130 Mich. App. 445 | Mich. Ct. App. | 1983
We revisit this case by reason of an order of the Supreme Court dated September 21, 1983, vacating the judgment of this Court in Maynard v Sauseda, 121 Mich App 644; 329 NW2d 774 (1982), and remanding to this Court "for reconsideration in light of Stockdale v Jamison, 416 Mich 217; 330 NW2d 389 (1982)”. 417 Mich 1100.20; 338 NW2d 189 (1983).
The difference between our opinion in Maynard, supra, and the Supreme Court’s opinion in Stock-dale, supra, lies in the amount of damages held to be recoverable upon a default judgment obtained by an injured party when an insurance company breaches its contractual duty to defend its insured. In Maynard, the Maynards obtained a default judgment against Leon Sauseda for $200,000 when United Fire Insurance Company refused to defend the action on grounds that the car Leon was driving when the accident occurred was not covered under the policy. Leon subsequently executed an assignment to the Maynards of all of his rights against United in exchange for the Maynards’ agreement not to attempt to collect the judgment from Leon personally.
When a writ of garnishment was filed against United, a motion was made by United to set aside
"Instead, United contends that, in the absence of bad faith, it should only be liable for damages up to the face amount of the policy. Although the trial court stated that it had little sympathy for United and although the facts may have justified a finding of bad faith on the part of United, the trial court did not specifically make a finding that United had acted in bad faith, and we do not sustain the trial court on the basis that United acted in bad faith. Instead, we affirm the trial court on the basis that when an insurance company breaches its duty to defend an insured, the insurer is obligated to make the insured whole for any damages suffered by the insured as a result of that breach of contract. In this case, judgments totalling over $200,000 have been entered against Leon, who had not been defended in court or otherwise, a defense United had contractually agreed to provide.” Maynard, supra, pp 654-655. (Emphasis in original.)
The Supreme Court granted leave to appeal in Stockdale and on December 23, 1982, only two weeks after our decision in Maynard, announced a
This Court affirmed,
"When plaintiffs obtained an assignment from Jami-son, they did not acquire the right to recover from Farm Bureau the amount of the default judgment. What they acquired was the right to recover from Farm Bureau the amount Farm Bureau owed Jamison as damages for the breach. That amount is fixed by measuring the actual loss suffered by Jamison as a result of the breach. Thus plaintiffs are entitled to recover an amount of money equal to the actual cost to Jamison of Farm Bureau’s failure to defend, principally the loss Jamison would have suffered had plaintiffs attempted to enforce their judgments against him.
"Had plaintiffs sought to enforce their judgments against Jamison, their recovery would have been limited by the amount of Jamison’s assets not exempt from legal process. If Jamison had been a wealthy man, he might have been required to pay the entire amount of the judgment. But if, as appears to be the case, Jamison is judgment-proof, plaintiffs would have recovered nothing and Jamison would have lost nothing as a result of the breach.
"We hold that ordinarily an insurer’s liability for breach of its contractual duty to defend its insured is limited to an amount equal to the insured’s assets not exempt from legal process.” Stockdale, supra, 416 Mich 227-228. (Emphasis added; footnotes omitted.)
The Court then concluded that the parties seemed to have agreed that Jamison was impecunious, and, if so, he was not monetarily damaged by the judgment against him and, thus, plaintiffs’ damages would not exceed $20,000. However, the Court added that if plaintiffs wanted to show that Jami-son had assets from which they could have recovered some portion of the default judgments in excess of the policy limits, plaintiffs could apply to the circuit court for a hearing thereon. Id., pp 228-229.
Reversed and remanded for entry of judgment in accordance with this opinion. No costs, neither party having prevailed in full.
"Farm Bureau had an absolute duty to defend Jamison and the trial judge was correct in stating the question of good faith or bad faith on the part of Farm Bureau is not a matter to be considered.” Stockdale, supra, 99 Mich App 544.