Can State Legislature’s “Impair” the Obligations and Rights of Insurance Contracts to Force Insurers to Cover Losses to Commercial Enterprises Under Commercial Insurance Policies Due to COVID19?

Post on Contract Clause and State Legislation to Force Insurers to Cover Losses Under Commercial Insurance Policies due to COVID19 Pandemic

Lawyer’s Weekly Chronicles Appellate Court Victory by Law Offices of Carson J. Tucker

The lawyer’s weekly recently published an article on the Menard v Imig case in which I successfully represented the Macomb County governmental defendants in the Court of Appeals, briefing and arguing this case addressing governmental immunity and the highway defect exception under the Governmental Tort Liability Act.

Macomb County Road Department Not Liable


Bank’s Failure to Raise “Abandonment” of Contract Constitutes Waiver in Breach of Contract Action

In Clapper, et al. v. Zochowski, et al, the Court of Appeals reversed the trial court’s ruling granting summary disposition in favor of a bank in a breach of contract action surrounding a loan purchase agreement.

The plaintiff sought to purchase a loan obligation held by the bank.

The bank was required to produce certain documents and parties at the closing in order to complete the contract.  The parties appeared for the closing, but the bank did not produce all documentation and the primary debtor did not appear as was required under the terms of the agreement.  Thus, the closing was never consummated.

The bank subsequently sold the loan obligations to another party.

Plaintiff filed suit against the bank alleging, among other things, breach of contract.  The bank argued that the agreement had been abandoned (although the bank raised this in reply to the plaintiff’s motion for summary disposition, not in its first responsive pleading as an affirmative defense).

The trial court entered judgment in favor of the bank, holding that the agreement did not place any burden on the bank to produce documents and certain parties.  The trial court also ruled that the agreement had been abandoned.

Here, the Court of Appeals reverses the case and remands for entry of summary disposition in favor of the plaintiff.  The Court of Appeals ruled the trial court could not address issues that were not raised before it.  More importantly, the Court of Appeals notes the bank failed to raise the issue of “abandonment” of the contract as an affirmative defense to the plaintiff’s complaint in its first responsive pleading.  This constituted a “waiver” of the defense for purposes of opposing plaintiff’s motion for summary disposition on the breach of contract claim.  Moreover, the Court of Appeals addresses and dismisses the issue of abandonment, recognizing it would be futile to allow the bank to amend its answer on remand.

Thus, the Court of Appeals orders entry of judgment in favor of plaintiff and remands only for consideration of the damages.

This case raises two important points:  first, and foremost, it is of utmost importance that all affirmative defenses available in a breach of contract action be raised by the defending party in its first responsive pleading.  The Court of Appeals correctly rules here that a failure to waive the defense constituted waiver.  It nonetheless rules that the argument of waiver would have been futile because the facts demonstrated that no abandonment of the agreement had occurred.

More importantly, perhaps, is the Court’s admonition of the trial court’s effort to address issues unrelated to the plaintiff’s claim that the bank breached its contract by failing to fulfill the requirement that certain documents and parties appear for the closing.

An interesting question raised by this case concerns whether the bank sought defense and indemnity coverage under any professional liability / errors and omissions insurance policies to cover the defense costs and potential indemnity of this claim.

Does the fact that the banking personnel failed to produce documentation and parties at the closing constitute acts that are covered by the bank’s professional liability insurance policies?

Effective appellate representation demands different skills than those required by litigation attorneys.  Appellate attorneys are adept at analyzing the intricacies of each case from an objective and critical perspective.  From reviewing and preparing the lower court record, identifying errors for appeal, and developing a strategy to raise those issues that will be addressed by appellate courts, appellate attorneys are capable of handling the most complex appeals from the application stage to oral advocacy before the highest courts.  Our research abilities and knowledge of current issues in nearly all major subject-matter areas of the law provide our clients with efficient and immediate assistance with complex and high-exposure cases.

We are also experienced at navigating through all appellate courts to shepherd the appeal in the most expeditious fashion possible so that it can be reviewed and quickly ruled upon.

Below are some of the recent significant cases prosecuted by the Appeals and Legal Research Group.

  • Omian v. Chrysler, LLC, Michigan Court of Appeals Docket No. 310743, remanded by Supreme Court as on leave granted, Supreme Court No. 146908, oral argument presented July 16, 2014 by Carson J. Tucker for Chrsyler, LLC
  • Moore v. Nolff’s Construction and Travelers Ins., Michigan Court of Appeals Docket No. 313478 and 313440 (consolidated), application and cross-application granted and oral argument in Court of Appeals presented July 2014 by Carson J. Tucker for Nolff’s Construction and Travelers Insurance
  • Arbuckle v. GM, Michigan Court of Appeals Docket No. 310611, oral argument in Court of Appeals presented May 2014 by Carson J. Tucker for GM
  • Yono v. MDOT, ___ Mich. App. ___ (201_), amicus curiae brief filed for Michigan Municipal League and Michigan Townships Association on June 16, 2014, after remand by Carson J. Tucker
  • Estate of Truett v. Wayne County, Unpublished Opinion of the Michigan Court of Appeals, dated May 6, 2014 (Docket No. 313638), briefed and argued by Carson J. Tucker for Wayne County
  • Omian v. Chrysler Group, LLC, 495 Mich. 859 (2013), application filed by Carson J. Tucker, Supreme Court remand to Court of Appeals on leave granted, oral argument to be held in July 2014
  • Ghanam v. John Does, 303 Mich. App. 522 (2013), application to appeal filed in Supreme Court by Carson J. Tucker
  • State Farm v. MMRMA, ___ Mich App ___ (2013), amicus curiae for Oakland County in support of MMRMA application, by Carson J. Tucker
  • Hannay v MDOT, ___ Mich ___ 201_), application granted, amicus curiae filed for Michigan Townships Association, Macomb County, Oakland County and Wayne County, et al., by Carson J. Tucker
  • Yono v. MDOT, ___ Mich ___ (201_), oral argument on application granted, amicus curiae for Oakland, Macomb and Wayne County filed by Carson J. Tucker in support of the state’s application
  • Huddleston v. Trinity Health, et al., 495 Mich. 976 (2014), oral argument on application granted, amicus curiae with Lawrence Garcia, Esq., for MDTC
  • Ashley, LLC v Pittsfield Twp., 494 Mich 875 (2013), application granted, for Pittsfield Township by Carson J. Tucker (resolved by settlement)
  • Bailey v. Schaaf, ___ Mich ___ (2013), amicus curiae for MDTC by Carson J. Tucker
  • Atkins v. SMART, 492 Mich 707 (2012), oral argument on application, Court of Appeals case reversed by opinion, Carson J. Tucker
  • Hagerty v Manistee, 493 Mich 933 (2013), amicus curiae for Michigan Municipal League, et al., by Carson J. Tucker
  • McMurtrie v Eaton Corp, 490 Mich 976 (2011)
  • Findley v DaimlerChrysler Corp., 490 Mich 928 (2011)
  • Brewer v. AD.Transport Express, Inc, 486 Mich 50 (2010)
  • Stokes v Chrysler, 481 Mich 266 (2008)
  • Brackett v Focus Hope, Inc, 482 Mich 269 (2008)
  • Rakestraw v Gen Dynamics, 469 Mich 220 (2003)



Court of Appeals Rules Disagreement Over the Terms of Settlement Contract Not an Ambiguity Over What Terms Actually Mean

This is an interesting, if not unsurprising, case in which the Court of Appeals affirmed a trial court’s finding concerning what the terms of a settlement contract were in a dispute over their meaning.

The plaintiff and the defendant’s insured entered into a settlement agreement in which the plaintiff repaid the insurer an amount to settle past due offsets for previously overpaid workers’ compensation benefits.  The dispute centered on a handwritten entry on the settlement agreement in which the plaintiff claimed future claims against him by the insurer for overpayments were forever precluded and the insurer claimed potential future claims were preserved.

According to the plaintiff, the handwritten entry stated that the insurer agreed to: “$95,000 in full settlement of all claims and waives future claims”; whereas the insurer claimed it agreed to:  “$95,000 in full settlement of all liens and leaves future credits.”

The trial court found in favor of the plaintiff, reading the provision as plaintiff urged.  The insurer appealed, claiming that the contract was ambiguous, and as such, parol evidence should have been allowed to clarify the true meaning of the entry.

The Court of Appeals affirmed the trial court’s ruling in favor of plaintiff.  The Court reasoned that the question was not one of whether the contract was “ambiguous”, which would mean that although the terms were clearly discernible, their meaning and intent  were not.  This situation would allow the introduction of evidence outside of the four corners of the contractual agreement, i.e., parol evidence, as a means to allow the factfinder (here the trial court) to discern the parties’ understanding and intent, and thus, the true meaning of their agreement.  Rather, the Court points out the dispute was truly one of discerning, factually, what terms were handwritten onto the document, a function reserved for the finder of fact and subject, therefore, to a different, more burdensome standard of review, to wit, “clear error”.  As the Court of Appeals concluded, it reviewed the handwritten entry and could not conclude, under the appropriate standard of review, that the trial court had made a mistake in his review of the facts.  As explained by the Court, “[w]here the parties disagree about what the words themselves are, the issue before the trial court is not one of contract ambiguity, but a straightforward factual determination, reviewed for clear error. MCR 2.613(C). In this case, the trial court expressly determined that the words used in the settlement agreement are ‘waives future claims,’ and our review of the settlement agreement does not leave us with a ‘definite and firm conviction that the trial court made a mistake.’  Hill v City of Warren, 276 Mich App 299, 308; 740 NW2d 706 (2007).”

This short opinion teaches a couple of important lessons.  First, the dispute between the parties in an appeal must be properly identified because that dispute will dictate what standard of review the Court of Appeals will apply.  If the issue were truly one concerning the contract’s “ambiguity”, a question of law, then the standard of review would be de novo, in which the Court of Appeals would be free to review the entire record, pleadings, lower court proceedings, and, potentially, the proffered, but rejected, parol evidence, to discern the parties’ intent and understanding of the contract and its meaning and effect.

If the dispute, on the other hand, is one of pure fact, here, what did the handwritten terms of the contract really say, then the question is one of fact, and the trial court’s determination of what the facts are in the lower court proceedings can only be reviewed for “clear error”.  The burden to overcome such review is much more difficult.  As articulated by the Court of Appeals in this case, it must be persuaded with “definite and firm conviction” that the trial court made a mistake.

Perhaps one way the insurer could have avoided such a preclusive consideration by the Court of Appeals was to alternately concede the plaintiff’s version of what the handwritten entry stated, but to argue, nonetheless, that this language itself was ambiguous.  The insurer might concede it would not itself file future claims, but that this did not mean it was precluded from seeking repayments in the future for overpayments made on the prior claim.  Alternatively, while in the ordinary sense, the insurer might seek compensation for overpayments in the future, there might be another method it could use than actually filing a “claim” in the workers’ compensation agency to recuperate such overpayments.  Thus, the meaning of “$95,000 for all claims and waives future claims“, might not be deemed to foreclose other, future methods of seeking recovery (including simply reducing future payments for benefits if applicable).  Thus, having lodged alternate meanings of the contract’s language, the insurer may claim it is “ambiguous”, and it would thereby be free to at least urge its own interpretation, offer (and have admitted) the parol evidence, and, ultimately to have the question of the contract’s “ambiguity”, a pure question of law, reviewed under the de novo standard of review.

In the latter case, the chance of succeeding on appeal in overturning the trial court’s ruling in this case would have been infinitely greater than having the Court of Appeals find “clear error” in the trial court’s simple determination of what was deemed only a question of mere fact.

Here is the Court of Appeals’ Opinion:  Stelman v. Troy Auto et al