916 F. Supp. 2d 813
W.D. Mich.2013Background
- This is a diversity-based insurance coverage dispute over the 1998-1999 CGL policy National Union issued to Amway; three motions for summary judgment were briefed and argued, with a November 20, 2012 hearing.
- Plaintiffs seek coverage for the Nitro action in Missouri; the Nitro amended complaint (2006) added injurious falsehood and RICO theories; earlier disparagement theories were found not to trigger coverage.
- AIG letters in 2006-2007 indicated the injurious falsehood claims were tied to events no earlier than April 2002, while the Nitro plaintiffs later produced discovery responses suggesting statements as early as 1998-1999.
- Michigan law governs and a two-step approach applies: first, whether the policy provides coverage; second, whether any exclusion defeats coverage; the insurer bears the burden on exclusions.
- The court holds National Union had a duty to defend under the 98/99 policy based on discovery-gleaned dates; the 02/03 policy’s “other insurance” provision does not apply to consecutive policies, and damages include defense costs and statutory interest, with the deductible remaining applicable.
- National Union’s contingent motion for partial summary judgment is denied without prejudice; allocation of defense costs is not resolved on the record, and no other insurer is found liable at this time.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Duty to defend under 98/99 policy | Nitro amended complaint and discovery show injurious falsehood within 98/99 period | Injurious falsehood occurred after 1999; no trigger under 98/99; Illinois National/02/03 policy controls | Duty to defend triggered under 98/99 |
| Application of 'other insurance' provisions for consecutive policies | Consecutive policies may have sharing obligations | Other insurance applies only to concurrent policies | Not applicable; other insurance provision does not apply to consecutive policies |
| Allocation of defense costs among policies | Defense costs should be allocated pro rata across periods | Costs should be allocated or waived under other insurance rules | Contingent motion denied without prejudice; no basis for allocation on record |
| Breach of duty and damages, including interest and deductible | National Union breached by refusing to defend; seek damages and interest; deductible should not bar recovery | Deductible and defense-cost structures limit recovery; interest may apply | Breach established; deductible applicable; 12% statutory interest awarded on untimely benefits |
Key Cases Cited
- American Bumper & Mfg. Co. v. Hartford Fire Ins. Co., 452 Mich. 440 (Mich. 1996) (duty to defend broader than indemnity; look beyond pleadings)
- Protective Nat’l Ins. Co. v. City of Woodhaven, 438 Mich. 154 (Mich. 1991) (duty to defend individualized by potential theories within policy)
- Detroit Edison Co. v. Michigan Mut. Ins. Co., 102 Mich. App. 136 (Mich. App. 1981) (duty to defend may extend beyond the complaint’s language)
- Arco Indus. Corp. v. American Motorists Ins. Co., 232 Mich. App. 146 (Mich. Ct. App. 1998) (allocation of damages; consecutive policies; time-on-the-risk approach)
- Auto Club Grp. Ins. Co. v. Burchett, 249 Mich. App. 468 (Mich. Ct. App. 2001) (duty to defend can extend to non-pleaded theories if arguably within policy)
- Frankenmuth Mut. Ins. Co. v. Continental Ins. Co., 450 Mich. 429 (Mich. 1995) (identifying whether policies cover same risks and subject matter; other-insurance scope)
- Stryker Corp. v. XL Ins. America, 681 F.3d 806 (6th Cir. 2012) (contract damages rule; Michigan insurance contract damages aligned with general contract law)
- Arco Indus. Corp. v. American Motorists Ins. Co. (table order), 462 Mich. 896 (2000) (affirmed Arco approach on allocation under consecutive policies)