United States District Court, W.D. Michigan, Southern Division
Home-Owners Insurance Company, Plaintiff: Curtis Hadley, LEAD
ATTORNEY, Frederick Milton Baker, Jr., Willingham & Cote PC,
East Lansing, MI.
Allied Property and Casualty Insurance Company, Amco
Insurance Company, Defendants, Counter-Claimants: Philip E.
Kalamaros, Hunt Suedhoff Kalamaros LLP, St. Joseph, MI.
Home-Owners Insurance Company, Counter-Defendant: Curtis
Hadley, LEAD ATTORNEY, Willingham & Cote PC, East Lansing,
JANET T. NEFF, United States District Judge.
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
case arises from a July 30, 2013 motor vehicle accident
(SMF ¶ 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).
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.
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).
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).
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 (
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.
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
Id. ¶ 52.
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).
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. ¶
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.
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).
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.