NOT RECOMMENDED FOR PUBLICATION

File Name: 13a0183n.06

No. 11-2228

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT

SOVEREIGN BANK, a Federal Savings

Bank,

Plaintiff-Appellant,

v.

FEDERAL INSURANCE COMPANY,

Defendant-Appellee.

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ON APPEAL FROM THE UNITED

STATES DISTRICT COURT FOR

THE WESTERN DISTRICT OF

MICHIGAN

Before: COOK and WHITE, Circuit Judges; and SHARP, District Judge.*

PER CURIAM. In this action for breach of contract and a declaration of rights under an

aviation insurance policy, Sovereign Bank appeals the district court’s summary dismissal of its

claims under Fed. R. Civ. P. 12(b)(6). We AFFIRM.

Sovereign loaned money to N400DE, LLC, a Michigan LLC owned by David Eyde, for the

purchase of a Mooney M20M Aircraft (the Mooney). Defendant Federal issued N400DE, LLC, an

aircraft-insurance policy that was effective from September 26, 2009 to September 26, 2010. The

policy insured the Mooney against physical damage or loss in the amount of $448,000. An

endorsement to the policy provided that Sovereign was a loss payee (to protect it against loss of its

The Honorable Kevin H. Sharp, United States District Judge for the Middle *

District of Tennessee, sitting by designation.

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collateral, the Mooney). On September 30, 2009, the aircraft crashed in Indiana, killing Eyde – the

only occupant. The plane was a total loss. On or about October 15, 2010, Sovereign filed a losspayee claim with Federal, which was denied. 

On December 7, 2010, Sovereign filed suit against Federal alleging breach of contract and

seeking a declaration of rights. Federal brought a 12(b)(6) motion seeking dismissal on the basis that

Sovereign’s suit was untimely because it was filed after the 12-month contractual limitation period

ended on September 30, 2010. Sovereign argued that the aircraft policy’s 12-month limitation period

was unenforceable. In support, Sovereign cited the Michigan Insurance Commissioner’s December

16, 2005 Order of Prohibition, No. 05-050-M, which barred newly-issued insurance policies that

limit “the time to file a claim or commence suit for uninsured motorist benefits to less than three

years.” 

At issue in the instant appeal is the district court’s ruling:

[Sovereign’s] cited decisions do not stand for the proposition that the Michigan

Supreme Court would extend the Commissioner’s Order to encompass insurance

causes of action beyond the “uninsured motorist benefits” claims, which alone is the

type of claim which the Commissioner’s December 2005 Order purports to govern.

[Sovereign’s] supplemental argument lacks any identifiable support in Michigan law

for the simple reason that the Commissioner’s “order and case law issued before and

after the Order” all arose in the specific context of no-fault insurance policies for

uninsured motorist coverage. The policy at issue here, by contrast, is an optional

aviation insurance policy for certain physical damage to an aircraft, rendering the

Order inapplicable and cited case law inapposite. It is not the place of a Michigan

court – let alone a federal court sitting only in diversity – to decide whether policy

considerations might warrant extending an agency’s rule or decision to a party,

transaction, contract or event which the agency’s written rule does not purport to

cover. Such development or expansion of the State’s intrusion into private contracts

is the province of the State Legislature and the executive agency to which the

legislature has delegated authority in the field. Indeed, the Michigan Supreme Court

has noted that under the applicable Michigan statute – Mich. Comp. Laws §

500.2236(5) – only the Commissioner of Insurance and Financial Services has

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authority to invalidate insurance contract provisions on the ground of

unreasonableness.[ ]

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Because the district court correctlyobserved that Sovereign cited no authoritysupporting that

the 2005 Prohibition Order extended beyond uninsured and underinsured motorist coverage, or to

this aviation policy, we AFFIRM.

Sovereign could have but apparently did not file a complaint with the State of 1

Michigan’s Office of Financial and Insurance Regulation.

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