Stephens v. Worden Ins. Agency, LLC.
| Decision Date | 16 October 2014 |
| Docket Number | Docket No. 314700. |
| Parties | STEPHENS v. WORDEN INSURANCE AGENCY, LLC. |
| Court | Court of Appeal of Michigan — District of US |
Law Offices of John R. Monnich, PC (by John R. Monnich, Detroit), for Jennifer Stephens.
Merry, Farnen & Ryan, PC, Roseville (by John J. Schutza ), for Worden Insurance Agency, LLC.
Worsfold Macfarlane McDonald, PLLC, Grand Rapids (by James H. Lohr ), for David Shamaly.
Before: BECKERING, P.J., and HOEKSTRA and GLEICHER, JJ.
At issue in this appeal is the statute of limitations applicable to a claim that an insurance agent secured insurance coverage other than that sought by the insured, leaving the insured liable under circumstances where he expected coverage. Such negligent-procurement and -advice claims sound in ordinary negligence, not malpractice. Accordingly, the three-year statute of limitations found in MCL 600.5805(10) applies. The claim accrued when the insurer denied the insured's claim. As this lawsuit was brought within three years of the accrual date, we reverse the circuit court's summary dismissal on statute of limitations grounds and remand for continued proceedings.
In 1998, Jack Fritz first approached agent David Shamaly at the Worden Insurance Agency to secure workers' compensation and general liability insurance for his construction company. Fritz informed Shamaly that his company operated in several states, not just Michigan, and that he required multistate coverage. From 1998 through 2008, Fritz operated under workers' compensation and general liability insurance policies issued by Hastings Mutual Insurance Company, the latest taking effect on April 21, 2008. And Fritz apparently experienced no loss outside of Michigan leading to a claim against the workers' compensation policy.
On June 7, 2008, Fritz's company was engaged in a construction project in Florida. Fritz's employee, Charles Becker, fell from a ladder and was killed. Fritz contacted Shamaly to report the accident, and Shamaly directed him to contact Hastings directly. When Fritz did so, he learned that the accident would not be covered under the workers' compensation policy because it applied only to accidents occurring in Michigan.
On December 2, 2008, Becker's widow and the personal representative of his estate, Jennifer Stephens, filed suit against Fritz in a Florida circuit court. On September 22, 2010, Fritz and Stephens reached a settlement, under which Fritz was liable for $5,000,000 to Stephens. Stephens promised not to pursue collection against Fritz in exchange for assignment of Fritz's right to pursue indemnification against Worden, Hastings, and any other appropriate entity or person liable in the coverage dispute.
As a result of the settlement agreement, Stephens filed the current action against Worden and its agent, Shamaly, in the St. Clair Circuit Court on May 31, 2011. Following defendants' first and unsuccessful motion for summary disposition on statute of limitations grounds, the court permitted Stephens to file a three-count amended complaint. Stephens's first count is labeled “negligence”1 and alleged that Shamaly and Worden “provided coverage which [they] specifically represented included the state of Florida,” despite that it did not. Stephens asserted that Fritz relied upon that representation, as well as certificates of insurance “specifically expressing the fact that there was appropriate insurance coverage as required by Florida laws.” Stephens accused Shamaly and Worden of breaching “the standard of care of a reasonable and prudent agent” by failing to make sufficient inquiry to ensure the proper level of coverage was in place. Worden breached its duty by failing to adequately supervise its agent, Stephens complained. And Stephens suggested that the Hastings certificates of insurance did not indicate that Florida coverage was in place when those certificates arrived at the Worden agency and that defendants “xeroxed and whited out” the documents to make it appear that coverage was available in Florida.
Stephens's second count is entitled “special relationship.” Stephens contended that a special relationship arose because Shamaly and Worden “negligently misrepresented the nature and extent of the insurance coverage in Florida.” Defendants also voluntarily took on the duty to advise Fritz regarding the adequacy of his coverage, rendering them liable for their negligence. Moreover, defendants “entered into an agreement whereby [they] promised to provide coverage” extending to Florida occurrences. Defendants expressed an expertise in this field but then selected an insurance provider that does not write policies in Florida. Based on this special relationship, Stephens continued, Fritz repeatedly relied upon defendants' advice and purchased whatever policies they recommended. The lack of coverage upon Becker's death “was secondary to the negligence and/or misrepresentation and/or breach of contract and/or breach of the special relationship,” Stephens concluded.
The third count in the amended complaint alleged that Worden was vicariously liable for Shamaly's acts. Shamaly was acting within the scope of his employment and had implied actual authority to act on Worden's behalf, rendering his employer liable. Stephens asserted that Worden knew about and acquiesced in Shamaly's acts as well. Stephens noted that Shamaly “was the only person writing commercial accounts, including workers compensation” and made decisions on behalf of the agency “concerning the practices of issuing Certificates of Insurance....” Each policy was produced on Worden's behalf. And Shamaly forwarded copies of Fritz's certificate of issuance to many job sites in other states, including Florida, despite that coverage did not actually exist in those states. Moreover, Worden placed Shamaly in a position of authority in which he directed other employees to issue certificates of insurance for work in other states when no such coverage existed. Stephens further alleged that Shamaly violated company policies and industry practices under Worden's supervision, including by failing to confirm where work would be conducted before issuing a certificate of insurance and failing to verify the existence of coverage. Worden was liable for Shamaly's transgressions because it allowed him too much freedom, presented him “as its sole commercial producer to customers and clothed him in the appearance of knowledge and experience,” and endorsed his representations. In addition, Stephens asserted, Worden ratified Shamaly's acts because it received a commission for the sale of insurance made on Shamaly's misrepresentations.
Defendants' renewed their summary disposition motion contending that Stephens's claims sounded in malpractice and therefore were subject to the two-year statute of limitations. MCL 600.5805(6) ; MCL 600.5838(1). In the alternative, defendants contended that Stephens's claims were subject to a three-year statute of limitations as an action seeking recovery for damages to a person. MCL 600.5805(10). Under defendants' alternative theory, Stephens's claims accrued on April 21, 2008, when Fritz's insurance policy was last renewed before Becker's accident, and the statute of limitations therefore expired five weeks before Stephens filed her suit.
Stephens responded that her claims sounded in negligence, breach of contract, and fraud, rather than professional malpractice. She argued that her claims against the insurance agent were common-law negligence claims that historically did not fall within the rubric of malpractice. Therefore three and six-year statutes of limitations applied. Her claims were timely, Stephens retorted, because they accrued either on June 7, 2008, when Becker died, or October 26, 2010, when a judgment was entered in the Florida circuit court based on the Fritz–Stephens settlement agreement.
The circuit court found that Stephens's complaint was barred by the statute of limitations and summarily dismissed her action under MCR 2.116(C)(7). Reviewing the manner in which Stephens fashioned her claims, the court determined that they sounded in malpractice. Specifically, Stephens cited the standards of care for an insurance agent and named expert witnesses to testify to that standard. As her claims were filed beyond the two-year statute of limitations, the court found them untimely.
We review de novo the circuit court's resolution of defendants' summary disposition motion. Kincaid v. Cardwell, 300 Mich.App. 513, 522, 834 N.W.2d 122 (2013).
Summary disposition under MCR 2.116(C)(7) is appropriate when the undisputed facts establish that the plaintiff's claim is barred under the applicable statute of limitations. Generally, the burden is on the defendant who relies on a statute of limitations defense to prove facts that bring the case within the statute.... Although generally not required to do so, a party moving for summary disposition under MCR 2.116(C)(7) may support the motion with affidavits, depositions, admissions, or other admissible documentary evidence, which the reviewing court must consider.... If there is no factual dispute, whether a plaintiff's claim is barred under the applicable statute of limitations is a matter of law for the court to determine. [Id. at 522–523, 834 N.W.2d 122 (citations omitted).]
In reviewing a motion under Subrule (C)(7), the circuit court “must accept the nonmoving party's well-pleaded allegations as true and construe the allegations in the nonmovant's favor....” Diehl v. Danuloff, 242 Mich.App. 120, 123, 618 N.W.2d 83 (2000).
We also review de novo the question whether a claim is barred by the statute of limitations and the issue of the proper interpretation and applicability of the limitations periods. See City of Taylor v. Detroit Edison Co., 475 Mich. 109, 115, 715 N.W.2d 28 (2006) ; Adams v. Adams (On Reconsideration),
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