DAIMLERCHRYSLER CORPORATION V PROFESSIONAL CORPORATE INTELLIGENCE
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STATE OF MICHIGAN
COURT OF APPEALS
DAIMLERCHRYSLER CORPORATION,
UNPUBLISHED
December 22, 2005
Plaintiff-Appellee,
v
PROFESSIONAL CORPORATE
INTELLIGENCE, INC., and FIRST MERCURY
INSURANCE COMPANY,
Nos. 254107; 256290
Wayne Circuit Court
LC No. 01-112090-CK
Defendants-Appellants.
Before: Murphy, P.J., and Sawyer and Meter, JJ.
PER CURIAM.
In this consolidated appeal, defendants appeal from orders of the circuit court granting
summary disposition to plaintiff and awarding plaintiff case evaluation sanctions. We affirm in
part, reverse in part and remand.
Plaintiff (DC) retained the services of defendant Professional Corporate Intelligence
(PCI) to do private investigative work at plaintiff’s facility in the St. Louis, Missouri, area.
Specifically, PCI was to look into criminal activity at the facility. PCI agents allegedly made
purchases of marijuana from plaintiff’s employees at the facility, as well as discovered other
evidence of criminal activity.
The employees involved were arrested and criminally charged, though ultimately
acquitted. Plaintiff, however, immediately terminated the employment of those employees
following their arrest. Additionally, various facts regarding the investigation were made public.
Thereafter, the employees filed suit against both plaintiff and PCI, seeking damages arising out
of the investigation and subsequent events. Ultimately, those suits were either dismissed or
settled by payments from PCI’s insurance company, defendant First Mercury Insurance
Company (FMIC). The settlements included a release of plaintiff as well.
The instant action arises from a suit filed by plaintiff seeking reimbursement for its legal
expenses in defending the suits by the former employees. Plaintiff’s contract with PCI included
an indemnification clause. Additionally, plaintiff was listed as an additional named insured
under PCI’s insurance coverage from FMIC. Ultimately, the trial court granted summary
disposition in favor of plaintiff, awarding plaintiff over $100,000 in damages and over $30,000
in case evaluation sanctions.
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Defendants first argue that the trial court erred in granting summary disposition because
they had no obligation to provide a defense for plaintiff. We agree in part. We review a trial
court’s decision to grant summary disposition de novo. Devillers v Auto Club Ins Ass’n, 473
Mich 562, 567; 702 NW2d 539 (2005). Furthermore, where the language of a contract is clear
and unambiguous, construction of the contract is a question of law. Meagher v Wayne State
Univ, 222 Mich App 700, 721; 565 NW2d 401 (1997).
Turning first to the issue whether FMIC owes coverage under the insurance policy, FMIC
argues that there is no coverage because the claims by the plaintiffs in the underlying suits do not
allege “bodily injury.” FMIC additionally argues that, even if claims come within the definition
of “bodily injury,” there is no coverage because the claims do not arise out of the work
performed by PCI, but rather arise out of actions by plaintiff after the completion of PCI’s work,
and that there is no coverage under the policy for plaintiff’s actions.
We begin by looking to the policy to determine exactly what is covered. Coverage A
under the policy provides for coverage for “those sums that the insured becomes legally
obligated to pay as damages because of ‘bodily injury’ or ‘property damage’ to which this
insurance applies.” While defendants’ brief focuses on this coverage, there is also Coverage B,
which provides for coverage for “those sums that the insured becomes legally obligated to pay as
damages because of ‘personal injury’ or ‘advertising injury’ to which this insurance applies.”
Section V of the policy defines “bodily injury,” “personal injury,” and “advertising
injury” as follows:
1. “Advertising injury” means injury arising out of one or more of the
following offenses:
a. Oral or written publication of material that slanders or libels a person or
organization or disparages a person’s or organization’s goods, products or
services;
b. Oral or written publication of material that violates a person’s right of
privacy;
c. Misappropriation of advertising ideas or style of doing business; or
d. Infringement of copyright, title or slogan.
***
3. “Bodily injury” means bodily injury, sickness or disease sustained by a
person, including death resulting from any of these at any time.
***
10. “Personal injury” means injury, other than “bodily injury”, arising out
of one or more of the following offenses:
a. False arrest, detention or imprisonment;
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b. Malicious prosecution;
c. Wrongful entry into, or eviction of a person from, a room, dwelling or
premises that the person occupies;
d. Oral or written publication of material that slanders or libels a person
or organization or disparages a person’s or organization’s goods, products or
services; or
e. Oral or written publication of material that violates a person’s right of
privacy.
Turning to the complaints in the underlying litigation, we first look at the claims raised
by Truman Brewer. Count I alleged Malicious Prosecution, claiming that plaintiff and PCI made
a complaint to the police which falsely accused Brewer of having committed the crime of
delivering a controlled substance at plaintiff’s Fenton, Missouri, plant. The complaint further
alleged that that resulted in Brewer’s prosecution, which ultimately resulted in acquittal. Brewer
alleged that, as a result of the malicious prosecution, he suffered the loss of his employment,
embarrassment, ridicule, pain and suffering, and attorney fees and costs in defending himself.
Count II was a claim of false imprisonment arising out of his arrest based upon the complaint to
the police. Brewer again claimed that he suffered humiliation, embarrassment, emotional
distress and the incurring of legal fees as a result. Count III sounded in libel, alleging that an
employee of PCI made false written statements in reports that Brewer had sold the employee
marijuana and that plaintiff and PCI had published those reports, with the St. Louis County
Prosecutor reading those reports and the reports being made public in the news media. Brewer
again claimed that those actions resulted in him suffering humiliation, embarrassment and
emotional distress.
The second complaint was filed by William Allen and five other plaintiffs. The initial
complaint alleged false arrest, libel and slander resulting in the plaintiffs suffering shame,
embarrassment, loss of employment, loss of income, fear of incarceration, attorneys’ fees and
humiliation. The Allen plaintiffs thereafter filed a new complaint in which it alleged false
imprisonment, malicious prosecution, libel and slander. The plaintiffs claimed that these alleged
torts resulted in their sustaining lost wages, embarrassment, ridicule, pain and suffering, and
attorney fees in defending themselves.
At first blush, it would appear that the claims clearly come within the policy coverages
for “personal injury” (as well as within “advertising injury” with respect to the defamation
claims). Defendant’s brief presumes that there is coverage only for “bodily injury” without
adequately explaining the basis for that presumption. But we assume that it arises from the
“additional insured” provisions of the policy. The additional insured endorsement provides in
part as follows:
1. WHO IS AN INSURED (Section II) is amended to include as an
insured the person or organization (called “additional insured”) shown in the
Schedule but only with respect to liability for “bodily injury” or “property
damage” arising solely out of “Your work” for the additional insured(s) at the
location designated above.
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We read that clause as clearly and unambiguously limiting coverage under the policy for
additional insured to the bodily injury and property damage coverages. And we do not agree
with plaintiff that the injuries alleged by the plaintiffs in the underlying suits come within the
definition of “bodily injury.”
The definition of “bodily injury” provided by the policy is not particularly helpful
because it is circular in nature. Looking to the plain and ordinary meaning of the phrase,
Meagher, supra at 722, we find guidance in Black’s Law Dictionary (5th ed), which states that
“bodily injury” generally “refers only to injury to the body, or to sickness or disease contracted
by the injured as a result of injury.” Despite DC’s assertion to the contrary, we do not read
claims of the plaintiffs in the underlying suits as alleging injuries to the body or sickness or
disease arising from an injury to the body.
DC also argues that FMIC’s settlement of the claims against PCI creates presumptive
evidence of liability. While at first this appears to be a compelling argument, it overlooks the
fact that PCI, as a named insured, enjoyed greater coverage than did DC as an additional insured.
As a named insured, PCI had coverage for personal injury and advertising injury, which, as
discussed above, covers the claims by the plaintiffs in the underlying suits. DC, however, as an
additional insured only enjoyed coverage for bodily injury and property damage. Accordingly, it
is quite possible for FMIC to be liable under the policy to provide a defense and coverage for
PCI but not for DC.
For the above reasons, we conclude that no coverage existed under the policy for any of
the claims against DC. While it is true that the duty to defend is broader than the duty to
indemnify, the allegations of the underlying suit must at least arguably fall within the coverage
of the policy to trigger a duty to defend. Radenbaugh v Farm Bureau General Ins Co of
Michigan, 240 Mich App 134, 137-138; 240 NW2d 134 (2000). Because the allegations in the
underlying complaints do not even arguably fall within the coverage of the policy, there was no
duty to defend. Accordingly, the trial court erred in granting summary disposition in favor of
plaintiff. In light of the resolution of this issue, we need not address the additional arguments
presented by defendants as to why there was no coverage under the insurance policy.
Turning to the issue of PCI’s liability to DC, we are not persuaded that the trial court
erred in granting summary disposition in favor of plaintiff. The agreement between PCI and DC
included the following indemnification clause:
The Company [PCI] agrees to indemnify and hold the Client [DC], its
agents and employees, harmless from and against any and all claims and causes of
action brought against Client and from any and all damages, losses, expenses,
attorneys’ fees, costs and liabilities sustained by Client, its agents and employees,
arising out of any claimed act or omission of the company or its agents and
employees in connection with or related to the services set forth herein. The
Company will also maintain, at its sole expense, insurance in amounts and
coverages satisfactory to Client to cover all claims hereunder.
Defendants argue that plaintiff is not entitled to indemnification under the agreement because the
claims against plaintiff in the underlying suits did not arise “out of any claimed act or omission
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of” PCI. Rather, defendants argue, the claims arose out of plaintiff’s own acts in making
statements to the media, requesting prosecution of the employees and so forth. We disagree.
The complaints in the underlying suits base liability virtually exclusively on the acts or
omissions of PCI. In the Brewer complaint, the claim for malicious prosecution is based upon
the allegation that PCI made a complaint to the St. Louis County Police. Similarly, the false
imprisonment claim alleges that PCI intentionally and unlawfully instigated the plaintiff’s arrest.
Likewise, the libel claim is based upon written reports prepared by PCI. DC’s alleged liability in
the Brewer complaint is one of respondeat superior for having retained PCI and, arguably, for
taking action on the allegedly false information supplied by PCI.
The Allen complaint is similarly based upon the actions of PCI, even in the claims
against DC. The false imprisonment claim bases DC’s liability on a failure to properly supervise
its agent (PCI), while the malicious prosecution claim alleges that the prosecution was initiated
by PCI, and the libel claim is based upon the reports prepared by PCI.
Clearly each of these claims is based upon the conduct of PCI and they sought to hold
DC liable for the actions of its agents. At most, there are vague allegations that DC is
responsible in part for its own actions that were taken based upon the information supplied by
PCI. It is equally clear to us that the damages suffered by DC, namely the attorney fees and
costs incurred in defending against these lawsuits, are damages “arising out of any claimed act or
omission of” PCI. Even if we accept defendants’ view that DC’s liability arises, in whole or in
part, out of the actions it took on its own, those actions were taken based upon the information
supplied by PCI. Accordingly, the claims against DC still arise out of the claimed acts or
omissions of PCI. That is, even if DC alone is responsible for requesting the arrest and
prosecution of the employees, and for making public the information in PCI’s report to DC,
those actions were taken based upon the information derived by PCI in its investigation. In other
words, DC’s conduct arose from the acts or omissions of PCI. Or to view it another way, the
claims against DC would have merit only if PCI supplied inaccurate information. If PCI
accurately reported to DC that the employees had engaged in criminal acts, then their arrest and
prosecution would not be false or malicious, nor would the publication of those true facts be
defamatory. Thus, the employees’ claims against DC must, of necessity, be based upon a claim
that PCI failed to properly investigate and report accurate information to DC and the police.
Absent an allegation that DC contributed its own inaccurate information in the material turned
over to the police and the prosecutor, or in the material made public, all of the claims must arise
out of the acts or omissions of PCI.1 And we see no such allegations in the Brewer and Allen
complaints.
1
We also note that it would be insufficient for PCI to show that, in fact, it was DC’s actions
alone that gave rise to the liability. The indemnification agreement does not merely indemnify
DC for claims arising out of PCI’s actions. Rather, it broadly indemnifies DC for any damages
arising out of any claimed act or omission of PCI. Thus, indemnification is owed even if the
underlying complaint inaccurately claims an act by PCI. Here, the acts claimed in the underlying
complaints are attributed to PCI. Therefore, whether those actions were taken by PCI, DC, or by
(continued…)
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In sum, we believe that the clear and unambiguous language of the agreement provides
for indemnification of plaintiff by PCI for the claims in the underlying lawsuits.
Defendants also briefly argue that, even if they owed indemnification to plaintiff for
those claims that are based upon respondeat superior liability, that obligation was satisfied
because a defense was effectively provided by the defense provided to PCI on those same claims.
We disagree. First, as discussed above, indemnification was not owed merely on those claims
based upon a theory of respondeat superior, but on all claims because all claims arise out of the
claimed acts or omissions of PCI. Second, the agreement does require PCI to provide a defense;
it requires PCI to indemnify DC. Black’s Law Dictionary (5th ed) defines indemnify as follows:
To restore the victim of a loss, in whole or in part, by payment, repair, or
replacement. To save harmless; to secure against loss or damage; to give security
for the reimbursement of a person in case of an anticipated loss falling upon him.
To make good; to compensate; to make reimbursement to one of a loss already
incurred by him.
Thus, the unambiguous terms of the contract require PCI to reimburse DC for the expenses that
DC incurred in defending itself, not to provide the defense. While the parties could certainly
have agreed that PCI could discharge its obligation to indemnify by providing a common
defense, nothing in the indemnification clause obligated DC to accept those terms. Accordingly,
absent an agreement to the contrary, DC was within its rights to provide its own defense and then
look to PCI for reimbursement of those costs under the indemnification clause.
For these reasons, we conclude that plaintiff is entitled to indemnification under the
agreement. Summary disposition to plaintiff was properly granted as to PCI.
Our resolution of the above issue also renders an easy resolution of the remaining issue
raised by defendants. Defendants argue that plaintiff cannot show that it suffered any damages
because any of the attorney fees incurred would have been occurred even absent any of the
claims in the underlying suit based upon respondeat superior. This argument, however, is based
upon the presumption that PCI is only obligated to indemnify those claims that are based upon
respondeat superior. As discussed above, PCI was obligated to indemnify DC for all claims.
Accordingly, PCI was obligated to indemnify DC for all attorney fees and costs incurred in the
litigation.
As for defendants’ argument that PCI is not obligated to indemnify DC for approximately
$10,000 in attorney fees incurred before suit was filed, we do not agree. The fees were incurred
in anticipation of potential litigation, litigation that did come to be filed. While it is arguably the
case that indemnification is not owed if suit is never filed, nothing in the indemnification
agreement limits the damages that are recoverable to those incurred after suit is actually filed.
Because suit was filed, clearly the indemnification agreement now applies. That agreement
indemnifies DC for all attorney fees and costs incurred, without limitation to when those fees and
(…continued)
neither one is immaterial to resolution of this issue. So long as the plaintiffs in the underlying
suit based their allegations upon the claimed acts of PCI, indemnification is owed.
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costs were incurred or, for that matter, without regard to whether those fees and costs were either
necessary or reasonable2. In short, the clear and unambiguous terms of the contract entitled
plaintiff to be indemnified by PCI for the attorney fees incurred in anticipation of litigation.
Having concluded that FMIC was not obligated to provide a defense to plaintiff, but that
PCI was obligated to indemnify plaintiff for all fees and costs incurred in defending the
underlying lawsuits, we turn to the issue raised in the companion appeal, the awarding of case
evaluation sanctions. We begin by noting that because we conclude that the trial court erred in
granting summary disposition to plaintiff as to FMIC, the case evaluation sanctions against
FMIC must be set aside. With respect to sanctions against PCI, we agree in part with
defendants’ argument.
First, defendants argue that the trial court erred in accepting the hourly rate requested by
plaintiff, $250 per hour for time worked by partners and $175 per hour for associate’s time.
MCR 2.403(O)(6)(b) provides for the awarding of an attorney fee based upon a reasonable
hourly or daily rate. We are not persuaded that the trial court abused its discretion in
determining that the proposed hourly rates were reasonable. Zdrojewski v Murphy, 254 Mich
App 50, 73; 657 NW2d 721 (2003).
Second, defendants argue that the trial court erred in awarding various expenses billed as
costs of litigation. We agree in part. Under MCR 2.403(O)(1), “actual costs” are awardable as
case evaluation sanctions. MCR 2.403(O)(6) defines “actual costs” as those costs taxable in any
civil action and a reasonable attorney fee. Plaintiff’s bill of costs included items such as
telephone toll charges, photocopy charges, travel expenses, etc. Taxation of costs is governed by
Chapter 24 of the Revised Judicature Act, MCL 600.2401 et seq., and such items are not
provided for by the statute. Accordingly, while the time spent by an attorney on such activities
may be awardable as attorney fees, the expense items incurred are not awardable as a taxable
cost. That is, for example, where an attorney makes a phone call, the billable time spent on the
call may be awarded as part of the reasonable attorney, but the long distance toll charge incurred
in making the telephone call is not awardable as a taxable cost. On remand, the trial court shall
revisit this issue and deduct from the award any expense items that do not qualify as a taxable
cost.
Third, defendants argue that the trial court improperly awarded costs for the expert
witness fee of attorney Gordon Ankney. We agree. Attorney Ankney was the lead attorney
representing plaintiff in the underlying lawsuits in Missouri. Ankney’s testimony in his
deposition related to the billings by his firm to plaintiff from representing plaintiff in those
underlying lawsuits. We agree with defendant that Ankney was a fact witness, not an expert
2
That is not to suggest that it is inherently unreasonable to incur fees and costs in advance of
litigation. It is neither unusual nor unreasonable for parties to potential litigation to incur
attorney fees and other costs associated with litigation before the lawsuit is even filed. Indeed,
potential litigants, and their attorneys, are to be encouraged to settle their matters without the
need to even file suit.
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witness. Accordingly, plaintiff is not entitled to treat any fee paid Ankney as a taxable cost as an
expert witness fee.
On remand, the trial court shall recalculate the amount of the case evaluation sanctions
award against PCI by deducting the amount of expenses which were previously awarded but do
not qualify as taxable costs and by treating attorney Ankney as a fact witness rather than an
expert witness.
Affirmed in part, reversed in part and remanded for further proceedings consistent with
this opinion. We do not retain jurisdiction. Defendant FMIC only may tax costs, the remaining
parties not having prevailed in full.
/s/ William B. Murphy
/s/ David H. Sawyer
/s/ Patrick M. Meter
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