_______________________________ 

Michigan Supreme Court 

Lansing, Michigan 

Chief Justice:	 Justices: 

Clifford W. Taylor Michael F. Cavanagh 

Elizabeth A. Weaver Opinion Marilyn Kelly 

Maura D. Corrigan 

Robert P. Young, Jr. 

Stephen J. Markman 

FILED MAY 24, 2005 

J & J FARMER LEASING, INC.,

FARMER BROTHERS TRUCKING CO.,

INC., CALVIN ORGANE RICKARD, JR.,

and JAMES W. RILEY, as Personal

Representative of the ESTATE OF

SHARYN ANN RILEY, Deceased, 

Plaintiffs-Appellees, 

v No. 125818 

CITIZENS INSURANCE COMPANY OF 

AMERICA, 

Defendant-Appellant. 

PER CURIAM. 

At issue is whether a covenant not to sue a party is 

indistinguishable from a release and, thus, results in a 

bar to suits against a covenantee’s tortfeasor by a 

covenantee’s assignee. The Court of Appeals concluded that 

the instruments are indistinguishable and, accordingly, 

that a covenantee’s assignee (the covenantor) would be 

barred in a suit against the tortfeasor. We disagree and 

vacate that part of the judgment. The Court of Appeals 
 

correctly concluded for other reasons that the covenantor 

was not released. Yet the Court unnecessarily relied on a 

misapplication of Frankenmuth Mut Ins Co v Keeley (On 

Rehearing), 436 Mich 372; 461 NW2d 666 (1990), so we vacate 

that portion of the Court’s analysis. This case is 

remanded to the Washtenaw Circuit Court for further 

proceedings consistent with this opinion. 

I 

Sharyn Riley was killed when her vehicle was struck by 

a truck owned by J & J Farmer Leasing, Inc. (or Farmer 

Brothers Trucking Company, Inc.),1

 operated by their 

employee Calvin Rickard, Jr., and insured by Citizens 

Insurance Company. Rickard was at fault. James Riley, as 

the personal representative of Sharyn Riley’s estate,2 sued 

Farmer under a wrongful death theory and Citizens assumed 

Farmer’s defense. Riley obtained a jury verdict of $3.2 

million against Farmer, which exceeded the $750,000 limits 

of the Citizens policy. Thus, Farmer, after Citizens 

tendered its policy limits, remained liable for the $2.45 

million balance of the judgment. 

1

 For ease of reference, we will refer to these parties

jointly as “Farmer.” 

2

 For ease of reference, we will refer to Sharyn

Riley’s estate as “Riley.” 

2
 
 

 

Farmer, believing that the case could have settled for 

the policy limits but for Citizens’ bad faith in pursuing 

settlement negotiations, assigned to Riley its cause of 

action against Citizens for bad-faith failure to settle.3 

As part of the agreement between Riley and Farmer, Riley 

agreed not to sue to collect the excess judgment of $2.45 

million from Farmer as long as Farmer cooperated in the 

suit against Citizens.4 

After Riley and Farmer filed suit, Citizens moved for 

summary disposition, MCR 2.116(C)(10), arguing that under 

the agreement Riley had released its underlying claim 

against Farmer for the excess judgment and, thus, Farmer’s 

surety, Citizens, was also released. That is, because the 

principal was released, so was the surety. The circuit 

court denied the motion, reasoning that the joint agreement 

3

 Michigan recognizes an insured’s claim against its

insurer for bad faith in refusing to settle. See 

Commercial Union Ins Co v Liberty Mut Ins Co, 426 Mich 127;

393 NW2d 161 (1986); Wakefield v Globe Indemnity Co, 246 

Mich 645; 225 NW 643 (1929). 

4

 In particular, as relevant here, the agreement sets

out Farmer’s desire to pursue a bad-faith claim and Riley’s

desire to recover the full judgment. It continues by

stating that the parties will pursue a joint lawsuit 

against Citizens, Riley will control the lawsuit, Farmer 

will cooperate fully or the agreement may be rendered null

and void, any recovery will go to Riley (with an exception

for $20,000 for attorney fees incurred by Farmer), and

Riley will in return “forever forbear” from collecting any

judgment from Farmer. 

3
 
 

was in the nature of a covenant not to sue and not a 

release because, under certain conditions, Riley could 

proceed against Farmer to collect the underlying judgment. 

The Court of Appeals granted Citizens’ application for 

leave to appeal and subsequently affirmed on a different 

basis than the trial court. While the Court held that the 

trial court reached the right result because of its 

understanding of the intent and purpose of our decision in 

Frankenmuth Mut Ins Co v Keeley (On Rehearing), 436 Mich 

372; 461 NW2d 666 (1990), the panel held that the agreement 

itself was a release because it “operates to release” 

Farmer from the underlying excess judgment.5 

Citizens applied for leave to appeal in this Court. It 

argued that the covenant not to sue in the agreement 

effectively operated as a release. Therefore, under 

Keeley, supra, plaintiffs’ claim must fail because Farmer 

had not suffered any pecuniary loss as a result of 

Citizens’ alleged bad faith in failing to settle the 

underlying lawsuit. We entertained oral argument on this 

matter in lieu of granting leave to appeal under MCR 

5 J & J Farmer Leasing, Inc v Citizens Ins Co of

America, 260 Mich App 607, 621; 680 NW2d 423 (2004). 

4
 
 

7.302(G)(1)6 and now resolve Citizens’ application for leave 

to appeal. 

II 

We review a summary disposition ruling de novo to 

determine whether the moving party is entitled to judgment 

as a matter of law. Maiden v Rozwood, 461 Mich 109, 118; 

597 NW2d 817 (1999). We view the evidence in the light 

most favorable to the party opposing the motion. Id. at 

120. 

III 

There is a material difference between a covenant not 

to sue and a release. A release immediately discharges an 

existing claim or right. In contrast, a covenant not to 

sue is merely an agreement not to sue on an existing claim. 

It does not extinguish a claim or cause of action. The 

difference primarily affects third parties, rather than the 

parties to the agreement. Theophelis v Lansing Gen Hosp, 

430 Mich 473, 492 n 14; 424 NW2d 478 (1988) (Griffin, J.); 

Industrial Steel Stamping, Inc v Erie State Bank, 167 Mich 

App 687,693; 423 NW2d 317 (1988). 

As the circuit court concluded, the agreement in this 

case is a covenant not to sue. Additionally, the covenant 

6

 471 Mich 940 (2004). 

5
 
not to sue is not absolute but, rather, is conditioned on 

the covenantee, Farmer, performing certain duties in the 

litigation against Citizens. Only if Farmer performs these 

duties does Riley’s covenant not to sue on the underlying 

excess judgment become absolute and release Farmer of all 

liability to Riley. 

This analysis resolves this matter. No resort to 

Keeley to reach the same conclusion was necessary. 

IV 

In conclusion, the Court of Appeals incorrectly held 

that the covenant not to sue was a release and it 

needlessly relied on Keeley. Accordingly, the Court of 

Appeals opinion, insofar as it dealt with the release and 

covenant not to sue issue, is vacated. Its analysis 

regarding Keeley is also vacated. The circuit court 

correctly found that the joint agreement was a covenant not 

to sue and, therefore, summary disposition was 

appropriately denied. This matter is remanded to the 

circuit court for further proceedings. 

Clifford W. Taylor

Michael F. Cavanagh

Elizabeth A. Weaver 

Marilyn Kelly

Maura D. Corrigan

Robert P. Young, Jr.

Stephen J. Markman 

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