Opinion
Case No. 5:00-CV-131
January 10, 2003
OPINION
This matter is before the Court on Plaintiff and Counter-Defendant's and Defendant and Counter-Plaintiff's Objections to Magistrate Ellen S. Carmody's Report and Recommendation ("Report"). The Court will deny Plaintiff's Objections and Defendant's Objections and will adopt Magistrate Judge Carmody's Report.
I. Facts
First Reinsurance of Hartford, the predecessor of Defendant Deerfield Insurance Company, insured Plaintiff from April 27, 1998 to April 27, 1999 under an insurance policy titled Public Officials Liability Insurance, policy number TCB 73506. During that period, Plaintiff was engaged in a project to remove and dispose of asbestos at Plaintiff's Ottawa Station Property. SCS Group, L.C. ("SCS") won the bid on the project and subcontracted portions to Performance Abatement Services, Inc. ("PAS"). During this same period of Plaintiff's insurance coverage, a dispute arose in this Court between SCS, PAS, and Plaintiff (the "underlying litigation"). SCS and PAS claimed the drawings and other information Plaintiff provided regarding the asbestos project did not indicate the true scope of the project. As a result, PAS had to remove more asbestos than disclosed without proper remuneration. Performance Abatement Servs., Inc. v. Lansing Bd. of Water Light, 168 F. Supp.2d 720 (W.D.Mich. 2001).
Plaintiff and Defendant disagree whether under the terms of the Public Officials Liability Insurance policy Defendant was required to provide a defense for Plaintiff and coverage for any liability on the claims. Defendant provided a defense for Plaintiff and paid to settle part of the claims against Plaintiff. Defendant also put Plaintiff on notice of specific defenses that it could assert to its duty to indemnify Plaintiff, and Defendant asserted a general reservation of rights under the policy. Later, Defendant again notified Plaintiff of additional specific defenses, and Defendant reiterated its general reservation of rights. Lansing Bd. of Water Light v. Deerfield Ins. Co., 183 F. Supp.2d 979, 982-83 (W.D.Mich. 2002). This litigation arises from those insurance coverage disputes.
II. Standard of Review
Under 28 U.S.C. § 636(b), a magistrate judge's report that is case-dispositive shall be reviewed de novo by the district court, and the court may accept, reject, or modify the findings and recommendations of the magistrate judge. 28 U.S.C. § 636(b); L. Civ.R. 72.3(b).
Review of a motion for summary judgment requires the Court to determine if there is no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). It is the function of the Court to decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). The question is "whether a fair-minded jury could return a verdict for the [non-moving party] on the evidence presented." Id. at 252. The facts are to be considered in a light most favorable to the non-moving party, and ". . . all justifiable inferences are to be drawn in his favor." Schaffer v. A.O. Smith Harvestore Prod., Inc., 74 F.3d 722, 727 (6th Cir. 1996) (quoting Anderson, 477 U.S. at 255) (other citations omitted). The nonmoving party may not rest on its pleadings but must present "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986) (quoting Fed.R.Civ.Pro. 56(e)).
III. Analysis
Counts I and II of Defendant's four part Counterclaim are claims for indemnification for the full amount (Count I) or in the alternative a portion of the $1.8 million settlement payment (Count II) on the grounds that the settlement payment went to pay claims that were not properly covered by the insurance policy. Count III is a claim for unjust enrichment, alleging Plaintiff received a benefit, additional asbestos removal, for which it did not pay and it would be unjust for Plaintiff to retain. Count IV was previously dismissed. Lansing Bd. of Water Light, 183 F. Supp.2d at 991.
Defendant moved for summary judgment on Counts II and III of its Counterclaim. Defendant separately moved for summary judgment on Count V of its Counterclaim. Plaintiff moved for summary judgment on Defendant's Counterclaim.
A. Plaintiff's First Objection
Plaintiff contends the Magistrate erred in failing to address whether there was any agreement to allow Defendant to bring its claim for reimbursement against Plaintiff. According to Plaintiff, nothing in the insurance policy allows Defendant to seek reimbursement. Defendant argues the parties reserved a right to litigate indemnity under the February 3, 2001 settlement agreement with PAS. Plaintiff denies that allegation and states the settlement agreement did not include such a condition. Additionally, Plaintiff asserts it put Defendant on notice that it did not recognize Defendant's right to seek reimbursement from Plaintiff for any settlement.
In its Response to Plaintiff's Objections, Defendant argues Plaintiff is presenting a new argument not raised until Plaintiff's Reply brief in support of its Summary Judgment Motion. Defendant also reminds this Court of its prior findings on this matter with respect to Plaintiff's first Motion to Dismiss Defendant's Counterclaim.
Dismissal of all Counts of Defendant's Counterclaim would have been appropriate if Defendant did not allege facts that an express agreement [to allow the insurer to seek indemnity] exists or that would permit this Court to imply an agreement under Michigan law between Plaintiff and Defendant. Plaintiff asserts that there was no express agreement and no circumstances in the instant case which would permit this Court to imply an agreement between Plaintiff and Defendant. However, Defendant represents that there was an express agreement between itself and Plaintiff that Plaintiff would later indemnify Defendant if Defendant won the coverage determination. (See Defendant Deerfield Insurance Company's Response to Plaintiff's Motion to Dismiss Counterclaim, at 5 (Dkt. No. 22)) (`. . . [Defendant Deerfield] would not have agreed to fund the settlement if [Plaintiff,] the Board[,] had not agreed to permit Deerfield its day in court on these issues.'). As such, Plaintiff cannot prevail on a Motion to Dismiss on this argument since Defendant has alleged existence of facts which would preclude Plaintiff's defense to indemnification.
Lansing Bd. of Water Light, 183 F. Supp.2d at 989. I see no reason to depart from this earlier finding as the parties have come no closer to demonstrating that there is not an issue of material fact with respect to Defendant's ability to seek indemnity pursuant to an express or implied agreement.
Furthermore, though the settlement agreement includes release of certain grounds for liability, it does not appear to release claims between the present parties on the basis of indemnity. Released Claims are defined as "any and all Claims . . . arising from, pertaining to, and concerning any act, matter, fact, transaction, or occurrence relating in any manner to the Project, the Contract between SCS and the Board, the subject matter of the Action . . ." Settlement Agreement, ¶ 6(c). The definition does not include claims related to the "Coverage Litigation," which is defined as the instant action. An objective reading of the release paragraph would lead one to understand it not to include the present action. As a result, the Court finds summary judgment on this issue inappropriate as there is a question of material fact as to whether there was a release.
B. Plaintiff's Second Objection
Plaintiff objects to the Report's finding that Plaintiff failed to demonstrate that no dispute of material fact exists regarding the nature of the settlement payment and whether it represented payment for claims covered by the insurance policy. Plaintiff presents a lengthy argument as to why the entire settlement payment was for its "wrongful act," for which indemnity is not available. Lansing Bd. of Water Light, 183 F. Supp.2d at 983 , 990. The essence of Plaintiff s argument is that the settlement amount is less than PAS's claimed amount of damages resulting from Plaintiff's "wrongful act" of failing to disclose drawings. As the Court understands Plaintiff, the only logical conclusion is that the settlement amount must then only be for Plaintiff's "wrongful act." The absurdity of this is palpable. Just because the settlement amount is less than the claimed damage amount related to Plaintiff's "wrongful act" does not necessarily mean that is all the settlement amount covers. PAS asserted other claims unrelated to any wrongful act and at this point there is a dispute of material fact as to whether all, a portion, or none of the settlement was for damages due to Plaintiff's "wrongful act." Lansing Bd. of Water Light, 183 F. Supp.2d at 990.
Plaintiff's argument that fundamentally all of PAS's claims are a consequence of Plaintiff's "wrongful act," and therefore, not subject to indemnity is also without merit. PAS's quantum meruit claims are not themselves allegations of a wrongful act and do not encompass any wrongful act. Damages on a quantum meruit claim are separate and apart from damages for a wrongful act. Id.
Both parties debate who has the burden of proof on this matter. Since both parties moved for summary judgment on this matter and neither demonstrated a lack of dispute as to a material fact, this debate is irrelevant. Neither party met the burden for summary judgment either as movant or opponent of the motion for summary judgment. Who has the burden of proof on the underlying claim is not at issue at this time and will not be addressed.
C. Defendant's First Objection
On May 24, 2002, Defendant moved for leave to file an amended Counter-Complaint in order to add an additional claim, proposed Count V. Count V asserted an exclusion to insurance coverage because Plaintiff allegedly committed a violation of law resulting in the claim for which Plaintiff was sued in the underlying litigation. Defendant seeks summary judgment on this claim.
Defendant was denied leave to amend its Counter-Complaint because of the delay in time and resulting prejudice it would cause Plaintiff. Therefore, the Report denied Defendant's Motion for Summary Judgment on Count V as moot.
Defendant objects on the ground that its delay in filing the Motion to Amend was caused by its duty to fully investigate all claims before pleading. Defendant argues a finding of prejudice is non-cognizable, inconsistent with this Court's prior ruling and Michigan law, and is factually unsupportable. Defendant has filed a motion for reconsideration of this Court's denial of its Motion for Leave to Amend and asks that its objections to the Report also be treated as a Motion to Reconsider.
The Court finds this matter is more appropriately considered in an opinion on a Motion to Reconsider and so will not address Defendant's arguments regarding denial of its Motion for Leave to Amend at this time. Since Defendant was denied leave to amend, this Court finds Defendant's Motion for Summary Judgment on Count V moot.
D. Defendant's Second Objection
Defendant seeks clarification as to which facts are disputed. The Court believes it has identified which facts remain undecided with respect to the parties' motions for summary judgment in the above discussion. In sum, the Court finds there is a dispute of material fact as to whether the settlement payment covered more than damages for "wrongful acts;" whether there was a release of the parties from a dispute over indemnity; and whether there was an agreement to resolve the question of indemnity after settlement. This reiteration does not include any remaining factual disputes raised in the Complaint which have not been considered in response to a motion for summary judgment.
IV. Conclusion
Therefore, the Court will deny Plaintiff's Objections and deny Defendant's Objections. The Court will adopt Magistrate Judge Carmody's Report.
ORDER
In accordance with the Opinion issued this date,
IT IS HEREBY ORDERED that Plaintiff and Counter-Defendant's Objections (Dkt. No. 123) are DENIED.
IT IS FURTHER ORDERED that Defendant and Counter-Plaintiff's Objections (Dkt. No. 124) are DENIED.
IT IS FURTHER ORDERED that Magistrate Judge Ellen S. Carmody's Report and Recommendation (Dkt. No. 121) is ADOPTED.