UNITED STATES DISTRICT COURT 

EASTERN DISTRICT OF MICHIGAN 

SOUTHERN DIVISION

LANIE A. CROMER, 

Plaintiff, Case No. 2:09-cv-13716 

vs. Hon. Gerald E. Rosen 

 

SAFECO INSURANCE COMPANY 

OF AMERICA, 

 Defendant. 

 / 

OPINION AND ORDER GRANTING 

DEFENDANT’S MOTION FOR PARTIAL DISMISSAL

At a session of said Court, held in 

 the U.S. Courthouse, Detroit, Michigan 

 on April 14 2010 

 PRESENT: Honorable Gerald E. Rosen 

 Chief Judge, United States District Court 

I. INTRODUCTION

 Plaintiff Lanie Cromer ("Cromer") filed this action alleging that Defendant Safeco 

Insurance Company (“Safeco”) breached its insurance contract with her. Cromer owned two 

adjacent houses in Detroit, Michigan insured with Safeco. As a result of a fire in March of 2008, 

both of these houses were damaged or destroyed. Cromer filed an insurance claim with Safeco 
2 

and her claim was denied.1 Cromer alleges Safeco denied her claim in bad-faith and did so in a 

way which caused her emotional distress and violated Michigan consumer protection laws. As a 

consequence, in addition to any amounts which she alleges to be due under the contract, Cromer 

is also seeking consequential damages, including attorney fees, for having to litigate her claim. 

 This matter is presently before the Court on Defendant Safeco’s Fed. R. Civ. P. 12(b)(6) 

Motion for Partial Dismissal of Plaintiff’s Complaint. In this motion, Safeco seeks dismissal of 

Cromer's Michigan Consumer Protection Act claim, her various tort claims, and her claim for 

attorney fees as consequential damages, arguing that these claims are not supported by Michigan 

law. 

 This motion has been fully briefed by the parties. Having reviewed these briefs, the 

Court has determined that oral argument is not necessary. Therefore, pursuant to Eastern District 

of Michigan Local Rule 7.1(e)(2), this matter will be decided on the briefs. This Opinion and 

Order sets forth the Court’s ruling. 

II. FACTUAL BACKGROUND

As alleged in the Complaint, this case arises out of a house fire which occurred at 

Cromer’s house at 14703 Alma Street in Detroit, Michigan, and spread to an adjacent house at 

14711 Alma Street, which she also owned. Cromer’s houses were insured by Defendant Safeco 

under policy numbers OK 632187 for the house at 14703 Alma Street and OK 633498 for the 

house at 14711 Alma Street, and she alleges the policies covered the properties against fire, 

vandalism and theft losses, as well as the contents and loss of rental income. Safeco admits that 

insurance policies were in effect for the two houses at the time of the fire loss. 

                                                           

1

 There are two separate insurance claims included in this matter: (1) 14703 Alma Street; and ( 2) 14711 Alma 

Street. Together, however, they form Plaintiff's cause of action ("claim") against Defendant for breach of contract 

as both houses were damaged or destroyed by fire and both houses were insured by Safeco. 
3 

Cromer alleges that she timely informed Safeco of the fire losses, provided reasonable 

proof of her claim, and performed all necessary conditions for being paid on the claim. As a 

result of the fire, she claims to have incurred damages and expenses which are, or should be, 

covered by her policies. However, Safeco has not paid the claim. Cromer alleges the reason 

Safeco gave her for not paying the insurance claim was that “the fire was intentionally set by 

[her] or persons in privity with [her]...[and]...[she] made misrepresentation[s] and concealment 

of material facts including the cause of the fire.” [Complaint, ¶¶ 18-19.]. 

Cromer further asserts that after she made a statement under oath, Safeco had no factual 

basis for denying her claim. Because Safeco still did not pay her claim following her statement, 

she alleges neglect in the handling of her claim, neglect in Safeco's refusal to pay her claim, and 

that Safeco's conduct amounted to a bad-faith breach of her contract. Based on her version of 

events, Cromer claims to have a reasonable expectation of coverage “under the circumstances of 

this case” and that she has not only suffered loss, but she will also suffer future losses. Cromer 

also alleges that Safeco's failure to pay her claim in a timely manner is being done in an 

“intentional, tortious and tortuous” manner and is, “extreme and outrageous and done with 

injurious intent or reckless disregard for the consequences to [her].” [Id., ¶¶ 25-26.]. 

Although Cromer's Complaint does not list individual counts, she is claiming she is 

owed: 

(1) Amounts due under her insurance contract for her fire losses; 

(2) 12% statutory interest pursuant to M.C.L. § 500.2006 for failing to pay the claim 

in excess of 60 days after reasonable proof of loss; 

(3) Damages for bad-faith adjustment of her claim, which she asserts is a violation of 

the Michigan Consumer Protection Act (“MCPA”), M.C.L. § 445.901, et seq.; 

(4) Damages for bad-faith adjustment of her claim, which she asserts is a violation of 

the Michigan [Uniform] Trade Practices Act (“UTPA”), M.C.L. § 500.2001, et 

seq.; 
4 

(5) Damages for Safeco’s conduct “and or acts and omissions and failure to timely 

pay amounts due to Plaintiff [since they are] intentional, tortious, and tortuous 

. . . [and] . . . extreme and outrageous and done with injurious intent or reckless 

disregard for the consequences to the Plaintiff.”; and, 

(6) Future losses and consequential damages, including attorney fees. 

In Safeco's answer to the complaint, it admits it did issue insurance policies on the two 

houses in question and that a letter was sent to her on July 2, 2009 outlining its reasons for 

denying her claim. Safeco also asserts that, “the insurance policy speaks for itself” with regard 

to what insurance benefits Cromer is or is not entitled. [Answer, ¶ 9.]. The Court has neither 

seen nor considered the July 2, 2009 letter from Defendant to Plaintiff nor the two insurance 

policies themselves as they have not been attached to any of the pleadings this Court reviewed. 

In this motion, Safeco seeks dismissal of all of Plaintiff’s claims, except Plaintiff’s breach of 

contract claim and any damages which may eventually be due to her pursuant to the UTPA, if 

she is ultimately successful in this matter. 

III. STANDARD OF REVIEW

 Fed. R. Civ. P. 12(b)(6) requires dismissal of a complaint if it “fail[s] to state a claim 

upon which relief can be granted. . . .” Analysis under Rule 12(b)(6) is appropriate where the 

Court is considering the pleadings themselves. 

 In deciding a Fed R. Civ. P. 12(b)(6) motion, the court must construe the complaint in the 

light most favorable to the plaintiff and accept all well-pleaded factual allegations as true. 

Kottmeyer v. Maas, 436 F.3d 684, 688 (6th Cir. 2006). While this standard is liberal, it does 

require that plaintiff’s allegations rise above the level of labels, conclusions, and formulaic 

recitations of the elements of a cause of action. See Bell Atlantic Corp. v. Twombly, 550 U.S. 

544, 555 (2007); see also First Am. Title Co. v. Devaugh, 480 F.3d 438, 444 (6th Cir. 2007). 

The complaint “must contain either direct or inferential allegations with respect to all material 
5 

elements necessary to sustain a recovery under some viable legal theory.” Weiner v. Klais and 

Co., Inc., 108 F.3d 86, 88 (6th Cir. 1997). “Factual allegations must be enough to raise a right to 

relief above the speculative level on the assumption that all the allegations in the complaint are 

true (even if doubtful in fact).” Bell Atlantic, 550 U.S. at 555 (citations omitted). Courts do not 

require “heightened fact pleading of specifics, but only enough to state a claim for relief that is 

plausible on its face.” Id. at 570; see also Ashcroft v. Iqbal, ____ U.S. ____, 129 S. Ct. 1937, 

1950 (2009). In the aftermath of Iqbal, this Court must consider the plausibility of the pleaded 

facts before determining whether those facts, if true, give rise to an actionable claim, and, 

therefore, a complaint must cross the line between possibility and plausibility of relief. 129 S. 

Ct. at 1949. Of course, determining whether a complaint states a plausible claim is contextspecific. Id. 

IV. DISCUSSION

A. CROMER’S CLAIM FOR BAD-FAITH HANDLING OF AN INSURANCE CLAIM IS 

NOT RECOGNIZED IN MICHIGAN LAW. 

1. There is No Tort of Bad-Faith Handling of an Insurance Claim in Michigan. 

 Cromer seeks damages alleging bad-faith on the part of Safeco in failing to pay her claim. 

However, the Michigan courts have refused to recognize bad-faith breach of an insurance 

contract as a separate and independent tort. When addressing this issue, the Michigan Court of 

Appeals stated: “[a] plaintiff cannot maintain an action in tort for nonperformance of a contract. 

There must be a separate and distinct duty imposed by law. An alleged bad-faith breach of an 

insurance contract does not state an independent tort claim.” Casey v. Auto Owners Ins. Co., 273 

Mich.App. 388, 729 N.W.2d 277, 286 (2006). 
6 

 Cromer relies upon Hart v. Ludwig, 347 Mich. 559, 79 N.W.2d 895 (1956), in stating: 

“[t]he law imposes an obligation upon everyone who attempts to do anything, even gratuitously, 

for another, to exercise some degree of care and skill in the performance of what he has 

undertaken, for nonperformance of which duty an action lies.” 79 N.W.2d at 898. However, the 

Michigan Supreme Court quoted Hart, supra, in Kewin v . Massachusetts Mut. Life Ins. Co. 409 

Mich. 401, 295 N.W.2d 50 (1980), another insurance breach of contract case, and said: 

We have simply the violation of a promise to perform the agreement. The only duty, 

other than that voluntarily assumed in the contract to which the defendant was subject, 

was his duty to perform his promise in a careful and skillful manner without risk of harm 

to others, the violation of which is not alleged. What we are left with is defendant's 

failure to complete his contracted-for performance. This is not a duty imposed by the law 

upon all, the violation of which gives rise to a tort action, but a duty arising out of the 

intentions of the parties themselves and owed only to those specific individuals to whom 

the promise runs. A tort action will not lie. 

409 Mich. at 422, 295 N.W.2d at 56. 

Similarly, in this case, Cromer merely alleges that Safeco’s denial of her claim was “done 

in bad-faith” and that this amounted to a bad-faith adjustment of her claim. However, in Kewin, 

the Michigan Supreme Court expressly held that such an allegation did not give rise to a tort 

action when it stated: “[w]e decline ... to declare the mere bad-faith breach of an insurance 

indemnity contract an independent and separately actionable tort and to thereby open the door to 

recovery for mental pain and suffering caused by breach of a commercial contract.” Id.

The Michigan Court of Appeals reiterated this point in Runions v. Auto-Owners Ins. Co., 

197 Mich.App. 105, 495 N.W.2d 166 (1992), another homeowner case in which the insurance 

company, following a fire, had not paid under the contract. There the court stated: 

The only conduct alleged by plaintiff as being tortious is defendants' failure to pay the 

claim. The facts alleged fall “far short of the conduct which is considered tortiously 

outrageous.” At most, it attempts to plead the nonexistent tort of bad-faith handling of an 
7 

insurance claim. The trial court properly held that plaintiff's complaint failed to state a 

claim. 

495 N.W.2d at 168 (citing Roberts v. Auto-Owners Ins. Co., 422 Mich. 594, 374 N.W.2d 905, 

909 (1985)). 

The Court of Appeals reemphasized this point in Isagholian v. Transamerica Ins. Corp., 

208 Mich.App. 9, 527 N.W.2d 13 (1994), a case between a homeowner and an insurance 

company where the insurer did not pay benefits following a theft. The court there held that an 

insurer’s bad-faith failure to pay its contractual obligation is insufficient to establish an 

independent tort action and upheld the dismissal of that count of the homeowner’s action. 527 

N.W.2d at 17. 

 Here, Cromer has neither alleged, nor made any showing whatsoever that Safeco engaged 

in any conduct other than denying her claim. Under Michigan law, a separate tort action cannot 

be maintained for the failure to pay under an insurance contract -- even if the non-payment is 

done in bad-faith. Accordingly, the Court finds that Plaintiff’s claim for bad-faith handling of 

her insurance claim fails to state a claim upon which relief may be granted, and, therefore, it will 

be dismissed. 

2. Bad-faith Adjustment of an Insurance Claim Is Not Covered by the Michigan 

Consumer Protection Act.

 Next, Cromer alleges a violation of the Michigan Consumer Protection Act. M.C.L. § 

445.903(1) makes any “[u]nfair, unconscionable, or deceptive methods, acts, or practices in the 

conduct of trade or commerce...unlawful.” However, the statute states that “[t]his act does not 

apply to or create a cause of action for an unfair, unconscionable, or deceptive method, act, or 

practice that is made unlawful by chapter 20 of the insurance code of 1956 [the Uniform Trade 
8 

Practices Act, M.C.L. § 500.2001 et seq.].” M.C.L. § 445.904(3). Indeed, the purpose of the 

UTPA is “to regulate trade practices in the business of insurance. . . .” See M.C.L. § 500.2002. 

 Prior to amendments to the MCPA, § 445.904(2) did allow suits against insurance 

companies. See Smith v. Globe Life Ins. Co., 460 Mich 446, 597 N.W.2d 28, 39 (1999). 

However, § 445.904 was amended through 2000 PA 432, which eliminated the ability to pursue 

claims against insurance companies under the MCPA. As a result, the MCPA is not applicable 

to insurance companies. More precisely, the Sixth Circuit has held that insurers are not subject 

to suit under the MCPA to the extent that their conduct is regulated by the Insurance Code. 

McLiechy v. Bristol West Ins. Co., 474 F.3d 897, 904 (2007). See also, Milhouse v. Mich. Basic 

Prop. Ins. Ass'n, 2005 WL 3501364, at *5 (Mich.Ct.App., Dec.22, 2005) (“Thus, the [Michigan 

Consumer Protection Act] no longer applies to insurance companies.”); Rodgers v. N. Am. Ins. 

Co., 2005 WL 1683548, at *2-3 (Mich.Ct.App., July 19, 2005) (“2000 PA 432, eliminate[d] the 

ability to bring a MCPA claim against an insurance company. . .”); Kitterman v. Mich. Ed. 

Employees Mut. Ins. Co., 2004 WL 1459523, at * 6 (Mich.Ct.App., June 29, 2004). 

 As the foregoing authorities make clear, Michigan has exempted insurance from the 

provisions of the MCPA, limiting statutory recovery pursuant to remedies under the Uniform 

Trade Practices Act. Under the UTPA, should a plaintiff ultimately prevail on a breach of 

contract action, “and benefits [are] not paid on a timely basis, the claimant is entitled to 12 

percent interest, irrespective of whether the claim is reasonably in dispute.” Griswold 

Properties, L.L.C. v. Lexington Ins. Co., 276 Mich.App. 551, 741 N.W.2d 549, 557 (2007) 

(analyzing M.C.L. § 500.2006(4)). See also, Commercial Union Ins. Co. v. Liberty Mutual Ins. 

Co., 426 Mich 127, 393 N.W.2d 161, 164, n 5 (1986) (noting that M.C.L. § 500.2006(4) is 

intended to provide a penalty on insurers who procrastinate or are dilatory in paying). For the 
9 

foregoing reasons, the Court finds that Plaintiff’s claim for damages under the Michigan 

Consumer Protect Act fails to state a claim upon which relief may be granted and, therefore, will 

be dismissed. 

B. CROMER’S CLAIM THAT SAFECO’S CONDUCT IN NOT PAYING HER CLAIM 

WAS INTENTIONAL, TORTIOUS, TORTUOUS AND/OR EXTREME AND 

OUTRAGEOUS FAILS TO STATE A CLAIM SEPARATE FROM THE ALLEGED 

BREACH OF CONTRACT ITSELF. 

1. Intentional and Tortious Conduct Must Involve Activity Separate and Distinct 

from the Alleged Breach of Contract.

 Cromer next asserts a claim for intentional infliction of emotional distress caused by 

Safeco’s failure to pay her benefits, claiming that the failure to settle her claim has been 

“intentional and tortious.” [Complaint, ¶ 25]. 

 The Michigan Supreme Court has never adopted the tort of intentional infliction of 

emotional distress into Michigan jurisprudence. See Smith v. Calvary Christian Church, 462 

Mich. 679, 614 N.W.2d 590, 593 n. 7 (2000); Roberts, supra, 422 Mich. at 597, 374 N.W.2d at 

907; Khalifa v. Henry Ford Hospital, 156 Mich. App. 485, 401 N.W.2d 884, 890 (1987); 

Andrews v. Prudential Securities, Inc., 160 F.3d 304, 309 (6th Cir. 1998). However, the 

Michigan Supreme Court has described the standards that would have to be met for satisfaction 

of such a claim: 

 The cases thus far decided have found liability only where the defendant’s 

conduct had been extreme and outrageous. It has not been enough that defendant 

acted with an intent which is tortious or even criminal, or that he intended to 

inflict emotional distress, or even that his conduct has been characterized by 

“malice,” or a degree of aggravation which would entitle the plaintiff to punitive 

damages for another tort. Liability has been found only where the conduct has 

been so outrageous in character and so extreme in degree, as to go beyond all 

bounds of decency, and to be regarded as atrocious, and utterly intolerable in a 

civilized community. Generally, the case is one in which the recitation of facts to 

an average member of the community would arouse his resentment against the 

actor, and lead him to exclaim, “Outrageous!” 
10 

 The liability clearly does not extend to mere insults, indignities, threats, 

annoyances, petty oppressions or other trivialities. The rough edges of our society 

are still in need of a good deal of filing down, and in the meantime, plaintiffs must 

necessarily be expected and required to be hardened to a certain amount of rough 

language, and to occasional acts that are definitely inconsiderate and unkind. 

There is no occasion for the law to intervene in every case where someone’s 

feelings are hurt. There must still be freedom to express an unflattering opinion, 

and some safety valve must be left which irascible tempers may blow off 

relatively harmless steam. 

Roberts, supra, 422 Mich. at 603, 374 N.W.2d at 908-909 (quoting Restatement 2d of 

Torts, § 46, comment d). 

 Thus, to the extent a cause of action for intentional infliction of emotional distress might 

be recognized, to make out a prima facie case, a plaintiff must, at a minimum establish: (1) 

extreme or outrageous conduct, (2) which intentionally and recklessly, (3) causes extreme 

emotional distress. McCahill v. Commercial Union Ins. Co., 179 Mich.App. 761, 446 N.W.2d 

579, 582 (1989) (citing Roberts, supra, 422 Mich. at 603, 374 N.W.2d at 908). However, 

Michigan law provides that “in a contractual setting, a tort action must rest on a breach of duty 

distinct from the contract.” Roberts, supra, 422 Mich. at 602, 374 N.W.2d at 908. Additionally, 

the mere failure to perform an obligation under a contract “cannot give rise to a negligence 

action in tort.” Runions, supra, 495 N.W.2d at 168 (citing Roberts, supra). 

 Under Michigan law, an action in tort cannot be maintained where a contractual 

agreement exists unless a duty separate and distinct from the contractual obligation is alleged. 

Fultz v. Union-Commerce Associates, 470 Mich. 460, 683 N.W.2d 587, 592 (2004). In Fultz, the 

Michigan Supreme Court, stated: “[t]his Court and the Court of Appeals have defined a tort 

action stemming from misfeasance of a contractual obligation as the violation of a legal duty 

separate and distinct from the contractual obligation.’” Id. (citing Rinaldo's Constr. Corp. v. 
11 

Michigan Bell Tel. Co., 454 Mich. 65, 559 N.W.2d 647, 658 (1997)); See also, e.g., Sherman v. 

Sea Ray Boats, Inc., 251 Mich.App. 41, 649 N.W.2d 783, 789 (2002) (stating that if “[t]he 

omission is one of nonfeasance, a failure to act, the action lies in contract only.”). 

 Cromer has failed to allege any actions by Safeco other than not having paid her claim 

and, therefore none independent of the alleged breach of contract. Accordingly, the Court finds 

that Plaintiff’s intentional infliction of emotional distress claim for the mere breach of a 

commercial insurance contract fails to state a claim upon which relief may be granted and, 

therefore, will be dismissed. 

2. Extreme and Outrageous Conduct Must Include Allegations Beyond the Breach of 

the Contract Itself.

 Although Cromer alleges that Safeco’s conduct in failing to pay the insurance claim was 

“extreme and outrageous,” no allegations of extreme and outrageous behavior are actually made. 

In fact, Cromer does not allege any conduct by Safeco other than stating they lacked a “factual 

basis” to deny [her] claim. 

 In Roberts, supra, while not adopting the tort of intentional infliction of emotional 

distress, the Michigan Supreme Court noted that “[o]utrageous conduct causing severe emotional 

distress [is proven by] showing: (1) extreme and outrageous conduct [which] intentionally or 

recklessly causes severe emotional distress to another.” 422 Mich. at 602, 374 N.W.2d at 908 

(quoting Restatement 2d of Torts §46). The Court went on to state this definition “[did] not 

indicate that such a cause of action could be established on evidence of an insurer's dilatory 

handling of a claim.” Id. In fact, in Roberts, the Court concluded that even an insurer failing to 

supply proper forms, failing to timely respond and wrongfully denying a claim fell “far short” of 

extreme and outrageous conduct. 422 Mich. at 608, 374 N.W.2d at 911. Here, Cromer, does not 
12 

even allege those actions which the Roberts court found fell "far short" of being extreme and 

outrageous. 

 Morever, the Michigan Court of Appeals, on facts very similar to those pled in this case, 

found that a failure to reasonably investigate an insured’s claim does not rise to the level of being 

the type of extreme and outrageous conduct which is necessary to maintain an independent cause 

of action in tort. Crossley v. Allstate Ins. Co., 155 Mich.App. 694, 400 N.W.2d 625 (1986). In 

Crossley, the plaintiff alleged mental distress damages based upon defendant's, "alleged failure 

to reasonably investigate his claim and alleged deliberate oppression of plaintiff to deny him 

benefits.” 400 N.W.2d at 628. The specific allegation in support of plaintiff's claim of intentional 

infliction of emotional distress was that the insurance company accused him, “of arson and fraud 

when [it] had absolutely no evidence whatsoever to support those allegations.” Id. The court 

dismissed the tort claim, finding no claim was made by plaintiff independent of the breach of 

contract, and that defendant’s conduct was not “outrageous.” Id. The court further found that 

the defendant did not publish any allegations of arson; it was merely responding to the filed 

proof of loss. Id. 

Turning to the complaint in this case, it is apparent that Cromer has not alleged any 

tortious conduct that is extreme and outrageous independent of the alleged breach of contract as 

required. Rather, she asserts only that Safeco has refused to pay benefits under the contract after 

she filed a proof of loss. Certainly, denials of claims are something that happen in the insurance 

industry on a routine basis and as the cases show, without more, the denial itself cannot give rise 

to separate liability in tort. Accordingly, the Court finds Plaintiff’s claim for damages for 

intentional infliction of emotional distress for the mere breach of a commercial insurance 

contract fails to allege any conduct which could be construed as “extreme and outrageous” 
13 

independent of the alleged breach of contract. This claim, then, fails to state a claim upon which 

relief may be granted and, therefore, will be dismissed. 

C. CROMER’S CLAIM FOR ATTORNEY FEES AS CONSEQUENTIAL DAMAGES IS 

NOT ALLOWED UNDER MICHIGAN LAW. 

 Finally, Cromer seeks consequential damages “including attorney fees.” Plaintiff 

relies on the Sixth Circuit decision in Murphy v. Cincinnati Insurance Co., 772 F.2d 273 (1985), 

in which the Sixth Circuit applying Michigan law, awarded attorney fees to a plaintiff as a result 

of having to litigate to get his insurance benefits. At the time Murphy was decided, no Michigan 

court had addressed this issue. Subsequent to that case, however, in a series of cases, the 

Michigan Court of Appeals has held that attorney fees are not recoverable as consequential 

damages. See Taylor v. Blue Cross/Blue Shield of Michigan, 205 Mich.App. 644, 657, 517 

N.W.2d 864, 871 (1994); Swickard v. Wayne Co. Medical Examiner, 196 Mich.App. 98, 492 

N.W.2d 497, 499 (1992); Dunn v. Emergency Physicians Medical Group, P.C., 189 Mich.App. 

519, 473 N.W.2d 762, 764 (1991). 

 For example, in Taylor, supra, a plaintiff brought suit against his insurance company 

claiming a bad-faith refusal to pay benefits under the contract. There, the Michigan Court of 

Appeals affirmed the trial court’s denial of attorney fees as consequential damages, holding that, 

“[t]he general rule in Michigan prohibits an award of attorney fees as an element of cost or 

damages absent express authorization by statute, court rule, or other recognized exception.” 205 

Mich.App. at 657, 517 N.W.2d at 871. More recently, in Burnside v. State Farm and Cas. Co., 

208 Mich.App. 422, 424, 528 N.W.2d 749, 750 (1995), the Michigan Court of Appeals expressly 

rejected the Sixth Circuit’s holding in Murphy, supra, and held that, “application of the 

American rule precludes recovery of attorney fees incurred as a result of an insurer’s bad-faith 
14 

refusal to pay a claim.” The Burnside court went on to state that, “[a]n insured's right to recover 

attorney fees as an element of damages is not triggered by the foreseeability of loss. Instead, 

attorney fees are recoverable only when expressly authorized by statute, court rule, or a 

recognized exception.” 208 Mich.App. at 427, 528 N.W.2d at 751.2

 

 In actions under a federal court's diversity jurisdiction, "[w]hen a conflict exists between 

holdings of the Circuit and more recent determinations of state appellate courts, the interpretation 

of the Circuit is not binding on federal district courts.” In re New York Asbestos Litig., 847 F. 

Supp. 1086, 1111 (S.D.N.Y. 1994); see also Medalie v. FSC Securities Corp., 87 F. Supp. 2d 

1295, 1302 (S.D. Fl. 2000). In such a situation the federal court is directed to follow the 

outcome it believes the highest court of the state would follow. In re Asbestos Litig., 772 F. 

Supp. 1380, 1391 (E.D.N.Y. 1991), aff’d in relevant part, 971 F.2d 831 (2d Cir. 1992). 

 The Sixth Circuit has held that if a state intermediate appeals court decision, “[is] 

squarely on point, we would be obliged to follow it unless ‘convinced by other persuasive data 

that the highest court of the state would decide otherwise.’” Wallace Hardware Co., Inc. v. 

Abrams, 223 F.3d 382, 396 (2000) quoting Ziebart Int'l Corp. v. CNA Ins. Cos., 78 F.3d 245, 

250-51 (6th Cir.1996). 

Unlike when Murphy, supra, was decided by the Sixth Circuit, there are now Michigan 

Court of Appeals decisions on point denying recovery of attorney fees. See Burnside, supra; 

Taylor, supra. Cromer argues that "[t]he Sixth Circuit got it right [in Murphy]" and asserts that, 

"this issue will be revisited by the current Michigan Supreme Court." [Cromer's Response Br. at 

4.]. However, Cromer offers no evidence or case law in support of this proposition other than 

                                                           

2

 This, of course, does not preclude the possibility of recovering attorney fees as sanctions for bad faith conduct at 

the conclusion of a federal action pursuant to Fed. R. Civ. P. 11 or 28 U.S.C. § 1927. 
15 

this naked assertion. Given that the Michigan Supreme Court has done nothing in nearly two 

decades to upset the Michigan Court of Appeals line of cases following the American Rule and 

holding attorney fees are not recoverable, the Court finds it unlikely that the Michigan Supreme 

Court will do so now. 

The conflict between the holdings of the Sixth Circuit and the Michigan Court of Appeals 

on the issue of attorney fees as consequential damages was addressed directly in City of Sterling 

Heights v. United Nat. Ins. Co., 2006 WL 212030, (E.D. Mich. January 27, 2006), an 

unpublished opinion from this District. In that case, the court declined to follow the Sixth 

Circuit's holding in Murphy, supra, stating that, “[this] Court predicts that the Michigan 

Supreme Court will reach a similar conclusion [to that of the Michigan Court of Appeals]” and 

granted defendant’s motion to dismiss as to the recovery of attorney fees under Michigan law as 

consequential damages in an insurance claim dispute. Id. at *9. 

 This Court sees no reason to doubt the validity of the Michigan Court of Appeals 

decisions and predicts, just as the court did in City of Sterling Heights, supra, that the Michigan 

Supreme Court would reach a similar conclusion. Therefore, the Court finds that in this matter, 

Plaintiff has failed to state a claim for attorney fees as consequential damages upon which relief 

may be granted under Michigan law, and the claim, therefore, is dismissed. 
16 

V. CONCLUSION

For all the foregoing reasons, 

 IT IS HEREBY ORDERED that Defendant’s Motion for Partial Dismissal Pursuant to 

Fed. R. Civ. P. 12(b)(6) [Dkt #8] is GRANTED. Accordingly, 

 IT IS HEREBY FURTHER ORDERED that Plaintiff’s claims of bad-faith handling and 

bad-faith adjustment of her insurance claim; violation of the Michigan Consumer Protection Act; 

intentional infliction of emotional distress due to intentional, tortious and torturous and extreme 

and outrageous behavior by Defendant; and, her claim for attorney fees as consequential 

damages are DISMISSED, WITH PREJUDICE. 

 This case, therefore, will proceed only on Plaintiff’s claim of breach of contract. 

SO ORDERED. 

 s/Gerald E. Rosen 

 Gerald E. Rosen 

 Chief Judge, United States District Court 

Dated: April 14, 2010 

I hereby certify that a copy of the foregoing document was served upon counsel of record on

April 14, 2010, by electronic and/or ordinary mail.

     s/Ruth A. Gunther, Case Manager