Auto-Owners Ins. Co. v. Campbell-Durocher Grp. Painting & Gen. Contracting, LLC
911 N.W.2d 493
Mich. Ct. App.2017Background
- City of Adrian contracted with Campbell-Durocher Group (general contractor) for a historic-façade restoration; Campbell-Durocher furnished payment and performance bonds with Auto‑Owners as surety and executed an indemnity agreement with Auto‑Owners.
- Original contract completion date was December 19, 2009; a change order moved substantial completion for storefront windows/doors to May 13, 2010; work remained incomplete thereafter.
- City terminated Campbell‑Durocher from the job on August 24, 2010, citing noncompletion, unpaid supplier, and unresolved storefront issues; City submitted a bond claim to Auto‑Owners.
- Auto‑Owners paid bond claims (approx. $127,000 to City; $62,000 to ABC Supply) and sought indemnification from the Campbells for ~$189,277 plus costs and fees under the indemnity agreement.
- Campbells sued the City for breach of contract (seeking ~$59,624 allegedly unpaid and damages for termination without 90 days’ notice); multiple summary‑disposition motions followed and appeals were taken after the trial court denied Auto‑Owners’ and the City’s motions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Auto‑Owners is entitled to summary judgment on its contractual indemnification claim | Auto‑Owners: indemnity agreement unambiguously requires Campbells to reimburse all bond losses; Auto‑Owners’ payments are prima facie evidence of liability | Campbells: Auto‑Owners paid in bad faith without proper investigation and therefore cannot recover | Held: Reversed trial court; Auto‑Owners entitled to summary disposition because indemnity language is clear, payments are prima facie evidence, and Campbells failed to present specific evidence of bad faith |
| Whether City was entitled to summary judgment on Campbells’ breach‑of‑contract claim | City: contract expired (Dec 19, 2009 or May 13, 2010 by change order), so §2.2 90‑day notice did not apply and termination in Aug 2010 was not a breach | Campbells: parties continued performance after May 2010 creating an implied extension; Campbells also seek payment for work performed before termination | Held: Affirmed trial court’s denial as to City; genuine issues of fact exist about implied extension, applicability of 90‑day notice, and unpaid work |
Key Cases Cited
- Ajax Paving Indus., Inc. v. Vanopdenbosch Const. Co., 289 Mich. App. 639 (contract interpretation governs indemnity agreements)
- Meagher v. Wayne State Univ., 222 Mich. App. 700 (clear contract language is a question of law)
- Kyocera Corp. v. Hemlock Semiconductor, LLC, 313 Mich. App. 437 (contract interpretation aims to honor parties’ intent)
- Title Guaranty & Surety Co. v. Roehm, 215 Mich. 586 (indemnity contracts construed to cover intended losses)
- P.R. Post Corp. v. Maryland Cas. Co., 403 Mich. 543 (prima facie evidence shifts burden to indemnitor)
- Miller v. Riverwood Recreation Ctr., Inc., 215 Mich. App. 561 (definition of good faith and bad faith in related contexts)
- Transamerica Ins. Co. v. Bloomfield, 401 F.2d 357 (enforceability of indemnity clauses allocating settlement risk)
Outcome: Trial court denial of Auto‑Owners’ motion reversed (Auto‑Owners entitled to indemnification absent evidence of bad faith); trial court denial of City’s motion affirmed (fact questions about contract extension and 90‑day notice remain).