Catlin Indemnity Company v. Westfield Insurance Company

Filing 12

ORDER Granting 4 Motion to Dismiss and Dismissing Case. Signed by District Judge Denise Page Hood. (LSau)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

CATLIN INDEMNITY COMPANY,
Case No. 14-13685
Plaintiff,
HONORABLE DENISE PAGE HOOD
v.
WESTFIELD INSURANCE COMPANY,
Defendant.
______________________________________/
ORDER GRANTING MOTION TO DISMISS
AND DISMISSING CASE
I.

BACKGROUND
On September 23, 2014, Plaintiff Catlin Indemnity Company filed the instant

action against Defendant Westfield Insurance Company alleging three counts:
Subrogation (Count I); Equitable Subrogation (Count II); and, Equitable
Contribution–In the Alternative (Count III).
The underlying matter arises from the drowning death on November 8, 2013
when KeAir Swift, a student at East Detroit High School, a part of the East Detroit
Public Schools, located in Macomb County, Michigan, drowned in the school’s pool.
(Comp., ¶ 9) Lakisha Swift, KeAir Swift’s mother and personal representative of the
estate, filed a lawsuit in state court, Swift v. Sails, Case No. 14-550-NO (Macomb

County Circuit Court). (Comp., ¶ 3) Jonathan Sails was the substitute teacher on the
day KeAir Swift drowned. (Comp., ¶¶ 11, 26) The Professional Educational Service
Group, LLC (“PESG”) is a teacher staffing company that maintains a roster of
teachers, secretaries, lunch aids and custodians, assigning them to work at various
public schools throughout Michigan, including East Detroit High School. (Comp., ¶
13) In the underlying lawsuit, Swift alleged that Sails had applied and was hired and
paid through PESG, who assigned Sails to East Detroit High School. (Comp., ¶ 14)
Catlin issued a policy of insurance to the East Detroit Public Schools. (Comp.,
¶ 1) Westfield is an insurance company that issued a policy of insurance to PESG.
(Comp., ¶ 2) The underlying lawsuit was settled with a portion of the total settlement
amount being paid by Catlin and the remainder amount by Westfield. (Comp., ¶ 19)
Catlin and Westfield agreed that the payments are subject fo a full and complete
reservation of rights as to each other for pursuing payments made to defend and/or
settle the underlying lawsuit. (Comp., ¶ 20)
In lieu of an Answer, Westfield filed the instant Motion to Dismiss, or
alternatively, Motion for Abstention pending issues raised in the underlying lawsuit
as to indemnity issues. A response, reply and supplemental briefs have been filed. A
hearing was held on the matter on May 6, 2015.
After the hearing was held, Westfield filed a supplemental brief noting that the
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Macomb County Circuit Court had decided which of the two parties’ insured were
liable for the drowning death of the student. The Macomb County Circuit Court
found that East Detroit Public Schools (Catlin’s insured) was solely liable for the
death of the student because it made the decision, in violation of state laws, to place
a non-certified substitute teacher in charge of a swimming class in the absence of a
certified lifeguard, and because it did so without the knowledge or approval of the
contractor, PESG, that provided the substitute teacher (Westfield’s insured). The
Macomb County Circuit Court ruled that by virtue a mutual indemnity provision in
its written agreement with PESG that East Detroit Public Schools “automatically
accepts liability” for claims arising out of its use of a substitute teacher in a manner
not approved by the contractor, only East Detroit Public Schools was solely liable for
the death of the student. (Doc. No. 11-1, Opinion, Pg ID 679) Catlin did not respond
to Westfield’s supplemental brief. Westfield now moves for dismissal of the action
for subrogation.
II.

ANALYSIS
A.

Motion to Dismiss Standard

Rule 12(b)(6) of the Rules of Civil Procedure provides for a motion to dismiss
based on failure to state a claim upon which relief can be granted. Fed. R. Civ. P.
12(b)(6). In Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007), the Supreme Court
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explained that “a plaintiff's obligation to provide the ‘grounds’ of his ‘entitle[ment]
to relief’ requires more than labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do[.] Factual allegations must be enough to
raise a right to relief above the speculative level....” Id. at 555 (internal citations
omitted). Although not outright overruling the “notice pleading” requirement under
Rule 8(a)(2) entirely, Twombly concluded that the “no set of facts” standard “is best
forgotten as an incomplete negative gloss on an accepted pleading standard.” Id. at
563. To survive a motion to dismiss, a complaint must contain sufficient factual
matter, accepted as true, to “state a claim to relief that is plausible on its face.” Id. at
570. A claim has facial plausibility when the plaintiff pleads factual content that
allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged. Id. at 556. The plausibility standard is not akin to a “probability
requirement,” but it asks for more than a sheer possibility that a defendant has acted
unlawfully. Ibid. Where a complaint pleads facts that are “merely consistent with” a
defendant's liability, it “stops short of the line between possibility and plausibility of
‘entitlement to relief.’” Id. at 557. Such allegations are not to be discounted because
they are “unrealistic or nonsensical,” but rather because they do nothing more than
state a legal conclusion–even if that conclusion is cast in the form of a factual
allegation. Ashcroft v. Iqbal, 556 U.S. 662, 681 (2009). To survive a motion to
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dismiss, the non-conclusory “factual content” and the reasonable inferences from that
content, must be “plausibly suggestive” of a claim entitling a plaintiff to relief. Id.
Where the well-pleaded facts do not permit the court to infer more than the mere
possibility of misconduct, the complaint has alleged, but it has not shown, that the
pleader is entitled to relief. Fed. R. Civ. P. 8(a)(2). The court primarily considers the
allegations in the complaint, although matters of public record, orders, items
appearing in the record of the case, and exhibits attached to the complaint may also
be taken into account. Amini v. Oberlin College, 259 F.3d 493, 502 (6th Cir. 2001).
B.

Subrogation (Count I)

In Michigan, “where an insurer, whose liability is arguably secondary to that
of a primary insurer, pays the claim, it becomes subrogated to the rights of the
insured.” Federal Kemper Ins. Co. v. Western Ins. Cos., 97 Mich. App. 204, 208
(1980). “A subrogee acquires no greater rights than those possessed by his subrogor
and the subrogated insurer is merely substituted for his insured.” Id. at 210 (quoting
Indemnity Ins. Co. of North America v. Otis Elevator Co., 315 Mich. 393 (1946)).
Based on the Macomb County Circuit Court’s May 12, 2015 decision finding
that East Detroit Public Schools is solely liable for the student’s death, Catlin, as the
school’s insurer, possess no rights against Westfield, PESG’s insurer. Catlin has
failed to state a subrogation claim against Westfield.
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C.

Equitable Subrogation (Count II)

Equitable subrogation is a legal fiction through which a person who pays a debt
for which another is primarily responsible is substituted or subrogated to all the rights
and remedies of the other. In re Lewis, 398 F.3d 735, 747 (6th Cir. 2005)(construing
Michigan law). For the same reasons set forth above, Catlin fails to state a claim upon
which relief may be granted since East Detroit Public Schools (Catlin’s insured) is
solely liable for the student’s death. Westfield’s insured, PESG, is not responsible for
the student’s death based on the Macomb County Circuit Court’s decision.
D.

Equitable Contribution (Count III)

In Michigan, a party seeking equitable contribution must show (1) a “common
liability” owed by the wrongdoers to the injured plaintiff, and (2) payment or
satisfaction by the party seeking contribution of the entire obligation or more than his
share of the common obligation. Caldwell v. Fox, 394 Mich. 401, 419-20 (1975).
Based on the Macomb County Circuit Court’s decision, Westfield is not liable
to Catlin because there is no “common liability” between Westfield and Catlin where
Catlin’s insured, East Detroit Public Schools, was found to be solely liable for the
student’s death.
III.

CONCLUSION
For the reasons set forth above,
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IT IS ORDERED that Defendant Westfield’s Motion to Dismiss (Doc. No. 4)
is GRANTED.
IT IS FURTHER ORDERED that this action is DISMISSED.

S/Denise Page Hood
Denise Page Hood
United States District Judge
Dated: September 30, 2015
I hereby certify that a copy of the foregoing document was served upon counsel of
record on September 30, 2015, by electronic and/or ordinary mail.
S/LaShawn R. Saulsberry
Case Manager

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