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BANKRUPTCY FLINT, BAY CITY, OWOSSO, LAPEER (810) 235-1970.Question cost of bankruptcy ? Call out Sam for chapter seven bankruptcy protection. Plea to Lee for Free consultation about bankruptcy evaluation. Stop repossession, stop foreclosure, stop garnishment because its www.nojokebeingbroke.com.
The BANKRUPTCY plaintiff in this adversary proceeding is the Chapter 7 trustee. The BANKRUPTCY trustee filed this adversary proceeding seeking a declaratory judgment that the defendant insurance company is required to provide coverage for certain claims asserted against the Chapter 7 debtor. The defendant filed a motion for summary judgment based upon its contention that the insurance policy at issue does not provide coverage for the claims identified by the trustee. For the reasons explained in this opinion, the Court grants the defendant’s motion for summary judgment.
jurisdiction under 28 U.S.C. §§ 1334(b) and 157(c)(1). The parties consent to have the Bankruptcy Court enter orders and judgment under 28 U.S.C. § 157(c)(2) and Local District Rule 83.50(a)(3)(A) (E.D. Mich.).
The following facts are not in dispute. Romeo Montessori School Association, Inc.
(“Debtor”) is a corporation that operated a preschool through elementary private educational facility.
tuition or for other educational services for the 2009-2010 school year. Although other proofs of claims have also been filed by other creditors in this bankruptcy case, a review of the claims register in the Debtor’s case indicates a total of 48 proofs of claims filed by Parents who prepaid tuition or other payments for the 2009-2010 school year in an aggregate amount of $178,458.69.
After his appointment, the Trustee discovered in the Debtor’s books and records various insurance policies issued by the defendant, Consolidated Insurance Company (“Consolidated”). One of the policies issued by Consolidated provided “school leaders errors and omissions liability and employee benefits liability coverage” for the period beginning October 1, 2008 and ending October 1, 2009 (“School Leaders Policy”).
TRUSTEE DEMANDS THE INSURANCE COMPANY TO PAY UP.
After reviewing the Parents’ proofs of claims and the terms of the School Leaders Policy, the Trustee demanded in writing that Consolidated provide coverage under the School Leaders Policy for the claims filed by the Parents. On November 30, 2009, Consolidated wrote to the Trustee to inform him that it did not believe that the School Leaders Policy provided coverage for the claims identified by the Trustee based upon the proofs of claims filed by the Parents in the Debtor’s bankruptcy case.
also stated that by identifying specific reasons why there was no coverage, Consolidated was not waiving its right to raise other insurance policy language or other issues in determining coverage, and expressly reserved for Consolidated the right to raise additional policy language and issues.
BANKRUPTCY TRUSTEE SUES THE INSURANCE COMPANY.
On March 15, 2010, the Trustee filed this adversary proceeding against Consolidated.
In addition to the reasons set forth in its November 30, 2009 letter denying coverage, Consolidated set forth in its affirmative defenses a number of other reasons why it does not believe that the Parents’ claims are entitled to coverage under the School Leaders Policy.
On December 28, 2010, Consolidated moved for summary judgment (docket entry no. 20).
The motion is based on one specific defense. The motion alleges that the Parents’ claims are in substance breach of contract claims and, therefore, are within an exclusion to coverage set forth in section I, C.7. of the School Leaders Policy. That provision of the School Leaders Policy excludes from coverage “any ‘claim’ alleging breach of contract.” The Trustee makes two arguments in response.
First, the Trustee argues that Consolidated has either waived, or is estopped from relying on, the contractual liability exclusion in the School Leaders Policy because Consolidated failed to raise that exclusion in its November 30, 2009 letter that denied the Trustee’s demand for coverage.
Second, the Trustee argues that even if Consolidated has not waived and is not estopped from relying on the contractual liability exclusion, Consolidated is still not entitled to summary judgment because the Parents’ proofs of claims do not expressly allege breach of contract but may be based upon theories of liability other than breach of contract. Therefore, the Trustee argues, the contractual liability exclusion contained in the School Leaders Policy does not apply.
On April 4, 2011, the Court heard Consolidated’s motion for summary judgment and, at the conclusion of the hearing, took the motion under advisement.
Standard for Summary Judgment Under Rule 56(c) Fed. R. Civ. P. 56 for summary judgment is incorporated into Fed. R. Bankr. P. 7056.
is such that a reasonable jury could return a verdict for the nonmoving party.’” Berryman v. Rieger, 150 F.3d 561, 566 (6th Cir. 1998) (quoting Anderson, 477 U.S. at 248).
“The initial burden is on the moving party to demonstrate that an essential element of the non-moving party’s case is lacking.” Kalamazoo River Study Group v. Rockwell International Corp., 171 F.3d 1065, 1068 (6th Cir. 1999) (citation omitted). “The burden then shifts to the non- moving party to come forward with specific facts, supported by evidence in the record, upon which a reasonable jury could return a verdict for the non-moving party.” Id. (citing Anderson, 477 U.S.
at 248). “The non-moving party, however, must provide more than mere allegations or denials . . . without giving any significant probative evidence to support” its position. Berryman v. Rieger, 150 F.3d at 566 (citing Anderson, 477 U.S. at 256).
Insurance contracts are interpreted by reference to state substantive law. Policy provisions often identify the state from which governing law derives. The School Leaders Policy contains no such provision. Nevertheless, Consolidated points out that Michigan law should govern, and the Trustee apparently agrees by relying upon the state’s case law and statutes to argue his case.
Therefore, the School Leaders Policy shall be interpreted in accordance with Michigan law. See Irons Home Builders, Inc. v. Auto-Owners Ins. Co., 839 F. Supp. 1260, 1264 (E.D. Mich. 1993) (“In cases involving the construction of an insurance contract, Michigan law requires the court to apply the law of the state where the insurance policy was issued.”).
the Contractual Liability Exclusion in the School Leaders Policy?
reason for the declination.”). However, application of the doctrines of waiver and estoppel is limited in Michigan, and ordinarily “the doctrines will not be applied to broaden the coverage of a policy to protect an insured against risks that were not included in the policy or that were expressly excluded from the policy.” Kirschner v. Process Design, 592 N.W.2d at 709-10 (citations omitted).
to pay a loss for which it charged no premium.
complaint if coverage is not otherwise provided by the School Leaders Policy. In short, under Michigan law, Consolidated’s failure to identify the contractual liability exclusion in the November 30, 2009 letter is not fatal to Consolidated’s defense to the Trustee’s complaint, and Consolidated has neither waived nor is it now estopped from raising the contractual exclusion defense.
to raise additional policy language and issues.
Although it may have been preferable for Consolidated to identify each and every defense to the Trustee’s demand in its November 30, 2009 letter, it is clear that Consolidated expressly reserved the right to raise additional defenses not specifically identified in the letter. That express reservation independently compels the Court to reject the Trustee’s arguments for application of the doctrines of waiver and estoppel.
Finally, Consolidated did expressly raise the contractual liability exclusion as a defense in its answer and affirmative defenses that it filed in this adversary proceeding on April 29, 2010.
November 30, 2009 letter. In sum, the Court rejects the Trustee’s arguments that Consolidated has either waived or is now estopped from asserting the contractual liability exclusion contained in the school Leaders Policy.
Contractual Liability Exclusion of the School Leaders Policy?
breach of contract.” Consolidated asserts that this exclusion applies to any loss that the Debtor may suffer in having to pay the Parents’ proofs of claim.
everyday meaning of the term “contract.” Because the Parents’ claims filed in the bankruptcy case are all based upon the Parents prepaying tuition or other payments to the Debtor, Consolidated concludes that the claims of the Parents are necessarily claims for breach of contract, arising as a result of the Debtor’s failure to provide the agreed upon educational services when it closed its business and filed bankruptcy on July 28, 2009.
possible, albeit unarticulated, alternate theories of recovery may exist in favor of the Parents, even though they have not been explicitly stated by the Parents, the Trustee asserts that the Parents’ claims are not within the contractual liability exclusion in the School Leaders Policy. To support his two arguments, the Trustee relies upon the Parents’ proofs of claims and upon his own affidavit.
are based on the fact that the Parents paid the Debtor tuition or for other educational services for the 2009-2010 school year that the Debtor failed to provide to the Parents’ children once the Debtor closed the school.
the cause of the Parents’ loss. Instead, the Trustee argues that there may be other legal theories of recovery, in addition to breach of contract, that the Parents might be able to assert against the Debtor that are based upon the same acts and events that give rise to the breach of contract: the advance payments for tuition and for other educational services that the Debtor failed to deliver.
of contract claim was excluded from the insurance policy at issue in that case. Instead, because the underlying complaint also alleged multiple tort claims such as conversion, embezzlement, and breach of fiduciary duty, the court examined each of those theories to determine whether coverage extended to the insured. The Trustee argues that summary judgment is premature in this case because similar theories of recovery may possibly be alleged by the Parents in this case.
There are two problems with the Trustee’s position. First, the Northland Insurance case is easily distinguishable. It addressed the extent of coverage for purposes of considering the insurer’s duty to defend. 327 F.3d at 455-58. The duty to defend is independent of and much broader than the duty to indemnify. Dochod v. Central Mutual Ins. Co., 264 N.W.2d 122, 123 (Mich. Ct. App. 1978) (citing City Poultry & Egg Co. v. Hawkeye Casualty Co., 298 N.W. 114 (Mich. 1941)).
(citing Zurich Ins. Co. v. Rombough, 180 N.W.3d 775 (Mich. 1979)).
“That an insurer may ultimately be found not liable, therefore, is a matter separate and apart from its obligation to defend the insured.” Id.
cknowledges that the Debtor is liable to the Parents for the pre-paid tuition. So not only is there no request to defend, but there is no question as to the liability of the insured. Accordingly, this Court need not undertake the close examination conducted by the court in Northland Insurance, in combing through the underlying complaint, in this case the Parents’ proofs of claims, for any facts on which any possible theory of recovery might be based.
for summary judgment, the Trustee provided only his own affidavit.
on to state that “on information and belief . . . the Debtor utilized [the funds] for purposes other than providing educational services . . . and therefore those funds are not available for refunding to the Parents.” Most of the Trustee’s affidavit simply parrots allegations from the complaint.
put up or shut up.” Cox v. Kentucky Dept. of Transp., 53 F.3d at 149. The Trustee cannot oppose Consolidated’s motion for summary judgment with bare allegations and speculation about other factual possibilities. In sum, the Trustee has not come forward with any probative evidence to support the Trustee’s assertion that the Parents may hold claims other than or in addition to their breach of contract claims.
is correct that one exclusion from the obligation to pay for a loss under the policy ends the inquiry.
insured’s particular claim.” Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431, 434 (Mich.
1992) (citation omitted); see also Hayley v. Allstate Ins. Co., 686 N.W.2d 273, 275 (Mich. Ct. App.
policy expressly excludes coverage for a claim alleging a breach of contract.
complaint for declaratory relief against Consolidated do allege breach of contract by the Debtor.
section I.C.7. exclusion is dispositive. Auto-Owners Insurance v. Churchman, 489 N.W.2d at 434.
to summary judgment as a matter of law. The Court will enter an order consistent with this opinion.
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