Stryker Corporation v. National Union Fire Insurance
576 F. App'x 496
6th Cir.2014Background
- Stryker sued XL under a Commercial General Liability umbrella policy after XL denied coverage for tort claims involving defective Uni-Knees; the policy had a $15 million aggregate limit above a $2 million self-insured retention (SIR).
- The Sixth Circuit in Stryker I affirmed coverage but held that XL’s liability is capped at policy limits absent proof that excess amounts are consequential damages; it remanded to recalculate pre-judgment penalty interest under Mich. Comp. Laws § 500.2006 on amounts for which XL was actually liable.
- On remand, the district court concluded that (1) the prior district ruling making XL liable for the $2 million SIR was effectively reversed by Stryker I, so Stryker remained liable for the SIR; (2) XL could not recoup an alleged overpayment to Pfizer because the payment was voluntary and not made under mistake or reservation of rights; and (3) XL had to pay pre-judgment penalty interest on amounts within the policy limit despite having exhausted the limit under its settlement with Pfizer.
- Background settlement: XL paid Pfizer $26 million to resolve Pfizer’s claims against Stryker; allocations included amounts that could be applied to the $15 million policy, and allocations that exceeded the limit by about $894,455.
- The district court denied XL’s asserted equitable or restitutionary recoupment (no counterclaim, no protest/reservation) and refused to offset the § 500.2006 penalty interest by ordinary interest paid to Pfizer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does XL remain liable for Stryker’s $2M SIR after Stryker I? | Stryker: Stryker I did not reverse the district court’s First SIR Opinion; XL waived challenge to the SIR. | XL: Stryker I rejected Capitol Reproduction so the First SIR Opinion (which relied on that case) was reversed; XL not liable for SIR. | Court: Stryker I’s rejection of Capitol Reproduction vitiated the First SIR Opinion; Stryker is liable for the $2M SIR. |
| Did XL waive the right to challenge the SIR? | Stryker: XL failed to preserve/press the argument on appeal and made representations implying liability. | XL: Appealed the First SIR Opinion and argued enforcement of contractual limits; statements were compliance with adverse rulings, not admissions. | Court: No waiver; XL sufficiently raised and pursued the legal argument on appeal; statements did not constitute binding admissions. |
| Can XL recoup/obtain credit for alleged overpayment to Pfizer? | XL: Overpayment made under compulsion to exhaust limits and stop interest; equitable restitution or mistake-of-fact permits recovery. | Stryker: Payment was voluntary to settle Pfizer; no mistake, no reservation of rights, and no counterclaim for restitution. | Court: Affirmed district court—no mistake or payment under protest; XL not entitled to credit or restitution. |
| Is XL liable for pre-judgment penalty interest under Mich. Comp. Laws § 500.2006 and entitled to offset for interest paid to Pfizer? | XL: Once Pfizer settlement exhausted policy, XL was not "actually liable" for indemnification portion; ordinary interest paid to Pfizer should offset penalty interest to Stryker. | Stryker: § 500.2006 applies to amounts within policy limits and interest paid to Pfizer is not the same award or the statutory offset. | Court: Affirmed interest award on amounts within limits; XL liable for penalty interest until it exhausted limits; no offset for ordinary interest paid to Pfizer because offset applies only to interest payable pursuant to the same award. |
Key Cases Cited
- Stryker Corp. v. XL Ins. America, Inc., 735 F.3d 349 (6th Cir. 2013) (affirming coverage, rejecting Capitol Reproduction, and remanding on consequential damages and § 500.2006 interest)
- Capitol Reproduction, Inc. v. Hartford Ins. Co., 800 F.2d 617 (6th Cir. 1986) (held insurer breach of defense duty negated insured’s retained limit; later rejected in Stryker I)
- Frankenmuth Mut. Ins. Co. v. Keeley, 433 Mich. 525 (Mich. 1989) (Michigan decisions limiting extra-contractual rules that presume consequential damages)
- Wilkie v. Auto–Owners Ins. Co., 469 Mich. 41 (Mich. 2003) (Michigan authority shaping consequential-damages analysis in insurance cases)
- Mich. Educ. Emp. Mut. Ins. Co. v. Morris, 460 Mich. 180 (Mich. 1999) (discusses equitable restitution/unjust enrichment as a potential remedy)