Court Opinion

ID: 4306452
Source: CourtListenerOpinion
Date Created: 2018-08-23 07:08:12.835318+00
Date Added: 2024-06-11T14:38:29.173875
License: Public Domain

STATE OF MICHIGAN

                        COURT OF APPEALS

TUDOR INSURANCE COMPANY,                         UNPUBLISHED
                                                 August 21, 2018
            Plaintiff/Counterdefendant/Cross-
            Defendant-Appellee,
and

CARMEN OTERO, by Guardian WANDA RUIZ,

            Intervening Plaintiff/Cross-
            Plaintiff-Appellant,

v                                                No. 335841
                                                 Wayne Circuit Court
PM SERVICES, INC., formerly known as             LC No. 13-010270-CK
ALTMAN MANAGEMENT COMPANY,

            Defendant/Counterplaintiff/Cross-
            Plaintiff,
and

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURG, PA,

            Defendant/Cross-
            Defendant/Appellee.

TUDOR INSURANCE COMPANY,

            Plaintiff/Counterdefendant/Cross-
            Defendant-Appellee,
and

CARMEN OTERO, by Guardian WANDA RUIZ,

            Intervening-Plaintiff/Cross-
            Plaintiff,

v                                                No. 335890
                                                 Wayne Circuit Court
PM SERVICES, INC., formerly known as             LC No. 13-010270-CK

                                           -1-
ALTMAN MANAGEMENT COMPANY,

               Defendant/Counterplaintiff/Cross-
               Plaintiff-Appellant,
and

NATIONAL UNION FIRE INSURANCE
COMPANY OF PITTSBURGH, PA,

               Defendant/Cross-Defendant-
               Appellee.

Before: SWARTZLE, P.J., and SHAPIRO and BOONSTRA, JJ.

PER CURIAM.

        In these consolidated cases,1 Wanda Ruiz, as guardian of Carmen Otero, and PM
Services, Inc., f/k/a Altman Management Company (Altman), appeal the trial court’s orders
granting the motions for summary disposition filed by Tudor Insurance Company (Tudor), and
National Union Fire Insurance Company (National Union). Tudor and National Union are the
primary and excess insurers respectively of Altman against whom plaintiff has a substantial
arbitration award. They denied coverage to Altman asserting that it had failed to provide them
with timely notice of the suit as required by the respective policies and that as a result of that
failure, a default was entered thereby depriving them of the opportunity to defend the claim.
Otero and Altman then sought a determination that Tudor and National Union owed coverage to
Altman. After discovery, Tudor and National Union filed motions for summary disposition. The
trial court concluded that they did not owe coverage and dismissed the cases. We affirm.

                                I. FACTUAL BACKGROUND

        In the underlying tort case, Otero alleged that on January 26, 2010, she was severely
injured as a result of a carbon monoxide leak in a building managed by Altman. For reasons that
will be discussed below, a default judgment was entered against Altman and damages in the

1
  In Docket No. 335841, Wanda Ruiz, as guardian of Carmen Otero, appeals the trial court’s
order granting National Union Fire Insurance Company’s motion for summary disposition, the
order granting Tudor Insurance Company’s motion for summary disposition, and a final order of
judgment entered on November 8, 2016. In Docket No. 335890, Altman appeals the trial court’s
order granting National Union Fire Insurance Company’s motion for summary disposition, the
order granting Tudor Insurance Company’s motion for summary disposition, and a final order of
judgment entered on November 8, 2016. We issued an order consolidating the cases. Tudor Ins
Co v Altman Mgt Co, unpublished order of the Court of Appeals, issued December, 14, 2016
(Docket Nos. 335841 and 335890).

                                               -2-
amount of $3.5 million were ultimately awarded in an arbitration in which neither insurer
participated.

       Altman manages many buildings and retained AON Risk Insurance Services West, Inc.,
(AON), an insurance brokerage firm, to find insurance for its various properties and assist in
processing claims and risk management. AON hired a wholesale insurance broker, Westrope &
Associates (Westrope), to locate appropriate policies for the subject building. Westrope advised
AON that it could obtain primary coverage of up to $1 million from Tudor and an excess policy
covering losses up to $25 million from National Union. Altman purchased these policies.

        Otero’s suit against Altman was filed on June 6, 2011, and timely served. Altman
forwarded the summons and complaint to AON, but AON failed to notify Westrope or either
insurer of the claim.2 Altman was unaware of AON’s failure, and believing that Tudor was
defending the case, did not take independent action to answer the complaint. Thus, the
complaint was not answered and Otero entered a default against Altman on July 25, 2011. The
default was served on Altman on August 12, 2011.

        A little over six months later, on February 29, 2012, Otero filed a motion for default
judgment, requesting damages in the amount of $1 million. A week later, Altman notified AON
of the motion for default judgment, and AON forwarded a copy of the motion to Tudor on March
6, 2012. Tudor assigned an attorney to defendant Altman, subject to a reservation of rights. On
March 14, 2012, the attorney filed a motion to set aside the default, but the trial court denied the
motion. The court stated that as a result of the default, Altman could not contest liability but that
it remained entitled to a trial on damages.

        Nearly a year later, on May 30, 2013, AON notified National Union of the lawsuit against
Altman. National Union promptly denied coverage based on the delay in notification. In August
2013, Otero’s lawsuit went to case evaluation and the panel issued a case evaluation award of
$10 million. Altman rejected the evaluation. On September 24, 2013, Altman notified National
Union that an award against Altman would likely exceed its coverage with Tudor. Subsequently,
Altman and Otero agreed to submit the damages issue to arbitration, which resulted in a $3.5
million award in favor of Otero.

        Tudor then sought a declaratory judgment contending that it had no obligation to defend
or indemnify Altman under its policy because Altman breached its duties under the contract by
failing to report the service of the complaint prior to the entry of default. 3 Altman filed a

2
  The original contract between Altman and AON specifically disclaimed any responsibility by
AON to notify insurers of claims. However, as was determined in a related suit between AON
and Altman, “the parties, through their affirmative conduct, modified the terms of the [contract]
and that AON waived its right to enforce the provision disclaiming its obligations to report
claims to Altman’s insurers.” Altman Mgt Co v AON Risk Ins Servs West, Inc, unpublished per
curiam opinion of the Court of Appeals, issued September 20, 2016 (Docket No. 328598), pp 4-
5.
3
    The notice provision contained in the Tudor policy provides in pertinent part as follows:

                                                  -3-
counterclaim against Tudor arguing that it was entitled to a declaratory judgment that Tudor was
required to defend the lawsuit and pay the arbitration award. The trial court granted Otero’s
motion to intervene, and she filed a complaint against Tudor and National Union asking the court
to enter a declaratory judgment against Tudor for the $1million policy it issued to Altman and
against National Union based on the excess coverage it issued to Altman.

       In addition to documentary evidence, the trial court considered the testimony of several
witnesses. AON’s casualty consultant, Wayne Brinkman, testified that Todd Mannschreck,
claims manager for Westrope, told him that Altman should report claims directly to AON, who
would then report the claims to Westrope, who would in turn notify the insurers. 4 During
Mannschreck’s deposition, the following exchange occurred:

              2. Duties in the Event Of Occurrence, Offenses, Claim[,] or Suit

              a. You must see to it that we are notified as soon as practicable of an
       “occurrence” or an offense which may result in a claim. . . .

                                            * * *

              b. If a claim is made or “suit” is brought against any insured, you must:

              (1) Immediately record the specifies of the claim or “suit” and the date
       received; and

              (2) Notify us as soon as practicable.

              You must see to it that we receive written notice of the claim or “suit” as
       soon as practicable.

              (c) You and any other involved insured must:

               (1) Immediately send us copies of any demands, notices, summonses or
       legal paper received in connection with the claim or “suit”;

              (2) Authorize us to obtain records and other information;

              (3) Cooperate with us in the investigation or settlement of the claim or
       defense against the “suit” . . . .
4
  As described in Altman Mgt Co, unpub op at 5, “[F]rom 2008 until 2010, Altman directly
submitted claims to Westrope, with a copy to [AON]. However, that process changed when
Westrope complained to [AON] that [Altman] had not included specific information needed to
process a claim. Going forward, Westrope required [AON] to submit claims on [Altman]’s
behalf.”

                                               -4-
        Q. So we took the deposition of Wayne Brinkman and he described to us
that he was advised that claims should be reported to AON by the insured in this
case, [Altman], and then passes along [sic], they couldn’t be reported directly to
Westrope.

                                           * * *

       A. That is how we would prefer it, yes.

       Q. . . . Okay. Where did that policy come from?

        A. We are not [Altman’s] technically we’re not [Altman’s] broker and we
are not the insurance company.

        Q. I don’t think I understand your answer. So my question was where did
that policy come from, where did handling it like that come from?

       A. Me.

       Q. Okay. And why is that? Why did you make that decision?

       A. Because we are not technically [Altman’s] broker and we are not the
insurance company.

       Q. If you were [Altman’s] broker, how would that change things?

                                           * * *

        A. I’m not [Altman’s] broker so they shouldn’t be reporting claims
directly to us.

         Q. So your view is they should be reporting claims directly to the broker,
in this case AON?

       A. That or the insurance company.

        Q. Okay. So you told Mr. Brinkman that claims should be reported to
AON, AON can pass them along to Westrope and you would pass them along to
the insurer?

       A. That is one way to handle it.

       Q. Okay. But you told them that?

       A. Yes.

       Q. Is there another way that you told them that you would handle it?

       A. Specific to the Otero case?

                                          -5-
              Q. Yes, sir.

              A. We didn’t have discussions specific to the Otero case.

              Q. What about specific reporting of claims to Tudor for [Altman]?

              A. I don’t know that we had any discussions other than advising him that we do
              not accept claims directly from insureds, in this case.

       Leslie Armstrong, Tudor’s associate vice president of claims, testified that in nearly all
prior 50 to 60 claims he handled, the process followed that chain: Altman reported the claims to
AON, AON sent them to Westrope, and Westrope notified Tudor.

       Tudor brought a motion for summary disposition pursuant to MCR 2.116(C)(10). It
argued that Altman failed to “see to it” that Tudor was timely notified, and that this breach
prejudiced it because a default was entered and it was unable to defend the suit on the merits.
Tudor also argued that the claim notice emailed by Altman to AON did not serve as notice to it
because AON was not an agent of Tudor; rather, AON was an agent of Altman pursuant to the
AON-Altman agreement. Additionally, Tudor argued that Westrope was not its agent for
purposes of notification because its agreement with Westrope did not authorize Westrope to
accept notice on its behalf. Both Otero and Altman responded.

        In her response, Otero argued that Westrope was Tudor’s agent and that Westrope’s
direction to notify AON, rather than itself, was binding on Tudor. She also argued that even if
Westrope was not Tudor’s actual agent for purposes of claim notice, Westrope had apparent
authority to advise Altman how to provide notice and accept claims on behalf of Tudor. Otero
further argued that Tudor’s policy did not provide for any specific mechanism for provision of
notice, which left Altman “to guess” the appropriate method and to rely on Westrope’s
instructions, i.e. to send the notice to AON.

       In its response, Altman made the additional argument that in addition to being its express
agent, AON was also Tudor’s agent by implication.

      In granting Tudor’s motion for summary disposition, the trial court concluded that
Westrope was Tudor’s agent but that AON was not Tudor’s agent. According to the court:

               Westrope’s undisputed verbal direction to [Altman] to serve only AON is
       not attributable to Tudor. There is no evidence Tudor held Westrope as having
       the authority to direct service of process in any manner, i.e. that [Altman] could
       not serve Tudor or [Altman] had to serve a particular entity.

             Secondly, Tudor has never held out that Westrope had any authority to
       amend the contract by a course of conduct to effectuate service in a particular
       manner contrary to the language of the contract.

            Thirdly, the chain of service, coupled with Westrope’s directive to serve
       AON does not create an agency relationship between AON and Tudor. There is

                                               -6-
       no evidence Tudor authorized Westrope to direct [Altman] as to the manner of
       service of process to bind Tudor.

               Finally Tudor’s knowledge of the chain of service utilizing AON is
       insufficient to create an agency relationship between Tudor and AON. The
       evidence shows [that] Tudor knew [Altman] used AON and Westrope to
       effectuate timely contractual notice to Tudor. Knowledge alone does not
       constitute mutual agreement that can amend the contract to provide for untimely
       service or restrictive service in a manner contrary to the contract.

                                             * * *

              There is no course of conduct which amended [Altman’s] contractual
       burdens to provide “practicable notice to Tudor” of an occurrence or written
       notice of the Summons and Complaint. The notice was not accomplished and
       Tudor was prejudiced because of the failure to provide the contractual notice.

                                         II. ANALYSIS

                                          A. AGENCY

        On appeal, appellants make two arguments. First, that Altman’s notice to AON was
sufficient to constitute notice to Tudor because AON was Tudor’s express, implied, or apparent
agent. Second, that because Westrope was Tudor’s express or apparent agent and Altman had
followed Westrope’s direction by sending the notice to AON, it constituted notice to Tudor.5 We
reject both contentions.6

5
   There are three types of agency relationships recognized under Michigan law: (1) actual
express agency; (2) actual implied agency; and (3) apparent agency. See Alar v Mercy Mem
Hosp, 208 Mich. App. 518, 528; 529 NW2d 318 (1995) (stating that the “authority of an agent to
bind a principal may be either actual or apparent. Actual authority may be express or implied”)
(citation omitted); Logan v Manpower of Lansing, Inc, 304 Mich. App. 550, 559; 847 NW2d 679
(2014) (defining an agency as “a fiduciary relationship created by express or implied contract or
by law, in which one party (the agent) may act on behalf of another party (the principal) and bind
that other party by words or actions”) (quotation marks and citations omitted). In this case, the
trial court and the parties refer to actual express agency as actual agency.
6
  This Court reviews de novo a trial court’s decision to grant summary disposition under MCR
2.116(C)(10). Johnson v Recca, 492 Mich. 169, 173; 821 NW2d 520 (2012). The existence of an
agency relationship and the scope of the relationship are generally questions of fact. Caldwell v
Cleveland-Cliffs Iron Co, 111 Mich. App. 721, 732; 315 NW2d 186 (1981). Where there is a
disputed question of agency, any testimony, either direct or inferential, tending to establish
agency creates a question of fact for the jury to determine. Meretta v Peach, 195 Mich. App. 695,
697; 491 NW2d 278 (1992).

                                               -7-
                                   1. AON as Agent of Tudor

         To the degree that appellants are arguing that AON was Tudor’s express agent, its claim
fails as there is no evidence, either documentary or testimonial, to suggest that these two parties
entered into an explicit principal/agent relationship. Breighner v Mich High Sch Athletic Ass’n,
Inc, 255 Mich. App. 567, 582-583; 662 NW2d 413 (2003) (stating that an agency relationship can
be created by express contract). Appellants acknowledge that AON is an agent of Altman, but
argue that it should be deemed a dual agent of both Altman and Tudor. “It is well established
that an independent insurance agent or broker is an agent of the insured, not the insurer.” Auto-
Owners Ins Co v Mich Mut Ins Co, 223 Mich. App. 205, 215; 565 NW2d 907 (1997). Therefore,
when Altman hired AON to find insurance for it and process its claims, AON was acting as an
agent of Altman. Relying on Vargo v Saurer, 457 Mich. 49; 576 NW2d 656 (1998), Otero argues
that AON should be deemed as a dual agent of Tudor and Altman. According to the Vargo
Court, “dual agency occurs when two persons or entities agree to share the services of an
individual for a single act.” Vargo, 457 Mich. at 69 (citation omitted). However, appellants
offered no evidence of an agreement between Tudor and Altman “to share the services of [AON]
for a single act.” Id. Indeed, the Tudor-Altman policy does not mention AON at all, and as
previously discussed, there is no evidence of any relationship between Tudor and AON. As
such, appellants’ dual agency argument is without merit.

        The argument that AON was either an apparent or implied agent of Tudor also fails.
“Apparent authority arises where the acts and appearances lead a third person reasonably to
believe that an agency relationship exists. However, apparent authority must be traceable to the
principal and cannot be established only by the acts and conduct of the agent.” Alar v Mercy
Mem Hosp, 208 Mich. App. 518, 528; 529 NW2d 318 (1995). “In determining whether an agent
possesses apparent authority to perform a particular act, the court must look to all surrounding
facts and circumstances.” Meretta v Peach, 195 Mich. App. 695, 699; 491 NW2d 278 (1992).

        Appellants argue that because Altman always provided notice to Tudor by notifying
AON, Tudor was aware of this practice and never objected or directed Altman to do otherwise.
However, AON never provided notice directly to Tudor. Moreover, Tudor never took any action
to suggest that notice to AON was required at all. The insurance policy does not require Altman
to use any particular means of notifying Tudor; it states only that “You must see to it that we are
notified as soon as practicable of an ‘occurrence’ or an offense which may result in a claim.” In
other words, so long as notice of a claim or suit timely reached it, Tudor was unconcerned with
the means by which that was accomplished. The fact that Tudor had accepted notice through
Westrope, which received it from AON, does not mean that Tudor was limiting Altman to this
mechanism or creating an agency relationship with AON.

       We also reject appellants’ argument that an implied agency exists between AON and
Tudor based on the parties’ procedure of forwarding claims to Tudor. In AFP Specialists, Inc v
Vereyken, 303 Mich. App. 497, 507-508; 844 NW2d 470 (2014), we discussed the circumstances
that would lead to the creation of an implied agency:

              An implied agency must be an agency in fact; found to be so by
       reasonable deductions, drawn from disclosed facts or circumstances. An agency
       cannot arise by implication if the alleged principal expressly denies its existence,

                                                -8-
       but it may arise from acts and circumstances within [the alleged principal’s]
       control and permitted over a course of time by acquiescence or in recognition
       thereof. Thus . . . the facts and circumstances giving rise to an implied agency
       must be (1) known to the alleged principal, (2) within the control of the alleged
       principal, and (3) explicitly acknowledged or at least acquiesced in by the alleged
       principal. . . . Specifically, an implied agency must rest upon acts and conduct of
       the alleged agent known to and acquiesced in by the alleged principal prior to the
       incident at bar. In sum, the facts and circumstances giving rise to an implied
       agency must be known to and acquiesced in by the alleged principal before the
       action of the alleged agent may bind the alleged principal. Moreover, the implied
       agency must be based upon facts . . . for which the principal is responsible . . . .
       [Quotation marks and citations omitted.]

Although the agreement between AON and Altman clearly states that AON was an agent of
Altman, there is no agreement between Tudor and AON stating that AON represents Tudor.
Appellants offered no evidence to demonstrate that Tudor manifested an intent to have AON act
on its behalf. Other than the evidence that AON was in the email chain where Tudor accepted
notice of claims using the parties’ method of delivery, there is no other evidence of any
relationship between Tudor and AON. Finally, there is no evidence demonstrating that Tudor
exerted control over AON, nor is there evidence that AON had the authority to bind Tudor.
Granted that Tudor was aware of the method of delivery and acquiesced to it, there is no
evidence that Tudor was in control of the delivery process. To the contrary, the testimony
revealed that Mannschreck made the decision that service should be effectuated that way because
Westrope was not Altman’s broker.

                                 2. Westrope as Agent of Tudor

       Appellants argue that because Westrope was an express or apparent agent of Tudor,
Mannschreck’s statement that Altman should deliver notices directly to AON was binding on
Tudor, and that notice to AON was sufficient to trigger Tudor’s duty to indemnify.

        Plaintiff’s argument is unconvincing. First, as to express agency, plaintiff has offered no
evidence of an agreement by which Tudor established or suggested that Westrope had the
authority to limit the means by which Altman could “see to it” that Tudor was notified of claims
or occurrences. The agreement between Tudor and Westrope gives Westrope authority to act as
its agent in offering Tudor policies to persons seeking coverage, and it makes Westrope
responsible for payment of premiums. However, it makes no reference to Westrope as having
authority to determine how an insured should provide notice to Tudor; rather, it states that “this
agreement does not permit [Westrope] to bind [Tudor].” There was also no testimony that Tudor
had provided such authority orally. Indeed, there is nothing in the contract between Tudor and
Westrope or in the policy or elsewhere in the record suggesting that Westrope’s agency extended
to accepting notice of claims on behalf of Tudor. No one from either Westrope or Tudor testified
that the agency encompassed acceptance of notice on behalf of Tudor. Therefore, we conclude
that the theory of actual express agency was unsupported and so properly dismissed.

                                               -9-
       Appellants also argue that because Tudor accepted notice that it received through the
Altman-AON-Westrope chain, that an apparent agency arose and that plaintiff, therefore, had
reason to conclude that Westrope’s instructions constitutes instructions from Tudor. We
disagree.

        There was no evidence that Tudor acted in such a manner that a reasonable person would
conclude that Westrope’s direction to notify AON, rather than Westrope, meant that Tudor had
given such direction or that notice to AON constituted notice to Tudor. Tudor had no objection
to receiving notice through the Altman-AON-Westrope chain, but its actions did not suggest that
Altman was required to follow Westrope’s directions as the means of providing notice to it.
Indeed, there is no evidence that Tudor took any action that would suggest that the only means
by which it would accept notice was through the Altman-AON-Westrope chain. Even
Westrope’s Vice-President testified that he advised Altman that it could either notify AON or
provide direct notice to Tudor.

        Accordingly, the trial court did not err in granting Tudor’s motion for summary
disposition.

               B. TIMELINESS OF NOTICE CLAIM TO NATIONAL UNION

       Appellants also argue that the trial court erred in granting National Union’s motion for
summary disposition, contending that timely notice was provided to National Union and that
National Union was not prejudiced. We disagree.7

       The notice of claim provision in National Union’s policy provides, in relevant part, as
follows:

       G. Duties in the Event of an Occurrence, Claim or Suit

              1. You must see to it that we are notified as soon as practicable of an
       Occurrence that may result in a claim or Suit under this policy. To the extent
       possible, notice should include:

              a. how, when and where the Occurrence took place;

              b. the names and addresses of any injured persons and any witnesses;

             the nature and location of any injury or damage arising out of the
       Occurrence.

7
  The construction and interpretation of an insurance contract is a preliminary question of law
that this Court reviews de novo. Allstate Ins Co v Muszynski, 253 Mich. App. 138, 140-144; 655
NW2d 260 (2002).

                                             -10-
               2. If a claim is made or Suit is brought against any Insured which is
       reasonably likely to involve this policy, you must notify us in writing as soon as
       practicable.

        National Union’s policy contains two notice of claim provisions: (1) notice of an
occurrence, and (2) notice of suit. The trial court properly found that Altman did not breach the
notice of occurrence provision because there was no evidence to show that Altman was aware of
Otero’s accident (i.e., the occurrence) until suit was filed some 17 months later. Regarding the
notice of suit, the evidence conclusively shows that Altman was served with Otero’s summons
and complaint on June 20, 2011, which it forwarded to AON the same day. National Union was
not notified of the lawsuit until May 30, 2013, a year and nine months after the service of Otero’s
summons and complaint and nine months after the trial court denied the motion to set aside the
default. In fact, although AON first notified National Union of the lawsuit in May 2013, it was
not until September 2, 2013, that Altman actually provided National Union with notice of
Otero’s lawsuit.

        In Motor State Ins Co v Benton, 35 Mich. App. 287, 290; 192 NW2d 385 (1971), “[t]he
clause ‘as soon as practicable’ [was] interpreted to mean ‘a reasonable time, dependent upon the
facts and circumstances of the case.’ ” Further, there are no Michigan cases interpreting the
phrase “reasonably likely to involve” the excess policy. However, in Evanston Ins Co v
Stonewall Surplus Lines Ins Co, 111 F 3d 852, 861 (CA 11, 1997), the 11th Circuit Court offered
some guidance:

       Notice is required only when it is “reasonably likely” that the claim will be found
       to have a value in excess of the primary insurance limits. “Reasonable to whom?
       The insured’s appraisal will have to control unless, as a matter of law, it is
       unreasonable.

               The fact is that excess carriers are not interested in receiving notice of
       every claim against their insureds. The excess insurer does not undertake to
       defend the insured. Consequently, the excess insurer is not interested in every
       accident, but only in those serious enough to involve it. Excess policies,
       therefore, usually require an assured to give notice of claims that appear “likely
       to involve’ the excess.

               Under the notice provision of the excess policy “the exercise of some
       judgment on the part of the assured in evaluating the case is contemplated.”
       (Herbert C. Brook, 21 Ins. Counsel J. 131 (April, 1954). This standard requires
       the insured to base its judgment regarding the amount of the claim against it upon
       sound reasons. Mere guesswork will not be enough; ignorance is no defense. An
       insured cannot be heard to say it did not know when it did not inquire. The
       insured must use diligence and take appropriate steps to make an informed
       judgment regarding the nature and amount of the claim. [Emphasis added.]

        Appellants’ argument that Altman could not have known that Otero’s claim was
reasonably likely to exceed Tudor’s $1 million limit is unavailing. Otero’s complaint alleged
that she suffered life-threatening exposure to carbon monoxide poisoning, was intubated for one

                                               -11-
week, and that brain damage was identified. The complaint also alleged that before Otero was
discharged from the hospital, she rapidly deteriorated, was non-responsive, had seizures, and had
trouble controlling her bowels. Altman has offered no explanation as to why it delayed in
notifying National Union of the claim. Even after the default was entered on July 25, 2011, and
the order denying the motion to set aside the default was entered on August 14, 2012, Altman
still delayed in giving notice to National Union. At most, Altman should have known that the
excess policy might be implicated when Otero moved for default judgment in the amount of $1
million, and the trial court stated that the issue of damages was to be resolved by a factfinder.
The extent of Otero’s injuries and the entry of the default was sufficient to put Altman on notice
that the lawsuit was “likely to involve” the excess policy issued by National Union. Therefore,
Altman breached the notice provision contained in the policy.

        However, for National Union to be relieved of its obligations under the policy, it is not
enough that Altman breached the notice provision under the policy; rather, it must also show that
it was prejudiced by the breach. Appellants’ argue that there was no prejudice to National Union
because it was in the exact same position from August 14, 2012, when the trial court denied the
notion to set aside the default, to September 24, 2013, when Altman gave notice of the Otero
lawsuit to National Union. National Union argues that a conflict of law issue exists and that
Florida law should govern. This could matter as under Florida law, there is a presumption of
prejudice to insurer when an insured fails to give timely notice of a claim to the insurer. Bankers
Ins Co v Macias, 475 So 2d 1216 (Fla, 1985). Michigan, on the other hand, provides that the
insurance company must establish actual prejudice. Koski v Allstate Ins Co, 456 Mich. 439, 444;
572 NW2d 636 (1998) (holding that “it is a well-established principle that an insurer who seeks
to cut off responsibility on the ground that its insured did not comply with a contractual
provision requiring notice immediately or within a reasonable time must establish actual
prejudice to its position.”).

        We need not reach the conflict of law issue because National Union was prejudiced by
the entry of the default. Because of the entry of the default, National Union was denied the
opportunity to participate in defending the lawsuit, engage in discovery, present evidence relative
to liability, present any meritorious defenses to the lawsuit, cross-examine witnesses at trial, or
participate in the arbitration proceeding. Therefore, National Union suffered actual prejudice as
a result Altman’s delay in providing notice of Otero’s lawsuit.

        Accordingly, the trial court did not err in granting National Union’s motion for summary
disposition.

       Affirmed.

                                                            /s/ Brock A. Swartzle
                                                            /s/ Douglas B. Shapiro
                                                            /s/ Mark T. Boonstra

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