Court Opinion

ID: 9850768
Source: CourtListenerOpinion
Date Created: 2023-09-24 05:02:47.159947+00
Date Added: 2024-06-11T09:20:43.078965
License: Public Domain

Cavanagh, J.
(concurring in part and dissenting in part). I agree with Justice Levin that defense costs should be borne by the primary and "excess” insurers pro rata on the basis of their shares of the underlying liability. I, therefore, agree that the decision of the Court of Appeals in meemic v Chalfant should be reversed. I also agree that the same principle would apply in Frankenmuth Mut v Continental if Continental had acted equitably. However, because Continental wrongly refused to provide a defense to its insured, I would not allow Continental to profit now.
As -Justice Levin recognizes, Michigan law permits contribution between insurers on the theory of equitable subrogation. Equitable subrogation must be employed because the insurers have no contract between themselves; their obligations run to their insureds, not each other. Thus, equitable subrogation may be employed to compensate an insurer for costs it incurs in defending an insured when another insurer is also contractually required to provide the defense.
Nevertheless, it is a well-established equitable maxim that those who seek equity must do so with "clean hands.” Stachnik v Winkel, 394 Mich 375, 382; 230 NW2d 529 (1975). Any wilful act that transgresses equitable standards of conduct is sufficient to allow a court, on its own motion, to deny a party equitable relief. Id. at 386.
Accordingly, I would affirm the decision of the Court of Appeals in Frankenmuth. A primary *441insurer who wrongly fails to provide a defense may not use equitable subrogation to force the excess insurer, who provided the entire defense in the first place, to pay a pro-rata share of the defense costs. Continental should bear the costs of the underlying action because equity should provide relief only to those with clean hands.