Michigan First Credit Union v. Cumis Insurance Society
641 F.3d 240
| 6th Cir. | 2011Background
- MFCU sued CUMIS for denial of a fidelity bond claim after losses from an indirect-lending program; a seven-day trial yielded a $5,050,000 verdict for MFCU.
- The fidelity bond covers losses caused by an employee's failure to faithfully perform trust, defined as conscious disregard of established policies; the bond excludes negligence or unintentional acts.
- MFCU's indirect-lending program expanded in July 2003; two employees reviewed applications against an eight-factor lending policy, with enforcement mainly by Michael Lewis (VP of lending).
- Audits in 2003 and 2004 by Doeren Mayhew revealed hundreds of policy-violating indirect loans; an October 2003 audit identified a non-conforming loan that Lewis had him remove from the report, signaling enforcement gaps.
- Following discovery of extensive policy violations and resulting losses, MFCU submitted a fidelity-bond claim; CUMIS denied, prompting this action and district-court proceedings, including post-trial interest decisions.
- The district court later awarded and then offset interest, and the parties appealed; the Sixth Circuit affirmed the judgment and interest calculation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether evidence supports coverage under the faithful‑performance clause. | MFCU contends the lending policy was established, enforced, and violated with conscious disregard. | CUMIS asserts the policy was not established/enforced and there was no conscious disregard. | Evidence supported establishment, enforcement, and conscious disregard; JMOL/new-trial denial affirmed. |
| Whether the trial evidence supports that the policy was actually enforced. | MFCU shows enforcement mechanisms (training, audits) were present. | Enforcement was insufficient to show coverage. | Enforcement evidence was substantial; verdict upheld. |
| Whether there is error warranting a new trial based on trial conduct (golden-rule argument, burden shifting, opening statements, hearsay). | CUMIS claims multiple trial errors requiring new trial. | Errors were isolated or not reversible. | No reversible error; no new trial required. |
| Whether penalty interest must be offset by prejudgment interest under Michigan law. | Offset not required. | Offset required by § 500.2006. | Penalty interest must be offset by prejudgment interest; district court affirmed. |
Key Cases Cited
- Anchor v. O'Toole, 94 F.3d 1014 (6th Cir.1996) (JMOL standard under diversity; review is de novo; favorable inferences for nonmovant)
- Ridgway v. Ford Dealer Computer Servs., Inc., 114 F.3d 94 (6th Cir.1997) (JMOL review standard; light favorable to nonmovant)
- Orzel v. Scott Drug Co., 449 Mich. 550 (Mich. 1995) (antiquated; standard for evaluating evidence in Michigan law)
- McCombs v. Meijer, Inc., 395 F.3d 346 (6th Cir.2005) (reasonable juries may infer conscious disregard)
- Lustig v. First Nat'l Bank of Louisville, 961 F.2d 1162 (5th Cir.1992) (reckless conduct may support inference of intent)
- City of Cleveland v. Peter Kiewit Sons' Co., 624 F.2d 749 (6th Cir.1980) (consideration of surrounding circumstances in evaluating error)
- Angott v. Chubb Group Ins., 270 Mich.App.465 (Mich.App.2006) (offset of penalty interest by other interest awards)
- McCahill v. Commercial Union Ins. Co., 179 Mich. App. 761 (Mich.App.1989) (offset principle persuasive authority)