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Home-Owners Ins. Co. v. Allied Property and Casualty Insurance Co.

United States District Court, W.D. Michigan, Southern Division

January 26, 2016

HOME-OWNERS INSURANCE COMPANY, Plaintiff/Counter-Defendant,

          For Home-Owners Insurance Company, Plaintiff: Curtis Hadley, LEAD ATTORNEY, Frederick Milton Baker, Jr., Willingham & Cote PC, East Lansing, MI.

         For Allied Property and Casualty Insurance Company, Amco Insurance Company, Defendants, Counter-Claimants: Philip E. Kalamaros, Hunt Suedhoff Kalamaros LLP, St. Joseph, MI.

         For Home-Owners Insurance Company, Counter-Defendant: Curtis Hadley, LEAD ATTORNEY, Willingham & Cote PC, East Lansing, MI.


         HON. JANET T. NEFF, United States District Judge.

         Plaintiff Home-Owners Insurance Company (Home-Owners) filed this suit, seeking a declaratory judgment that Defendants Allied Property and Casualty Insurance Company (Allied) and AMCO Insurance Company (AMCO) have the primary coverage obligation for claims arising from a motor vehicle accident. Defendants removed the diversity action to this Court. Now pending before the Court are the parties' cross-motions for summary judgment (Dkts 59 & 61). Having considered the parties' written briefs, stipulated statement of facts and accompanying exhibits, and having had the benefit of oral argument, the Court concludes that Home-Owners is properly granted summary judgment, and Defendants' motion is properly denied.

         I. BACKGROUND

         This case arises from a July 30, 2013 motor vehicle accident (SMF[1] ¶ 1). It is undisputed that on that date, Jason Onstott's vehicle collided with the vehicle driven by Glenn Alan Kleinheksel, resulting in serious injuries to Kleinheksel and the death of Kleinheksel's passenger, David J. Bremer ( id. ¶ ¶ 1, 13). Onstott owned the vehicle that he was driving during the accident ( id. ¶ 2). Plaintiff Home-Owners insured the accident vehicle under an auto policy and Onstott under a personal umbrella policy. The auto policy afforded $500,000 liability coverage for the accident vehicle ( id. ¶ ¶ 20-21). The auto policy also provided that " [i]f [Home-Owners] make[s] a payment under this policy and the person to or for whom payment is made has a right to recover damages from another, we will be entitled to that right" (Pl.'s Ex. A, § V(3)(a), Dkt 59-2 at PageID.1072). The personal umbrella policy, which afforded $1 million in coverage (SMF ¶ 20, 24), provided that " [i]f other insurance covering a loss also covered by this policy is available to the insured, the insurance afforded by this policy shall be excess of such other insurance" (Pl.'s Ex. B, Conditions, Dkt 59-3 at PageID.296).

         At the time of the accident, Onstott was a shareholder, officer or director and employee of Western Tel-Com (WTC) (SMF ¶ 3). Onstott, acting in the course of his employment, was on his way to attend an interview with a prospective WTC employee ( id. ¶ 4). WTC was insured under two pertinent policies. The first policy, Defendant Allied's business auto policy, afforded $1 million in coverage and defined " covered autos" to include " any Auto" ( id. ¶ ¶ 28-30). WTC's Allied business auto policy excluded from the definition of " insured" a " [WTC] employee if the covered auto is owned by that employee or a member of his or her household ..." ( id. ¶ 32). The second policy, issued by Defendant AMCO, insured WTC on the date of the accident under a $10,000,000 excess liability policy (" WTC's AMCO commercial umbrella policy" ) ( id. ¶ 37). Onstott is not a named insured under WTC's AMCO commercial umbrella policy ( id. ¶ 38).

         Kleinheksel subsequently filed a lawsuit against Onstott and WTC, including a derivative claim (" the Kleinheksel lawsuit" ) (SMF ¶ 16). Marie K. Bremer, the personal representative of the Estate of David J. Bremer, also filed a lawsuit (" the Bremer lawsuit" ) ( id. ¶ 14). Personal Representative Bremer initially named both Onstott and WTC as defendants, but she voluntarily dismissed WTC without prejudice on May 6, 2014 ( id. ¶ 15).

         Onstott and Kurt Friedriechsen, WTC's other shareholder, testified that at the time of the accident, Onstott was " acting in the course of his employment, in good faith, at the request, and in the best interests, of his employer, WTC, to attend an interview with a prospective WTC employee" (SMF ¶ 4). Onstott admitted in his November 6, 2014 deposition in the underlying lawsuits that on the day of the accident, he failed to act as a reasonably careful and prudent motor vehicle operator would have acted under the same or similar circumstances ( id. ¶ 11). Onstott also admitted that he was speeding when he ran the stop sign and collided with the vehicle being driven by Kleinheksel with passenger Bremer ( id. ). Defense counsel posed questions during Onstott's January 5, 2015 deposition suggesting that Onstott's violation of traffic laws by driving inattentively, failing to yield and running a stop sign while talking on his cell phone--circumstances that led to the accident--precluded a finding that Onstott was acting either in good faith or in WTC's best interests when the accident occurred ( id. ¶ 5). In response to the questions posed, Onstott testified that he did not believe that violating traffic laws, driving inattentively, running a stop sign or failing to yield the right-of-way to other automobiles were activities in WTC's best interests ( id. ¶ ¶ 6-10).

         Onsott pled " no contest" to, and was found guilty of, one count of a Moving Violation Causing Death and one count of a Moving Violation Causing Serious Impairment of a Bodily Function, misdemeanor offenses under Mich. Comp. Laws § 257.601d (SMF ¶ 19). He was placed on six months' probation, spent five days in jail, and paid fines and fees ( id. ).

         On February 25, 2015, Onstott wrote to WTC's Board of Directors and requested indemnification for all expenses, including attorney fees, judgments, penalties, fines and amounts paid in settlement that Onstott incurred in connection with the pending lawsuits (SMF ¶ 48). On March 9, 2015, counsel for Allied and AMCO stated in a letter to WTC that Allied and AMCO " do not consent, do not agree, and do not give Western Tel-Com permission to agree to such indemnification, expense and obligation" ( id. ¶ 50). In the same letter, counsel for Allied and AMCO also stated:

You are reminded that the indemnification provisions under the Business Corporation Act prohibits indemnification of Mr. Onstott for these claims because he did not have a reasonable belief that his conduct in running a stop sign and speeding and driving inattentively was in the best interests of Western Tel-Com, and he also had not [sic] reason to believe such conduct was lawful, and has so stated on July 10, 2014 and January 5, 2015.
Indemnification by Western Tel-Com as requested is improper, and will violate policy terms and will adversely affect any possible coverage, if there is any.

Id. ¶ 51.

         On March 10, 2015, in a letter addressed to defense counsel, WTC informed Allied and AMCO that " WTC does not contemplate making any voluntary payment for the indemnification claim; rather, it has provided notice to your clients of the existence of the claim and will look to your clients for coverage and payment of the claim pursuant to the referenced policies" ( id. ¶ 49). In response, counsel for Allied and AMCO stated:

It is my understanding that Jason Onstott has made a request for indemnification under the By-Laws. According to Jason Onstott's and Kurt Freidriechsen's deposition testimony, there has been no previous request for indemnification and no corporate action accepting indemnification. To my knowledge, there has been no court action requested or filed asking for an order of indemnification. I was merely making it unequivocal that my clients do not consent or agree to Western Tel-Com taking any corporate action to indemnify Jason Onstott or to agree to such indemnification.

Id. ¶ 52.

         The Bremer lawsuit was settled and dismissed with prejudice pursuant to an agreement approved by the court that released all potentially liable parties, including Onstott, WTC, anyone else who may have been deemed to be an owner of the accident vehicle, and their respective agents and assigns (SMF ¶ 18). The agreement in Bremer also " terminate[d] all further claims that [the estate of David Bremer] may have against Jason D. Onstott, his wife, Western Tel-Com or their insurance carriers" ( id. ). On April 9, 2015, the Kleinheksel lawsuit was likewise settled and dismissed with prejudice pursuant to a Release and Settlement Agreement that disposed of all claims arising out of the accident against Onstott, his wife, WTC and their respective insurers, successors and assigns ( id. ¶ 17).

         As of July 24, 2015, Onstott had not sued WTC for indemnification, nor had he filed suit or otherwise applied to any court to determine whether he is entitled to indemnification under WTC's bylaws for the accident (SMF ¶ ¶ 53-54). Further, Home-Owners had not received an assignment of any right that Onstott may have to proceed against WTC, and Home-Owners had not sued WTC based on any rights it could have secured by assignment from Onstott ( id. ¶ ¶ 55-56).

         Home-Owners filed a Complaint for Declaratory Judgment against Defendants on April 9, 2014, in the Circuit Court for Ingham County, Michigan (Dkt 1-1 at Page ID.22). On April 28, 2014, Defendants Allied and AMCO removed the case to this Court based on this Court's diversity jurisdiction (Dkt 1). On July 16, 2014, Home-Owners amended its complaint (Dkt 17). Defendants filed an Answer and Counter-Claim for Declaratory Judgment in their favor (Dkt 20). Following a Status Conference in June 2015, the parties proceeded with briefing Home-Owners' motion for summary judgment (Order, Dkt 55). Home-Owners filed its Motion for Summary Judgment (Dkt 59), to which Defendants Allied and AMCO filed a response and cross-motion for summary judgment in their favor (Dkt 61). Home-Owners filed a reply (Dkt 66). The Court conducted oral argument on January 26, 2016.

         II. ANALYSIS

         A. Motion Standard

         A court properly grants summary judgment " 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 party moving for summary judgment has the initial burden of showing that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir. 1989). Once the moving party has made such a showing, the burden is on the nonmoving party to demonstrate the existence of an issue to be litigated at trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The Court must view the factual evidence and draw all reasonable inferences in favor of the nonmoving party. Slusher v. Carson, 540 F.3d 449, 453 (6th Cir. 2008). " Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 'genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

         The parties do not dispute that Michigan law governs the issues on which they seek summary judgment (Dkt 59 at 8; Dkt 61 at 12). This Court applies state law in accordance with the controlling decisions of the state supreme court. See Allstate Ins. Co. v. Thrifty Rent-A-Car Sys., Inc., 249 F.3d 450, 454 (6th Cir. 2001) (citing Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1348 (6th Cir. 1996)). If the state supreme court has not yet addressed an issue presented, then the Court must predict how the court would rule by looking to all the available data. See id. " Relevant data include decisions of the state appellate courts, and those decisions should not be disregarded unless we are presented with persuasive data that the Michigan Supreme Court would decide otherwise." Id. (quoting Kingsley Assocs. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 507 (6th Cir. 1995)).

         B. ...

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