State of Michigan Workers' Compensation Insurance Agency v. Ace American Insurance
580 F. App'x 10
2d Cir.2014Background
- Delphi (now DPH Holdings) filed for bankruptcy in 2005 in SDNY.
- Insurers ACE and Pacific Employers sued for a declaration that Delphi policies do not cover Michigan self-insured entities.
- Bankruptcy court granted summary judgment for the Insurers; district court affirmed in 2013.
- Michigan Defendants argued Michigan endorsements broaden coverage and that WDCA overrides contracts.
- Court examined contract language, Michigan endorsements, and statutory framework to determine coverage.
- Court reaffirmed that contracts, not Michigan WDCA, govern eligibility for coverage and that self-insured Michigan entities are not covered.
- Court rejected sovereign immunity and abstention challenges as applied to the adversary proceeding.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Michigan entities’ self-insured status falls within policy coverage | Insurers: contracts cover workplaces unless self-insured status excludes them | Michigan Defendants: Michigan endorsements extend coverage to all Michigan entities | Unambiguous contracts do not cover self-insured Michigan entities |
| Effect of Michigan Endorsement on coverage scope | Endorsement broadens coverage to insured employers | Endorsement limited to insured employers in policy terms | Endorsement does not override specific Michigan entity language |
| Preemption of contract interpretation by Michigan WDCA | Statute controls rights and limitations of coverage | Contracts govern unless statute mandates otherwise | WDCA does not create coverage for self-insured Michigan entities under these policies |
| Sovereign immunity and in rem nature of proceeding | Proceeding necessary to effectuate bankruptcy in rem jurisdiction | Immunity may apply to related actions | Adversary proceeding does not offend sovereign immunity |
| Abstention under 28 U.S.C. § 1334(c)(1) or Burford abstention | Abstention appropriate | Court should abstain | No basis to abstain; district court decision affirmed |
Key Cases Cited
- City of Grosse Pointe Park v. Mich. Mun. Liab. & Prop. Pool, 473 Mich. 188 (2005) (interpretation of contract terms under Michigan law)
- Rory v. Cont’l Ins. Co., 473 Mich. 457 (2005) (contract interpretation; explicit vs. general clauses)
- Shay v. Aldrich, 487 Mich. 648 (2010) (interpretation of insurance policy provisions)
- Titan Ins. Co. v. Hyten, 491 Mich. 547 (2012) (statutory controls over policy provisions)
- New Amsterdam Cas. Co. v. Moss, 312 Mich. 459 (1945) (statutory effect on insurance contracts)
- Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459 (2003) (specific clause controls over general clause)
- McQueen v. Great Western Packing Co., 402 Mich. 321 (1978) (insurer not obligated beyond contract terms)
- Kmart Corp. v. Fireman’s Fund Ins. Co., 88 F.Supp.2d 767 (E.D. Mich. 2000) (Michigan law governs where specific and general clauses conflict)
- Cent. Va. Comm. Coll. v. Katz, 546 U.S. 356 (2006) (sovereign immunity in in rem contexts)