NORTH POINTE INS CO V EMANUEL STEWARD
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STATE OF MICHIGAN
COURT OF APPEALS
NORTH POINTE INSURANCE COMPANY,
UNPUBLISHED
March 4, 2004
Plaintiff/CounterdefendantAppellant,
v
No. 240125
Wayne Circuit Court5
LC No. 99-901524
EMANUEL STEWARD and EMANUEL
STEWARD ENTERPRISES, INC.,
Defendants/CounterplaintiffsAppellees,
and
DWAYNE J. ROBINSON,
Defendant.
Before: Bandstra, P.J., and Hoekstra and Borrello, JJ.
PER CURIAM.
Plaintiff/counterdefendant North Pointe Insurance Company appeals as of right
from the trial court’s order denying its motion for JNOV, new trial, and remittitur after a jury
awarded defendants/counterplaintiffs Emanuel Steward and Emanuel Steward Enterprises, Inc.,
approximately $1.8 million in damages. We reverse.
I. Facts
This case originated out of two unrelated injuries that occurred at defendant Emanuel
Steward’s Detroit nightclub (doing business as Emanuel Steward’s Place) in April 1996. The
first person injured was Dwayne Robinson, who claimed he tripped and fell because the bar was
overcrowded and the stage was improperly located. Robinson settled his claim. The second
person injured was Kevin Fuquay, who claimed he was injured as a bystander when a fight broke
out in the club. Fuquay went to trial, and the jury awarded no cause of action.
Emanuel Steward owned the club where the alleged injuries occurred. He had insurance
on the business through North Pointe Insurance Company. On September 4, 1996, North Pointe
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wrote Steward’s business a reservation of rights letter regarding the Robinson case. At issue in
the letter is the following phrase: “We will vigorously defend against this claim.” The letter also
stated that the insured must “cooperate with us in the investigation, settlement or defense of a
claim or suit.”
Along with the reservation of rights letter, North Pointe mailed a separate letter stating
that they were “investigating this claim for your insurance company, North Pointe Insurance
Company.”
North Pointe filed a complaint for declaratory relief on January 20, 1999, against both
Steward and Dwayne Robinson. In it, North Pointe claimed that although the date of Robinson’s
alleged injury was January 5, 1996, North Pointe was not notified of the claim until June 3, 1998.
North Pointe also claimed that Steward “failed to cooperate in the defense of the underlying
action by, among other things, failing to identify witnesses, failing to produce requested
documents and by failing to have known witnesses available.” North Pointe asked the court to
hold that North Pointe had no duty to defend Steward and his nightclub.
Steward filed a counterclaim, alleging breach of contract; misrepresentation; negligent
handling of insurance claim (bad faith); malicious, willful, and reckless mishandling of insurance
claim (bad faith); negligent training and supervision of claims adjusters; violation of the fair
trade practices act; intentional infliction of emotional distress; negligent infliction of emotional
distress; gross negligent infliction of emotional distress; and abuse of process. Steward also
requested exemplary damages and damages for himself and his corporation. Following actions
by North Pointe to dismiss Steward’s claims pursuant to the trial court’s ruling, Steward filed an
amended counterclaim to reflect the three surviving counts (abuse of process, intentional
infliction of emotional distress, and negligent performance of a voluntarily undertaken duty). On
October 10, 2001, North Pointe dismissed the declaratory judgment action.
The jury returned a verdict in favor of Steward, awarding him $1.4 million in damages
for emotional distress, $52,000 in attorney’s fees, and $350,000 in exemplary damages. The jury
found Steward ten percent comparatively negligent.
II. Causes of Action
North Pointe first argues that no cause of action lied in this matter because Steward’s
claims were governed by the insurance contract. In essence, North Pointe argues that it had no
duty to investigate Robinson’s claim, despite its assertions in its letter that it would vigorously
defend against this claim and that it had opened an investigation. We agree. Questions of duty
are questions of law for the trial court. Scott v Harper Recreation, 444 Mich 441, 448; 506
NW2d 857 (1993), citing Williams v Cunningham Drug Stores, 429 Mich 495, 500; 418 NW2d
381 (1988).
This Court has recognized that a duty can arise, and therefore a cause of action in tort,
“where a defendant voluntarily assumed a function that it was under no legal obligation to
assume.” Baker v Arbor Drugs Inc, 215 Mich App 198, 205; 544 NW2d 727 (1996). However,
if the parties’ relationship arises from a contract, a tort action will lie for negligent performance
of a voluntarily undertaken duty only if there is a breach of a duty that is separate and distinct
from the duties imposed by the contract. See Nelson v Northwestern Savings & Loan Ass'n, 146
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Mich App 505; 381 NW2d 757 (1985). See also Crews v Gen Motors Corp, 400 Mich 208, 226;
253 NW2d 617 (1977) (“a tort action will not lie when based solely on nonperformance of a
contractual duty”), and Hart v Ludwig, 347 Mich 559, 565; 79 NW2d 895 (1956). In other
words, a relationship must exist that would give rise to a legal duty without enforcing the
contract promise itself. Nelson, supra.
In this case, Steward claimed that North Pointe negligently performed a voluntarily
undertaken duty to vigorously defend against Robinson’s claim. Steward’s claim is predicated
on one sentence contained in North Pointe’s reservation of rights letter sent to Steward on
September 4, 1996. The sentence states, “We will vigorously defend against this claim, and it
remains our hope that a settlement may be reached on terms that North Pointe regards as
reasonable.”
North Pointe sent the reservation of rights letter to Steward by North Pointe as part of a
package of correspondence relative to the Robinson’s claim. The letter stated:
RESERVATION OF RIGHTS
The above referenced policy has an aggregate coverage period limit of
$1,000,000/$1,000,000. Unfortunately, in today’s litigious society any claim may
expose you to liability above your policy limits. If you wish, you may retain
separate counsel at your own expense to assist in the defense of this action, or to
monitor or oversee its progress. We will vigorously defend against this claim,
and it remains our hope that a settlement may be reached on terms that North
Pointe regards as reasonable.
In addition, your policy requires that you cooperate with us in the investigation,
settlement or defense of a claim or suit. Therefore, North Pointe Insurance
Company is reserving its right to deny coverage of this claim in the event your
failure to cooperate prejudices our ability to defend this claim.
By reserving its rights under the policy, North Pointe Insurance Company does
not waive any other or additional defenses that may be available under the policy.
In addition, North Pointe shall not be estopped from asserting other or additional
defenses as may be available under the policy by issuing this reservation of rights.
We conclude that in its reservation of rights letter North Pointe did not voluntarily
undertake a duty separate and distinct from the contract of insurance that existed between it and
Steward. The “vigorously defend” language is gratuitous and read in context, this letter does not
communicate an intent to assume a duty beyond that found in the insurance policy. Further, it
defies reason and common sense that an insured could reasonably conclude that his insuror
intended to assume a duty not contained in the policy of insurance and communicated that intent
in a letter entitled “RESERVATION OF RIGHTS.” Because no duty as alleged by Steward
existed, North Pointe was entitled to summary disposition on Steward’s claim of negligent
performance of a voluntarily undertaken duty.
North Pointe next contends that Steward’s claim of abuse of process should fail as a
matter of law. We agree.
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The parties agree that the controlling authority here is Friedman v Dozorc, 412 Mich 1;
312 NW2d 585 (1981). Friedman requires that an abuse of process claimant prove both “an
ulterior purpose” and “an act in the use of process which is improper in the regular prosecution
of the proceeding.” Id. at 30. Friedman quoted from the Restatement, which provides that “the
gravamen of the misconduct . . . is not . . . the wrongful initiation of . . . civil proceedings; it is
the misuse of process, no matter how properly obtained, for any purpose other than that which it
was designed to accomplish.” Id. at 30, n 18. Accordingly, the Friedman court reasoned that
“we need not decide whether plaintiff’s pleadings sufficiently allege that the defendants had an
ulterior purpose in causing process to issue, since it is clear that the plaintiff has failed to allege
that defendants committed some irregular act in the use of process.” Id. at 31.
Defendants here concentrate on the “ulterior purpose” they allege; i.e., that plaintiff was
trying to promote a lesser cost settlement with underlying plaintiffs through the litigation against
defendants. They do not, however, tell us what “irregular act” defendants employed during the
litigation, as required by Friedman. Tellingly, when discussing the “smoking guns” that
establish a claim for abuse of process, defendants misstate the second component of the cause of
action as being “action in the use of legal process to achieve that ulterior purpose,” without
suggesting that they can prove that such action was somehow “improper or irregular.”
Accordingly, we conclude that they failed to state a cause of action and that summary disposition
should have been granted to plaintiff.
This is not to say that defendants have no remedy if, in fact, the lawsuit against them was
totally unfounded. As plaintiff points out, Friedman itself was the reason that the General Court
Rules were supplemented when the Michigan Court Rules were adopted to include provisions for
remedies if lawsuits are filed without an appropriate factual or legal basis. See id. at 57-63
(Levin, J., concurring). Defendants have not asked for that relief and cannot reasonably expect
to obtain an alternative remedy under an abuse of process claim that is simply unfounded.
North Pointe next contends that Steward’s claim of intentional infliction of emotional
distress should have failed as a matter of law. We agree.
To succeed on a claim of intentional infliction of emotional distress, a plaintiff must
prove the following elements: “(1) ‘extreme and outrageous’ conduct, (2) intent or recklessness,
(3) causation, and (4) ‘severe emotional distress.’” Roberts v Auto-Owners Ins Co, 422 Mich
594, 602; 374 NW2d 905 (1985), quoting Restatement Torts, 2d, § 46, p 71. The type of conduct
that would subject a defendant to liability has been further described as follows:
“It has not been enough that the defendant has acted with an intent which
is tortious or even criminal, or that he has intended to inflict emotional distress, or
even that his conduct has been characterized by ‘malice’, or a degree of
aggravation which would entitle the plaintiff to punitive damages for another tort.
Liability has been found only where the conduct has been so outrageous in
character, and so extreme in degree, as to go beyond all possible bounds of
decency, and to be regarded as atrocious, and utterly intolerable in a civilized
community. Generally, the case is one in which the recitation of the facts to an
average member of the community would arouse his resentment against the actor,
and lead him to exclaim, ‘Outrageous!’
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The liability clearly does not extend to mere insults, indignities, threats,
annoyances, petty oppressions, or other trivialities. The rough edges of our
society are still in need of a good deal of filing down, and in the meantime
plaintiffs must necessarily be expected and required to be hardened to a certain
amount of rough language, and to occasional acts that are definitely inconsiderate
and unkind. There is no occasion for the law to intervene in every case where
some one’s feelings are hurt. There must still be freedom to express an
unflattering opinion, and some safety valve must be left through which irascible
tempers may blow off relatively harmless steam.” [Id. at 602-603, quoting
Restatement Torts, 2d, § 46, comment d, pp 72-73.]
North Pointe was correct in asserting that intentional infliction of emotional distress is
generally not recoverable where a party claims breach of contract. See Kewin v Massachusetts
Mut Life Ins Co, 409 Mich 401, 415-416; 295 NW2d 50 (1980). Additionally, and more
importantly, the harm Steward claimed to have suffered simply does not rise to the level of proof
necessary to prevail in an action for intentional infliction of emotional distress. Thus, we hold
that the trial court erred by allowing Steward’s claim of intentional infliction of emotional
distress to proceed to the jury.
Our resolution of North Pointe’s challenges to the causes of actions brought by Steward
makes resolution of the remaining issues raised in this appeal unnecessary.
We reverse.
/s/ Richard A. Bandstra
/s/ Joel P. Hoekstra
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