Watch the full video at https://rumble.com/v2ltidi-prejudice-not-required-for-claims-made-policy.html?mref=6ozih&mrefc=2 and at https://youtu.be/c-aFFXG35xY
Plaintiff appealed the trial order granting summary disposition in favor of defendant (no genuine issue of material fact) and the trial order granting in part and denying in part defendant’s motion for costs and attorney’s fees. Defendants appealed the trial court’s order granting in part and denying in part the motion for costs and attorney’s fees.
IN Maple Manor Rehabilitation Center, LLC v. Evanston Insurance Company, no. 359147, Court of Appeals of Michigan (April 27, 2023) resolved the disputes.
Dorothy Irvine, age 88, was admitted to Plaintiff, Maple Manor Rehabilitation Center (“Maple Manor”), on November 25, 2014, following a hospital stay. Around December 11, 2014, she was found lying on the floor of the rehabilitation center.
She passed away at the hospital on 16 December 2014. Irvine’s death certificate, issued on 17 December 2014, stated that her cause of death was atherosclerotic cardiovascular disease and that her manner of death was natural.
On July 20, 2017, Irvine’s son, as personal representative of Irvine’s estate, filed a wrongful death lawsuit against Maple Manor, alleging negligence (the “Irvine Lawsuit”). At the time the Irvine lawsuit was filed, Maple Manor had professional insurance in place with Evanston Insurance Company (“Defendant”). However, Maple Manor did not notify the defendant of the Irvine lawsuit when it was filed. Rather, Maple Manor defended the Irvine lawsuit itself.
On June 7, 2019, Maple Manor reported the Irvine lawsuit to its broker. On June 12, 2019, the defendant denied the request, stating that it was not notified of the claim in time as required by the policy.
Maple Manor then filed a complaint against the defendant for breach of contract.
The defendant argued that the policy issued to Maple Manor contained language requiring claims to be made during the policy period, and reported to the defendant “as soon as possible,” including “immediately” forwarding to Evanston any legal process to qualify for coverage.
The trial court found that notice given 18 months after the Irvine lawsuit had been filed was not “as soon as practicable” under the circumstances. The district court further held that the defendant was prejudiced by the late notice because Maple Manor removed all flexibility as to how the defendant would have defended the case, who it would have chosen as counsel, what strategies it would have used, etc. The district court agreed an order granting summary disposition in favor of the defendant.
Defendant subsequently sought attorneys’ fees of $26,581.60 plus costs of $491.20, based primarily on its claim that Maple Manor’s lawsuit was frivolous. The trial court granted defendant’s motion in part and denied in part, awarding defendant $491.20 in costs, as well as attorney’s fees incurred after the September 8, 2020 hearing on defendant’s first summary disposition motion in the amount of $13,708.80 for plaintiff’s failure to provide reasonable basis for his position.
For over a hundred years, Michigan jurisprudence has without exception adopted a working definition with a very specific legal understanding—being within a reasonable time under the circumstances.
The lawsuit in Irvine was filed against Maple Manor on July 20, 2017, but it wasn’t until June 7, 2019, nearly two years after the lawsuit was filed, that Maple Manor notified the defendants of the wrongful death lawsuit. Almost two years is not a reasonable time in any circumstances where Maple Manor fully participated in the trial with the same attorneys it has now and has offered no legitimate excuse and identified no impediment to informing the defendant of the Irvine process earlier.
Maple Manor specifically requested cancellation of the policy with the defendant on May 16, 2018. Maple Manor knew full well that it had active insurance with the defendant on July 20, 2017, the date the lawsuit was filed, and thereafter until it requested cancellation of the policy on July 20, 2017 .May 16, 2018.
Maple Manor made a conscious, intentional decision not to inform Defendant of the Irvine lawsuit until June 7, 2019. It was not by mistake, oversight, mistake, inadvertence, or belief that it lacked coverage.
Damages to the insurer are an essential element in determining whether termination is reasonably granted, and the burden is on the insurer to show prejudice. However, that principle was developed in the context of “occurrence” policies, not claims insurance.
The delay in giving notice of termination here was about two years and there have been far less delays prima facie failure to notify as soon as practicable. Maple Manor made a conscious choice to defend against the Irvine lawsuit on its own until it determined that the defendant should be involved. This is contrary to the express terms of the insurance contract requiring termination of a claim “as soon as practicable” and “immediate” service of summons or other process received by the claimant, as well as the purpose of termination requirements in insurance contracts in general. .
Maple Manor, a professional rehabilitation facility owned and operated by Physician Principals, was well aware that it had professional business insurance coverage provided by the defendant for the Irvine lawsuit filed against it on July 20, 2017. Maple Manor chose not to notify the defendant of the atmosphere. considered frivolous or to seek a defense against it from the defendant until almost two years later, when Maple Manor had already agreed to an arbitration with a minimum liability of $10,000. The Court of Appeals concluded that the Court of Appeals did not err in finding that there were no material issues of fact in these matters and that the defendant was thus entitled to summary disposal.
The purpose of imposing sanctions for asserting frivolous claims is to deter parties and counsel from filing documents or asserting claims and defenses that are not adequately researched and investigated or that are intended to serve an improper purpose.
Maple Manor had no reasonable basis to believe that the facts underlying its legal position in this matter were in fact true, nor did Maple Manor’s legal position have any arguable legal merit. Thus, the trial court abused its discretion in declining to award defendant all of his attorney’s fees on this frivolous matter.
Grant of disposition was determined. The district court’s decision to award only a portion of the defendant’s requested attorney’s fees was reversed and the case was remanded for entry of an order awarding the defendant all of the requested attorney’s fees.
Maple Manor was its own worst enemy. It paid for insurance to cover the Irvine lawsuit but decided to retain its own lawyers to defend the lawsuit without informing its insurer that the lawsuit existed. It then lied when they tried, belatedly, to get coverage, even though the first report to the insurer was almost two years after the lawsuit was served and almost a year after they canceled the policy. The report was not made during the effective date of the policy, not as soon as reasonably practicable, and the lawsuit it filed was frivolous and required it to pay the insurer’s attorneys’ fees.
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