STEPHENS v WORDEN INSURANCE AGENCY, LLC
Docket No. 314700
307 MICH APP 220
October 16, 2014
Submitted July 8, 2014, at Detroit. Decided October 16, 2014, at 9:05 a.m. Leave to appeal sought.
Jennifer Stephens, as assignee of Jack E. Fritz, brought an action in the St. Clair Circuit Court against the Worden Insurance Agency, LLC, and David Shamaly. Fritz operated a construction company under workers’ compensation and general liability insurance policies issued by Hastings Mutual Insurance Company that he obtained through Shamaly, an agent at Worden. Fritz had informed Shamaly that his company operated in several states and that he needed multistate coverage. On June 7, 2008, one of Fritz‘s employees, Charles Becker, fell from a ladder and was killed while working on a construction project in Florida. Hastings informed Fritz that the accident was not covered because the workers’ compensation policy only applied to accidents occurring in Michigan. Stephens, Becker‘s widow and the personal representative of his estate, filed suit against Fritz in Florida. As part of their settlement agreement, Fritz assigned to Stephens his right to pursue indemnification against Worden, Hastings, and any other appropriate parties. Stephens subsequently filed her St. Clair Circuit Court complaint on May 31, 2011. Defendants moved for summary disposition, asserting that Stephens‘s claims sounded in malpractice and were therefore barred by a two-year statute of limitations. In the alternative, defendants asserted that even if subject to a three-year statute of limitations, Stephens‘s action was barred because her claims accrued on April 21, 2008, when Fritz‘s insurance policy was last renewed before Becker‘s accident. The court, Daniel J. Kelly, J., granted defendants’ motion, concluding that Stephens‘s complaint was subject to the malpractice statute of limitations. Stephens appealed, and Worden cross-appealed.
The Court of Appeals held:
1. The Court of Appeals has characterized an insurance agent‘s failure to procure requested insurance as a tort.
2. Under
3. The doctrine of respondeat superior is well established in Michigan. An employer is generally liable for the torts its employees commit within the scope of their employment. Although an act may be contrary to an employer‘s instructions, liability will attach if the employee accomplished the act in furtherance, or the interest, of the employer‘s business. In this case, Shamaly was acting in the interest of his employer. Shamaly‘s sale of insurance resulted in profit for Worden and he was acting within the scope of his job description when he procured the Hastings policy for Fritz. Therefore, Stephens presented sufficient evidence to overcome summary disposition on the alternative ground that Worden could not be held vicariously liable for Shamaly‘s actions.
Reversed and remanded for further proceedings.
TORTS — NEGLIGENCE — INSURANCE AGENTS AND AGENCIES — NEGLIGENT-PROCUREMENT OR -ADVICE — STATUTE OF LIMITATIONS — ACCRUAL.
A claim against an insurance agent or agency alleging a failure to procure the type or level of insurance sought by the client or alleging that the client was provided negligent advice sounds in ordinary negligence, not malpractice, and is subject to a three-year period of limitations; such a negligent-procurement or -advice claim accrues when the insurer denies the insured‘s claim (
Law Offices of John R. Monnich, PC (by John R. Monnich), for Jennifer Stephens.
Merry, Farnen & Ryan, PC (by John J. Schutza), for Worden Insurance Agency, LLC.
Worsfold Macfarlane McDonald, PLLC (by James H. Lohr), for David Shamaly.
Before: BECKERING, P.J., and HOEKSTRA and GLEICHER, JJ.
PER CURIAM. At issue in this appeal is the statute of limitations applicable to a claim that an insurance agent secured insurance coverage other than that sought by the insured, leaving the insured liable under circumstances where he expected coverage. Such negligent-procurement and -advice claims sound in ordinary negligence, not malpractice. Accordingly, the three-year statute of limitations found in
I. BACKGROUND
In 1998, Jack Fritz first approached agent David Shamaly at the Worden Insurance Agency to secure workers’ compensation and general liability insurance for his construction company. Fritz informed Shamaly that his company operated in several states, not just Michigan, and that he required multistate coverage. From 1998 through 2008, Fritz operated under workers’ compensation and general liability insurance policies issued by Hastings Mutual Insurance Company, the latest taking effect on April 21, 2008. And Fritz apparently experienced no loss outside of Michigan leading to a claim against the workers’ compensation policy.
On June 7, 2008, Fritz‘s company was engaged in a construction project in Florida. Fritz‘s employee, Charles Becker, fell from a ladder and was killed. Fritz contacted Shamaly to report the accident, and Shamaly directed him to contact Hastings directly. When Fritz did so, he learned that the accident would not be covered under the workers’ compensation policy because it applied only to accidents occurring in Michigan.
On December 2, 2008, Becker‘s widow and the personal representative of his estate, Jennifer Stephens, filed suit against Fritz in a Florida circuit court. On September 22, 2010, Fritz and Stephens reached a settlement, under which Fritz was liable for $5,000,000 to Stephens. Stephens promised not to pursue collection against Fritz in exchange for assignment of Fritz‘s right to pursue indemnification against Worden, Hastings, and any other appropriate entity or person liable in the coverage dispute.
As a result of the settlement agreement, Stephens filed the current action against Worden and its agent, Shamaly, in the St. Clair Circuit Court on May 31, 2011. Following defendants’ first and unsuccessful motion for summary disposition on statute of limitations grounds, the court permitted Stephens to file a three-count amended complaint. Stephens‘s
Stephens‘s second count is entitled “special relationship.” Stephens contended that a special relationship arose because Shamaly and Worden “negligently misrepresented the nature and extent of the insurance coverage in Florida.” Defendants also voluntarily took
on the duty to advise Fritz regarding the adequacy of his coverage, rendering them liable for their negligence. Moreover, defendants “entered into an agreement whereby [they] promised to provide coverage” extending to Florida occurrences. Defendants expressed an expertise in this field but then selected an insurance provider that does not write policies in Florida. Based on this special relationship, Stephens continued, Fritz repeatedly relied upon defendants’ advice and purchased whatever policies they recommended. The lack of coverage upon Becker‘s death “was secondary to the negligence and/or misrepresentation and/or breach of contract and/or breach of the special relationship,” Stephens concluded.
The third count in the amended complaint alleged that Worden was vicariously liable for Shamaly‘s acts. Shamaly was acting within the scope of his employment and had implied actual authority to act on Worden‘s behalf, rendering his employer liable. Stephens asserted that Worden knew about and acquiesced in Shamaly‘s acts as well. Stephens noted that Shamaly “was the only person writing commercial accounts, including workers compensation” and made decisions on behalf of the agency “concerning the practices of issuing Certificates of Insurance....” Each policy was produced on Worden‘s behalf. And Shamaly forwarded copies of Fritz‘s certificate of issuance to many job sites in other states, including Florida, despite that coverage did not actually exist in those states. Moreover, Worden placed Shamaly in a position of authority in which he directed other employees to issue certificates of insurance for work in other states when no such coverage existed. Stephens further alleged that Shamaly violated company policies and industry practices under Worden‘s supervision, including by failing to confirm where work would be conducted before issuing a certificate of insur-ance and failing to verify the existence of coverage. Worden was liable for Shamaly‘s transgressions because it allowed him too much freedom, presented him “as its sole commercial producer to customers and clothed him in the appearance of knowledge and experience,” and endorsed his representations. In addition, Stephens asserted,
Defendants’ renewed their summary disposition motion contending that Stephens‘s claims sounded in malpractice and therefore were subject to the two-year statute of limitations.
Stephens responded that her claims sounded in negligence, breach of contract, and fraud, rather than professional malpractice. She argued that her claims against the insurance agent were common-law negligence claims that historically did not fall within the rubric of malpractice. Therefore three and six-year statutes of limitations applied. Her claims were timely, Stephens retorted, because they accrued either on June 7, 2008, when Becker died, or October 26, 2010, when a judgment was entered in the Florida circuit court based on the Fritz-Stephens settlement agreement.
The circuit court found that Stephens‘s complaint was barred by the statute of limitations and summarily dis-missed her action under
II. APPLICABLE LEGAL STANDARDS
We review de novo the circuit court‘s resolution of defendants’ summary disposition motion. Kincaid v Cardwell, 300 Mich App 513, 522; 834 NW2d 122 (2013).
Summary disposition under
MCR 2.116(C)(7) is appropriate when the undisputed facts establish that the plaintiff‘s claim is barred under the applicable statute of limitations. Generally, the burden is on the defendant who relies on a statute of limitations defense to prove facts that bring the case within the statute.... Although generally not required to do so, a party moving for summary disposition underMCR 2.116(C)(7) may support the motion with affidavits, depositions, admissions, or other admissible documentary evidence, which the reviewing court must consider.... If there is no factual dispute, whether a plaintiff‘s claim is barred under the applicable statute of limitations is a matter of law for the court to determine. [Id. at 522-523 (citations omitted).]
In reviewing a motion under Subrule (C)(7), the circuit court “must accept the nonmoving party‘s well-pleaded allegations as true and construe the allegations in the nonmovant‘s favor....” Diehl v Danuloff, 242 Mich App 120, 123; 618 NW2d 83 (2000).
We also review de novo the question whether a claim is barred by the statute of limitations and the issue of the proper interpretation and applicability of the limitations periods. See City of Taylor v Detroit Edison Co, 475 Mich 109, 115; 715 NW2d 28 (2006); Adams v Adams (On Reconsideration), 276 Mich App 704, 708; 742 NW2d 399 (2007).
III. STATUTES OF LIMITATIONS
The statutes of limitations for various tort actions brought in Michigan courts are set forth in
(1) A person shall not bring or maintain an action to recover damages for injuries to persons or property unless, after the claim first accrued to the plaintiff or to someone through whom the plaintiff claims, the action is commenced within the periods of time prescribed by this section.
* * *
(6) Except as otherwise provided in this chapter, the period of limitations is 2 years for an action charging malpractice.
* * *
(10) Except as otherwise provided in this section, the period of limitations is 3 years after the time of the death or injury for all actions to recover damages for the death of a person, or for injury to a person or property. [
MCL 600.5805 .]
IV. THE NATURE OF STEPHENS‘S CLAIMS
The resolution of this case hinges on the proper characterization of Stephens‘s claims. It is well estab-lished under Michigan jurisprudence that a court is not bound by the label a party assigns to its claims. Rather, we must consider “the gravamen” of the suit based on a reading of the complaint as a whole. Buhalis v Trinity Continuing Care Servs, 296 Mich App 685, 691-692; 822 NW2d 254 (2012). In this manner, we prevent a party from avoiding an applicable statute of limitations through “artful drafting.” Simmons v Apex Drug Stores, Inc, 201 Mich App 250, 253; 506 NW2d 562 (1993).
We reject Stephens‘s argument that her claims could be characterized as sounding in breach of contract. Such a claim would have to be founded on defendants’ breach of a contract with Fritz to secure insurance that would cover his work in other states. Although the Supreme Court has described “the relationship between the insurer and insured” as “a contractual one,” Harts v Farmers Ins Exch, 461 Mich 1, 7; 597 NW2d 47 (1999), it has not held that the provision of negligent advice or the negligent procurement of insurance may support a claim for breach of contract. Rather, this Court has characterized an insurance agent‘s failure to procure requested insurance as a tort. Holton v A + Ins Assoc, Inc, 255 Mich App 318, 324-325; 661 NW2d 248 (2003). See also Zaremba Equip, Inc v Harco Nat‘l Ins Co, 280 Mich App 16, 37-38; 761 NW2d 151 (2008) (holding that an insurance agent who does not procure the insurance coverage requested breaches his or her duty, suggesting a negligence claim). Accordingly, the six-year statute of limitations described in
Stephens‘s contention that her complaint sounded in fraud is equally without merit. Fraud claims must be pleaded with particularity, addressing each element of the tort. Cooper v Auto Club Ins Ass‘n, 481 Mich 399, 414; 751 NW2d 443 (2008). To properly plead a fraud claim, the plaintiff must allege that (1) the defendant made a representation that was material, (2) the representation was false, (3)
Stephens did allege that defendants made a material representation that ultimately proved false: that the workers’ compensation policy secured for Fritz would cover occurrences in Florida. She also alleged that defendants intended Fritz to rely upon this representation in purchasing insurance, which he did. Fritz suffered an injury as a result of the misrepresentation when he was denied coverage for Becker‘s Florida accident. However, Stephens did not plead with particularity that defendants either knew the representation was false, or made it recklessly without any knowledge of the potential truth. Stephens implies recklessness in her complaint by asserting that defendants failed to contact Hastings Mutual and make proper inquiries when they discovered that Fritz‘s certificates of insurance did not mention Florida coverage. Stephens alleges that defendants instead “xeroxed and whited out rather than investigated” information on Fritz‘s certificates of insurance. But Stephens never particularly states that those actions were taken to defraud Fritz or any customer requesting Fritz‘s insurance information. She never even identifies the information that was allegedly “whited out.” Absent assertions supporting the third element with particularity, we cannot conclude that Stephens properly pleaded a fraud claim.2
The question remaining is whether Stephens‘s claims sound in ordinary negligence or malpractice. There is no statute within the Revised Judicature Act defining malpractice. Defendants, citing
against all state-licensed
Absent a statutory definition, our Supreme Court has repeatedly held that “malpractice” must be given its common-law meaning. Local 1064, RWDSU AFL-CIO v Ernst & Young, 449 Mich 322, 329; 535 NW2d 187 (1995), citing Sam, 411 Mich at 424. In Sam, the Supreme Court held that the statute of limitations now found in
In Local 1064, the Supreme Court provided further analysis for a court considering whether a professional could be held liable under a malpractice theory. Local 1064 defined “the common law” as “[t]hose rules or precepts of law in any country, or that body of its jurisprudence, which is of equal application in all places, as distinguished from local laws and rules,” as well as
[t]he embodiment of principles and rules inspired by natural reason, an innate sense of justice, and the dictates of convenience, and voluntarily adopted by men for their government in social relations. The authority of its rules does not depend on positive legislative enactment, but on general reception and usage, and the tendency of the rules to accomplish the ends of justice. [Local 1064, 449 Mich at 329-330 (quotation marks and citations omitted).]
This “embodiment of principles and rules inspired by natural reason” cannot be limited to a review of only Michigan caselaw. Id. at 330 (quotation marks and
citation omitted). Rather, “the traditional nature and origin of the common law make it clear that a consideration of judicial decisions from other jurisdictions is not prohibited....” Id.
There are no precedentially binding Michigan cases holding insurance agents or agencies liable under a malpractice theory. Rather, those cases in which an insurance agent failed to procure the type or level of insurance sought by the client or provided negligent advice have sounded in ordinary negligence.5 The same is true throughout many of our sister states.6
ited home study course, an insurance trade association program, an authorized insurer, or an educational institution.
Absent a common-law basis for subjecting insurance agents to professional malpractice liability, the circuit court erred by applying the malpractice statute of limitations in this case. Rather, Stephens raised an ordinary negligence claim. And the statute of limitations for ordinary negligence claims is three years. Lemmerman v Fealk, 449 Mich 56, 63-64; 534 NW2d 695 (1995);
V. THE TIMELINESS OF STEPHENS‘S CLAIMS
The parties also do not agree on the date on which Stephens‘s claim accrued.7
“For purposes of
accrues. But there must be an initial injury for a claim to exist and it is that injury that triggers the running of the limitations period. Marilyn Froling Revocable Living Trust v Bloomfield Hills Country Club, 283 Mich App 264, 289-290; 769 NW2d 234 (2009).
The accrual of a negligent-procurement or -advice claim is an issue of first impression in Michigan. And the issue has received diverse treatment nationwide. Some jurisdictions have held that the “wrong” occurs when the insurance agent commits his negligence by procuring deficient coverage. See Kaufman, 603 A2d at 834-835; Filip v Block, 879 NE2d 1076, 1082 (Ind, 2008). Other jurisdictions delay the date of the injury because “[i]f no accident produces a claim, the failure will have been negligence in the abstract.” Int‘l Mobiles Corp v Corroon & Black/Fairfield & Ellis, Inc, 29 Mass App 215, 219; 560 NE2d 122 (1990). Therefore, some jurisdictions have held that the claim accrues when the insured experiences the event for which no coverage is available. Id. See also Cunningham v Ins Co of North America, 521 F Supp 2d 166, 172 (ED NY, 2006), recon gtd on other grounds 521 F Supp 2d at 173 (2007). Others assert that the claim accrues when insurance coverage is ultimately denied. Broadnax v Morrow, 326 Ill App 3d 1074, 1081; 261 Ill Dec 225; 762 NE2d 1152 (2002); Johnson & Higgins of Texas, Inc v Kenneco Energy, Inc, 962 SW2d 507, 514 (Tex, 1998). Still others wait until the underlying coverage dispute has been resolved by litigation before starting the clock on a negligent-procurement claim. Blumberg v USAA Cas Ins Co, 790 So 2d 1061; 1065 (Fla, 2001); Kosa v Ferderick, 136 Ohio App 3d 837, 840; 737 NE2d 1071 (2000).
Today we hold that a negligent-procurement or -advice claim accrues when the insurer denies the insured‘s claim. On that date any speculative injury becomes certain, and the elements of the negligence action are complete.
In this regard, we find Holton instructive. In Holton, 255 Mich App at 324, this Court noted that “Michigan law recognizes a cause of action in tort for an insurance agent‘s failure to procure requested insurance coverage....” For comparative fault purposes, this Court described the negligent-procurement action “as arising out of an insurance claim....” Id. at 325 (emphasis added). No negligence action can exist until a claim is made because, until that moment, there can be no actual damage. See id. (“[P]laintiffs’ claim is that their damages occurred because of inadequate insurance coverage, not because of the home fire.“). As the underlying event is not the trigger for the cause of action, Becker‘s death cannot be the accrual date for Stephens‘s claims. Similarly, the date on which defendants advised Fritz or procured the insurance policy, or on which the policy took effect cannot be deemed the accrual
Delaying accrual until the resolution of any coverage litigation is also insupportable under Michigan law. The elements of the negligence claim are complete when the claim is denied. Therefore, the insured can file its negligence action contemporaneously or even in conjunction with its coverage dispute.
The record does not reveal the exact date when Fritz filed his claim with Hastings Mutual or when Hastings Mutual denied coverage. The record instructs that Becker died on June 7, 2008, however, and the claim must have been filed and denied on or after that date. Fritz therefore would have had until at least June 7, 2011, to file a negligent-procurement and -advice suit against defendants. Stephens, as Fritz‘s assignee, filed her complaint on May 31, 2011, a full week before the earliest possible expiration of the statutory limitations period. Accordingly, her claim was timely and the circuit court erred by dismissing it pursuant to
VI. VICARIOUS LIABILITY
Worden argues in the alternative that the circuit court should have dismissed Stephens‘s vicarious liability claims against it.8 Worden does not cite a court rule provision supporting dismissal of these claims. Because some discovery had been conducted augmenting the allegations in Stephens‘s complaint, we will review the propriety of Worden‘s request under
A motion under
Worden contends that Shamaly acted outside the scope of his employment, negating any claim of vicarious liability. Specifically,
Shamaly testified in his deposition ... that if he had done as claimed[,] he would have violated the policy of the Worden Agency to only procure issuance of policies ... in conformance with an insurer‘s underwriting guidelines, since the underwriting guidelines of Hastings Mutual ... limited workers’ compensation coverage only to work being performed in Michigan.
Stephens presented sufficient evidence to overcome summary disposition on this ground.
The doctrine of respondeat superior is well established in this state: An employer is generally liable for the torts its
employees commit within the scope of their employment. ... This Court has defined “within the scope of employment” to mean “‘engaged in the service of his master, or while about his master‘s business.‘” Independent action, intended solely to further the employee‘s individual interests, cannot be fairly characterized as falling within the scope of employment. Although an act may be contrary to an employer‘s instructions, liability will nonetheless attach if the employee accomplished the act in furtherance, or the interest, of the employer‘s business. [Hamed v Wayne Co, 490 Mich 1, 10-11; 803 NW2d 237 (2011) (citations omitted).]
Here, Shamaly was acting in the interest of his employer, Worden. Although his sale of insurance resulted in a commission for Shamaly, it also resulted in profit for Worden. It was Shamaly‘s job to secure commercial insurance policies for Worden‘s customers. Shamaly acted within the parameters of his job description when he procured the Hastings Mutual policy for Fritz, even if his job performance was negligent or not in conformance with his employer‘s instructions. Ac-cordingly, we reject Worden‘s alternate ground for affirming the dismissal of Stephens‘s claims against it.
We reverse and remand for continued proceedings consistent with this opinion. We do not retain jurisdiction.
BECKERING, P.J., and HOEKSTRA and GLEICHER, JJ., concurred.