Court Opinion

ID: 4167703
Source: CourtListenerOpinion
Date Created: 2017-05-11 04:11:07.603494+00
Date Added: 2024-06-11T09:21:16.485665
License: Public Domain

Order                                                                          Michigan Supreme Court
                                                                                     Lansing, Michigan

  May 10, 2017                                                                        Stephen J. Markman,
                                                                                                 Chief Justice

  152994                                                                                    Brian K. Zahra
                                                                                    Bridget M. McCormack
                                                                                          David F. Viviano
                                                                                      Richard H. Bernstein
  EMPLOYERS MUTUAL CASUALTY                                                                  Joan L. Larsen
  COMPANY,                                                                                Kurtis T. Wilder,
           Plaintiff/                                                                                 Justices
           Counter-Defendant-Appellee,
  v                                                        SC: 152994
                                                           COA: 322215
                                                           Wayne CC: 12-002767-CK
  HELICON ASSOCIATES, INC. and ESTATE
  OF MICHAEL J. WITUCKI,
           Defendants/Counter-Plaintiffs,
  and
  DR. CHARLES DREW ACADEMY and
  JEREMY GILLIAM,
            Defendants,
  and
  WELLS FARGO ADVANTAGE NATIONAL
  TAX FREE FUND, WELLS FARGO
  ADVANTAGE MUNICIPAL BOND FUND,
  LORD ABBETT MUNICIPAL INCOME
  FUND, INC. and PIONEER MUNICIPAL HIGH
  INCOME ADVANTAGE,
             Defendants-Appellants.

  _________________________________________/

          On March 8, 2017, the Court heard oral argument on the application for leave to
  appeal the December 1, 2015 judgment of the Court of Appeals. On order of the Court,
  the application is again considered. MCR 7.305(H)(1). In lieu of granting leave to
  appeal, we REVERSE the judgment of the Court of Appeals, which determined that the
  plaintiff is entitled to summary disposition on the basis of its insurance policy’s “fraud or
  dishonesty” exclusion. The plaintiff’s policy provides coverage for “wrongful act[s],”
  defined as “[a]ctual or alleged errors,” “[m]istatement[s] or misleading statement[s],” and
  “[a]ct[s] of omission or neglect or breach of duty by an ‘insured’ . . . [i]n the discharge of
  ‘organizational’ duties.” The policy excludes from this coverage, inter alia, “[a]ny action
  brought against an ‘insured’ if by judgment or adjudication such action was based on a
                                                                                                                2

determination that acts of fraud or dishonesty were committed by the ‘insured.’ ” As the
Court of Appeals correctly recognized, this “fraud or dishonesty” exclusion does not
eliminate coverage for acts of “[m]ere negligence” by the insured. The Court of Appeals
erred, however, by nonetheless concluding that the exclusion barred coverage for the
federal consent judgment at issue in this case. The judgment states only that it is “on
Plaintiff[s’] claims pursuant to Section 36b-29(a)(2) of the Connecticut Uniform
Securities Act,” a provision that imposes liability for “untrue statement[s]” and
“omission[s]” made both knowingly and negligently. See Conn Gen Stat § 36b-29(a)(2)
(imposing liability for, inter alia, “offer[ing] or sell[ing] . . . a security by means of any
untrue statement of a material fact or any omission to state a material fact necessary in
order to make the statements made, in the light of the circumstances under which they are
made, not misleading,” when the offeror or seller “knew or in the exercise of reasonable
care should have known of the untruth or omission”); see also, e.g., Lehn v Dailey, 77
Conn App 621, 631 (2003). Consistent with this scope of statutory liability, the “claims”
on which the judgment is based comprise allegations of negligent misrepresentations and
omissions. Thus, even if this judgment were “based on a determination” for purposes of
the “fraud or dishonesty” exclusion, at most it determined that the Connecticut statutory
provision had been violated as alleged; it did not determine that any such violation was
based on dishonest or fraudulent, rather than merely negligent, misrepresentations or
omissions by the insured. Accordingly, the judgment did not amount to “a determination
that acts of fraud or dishonesty were committed by the ‘insured,’ ” such that coverage for
it was barred by the “fraud or dishonesty” exclusion. We REMAND this case to the
Court of Appeals for consideration of the remaining policy exclusions raised by the
defendants but not addressed by that court in its initial review of this case.

                          I, Larry S. Royster, Clerk of the Michigan Supreme Court, certify that the
                    foregoing is a true and complete copy of the order entered at the direction of the Court.
                          May 10, 2017
       d0503
                                                                              Clerk