Company cannot sue its insurance agent for securing umbrella that did not provide requested coverage
American Erectors placed its insurance through the McNish Group in Oakland County. It wanted to go cheap on labor, so it created an alter ego to employ workers. At the same time, it asked McNish to secure insurance on both it and the alter ego, to assure that it was covered in the event of injuries. Several months later, one of the plaintiff's employees was killed in an industrial accident; the insurer who had written the umbrella coverage wrote to the plaintiff informing it that the five million dollar umbrella would not cover the estate's wrongful death claim, because under the terms of the policy, the case pitted one insured against another.
While the case was pending the agency urged the plaintiff not to take legal action and to allow it to "manage" the claim through the trial. It specifically told the plaintiff employer that it had coverage for this kind of gap in coverage and that would take care of the matter if plaintiff lost the pending wrongful death case. It did, in fact, lose the case and suffer a seven million dollar verdict for negligence. It then sued the agent for negligence.
The Court upheld the dismissal of the insured plaintiff's case based on the statute of limitations. It pointed out that insurance negligence is not professional negligence and that the cause of action accrued when the umbrella insurer denied coverage (more than three years before the plaintiff filed its action against the agent). The Court further held that the agent was not "estopped" to assert the statute of limitations because its promises to address the problem down the road were merely promises of future action which the plaintiff should not have relied upon. To reach this conclusion, the Court of Appeals made the somewhat incredible finding that "McNish's representation that it would obtain affirmative relief...was ...not a false representation...designed to induce plaintiff to refrain from bringing a timely action."
It is a little hard to sympathize with a corporate employer "hung by its own petard," when it's attempt to reduce the rights of its own labor force backfires and results in a seven million dollar uninsured judgment. Nevertheless, it is even harder to justify a decision that does not hold a negligent (insurance agent) company to fulfill the explicit promises it has made to the victim of its own carelessness. But, when special interests dominate the judiciary, as insurance interests do in Michigan, this is the outcome you get.