AMERICAN BUMPER & MFG CO V AMERICAN INTERNATIONAL GROUP
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STATE OF MICHIGAN
COURT OF APPEALS
AMERICAN BUMPER & MANUFACTURING
COMPANY and JACK C. SKOOG,
FOR PUBLICATION
March 23, 2004
9:15 a.m.
Plaintiffs-Appellants,
v
NATIONAL UNION FIRE INSURANCE COMPANY
OF PITTSBURGH, PA
No. 245342
Ionia Circuit Court
LC No. 97-018096-CK
Defendant-Appellee,
and
AMERICAN INTERNATIONAL GROUP, INC.,
LANSING INSURANCE AGENCY, and L.
JOHN WENGLARSKI,
Defendants.
AMERICAN BUMPER & MANUFACTURING
COMPANY and JACK C. SKOOG,
Plaintiffs-Appellees,
No. 245367
Ionia Circuit Court
LC No. 97-018096-CK
v
NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA
Defendant-Appellant,
and
AMERICAN INTERNATIONAL GROUP, INC.,
LANSING INSURANCE AGENCY, and JOHN
L. WENGLARSKI,
Defendants.
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Updated Copy
June 18, 2004
Before: Fitzgerald, P.J., and Cavanagh and Hoekstra, JJ.
FITZGERALD, P.J.
In this declaratory judgment action, the trial court granted summary disposition in favor
of plaintiffs American Bumper & Manufacturing Company and Jack C. Skoog1 (American
Bumper) on the ground that National Union Fire Insurance Company of Pittsburgh, PA
wrongfully refused to defend American Bumper, its insured, in two wrongful death actions
arising from a single incident in which two American Bumper employees were killed. The trial
court entered judgment in favor of American Bumper for defense of the lawsuits in the amount
of $1,522,000 and awarded American Bumper prejudgment interest of $885,732. The court
refused to award the costs of settlement as an element of damages for breach of the duty to
defend. Both parties appeal as of right. We vacate and remand.
FACTS
On September 20, 1991, two American Bumper employees, Stephen Eilar and Ricky
Dora, were killed when a mechanical press allegedly malfunctioned and recycled on its own,
crushing the employees. The personal representative of Eilar's estate brought a wrongful death
action contending that Eilar's injuries were the result of an intentional tort outside the ambit of
the exclusive remedy provision of the Worker's Disability Compensation Act (WDCA), MCL
418.101 et seq.2 The personal representative of Dora's estate filed a similar complaint on the
same grounds. The lawsuits were consolidated.
Each underlying complaint was designed to avoid the exclusive remedy provision of the
WDCA.3 In the Eilar case, the second amended complaint contained three counts: count I—
defendant Skoog (intentional tort); count II—American Bumper (intentional tort); count III—
defendants American Bumper and Skoog (intentional nuisance in fact).4 In counts I and II, the
complaint alleged that American Bumper
1
Skoog was the principal stockholder and chief operating officer of American Bumper. He was
therefore sued as an agent of American Bumper.
2
It is well-settled that the WDCA's exclusive remedy provision applies equally to recovery
against coemployees, officers, and agents of the employer. Berger v Mead, 127 Mich App 209,
213-214; 338 NW2d 919 (1983). Thus, the same analysis applies to both American Bumper and
Skoog.
3
Any cause of action that did not plead intentional conduct would be barred by the exclusive
remedy provision of the WDCA. Further, the National Union policy contains a worker's
compensation exclusion.
4
Eilar's second amended complaint and Dora's first amended complaint did not contain any
counts alleging nonintentional torts against American Bumper. Although Eilar and Dora
subsequently moved to amend their complaints to add counts of fraudulent concealment and
"willful/wanton misconduct and gross negligence," the trial court rejected the proposed
amendments, finding that the counts were barred by the exclusive remedy provision of the
(continued…)
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committed an intentional tort by [its] deliberate acts which caused dangerous and
hazardous work conditions at the American Bumper Plant, and Defendant had
actual knowledge that an injury was certain to occur as a result of [its] act, and
defendant willfully disregarded that knowledge, and Defendant thereby
specifically intended the injury to Stephen Christopher Eilar . . . . [Emphasis
added.]
In count III of the Eilar complaint, entitled "Intentional Nuisance in Fact," the plaintiff
incorporated the previous paragraphs of the complaint (1-23) and contended that the American
Bumper Ionia Plant was
operated and maintained at or before the time of the injury to Stephen Eilar in
such an intentional and deliberate manner that its condition had a natural tendency
to create danger and to inflict injury to its employees.
The first amended complaint in the Dora case alleged intentional torts against American
Bumper and Skoog (counts I and II), asserting that Dora's death was caused by the "intentional,
willful, and wanton acts of the Defendant" and that the deliberate acts "proximately caused and
intended Plaintiff 's decedent's death." Count III pleaded intentional nuisance in fact, asserting
that
at the time of the Defendants' intentional acts, they knew that injury resulting
from the condition was substantially certain to result from the conditions that
existed.[5]
American Bumper tendered the claims to each of its insurance carriers that issued
policies in effect at the time of the accident, including Employers Reinsurance (worker's
compensation/employer's liability), Federal Insurance Company (primary general liability), and
National Union (excess umbrella). Federal denied the claim, and Employers Reinsurance agreed
to pay its policy limits. National Union investigated the claim and advised American Bumper
that coverage might not be afforded because of the nature of the Eilar and Dora allegations. On
October 27, 1992, National Union declined American Bumper's claim.
In 1993, American Bumper filed a motion for summary disposition in the underlying
consolidated cases in which it asserted that the plaintiffs had not and could not produce proofs to
establish an intentional tort under the WDCA. The trial court agreed and granted summary
disposition in favor of American Bumper in an opinion dated October 28, 1993. Both plaintiffs
appealed to this Court. While the cases were on appeal, American Bumper settled both cases for
a combined amount of $2 million, with $1.2 million allocated to Eilar and $800,000 allocated to
Dora. On April 28, 1997, this Court dismissed the appeals. On May 12, 1997, the circuit court
entered an order of dismissal pursuant to the settlement.
(…continued)
WDCA. Accordingly, because the proposed amendments were never approved in the underlying
case, American Bumper's arguments regarding the duty to defend the claims are misplaced.
5
Count IV was against defendant D & S Machine Repair and count V was against defendant
Midwest Brake Bond Company.
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On several subsequent occasions during the course of the underlying proceedings,
National Union examined American Bumper's claim for insurance coverage. On January 10,
1997, National Union advised American Bumper that it would not change its original position of
declining coverage and refusing to defend. On March 7, 1997, American Bumper filed this
declaratory action.
On April 30, 1999, the trial court denied National Union's renewed motion for summary
disposition and granted partial summary disposition as a matter of law in favor of American
Bumper concerning National Union's duty to defend American Bumper in the underlying
lawsuits. The trial court interpreted the duty to defend language of the policy to be fully
independent of the indemnity language:
However, the defense paragraph indicates that it covers occurrences
covered under the policy which is a different language than what the coverage
paragraph says. The coverage says, to which the insurance applies and
occurrence is defined in the policy.
Nothing is excluded in the defense obligation. It doesn't say that the
defense only applies if there's no coverage—or there's no defense if there's no
coverage. I think to be clear, the section regarding defense should have said that
the occurrence resulted in liability to pay and it didn't say that. It just says it
covers an occurrence. So because of this difference, there must be some different
intention of the parties to do this.
The court eventually awarded $1,522,000 as defense costs for the underlying lawsuits, and
prejudgment interest in the amount of $885,732.
Docket No. 245367
The personal representatives of the estates of Eilar and Dora sued American Bumper
under the intentional tort exception to the WDCA. MCL 418.131(1). The intentional tort
exception allows imposition of liability under two distinct sets of circumstances. First, the
employer specifically intended the injury. An employer shall be deemed to have intended to
injure if the employer had actual knowledge that an injury was certain to occur and willfully
disregarded that knowledge. Travis v Dreis & Krump Mfg Co, 453 Mich 149; 551 NW2d 132
(1996). The second set of circumstances is known as the legislatively prescribed "inferred
intent" tort. A review of the complaints reveals that the Eilar plaintiff relied on the first
exception (American Bumper "specifically intended to injure") and that the Dora plaintiff relied
on the second exception (American Bumper had actual knowledge that an injury was certain to
occur and willfully disregarded that knowledge).
National Union's excess umbrella liability policy provides under the heading "Coverage":
A. We will pay on behalf of the insured that portion of the ultimate net
loss in excess of the retained limit as hereinafter defined, which the Insured will
become legally obligated to pay as compensatory damages (excluding all fines,
penalties, punitive or exemplary damages) because of Personal Injury, Property
Damage Liability or Advertising Liability, caused by an occurrence to which this
insurance applies . . . . [Emphasis added.]
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Under the heading "Defense," the policy provides:
A. The provisions of this section apply solely to occurrences covered
under this policy but not covered by any underlying policies listed in the Schedule
of Underlying Insurance or any other underlying insurance providing coverage to
the Insured. . . .
1. We will defend any suit against the Insured alleging liability insured
under the provisions of this policy and seeking recovery for damages on account
thereof even if such suit is groundless, false or fraudulent, but we will have the
right to make such investigation and negotiation and settlement of any claim or
suit as may be deemed expedient by us . . . . [Emphasis added.]
Under the heading "Definitions," "occurrence" is defined:
1. With respect to Personal Injury and Property Damage, the term
occurrence means an event, including continuous or repeated exposures to
conditions, which result in Personal Injury and Property Damage neither expected
nor intended from the standpoint of the Insured. [Emphasis added.]
Under the heading "Exclusions," the policy provides:
This policy does not apply:
* * *
15. to any liability resulting from personal injury or property damage
which is expected or intended by the insured, except that this Exclusion does not
apply to Personal Injury resulting from the use of reasonable force to protect
persons or property. [Emphasis added.]
The present action was brought by an employer against its insurers to determine whether
allegations relating to its employees fell within the coverage provided by the insurance policy.
Thus, the determination is not whether the allegations successfully avoid the exclusive remedy
provision of the WDCA, but whether those allegations are comprehended by a particular
insurance policy. Whether National Union is contractually obligated under the policy to defend
American Bumper against the claims is a question of law requiring interpretation of an insurance
contract. Auto-Owners Ins v Harrington, 455 Mich 377, 381; 565 NW2d 839 (1997).
An insurer is not required to defend its insured against claims specifically excluded from
policy coverage. Protective Nat'l Ins Co of Omaha v City of Woodhaven, 438 Mich 154, 159;
476 NW2d 374 (1991). Where policy language is clear, this Court is bound by the specific
language set forth in the policy. South Macomb Disposal Auth v American Ins Co (On Remand),
225 Mich App 635, 657; 572 NW2d 686 (1997).
The National Union policy provides coverage for injury caused by an "occurrence" to
which the policy applies, and also provides that the defense provision of the policy applies solely
to "occurrences covered under this policy." An occurrence is defined as "an event . . . neither
expected nor intended from the standpoint of the insured." Similarly, the policy provides an
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exclusion for "any liability resulting from Personal Injury . . . which is expected or intended by
the insured." The plain language of the policy demonstrates that the policy excludes both
coverage and a defense for occurrences of injury that were subjectively expected by the insured.
This Court has interpreted exclusionary language identical to that in the National Union policy
and concluded that it differs from the language of an insurance policy excluding coverage for
events "caused intentionally" in that it excludes coverage for occurrences of injury that were
subjectively expected by the insured. Metropolitan Property & Liability Ins Co v DiCicco, 432
Mich 656, 673; 443 NW2d 734 (1989). Indeed, this Court has acknowledged that "the addition
of the word 'expected' expands the meaning of the 'caused intentionally' language" in an
insurance policy exclusion clause. Id.
Thus, the policy exclusion will preclude coverage in this case if the court can find as a
matter of law that, from the standpoint of American Bumper, the bodily injury to Eilar and Dora
was either expected or intended. Because the Eilar complaint alleged that American Bumper
specifically intended the injury, the policy exclusion clearly precludes coverage in the Eilar case.
The Dora complaint alleged that American Bumper had knowledge of the conditions that
caused Dora's injury, that American Bumper had knowledge that an injury was certain to occur,
and that American Bumper disregarded the fact that an injury was certain to occur. The only
way that the Dora plaintiff could avoid the exclusive remedy provisions of the WDCA was by
proving that injury was certain to occur and that American Bumper willfully disregarded the fact
that injury was certain to occur.
In Cavalier Mfg Co v Employees Ins Co of Wausau, 211 Mich App 330, 333-334; 535
NW2d 583 (1995), remanded 453 Mich 953 (1996), this Court held that where an employee
alleges acts sufficient to constitute an intentional tort within the meaning of the WDCA, those
same allegations do not necessarily constitute "bodily injury intentionally caused" within the
meaning of the insurance policy exclusion at issue in that case.6 The policy exclusion in
Cavalier, however, excluded only "bodily injury intentionally caused." The exclusion in the
present case is different in that it excludes injury expected or intended from the standpoint of the
insured.
In Golec v Metal Exchange Corp, unpublished opinion per curiam of the Court of
Appeals, issued January 11, 2002 (Docket Nos. 220166, 220444), a divided panel of this Court
held that an employer's willful disregard of actual knowledge that an injury was certain to occur
is not the legal equivalent of the injury being "expected or intended from the standpoint of the
insured." Id., p 8. The majority concluded that "it is possible to deliberately disregard actual
knowledge that an injury is certain to occur without actually intending or expecting the injury."
Id. Although the majority did not detail its reasoning, it explained:
6
The Court reasoned that because such an exclusion requires both an intentional act and an
intentionally caused injury, it is possible for an employee to allege an implied intentional tort
under the WDCA without coming within the policy exclusion as a matter of law because unlike
the exclusion, the implied intentional tort does not require a specific intent to harm. Id.
-6-
The [implied intentional tort] provision holds an employer responsible for
an intentional injury when, although the injury was not truly intended, the
circumstances were such that the employer was aware of all the elements leading
to certain injury, although for some reason, the employer ignored the obvious and
placed the employee in harm's way. Under these circumstances, it may or may
not be the case that the employer subjectively expected the injury to occur. The
employer may have ignored the obvious, without actually intending injury, but,
nevertheless, expecting it and being indifferent to it. Or, the employer may have
ignored the obvious because although all the elements leading to certain injury
were present and known to the employer, the employer did not bother to put two
and two together in its haste to get the job done. The policy exclusion requires
consideration of the subjective intent to the employer. Under this standard,
liability under the [implied intentional tort] provision does not preclude coverage
as a matter of law. Such is the case here. [Id.]
In National Union Fire Ins Co of Pittsburgh, PA v Rodriguez, unpublished opinion of the
United States District Court for the Eastern District of Michigan, issued February 12, 2004
(Docket No. 03-71738), in analyzing the majority holding in Golec, the court stated at slip op pp
14-15:
Thus, under the Golec court's understanding, an employer could
accidentally or negligently disregard actual knowledge of certain injury "in its
haste to get the job done." Id. To the contrary, however, the Michigan Supreme
Court clearly indicated that the terms "willfully disregards" in the WDCA are
'intended to underscore that the employer's act or failure to act must be more than
mere negligence . . . . ' Travis [v Dreis & Krump Mfg Co, 453 Mich 149; 551
NW2d 132 (1996)]. Furthermore, the Golec opinion seems inconsistent with
Travis in that Travis stands for the proposition that the implied intentional tort
provision of the WDCA provides an avenue to infer a specific intent to injure on
the part of the employer. Id. at 143. If a specific intent to injure is inferred as a
matter of law based on the employer's willful disregard of actual knowledge that
an injury is certain to occur, this Court fails to see how the same state of mind is
not also sufficient to infer a subjective expectation of injury as a matter of law.
This is also the conclusion arrived at by Judge Talbot, who dissented in Golec.
In his dissent in Golec, Judge Talbot stated:
It [the trial court] opined that the exception to the WDCA that applied to
the instant case, that plaintiff 's employer "disregarded actual knowledge that an
injury was certain to occur," did not amount to intentionally causing an injury for
the purposes of the WC/EL policy exclusion, but did not amount to expecting an
injury for the purposes of the CUP policy exclusion. Accordingly, the subjective
expectation of injury could be inferred as a matter of law. I agree.
It appears that plaintiff was in a no-win situation with regard to the CUP.
Whether his employer disregarded actual knowledge that plaintiff would be
injured is a question of fact for the jury to resolve. See Travis v Dreis & Krump
Mfg Co, 453 Mich 149, 184-187; 551 NW2d 132 (1996). If the case had gone to
trial, plaintiff would have had to prove that his employer disregarded actual
-7-
knowledge that plaintiff would be injured in order to survive the exclusive remedy
provision of the WDCA. Id.; see also Cavalier Mfg Co v Employees Ins Co of
Wausau, 211 Mich App 330, 340; 535 NW2d 583 (1996). If plaintiff had been
successful in that regard, then in my opinion and contrary to the majority's
holding, the CUP would not cover plaintiff 's injuries; they would be excluded as
bodily injuries expected by the insured employer. If, instead, plaintiff had failed
to prove that his employer disregarded knowledge of certain injury, the CUP
exclusion for "bodily injury . . . either expected or intended from the standpoint of
the insured" would not preclude coverage, but the exclusion for workers
compensation claims would do so.
I disagree with the majority's distinction between the disregard of
knowledge of certain injury and the expectation of injury. Because I do not
subscribe to the majority's conclusion that "it is possible to deliberately disregard
actual knowledge that an injury is certain to occur without actually intending or
expecting the injury, I would affirm the trial court's conclusion that the CUP
excludes coverage for plaintiff 's injuries. [Id., pp 1-2 (emphasis in original).]
We are persuaded by the reasoning in Judge Talbot's dissent and in the National Union opinion
and conclude that American Bumper's subjective expectation of injury is inferred as a matter of
law. We fail to see how American Bumper could have committed any acts with the belief that
the deceased employees were certain to be injured, yet not have expected such injuries to occur.
The policy exclusion for "bodily injury . . . either expected or intended from the standpoint of the
insured" effectively bars coverage for the underlying claims. See also Wedge Products, Inc v
Hartford Equity Sales Co, 31 Ohio St 3d 65; 509 NE2d 74 (1987), and Westfield Ins Co v Jarrett
Reclamation Services, Inc, 114 Ohio App 3d 492; 683 NE2d 415 (1996) (no coverage afforded
for intentional tort in a policy providing protection for injuries "neither expected nor intended
from the standpoint of the insured"). Because there is no possibility of coverage under the policy
for either of the actions filed against American Bumper, it follows that National Union had no
duty to defend against those actions. Marlo Beauty Supply, Inc v Farmers Ins Group of Cos, 227
Mich App 309, 315; 575 NW2d 324 (1998), modified on other grounds by Harts v Farmers Ins
Exchange, 461 Mich 1; 597 NW2d 47 (1999) (the duty to defend is tied to the availability of
coverage).7
The judgment in favor of American Bumper and Skoog is vacated, and the case is
remanded for entry of an order granting summary disposition in favor of National Union.
Jurisdiction is not retained.
Hoekstra, J., concurred.
/s/ E. Thomas Fitzgerald
/s/ Joel P. Hoekstra
7
In light of our holding, we need not address the remainder of the issues raised in Docket Nos.
245342 and 245367.
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