Thomas A. Fox, Tammy Puchlak.

OPINION AND ORDER (1) GRANTING AND DENYING IN PART PLAINTIFFS’ MOTION FOR SUMMARY JUDGMENT, (2) DENYING INSURED DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT, AND (3) GRANTING CLAIMANT DEFENDANTS’ MOTION FOR SUMMARY JUDGMENT

THOMAS L. LUDINGTON, United States District Judge

This matter is before this Court upon cross-motions for summary judgment filed by all parties. See ECF Nos. 24; 26; 27. For the reasons stated hereafter, Plaintiffs’ Motion for Summary Judgment will be granted as to Defendants County of Genesee and Deborah Cherry (the "Insured Defendants") but denied as to Defendants Thomas A. Fox and Tammy Puchlak (the "Claimant Defendants"); the County Defendants’ Motion for Summary Judgment will be denied; and the Claimant Defendants’ Motion for Summary Judgment will be granted. A final judgment will be entered separately.

I.

This is a declaratory-judgment action concerning whether two insurers have the duty to defend two insureds against two lawsuits. The material facts are undisputed.

In 2018, Plaintiffs Safety Specialty Insurance ("Safety Specialty") and Safety National Casualty Company ("Safety National") issued two insurance policies to Genesee County: the Public Officials and Employment Practices Liability Policy (the "PO&EPL Policy") and the Commercial General Liability Policy (the "CGL Policy"). See Compl., ECF No. 1 at PageID.13, 22. Under the PO&EPL Policy, Safety Specialty agreed to defend and indemnify Genesee County and its employees from claims alleging certain "wrongful acts." Id. at PageID.14–15. Similarly, under the CGL Policy, Safety National agreed to defend and indemnify Genesee County and its employees from suits alleging certain types of injuries, including "bodily injury." Id. at PageID.23–24. Both policies contain various exclusions and a self-insured retention, which requires Genesee County to pay up to $350,000 toward its defense before Plaintiffs become obligated to defend or indemnify.¹ Id. at PageID.21, 28–29.

In November 2018, Tammy Puchlak, as trustee of the Walter Puchlak Revocable Trust Agreement Dated February 24, 2010, filed a complaint in the St. Clair County Circuit Court against Genesee County; its treasurer, Deborah Cherry; and four other Michigan counties and their treasurers. See Puchlak's Compl., ECF No. 1-2 at PageID.73–74. In short, she alleges that St. Clair County seized trust property to satisfy a property-tax delinquency, sold the property at auction for a price above the delinquency, and then kept the six-figure difference between the auction price and the delinquency (the "surplus proceeds"). Id. In Puchlak's view, St. Clair County's conduct amounted to a taking without just compensation or an excessive fine in violation of the Michigan and United States Constitutions. Id. at PageID.75–77. Given that other Michigan counties have allegedly engaged in the same conduct, Puchlak seeks to represent a class of Michigan property owners who had their property seized and sold by one of the five defendant counties and did not receive the surplus proceeds. Id. at PageID.74.

In June 2019, Thomas A. Fox filed a similar complaint in this Court against Genesee County, Deborah Cherry, and 13 other Michigan counties and their treasurers. ECF No. 1 at PageID.4. Five months later, he filed an amended complaint, adding 14 more counties and their treasurers, including Genesee County and Cherry. Id. Like Pachluk, Fox claims that his local county government—Gratiot County—seized his tax-delinquent property, sold it auction, and kept the surplus proceeds. Id. at PageID.5. Further, like Pachluk, Fox seeks to represent a class of property owners similarly victimized by Michigan counties. Id. at PageID.6. But in addition to alleging a taking without just compensation and excessive fine, Fox also alleges unjust enrichment and violations of substantive and procedural due process. Id. at PageID.7–10.

Shortly after Fox and Pauchluk filed their lawsuits, Genesee County provided notice of the lawsuits to Plaintiffs by letter. See Defs.’ Counterclaim, ECF No. 9 at PageID.245. Plaintiffs responded that they were reserving their rights to deny coverage under both policies, citing various policy exclusions. Id.

In December 2020, Plaintiffs brought this case, naming as Defendants Genesee County, Deborah Cherry, and the two underlying claimants, Fox and Pachluk. ECF No. 1. Plaintiffs seek a declaration that, under the terms of both insurance policies, they have no duty to defend the Insured Defendants from the two lawsuits or to indemnify them for any damages that might be awarded. See id. at PageID.31–41. The Insured Defendants responded with a counterclaim against Safety Specialty only, alleging breach of contract and seeking a declaration that Safety Specialty must defend and indemnify them under the PO&EPL Policy. See ECF No. 9.

In October 2021, the parties filed cross-motions for summary judgment; the Insured Defendants and Claimant Defendants filed separate motions. See ECF Nos. 24; 26; 27. Notably, the Claimant Defendants have declined to weigh in on the coverage issue. See ECF No. 24. Instead, they argue that Plaintiffs lack standing to seek a declaration against them. Id.

II.

A motion for summary judgment should be granted if the "movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." FED. R. CIV. P. 56(a). The moving party has the initial burden of identifying where to look in the record for evidence "which it believes demonstrate the absence of a genuine issue of material fact." Celotex Corp. v. Catrett , 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The burden then shifts to the opposing party who must set out specific facts showing "a genuine issue for trial." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 250, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (citation omitted). This Court must view the evidence and draw all reasonable inferences in favor of the non-movant and determine "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251–52, 106 S.Ct. 2505.

Though "disputed issues of contractual intent " often present questions of fact, "disputed issues of contractual interpretation " present questions of law, which "can be resolved at summary judgment." See B.F. Goodrich Co. v. U.S. Filter Corp. , 245 F.3d 587, 595 (6th Cir. 2001). "[G]enuine issues of material fact do not exist simply because opposing litigants argue for different interpretations of the same contractual provision." Id.

III.

A.

Plaintiffs and the Insured Defendants seek a declaration under the Declaratory Judgment Act (DJA), 28 U.S.C. § 2201 et seq. The DJA provides, in relevant part:

In a case of actual controversy within its jurisdiction, ... any court of the United States, upon the filing of an appropriate pleading, may declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought. Any such declaration shall have the force and effect of a final judgment or decree and shall be reviewable as such.

28 U.S.C. § 2201(a). As the DJA's prefatory clause suggests, the threshold question is whether there is an "actual controversy" between the parties.

The Constitution limits the jurisdiction of federal courts to "Cases" and "Controversies." U.S. CONST. art. III. § 2. Over the years, the Supreme Court has sharpened this limitation with several jurisdictional rules, including standing, mootness, and ripeness. See DaimlerChrysler Corp. v. Cuno , 547 U.S. 332, 126 S.Ct. 1854, 164 L.Ed.2d 589 (2006) (noting that mootness, ripeness, political-question doctrine, and standing "all originate in Article III's ‘case’ and ‘controversy’ language"). Importantly, the DJA "does not alter these rules or otherwise enable federal courts to deliver ‘an expression of opinion’ about the validity of laws." Saginaw Cnty. v. STAT Emergency Med. Servs., Inc. , 946 F.3d 951, 954 (6th Cir. 2020) (quoting Muskrat v. United States , 219 U.S. 346, 362, 31 S.Ct. 250, 55 L.Ed. 246 (1911) ). Rather, it merely provides "an alternative remedy—a declaratory judgment—for existing cases or controversies." Id. Therefore, "when a claimant seeks declaratory relief, ... he must satisfy the prerequisites of the [DJA] and Article III's standing baseline." Id. More specifically, "[h]e must plausibly allege facts that, ‘under all the circumstances, show that there is a substantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.’ " Id. (quoting MedImmune, Inc. v. Genentech, Inc. , 549 U.S. 118, 127, 127 S.Ct. 764, 166 L.Ed.2d 604 (2007) ).

Between Plaintiffs and the Insured Defendants, the answer is clear. Id. The Insured Defendants have asked Plaintiffs to defend them from two pending lawsuits; Plaintiffs have refused to do so; and both sides believe that their position is grounded in Michigan law and the plain text of their agreements.² See generally ECF Nos. 1; 9.

But between Plaintiffs and the Claimant Defend...