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Lansing Community College v. National Union Fire Insurance Co.

March 1, 2010


The opinion of the court was delivered by: Hon. Gordon J. Quist


Plaintiffs, Lansing Community College ("LCC") and Middle Cities Risk Management Trust ("Middle Cities"), have sued Defendant, National Union Fire Insurance Company of Pittsburgh, Pa. ("National Union"), seeking, among other things, a declaration that National Union is obligated to pay defense costs and indemnify LCC and its employees under a Not-For-Profit Protector policy in litigation captioned Claude McCollum v. Rodney Bahl, et al., No. 1:08-CV-96, pending before this Court. Plaintiffs originally filed their complaint, alleging claims for a declaratory judgment, breach of contract, promissory estoppel, fraudulent misrepresentation, and violation of the Michigan Uniform Trade Practices Act, in the Ingham County Circuit Court. National Union removed the case to this Court pursuant to 28 U.S.C. § 1441, alleging diversity of citizenship as the basis for jurisdiction.*fn1

National Union has now moved for summary judgment. For the reasons set forth below, the Court will grant the motion and dismiss Plaintiffs' complaint with prejudice.


A. The Underlying Litigation*fn2

On or about January 24, 2008, Claude Zain McCollum ("McCollum") filed a lawsuit in the Ingham County Circuit Court against LCC and other defendants alleging various claims, including violation of his federal civil rights, in connection with his wrongful arrest, prosecution, and conviction for the murder and sexual assault of Carolyn Kronenberg, an LCC professor, on January 25, 2005. The victim was found in the Student Personnel Services Building on LCC's campus in downtown Lansing, Michigan, where she was preparing to teach a class. The subsequent investigation determined that the murder occurred that morning between 8:30 a.m. and 8:45 a.m. At the time of the murder, McCollum was an LCC student and was present in the Technology and Learning Center Building, a separate building on campus.

The LCC Police Department immediately began an investigation for the identity of the murder suspect. LCC police officers Rodney Bahl and Brian McManus conducted the investigation under the supervision of LCC officer John Imeson. The officers soon focused their investigation upon McCollum and took him in for questioning on January 25, 2005. Following the initial interview at LCC's facility, Officers Bahl and McManus took McCollum to the City of Lansing Police Department for additional questioning. McCollum alleges that during this interview, the officers provided him with details of the crime known only to the police and the perpetrator and then solicited statements from McCollum based upon the information provided to him. The officers then used McCollum's manufactured statements to secure a criminal complaint and warrant for the murder and sexual assault of Professor Kronenberg. McCollum was arrested and jailed without bond pending further proceedings.

McCollum was subsequently tried and convicted of murder and criminal sexual conduct in the first degree and sentenced to life in prison.

McCollum appealed his conviction to the Michigan Court of Appeals. Shortly before oral argument, McCollum's appellate counsel and the prosecutor filed a joint motion to vacate the conviction and remand the matter back to the trial court. The motion was based upon new evidence indicating that a third party committed the crime, as well as videotape evidence showing that McCollum was in a different building on campus at the time the murder was committed. The court of appeals granted the motion, vacated the conviction, and remanded the matter back to the trial court. On October 24, 2007, all charges against McCollum were dismissed.

Following dismissal of the charges, McCollum sued various individuals and entities that were involved in securing his conviction. McCollum initially sued LCC Police Officers Bahl, McManus, and John Imeson; City of Lansing Police Officer Bruce Lankheet; Ingham County Prosecutor Stuart J. Dunnings and Assistant Prosecutors Eric E. Matwiejczyk and Marie L. Wolfe; and Michigan State Police Officer James A. Young. McCollum also sued the City of Lansing, Ingham County, and LCC. McCollum alleged that, among other things, Defendants secured his wrongful conviction by failing to disclose a videotape that showed McCollum in a different building when the murder occurred and would have exonerated him from the charged crimes. Defendants removed the case to this Court on the basis of the federal claims under 42 U.S.C. § 1983. Following a series of voluntary dismissals and dismissals on motions, the only defendants now remaining in the case are Bahl, Imeson, and LCC.

B. LCC's Request for a Defense from National Union

During the period of time relevant to McCollum's claims, LCC was insured under a Not-For-Profit Individual and Organization Insurance Policy issued by National Union (the "Policy").*fn3 LCC was also insured under a general liability policy issued by Plaintiff Middle Cities (the "Middle Cities policy").

On December 7, 2007, McCollum's counsel sent a letter to LCC advising LCC of McCollum's intent to file a civil complaint against LCC and its employees arising out of his wrongful arrest, prosecution, and conviction for the Kronenberg sexual assault and murder. On December 13, 2007, LCC's representative notified National Union of the threatened lawsuit. On January 22, 2007, National Unition sent a letter to LCC stating that although no claim had been filed as defined by the Policy, National Union would accept LCC's notice "as a potential claim or notice of circumstances which may give rise to a future claim." (Letter of 1/22/07 from de Blank to Jones at 2, Def.'s Br. Supp. Ex. D.) National Union further advised LCC to forward any information, documents, or pleadings to National Union in the event a complaint was filed to allow National Union to review it for possible coverage under the Policy. Finally, National Union referred to the "other insurance" provision of the Policy but did not specifically cite any potential exclusion from coverage. In addition to notifying National Union of the potential claim, LCC notified Middle Cities, and Middle Cities agreed to provide coverage under a reservation of rights.

On January 29, 2008, after McCollum filed his complaint in state court, LCC sent National Union a copy of the summons and complaint and advised National Union that it had already retained Dickinson Wright, PLLC as defense counsel. On February 26, 2008, AIG claims representative Elena de Blank sent a letter on behalf of National Union to LCC regarding the McCollum lawsuit. Discussing coverage, de Blank wrote, "Our supplemental view is that coverage may be afforded for certain of the Loss suffered as a result of this matter, subject to our continuing analysis and reservations contained herein." (Letter of 2/26/08 from de Blank to Jones at 2, Def.'s Br. Supp. Ex. G.) In addition, de Blank pointed out possibly applicable exclusions 4(b) and 4(h) for loss arising out of any criminal or fraudulent act or for bodily injury, sickness, disease, death of any person, or damage to or destruction of property. (Id. at 2-3.) The letter consented to the retention of Dickinson Wright as counsel:

We understand that Lansing Community College has retained Dickinson Wright as defense counsel for this matter. Please note that Clause 9 requires the Insured retain panel counsel for this type of claim. However, National Union will consent to the retention of Dickinson Wright in regards to the matter subject to the following rates, $250 for partners, $200 for associates, and $85 for paralegals. These rates shall remain in effect for the life of the claim, unless a subsequent changes [sic] is mutually agreed upon. Please note that the Insurer now requires a first report from panel counsel, with an action plan, within 30 days of receipt of this letter. In addition, kindly forward panel counsel a copy of the attached "Defense Counsel Guidelines" and advise that we request quarterly status reports (more often as significant events arise). (Id. at 3.) De Blank also requested that LCC contact her in the event it received a settlement demand or decided to make an offer, and she again referenced the Policy's "other insurance" provision. Finally, de Blank cautioned:

The above discussion is based upon information furnished to date and is by necessity subject to supplementation. No statement herein should be considered a waiver of any right, defense or privilege that National Union may have under the policy or law, regardless of whether the provision has been noted herein. It is understood that all rights remain fully and mutually reserved. (Id.)

National Union instructed LCC and Dickinson Wright to have Dickinson Wright send its invoices directly to LCC for payment of the first $100,000 of attorney fees in satisfaction of LCC's self-insured retention under the Policy. (Butler Aff. ¶ 10, Pls.' Resp. Br. Ex. 6.) In accordance with those instructions, LCC paid Dickinson Wright's invoices during the next six months until the deductible was exhausted.

In October 2008, National Union sent a letter to LCC stating that because Middle Cities had accepted the claim for coverage, the Policy was excess to the Middle Cities policy because the Policy did not have a duty to defend. (Def.'s Br. Supp. Ex. H.) National Union requested that LCC keep it informed of any activities or developments in the claim. National Union also asserted the right to raise additional coverage defenses based ...

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