Stryker Corporation et al v. National Union Fire Insurance Company of Pittsburgh, PA et al
Filing
327
OPINION ; signed by Judge Robert Holmes Bell (Judge Robert Holmes Bell, kcb)
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
STRYKER CORPORATION, et al.,
Plaintiffs,
HON. ROBERT HOLMES BELL
v.
File No. 1:05-CV-51
XL INSURANCE AMERICA, INC. and
TIG INSURANCE COMPANY,
Defendants.
/
OPINION
This matter is before the Court on Plaintiff Stryker Corporation’s motion, joined by
XL Insurance America,1 for summary judgment against TIG Insurance Company (Dkt. Nos.
261, 280)2 and on TIG’s motion to bar or strike references to settlement negotiations (Dkt.
No. 295). For the reasons that follow, both motions will be denied.
I.
In 1998, Stryker purchased the assets and stock of Howmedica Osteonics Corp. from
1
Stryker has raised several arguments in support of its motion for summary judgment.
XL’s joinder, however, is limited to the issue of waiver of the “consent to settle” defense.
(Dkt. No. 300, XL Reply Br. at 1.)
2
The Court will refer to Stryker Corp v. XL Insurance America, Inc., Case No. 4:01CV-157, rev’d in part, 681 F.3d 806 (6th Cir. 2012), as Stryker I, and to this case, Stryker
Corp. v. National Union Fire Insurance Co. of Pittsburgh, PA, Case No. 1:05-CV-51, rev’d
in part, 681 F.3d 819 (6th Cir. 2012), as Stryker II.
Pfizer, Inc. Howmedica was the manufacturer of the Duracon Unicompartmental Knee
(“Uni-Knee” or “DUK”). In 2000, Stryker began receiving product liability claims regarding
defective Uni-Knees (“DUK claims”). Stryker tendered these product liability claims and
lawsuits arising out of defective Uni-Knees to XL, its insurer for the 2000 policy year. XL
declined to defend or indemnify Stryker for the DUK claims. (Dkt. No. 54, Ex. I.) Stryker
ultimately paid over $7,620,731.07 to settle the DUK claims. (Stryker I, Dkt. No. 1126, Ex.
D, Settlement Chart.)
In 2001, Stryker sued XL for defense and indemnification for the
DUK claims against Stryker. Stryker I, Case No. 1:01-CV-157.
Pfizer, as the parent corporation of Howmedica, also received many Uni-Knee product
liability claims. Pfizer prevailed in its suit against Stryker for indemnification for the UniKnee claims pursuant to a Stock and Asset Purchase Agreement and obtained an
interlocutory judgment against Stryker in the amount of $17,710,428.34. Pfizer, Inc. v.
Stryker Corp., 348 F. Supp. 2d 131, 159 (S.D.N.Y. 2004).
In 2005 Stryker filed this complaint against XL and TIG, its excess insurer, seeking
damages against XL for breach of contract, a declaration that XL was obligated to defend and
indemnify Stryker in the Pfizer action, and a declaration that TIG is obligated to cover any
losses from Stryker I and Pfizer that were not covered by XL. (Dkt. No. 70, Third Am.
Compl.) This Court entered summary judgment in favor of Stryker against XL and TIG.
(Dkt. No. 162.)
The Sixth Circuit has affirmed this Court’s judgment in Stryker I that the XL policy
2
provided coverage for the DUK claims. Stryker I, 681 F.3d at 813, but reversed this Court’s
determinations with respect to consequential damages and application of the Pfizer settlement
to XL’s policy limits. The Sixth Circuit has affirmed this Court’s ruling in Stryker II that this
case is not moot, but reversed this Court’s ruling that TIG is precluded from raising coverage
defenses on remand. Stryker II, 681 F.3d at 826.
In 2009, XL settled with Pfizer and paid the Pfizer judgment. TIG filed an action
against Stryker and XL, seeking a declaration that the TIG policies were not at issue until the
limits of the underlying insurance were exhausted. TIG Ins. Co. v. Stryker Corp., Case No.
1:09-CV-156 (Stryker III). This Court dismissed Stryker III based on its determination that
the claims raised in Stryker III should have been raised as compulsory counterclaims in
Stryker II. (Stryker III, Dkt. Nos. 30, 31.)
The current motion concerns Stryker and XL’s contentions that TIG has no defenses
against Stryker’s claim that TIG is liable, under its excess policy, to pay Stryker’s settlements
of the direct DUK claims.
II.
Before turning to the motion for summary judgment, the Court will consider TIG’s
challenge to the evidence that has been presented by XL in support of the motion for
summary judgment. TIG moves to strike “references to conduct and statements during
settlement negotiations.” (Dkt. No. 295, TIG’s Mot. to Strike.) Specifically, TIG seeks to
exclude evidence that TIG refused to participate in the settlement conference or to contribute
3
to any settlement of any Uni-Knee-based claims because such claims were not covered under
its excess policy. (Dkt. No. 280, XL Br. p.2 first bullet point, p. 5, 2nd ¶, & Attach. 1, Betz
Decl. ¶ 3.)
TIG challenges XL’s references to conduct and statements made during settlement
negotiations because they are not admissible under Rule 408 of the Federal Rules of
Evidence. Rule 408 provides that “conduct or a statement made during compromise
negotiations about the claim” is not admissible “to prove or disprove the validity or amount
of a disputed claim or to impeach by a prior inconsistent statement or a contradiction.” Fed.
R. Evid. 408(a). There is a “strong public interest in favor of secrecy of matters discussed
by parties during settlement negotiations.” Goodyear Tire & Rubber Co. v. Chiles Power
Supply, Inc., 332 F.3d 976, 980 (6th Cir. 2003). “In order for settlement talks to be effective,
parties must feel uninhibited in their communications.” Id. Rule 408, however, does not bar
all communications made during settlement. By its terms, it applies only to “conduct or a
statement made during compromise negotiations about the claim.” Fed. R. Evid. 408(a)(2).
“Rule 408 excludes only evidence of conduct and statements made solely as part of the
settlement negotiations, and not statements and conduct made at the meeting which are
unrelated to such compromise negotiations.” Trans Union Credit Info. Co. v. Assoc. Credit
Servs., Inc., 805 F.2d 188, 192 (6th Cir. 1986). “[T]he purpose of the settlement privilege
is to keep the give and take of proposed settlement negotiations secret.” State v. Little River
Band of Ottawa Indians, 5:05-CV-95, 2007 WL 851282, at *3 (W.D. Mich. Mar. 16, 2007)
4
(Brenneman, M.J.). “The strong public interest favoring secrecy of matters discussed by
parties ‘during settlement negotiations,’ does not extend with equal force to discussions
about the prospect or existence of settlement negotiations.” Id. at *2 (citing Goodyear Tire
& Rubber Co. v. Chiles Power Supply, Inc., 332 F.3d 976 (6th Cir.2003)). As the Sixth
Circuit noted in Goodyear, even though Rule 408 bars the admissibility of settlement
communications, its exceptions have been used to admit the occurrence of settlement talks.
332 F.3d at 981.
The evidence TIG seeks to exclude simply discloses that TIG declined to participate
in a settlement conference on the ground that it owed no coverage. TIG’s decision not to
participate in settlement negotiations is not the type of communication that the Rule is
designed to protect. Moreover, TIG’s communication that it owed no coverage was not
secret; it had made this position known in its prior public pleadings. (See, e.g., Dkt. No. 66,
TIG Answ. to 2nd Am. Compl. Affirm. Defenses.) The evidence TIG seeks to exclude is not
“conduct or a statement made during compromise negotiations about the claim,” and does
not fall within the scope of Rule 408(a).
Moreover, even if the communications did fall within the scope of Rule 408(a), the
Rule only prohibits use of the evidence “to prove or disprove the validity or amount of a
disputed claim or to impeach by a prior inconsistent statement or a contradiction.” Fed. R.
Evid. 408. The Rule expressly provides that “conduct [and] statements made in compromise
negotiations” are nevertheless admissible if used for a purpose other than one of those
5
expressly prohibited by the Rule. Fed. R. Evid. 408(b). “The exception clearly intends to
exempt from the absolute prohibition of the Rule evidence focused on issues different from
the elements of the primary claim in dispute.” PRL USA Holdings, Inc. v. U.S. Polo Ass’n,
Inc., 520 F.3d 109, 114 (2d Cir. 2008) (holding that statements made in settlement
negotiations were admissible to prove estoppel); see also Traverse Bay Area Intermediate
Sch. Dist. v. Mich. Dept. of Educ., No. 5:06-CV-139, 2007 WL 2986469, at *2 (W.D. Mich.
Oct. 10, 2007) (Quist, J.) (“As the language of the rule makes clear, however, evidence
pertaining to settlement terms or negotiations is admissible when it is offered for another
purpose unrelated to the validity or amount of a claim.”).
XL contends that it has offered the challenged evidence for “another purpose,”
namely, “to demonstrate that TIG’s denial of coverage constituted a waiver of its entitlement
to assert a consent-to-settle defense.” (Dkt. No. 298, XL Br. 13.) XL also contends that
when TIG took the position that there was no coverage for the DUK claims because Stryker
did not seek TIG’s consent prior to settlement, TIG “opened the door” to evidence
challenging the merits of its position.
The exceptions to Rule 408 have been held to allow evidence of waiver. See, e.g.,
Thomas & Marker Const., Co. v. Wal-Mart Stores, Inc., 3:06-CV-406, 2008 WL 5119587
(S.D. Ohio Nov. 30, 2008) (holding that offer was admissible if offered as evidence of
waiver, and not to prove liability for, invalidity of, or amount of a claim); Griggs v. Allstate
Ins. Co., No. C-3-96-48, 1997 WL 1764777 (S.D. Ohio Sept. 15, 1997) (holding that offer
6
to pay for loss was admissible as evidence of waiver of the limitations period). The
exceptions have also been held to allow evidence of estoppel. See, e.g., PRL USA Holdings,
520 F.3d at 114 (holding that statements made in settlement negotiations were admissible to
prove estoppel).
XL has not introduced the challenged evidence to prove or disprove the validity of
Stryker’s claim against TIG, but to show that TIG had notice and an opportunity to
participate in the Pfizer settlement in order to counter TIG’s assertion that Stryker was
required to obtain TIG’s prior consent to a settlement. The Court is satisfied that whether
this is viewed as a waiver or an estoppel argument, XL is offering the challenged evidence
for “another purpose” that is not barred by Rule 408.
TIG has also moved to strike Mr. Betz’s declaration pursuant to Rule 56(c)(4) because
his statements are not based on his personal knowledge. See Fed. R. Civ. P. 56(c)(4) (“An
affidavit or declaration used to support or oppose a motion must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that the affiant or
declarant is competent to testify on the matters stated.”). TIG contends that while the
declaration implies that Mr. Betz had personal knowledge of the matters contained in the
declaration, there is no clear assertion that Mr. Betz has personal knowledge of the
referenced conduct and statements. This argument lacks merit. Mr. Betz attended both days
of the settlement conference. (Dkt. Nos. 164, 165, Minutes.) For purposes of a summary
judgment motion, “[t]he proffered evidence need not be in admissible form, but its content
7
must be admissible.” Perry v. Jaguar of Troy, 353 F.3d 510, 516 n.3 (6th Cir. 2003) (citing
Bailey v. Floyd Cnty. Bd. of Educ., 106 F.3d 135, 145 (6th Cir. 1997)). The Court is
satisfied, based on Mr. Betz’s declaration and the public record of his presence at the
settlement conference, that he has personal knowledge of the matters contained in his
declaration and would be competent to testify to them. Accordingly, TIG’s motion to bar or
strike references to settlement negotiations will be denied.
III.
Stryker moves for summary judgment against TIG on the issue of liability. Stryker
contends that TIG has no defenses to Stryker’s contention that TIG is liable for the settlement
payments Stryker has made that are in excess of the XL policy. The focus of this motion is
on TIG’s contention that it does not owe insurance benefits to Stryker for the direct DUK
claims because Stryker did not obtain TIG’s written consent to enter into settlements of the
direct DUK claims.
A. RIPENESS
In its initial response brief, TIG argued that the motion for summary judgment is
premature because it has not yet been established that the XL Policy has been exhausted.
(Dkt. No. 268, TIG Br. 1.) After TIG filed its brief, this Court entered its order of February
8, 2013, which specifically declared that XL has exhausted its policy limits. (Dkt. No. 305,
Op.) Although there may still be some dispute as to the exact amounts Stryker is claiming
from TIG, Stryker’s motion is directed only to the issue of liability, and not to the issue of
8
damages. Accordingly, the Court finds that the issue is ripe for determination.
B. DEFENSES UNIQUE TO THE TIG POLICY
Stryker contends that pursuant to the Sixth Circuit’s opinion, TIG may only raise
coverage defenses that are unique to its policy, and that TIG has no such defenses. Stryker
is mistaken on both points.
The Sixth Circuit did not limit TIG to coverage defenses that are unique to its policy.
The Sixth Circuit held that “TIG is not in privity with XL, and is not precluded from raising
its own defense to coverage on remand.” Stryker II, 681 F.3d at 825. Although the Sixth
Circuit noted that it did “not mean to suggest that the district court should interpret the
portion of the TIG policy that incorporates the XL language differently from the
interpretation of the XL policy itself,” and further noted that TIG policy provisions that do
not incorporate language from the XL policy “might generate coverage defenses that are
unique to the TIG policy,” 681 F.3d at 825 n.4, this language does not suggest that TIG is
prohibited from arguing for a different interpretation of the XL policy or to raising only
defenses that are unique to its policy.
Stryker’s contention that TIG has no defenses other than the defenses XL has raised
is based on the fact that the TIG policy is a “follows form” policy. A “follows form” policy
is simply one that insures the same risks covered by the underlying policy. See N. River Ins.
Co. v. CIGNA Reinsurance Co., 52 F.3d 1194, 1199 (3d Cir. 1995) (holding that a “following
forms” provision typically limits the reinsurance to the terms and conditions of the
9
underlying policy and provides that the reinsurance certificate will cover only the kinds of
liability covered in the original policy issued to the insured); Hartford Acc. & Indem. Co. v.
Chi. Hous. Auth., 12 F.3d 92, 95 (7th Cir. 1993) (holding that a “following form” policy
“insures the same risks covered by the underlying policy . . . but provides coverage to the
insured in addition to and in excess of the coverage provided by” the underlying policy). The
TIG policy follows-form to the underlying XL policy inasmuch as it insures against the same
risks. That does not mean that the TIG policy cannot include conditions of coverage that
differ from those of the underlying XL policy. In fact, the TIG policy expressly provides that
the definitions, terms, conditions, limitations and exclusions of the underlying insurance
apply “unless they are inconsistent with the provisions of this policy . . . .” TIG Policy § IA.
The Court cannot find, as a matter of law, that TIG does not have any defenses that are
unique to its policy.
C.
“CONSENT TO SETTLE” DEFENSE
In the course of this litigation TIG has asserted that it does not owe Stryker coverage
for amounts Stryker paid to settle direct DUK claims because settlement payments made
without TIG’s prior consent do not constitute Ultimate Net Loss under the TIG policy. The
heart of Stryker and XL’s summary judgment motion is directed at the “consent to settle”
defense. Stryker and XL contend that this defense fails under the language of the TIG policy,
or that it has been waived.
The TIG excess umbrella policy provides for coverage as follows:
10
WE will pay on YOUR behalf the ULTIMATE NET LOSS (1) in excess of all
UNDERLYING INSURANCE, and (2) only after all UNDERLYING
INSURANCE has been exhausted by the payment of the limits of such
insurance for losses arising out of occurrences insured by all of the policies
designated in the Declarations as UNDERLYING INSURANCE. If any
UNDERLYING INSURANCE does not pay a loss for reasons other than the
exhaustion of an aggregate limit of insurance, then WE shall not pay such loss.
The Definitions, Terms, Conditions, Limitations, and Exclusions of the “first
policy of UNDERLYING INSURANCE,” in effect at the inception date of this
policy, apply to this coverage unless they are inconsistent with the provisions
of this policy, or relate to premium, subrogation, any obligation to defend, the
payment of expenses, limits of insurance, cancellation or any renewal
agreement.
(Dkt. No. 70, 3rd Am. Compl., Ex. G, TIG Policy at 12; Dkt. No. 268, TIG Br. at 5.)
The TIG policy defines ULTIMATE NET LOSS as follows:
ULTIMATE NET LOSS means the amount of the principal sum, award or
verdict actually paid or payable in cash in the settlement or satisfaction of
claims for which the insured is liable, either by adjudication or compromise
with the written consent of US, after making proper deduction for all
recoveries and salvages.
Defense expense payments shall be included within the ULTIMATE NET
LOSS, provided that such expenses are included within the terms, conditions,
and limits of insurance of any UNDERLYING INSURANCE.
(TIG Policy 14.)
The definition of Ultimate Net Loss is part of the words of coverage. Accordingly,
Stryker bears the burden of proof on whether a particular settlement is included in Ultimate
Net Loss. See Tooling Mfg. & Tech. Ass’n v. Harford Fire Ins. Co., 693 F.3d 665, 671 (6th
Cir. 2012) (“[T]he insured has the burden to demonstrate that its claim falls within the terms
of the policy.”) (citing Heniser v. Frankenmuth Mut. Ins. Co., 534 N.W.2d 502, 510 (Mich.
1995)).
11
1. Construction of the Policy
Movants contend that construing the policy to require the insured to obtain the consent
of an excess insurer before settling within primary limits is unreasonable and would produce
absurd results. See Certified Restoration Dry Cleaning Network, L.L.C. v. Tenke Corp., 511
F.3d 535, 545 (6th Cir. 2007) (“[C]ontracts must be construed consistent with common sense
and in a manner that avoids absurd results . . . .”). Movants contend that it is unreasonable
to require the insured to obtain the excess insurer’s consent to settlements that do not
implicate the excess insurer’s policy because it would subject the right to settle within
primary limits to the whims of the excess insurer.
The Court does not agree that TIG’s construction of the policy would produce absurd
results. Movants’ position is based on the assumption that Stryker’s settlements within XL’s
limits did not implicate the excess policy. That assumption is not correct. The TIG policy
clearly provides only for payment of Ultimate Net Loss, which is defined to include only
settlements which have been entered into with TIG’s written consent. The TIG policy does
not exclude the consent requirement for settlements within the underlying policy limits. It
is neither unreasonable nor absurd for an excess insurance policy to require the insured to
obtain consent to settlements that the insured might in the future want to include in the
calculation of the Ultimate Net Loss. Even settlements that are within the underlying
insurance limits implicate the excess insurer’s policy if there is any possibility that the
underlying insurance will be exhausted.
The insured is in the best position to know its
12
potential exposure, and if it wants to preserve its potential right to excess insurance, it is not
unreasonable or absurd to require it to consult with the excess insurer.
Movants’ unreasonableness argument is based on the fear that the excess insurer will
exercise its right to consent to scuttle a settlement that is within the primary insurer’s limits.
The Court is not prepared to assume that the excess insurer would unreasonably withhold its
consent to a settlement that is within the primary insurer’s limits, or that an unreasonable
withholding of consent could not be addressed when the issue of Ultimate Net Loss arose.
In support of its argument that TIG’s construction is absurd, Stryker contends that TIG
has admitted that Stryker did not need TIG’s consent to settle the claims against Stryker.
(Dkt. No. 321, Stryker Supp. Br. 6.) This is not a correct interpretation of counsel’s
statements on the record. The Court asked counsel for TIG whether TIG had “an interest in
the first settlement for $100,000 because that’s part of the add-on that gets you up to where
you may have to kick in everything above” (i.e., the Ultimate Net Loss). (Dkt. No. 320, Tr.
18.) Counsel for TIG responded that TIG had an interest in the early settlements, but TIG
did “not have a right to deny consent to a settlement that Stryker proposes to make within the
limits of the XL policy.” (Id.) Counsel’s representation that TIG would not have withheld
consent for a settlement within XL’s policy limits is not an admission that Stryker did not
need TIG’s consent to settle the claims if it wanted them included in the calculation of
Ultimate Net Loss. Counsel for TIG did not suggest that TIG does not have a right under the
policy to insist on the opportunity to review and consent to the settlement.
13
TIG’s
representation that it would not have denied consent may factor into a consideration of
whether the lack of notice caused TIG prejudice, but the question of prejudice is not currently
before the Court and, in any event, raises factual issues that would preclude a ruling on
summary judgment.
Stryker also contends that TIG has admitted that Stryker acted reasonably in settling
the direct claims without TIG’s consent. (Dkt. 321, Stryker Supp Br. 6.)3 TIG’s concession
that Stryker acted reasonably under the circumstances does not suggest that TIG has admitted
that TIG’s “consent to settle” requirement is unreasonable. In fact, as TIG noted in the same
brief:
However, the definition of Ultimate Net Loss in the TIG Policy cannot be read
to bring within its scope settlements not consented to by TIG if Stryker
believes another insurer is responsible. There is no such language in the
Ultimate Net Loss definition and no basis for reading into the TIG Policy such
an expansion of coverage. There simply can be no misunderstanding that the
TIG Policy provides coverage only for Ultimate Net Loss and that amounts
paid on settlements not entered into with the written consent of TIG do not
constitute Ultimate Net Loss.
(Stryker I, Dkt. No. 1188, TIG Br. pp 14-15.)
The Court cannot find, as a matter of law, that it is unreasonable or absurd to apply
a “consent to settle” requirement to settlements entered into before the underlying policy
limits have been exhausted. The Court also disagrees with Stryker’s contention that TIG has
conceded that the provision is unreasonable or absurd.
3
Stryker relies on the following statement by TIG: “It is apparent that Stryker did not
seek consent from TIG for its settlements because it believed XL (and initially National
Union) to be responsible for those settlements. . . . This was certainly a reasonable view and
one later confirmed by rulings in Stryker I.” (Stryker I, Dkt. No. 1188, TIG Br. 14.)
14
2. Waiver
a. By Failing to Give Notice
Movants contends that TIG waived its “consent to settle” defense by failing to give
Stryker notice of the defense in the seven years that this litigation has been pending or in the
twelve years since TIG received notice of the first Uni-Knee claims.
An insurer waives conditions to coverage when the insurer fails to give reasonable
notice to the insured that it is invoking them or reserving the right to do so. City of Sterling
Heights v. United Nat. Ins. Co. 319 F. App’x 357, 365 (6th Cir. 2009); Owens Corning v.
Nat’l Union Fire Ins. Co. of Pittsburgh, Pa, 257 F.3d 484, 498 (6th Cir. 2001) (finding
waiver where an insurer slept on a defense for nearly 10 years and raised it only after other
defenses failed).
In its first pleading in this case, TIG asserted as an affirmative defense: “The
purported claims against Plaintiffs have not and will not result in ULTIMATE NET LOSS
as defined by the subject TIG policies, and, therefore, the Insuring Agreements of the subject
TIG policies have not been satisfied.” (Dkt. No. 7, TIG Affirm. Def. ¶ 5.) TIG has
maintained this defense throughout this case. (Dkt No. 66, TIG Affirm. Def. ¶ 5; Dkt. No.
82, TIG Affirm. Def. ¶ 5.) Because the policy defines Ultimate Net Loss as the amount paid
in settlement or satisfaction claims “with the written consent” of TIG, TIG’s “consent to
settle” defense is part and parcel of its “Ultimate Net Loss” defense. Accordingly, Movants
are not entitled to a ruling that TIG waived the “consent to settle” defense by failing to give
notice.
15
b. By Denying Coverage
Movants also contend that TIG waived its “consent to settle” defense by denying
coverage. Under Michigan law, “[w]hen an insurer breaches its own policy of insurance by
refusing to fulfil its duty to defend the insured, the insurer is bound by any reasonable
settlement entered into in good faith between the insured and the third party.” Alyas v.
Gillard, 446 N.W.2d 610, 613 (Mich. Ct. App. 1989) (citing The Detroit Edison Co. v. Mich.
Mut. Ins. Co., 301 N.W.2d 832, 836 (Mich. Ct. App. 1980)). “An insured is released from
any agreement not to settle without the insurer’s consent where the insurer has denied
liability and wrongfully refused to defend.” Id. (citing Giffels v. The Home Ins. Co., 172
N.W.2d 540, 544 (Mich. Ct. App. 1969)).
The TIG policy states that “if any UNDERLYING INSURANCE does not pay a loss
for reasons other than the exhaustion of an aggregate limit of insurance, then WE shall not
pay such loss.” (TIG Policy 12.) Stryker contends that because XL denied coverage, TIG
also denied coverage pursuant to the terms of the TIG policy. Stryker contends that in light
of this denial, Stryker is released from the “consent to settle” requirement, and TIG is bound
by the reasonable settlements Stryker entered into in good faith.
Nothing in the TIG policy delegates to XL authority to accept or deny coverage under
the TIG Policy. Moreover, Stryker has provided no case authority for imputing XL’s denial
of coverage as a denial of coverage by TIG. Because TIG arguably has defenses to coverage
that are unavailable to XL, XL’s denial of coverage does not automatically release Stryker
from the “consent to settle” requirement.
16
Movants both contend that TIG denied coverage when it denied the allegation in
Stryker’s complaint that “TIG has an obligation to cover any loss in excess of the primary
umbrella policies, up to the limits of the TIG policy.” (Dkt. No. 1, Compl. ¶ 33; Dkt. No. 7,
TIG Answ. ¶ 72.) Movants further contend that TIG confirmed its denial of coverage when
it refused to participate in the settlement conference or to contribute to any settlement of any
Uni-Knee-based claims because such claims were not covered under its excess policy. (See
Stryker II, Dkt. No. 280, Betz Decl. ¶ 3.) Such evidence of TIG’s denial of coverage
occurred after Stryker had settled most of the DUK claims. The evidence accordingly has
little bearing on whether TIG waived its right to enforce the “consent to settle” provision at
the time Stryker entered into the settlements of the direct DUK claims.
There is no real dispute that an excess insurer can, by its actions, waive its ability to
demand compliance with its written consent requirement. See, e.g., Gen. Star Nat. Ins. Co.
v. Universal Fabricators, Inc. 427 F. App’x 32, 34 (2d Cir. 2011) (holding that excess
insurer had relinquished its ability to demand compliance with its policy provision requiring
written consent to a compromise agreement by telling its primary insurer to handle the matter
as it saw fit). However, the issue of waiver based on denial of coverage is not ripe for
summary judgment. The record is silent as to what communications Stryker did or did not
have with TIG prior to entering into the settlements. There are issues of fact that need to be
fleshed out before the issue of waiver of the right to enforce the “consent to settle” provision
can be determined.
17
c. By Judicial Admissions
Movants contend that TIG waived its “consent to settle” defense through its lawyer’s
representations to the Court. In support of this argument, Movants point to three occasions
where TIG’s lawyers stated that coverage under the TIG policy turns solely on whether the
XL policy provides coverage.
Movants rely on the following statements by TIG’s counsel:
1. At the August 20, 2007, Rule 16 Conference, counsel for TIG agreed with
the Court that it was “fair to say that except for this prior knowledge defense
[under the 1999 policy] that might be separate, that TIG’s liability issues stand
or fall with the first level of coverage.”
(Dkt. No. 72, Tr. at 8.)
2. In a March 24, 2008, brief, TIG’s counsel stated that “the coverage issues
presented as to whether coverage under the TIG policy is triggered in this case
turn solely on interpretation of the underlying 2000 XLIA Policy.”
(Dkt. No. 107, TIG Br. at 3.)
3. In a September 15, 2008, motion, TIG stated: “Thus, this Court’s
interpretation of the definitions, terms, conditions, limitations and exclusions
of the underlying 2000 XLIA policy determines whether the TIG Policy can
be implicated by the Uni-Knee cases.”
(Dkt. No. 154, TIG Mot. at 2.)
“Statements of an attorney that are directly related to the litigation at hand have been
held to be within the attorney’s scope of authority and binding on the client.” United States
v. Johnson, 752 F.2d 206, 210-11 (6th Cir. 1985). However, “[i]n order to qualify as judicial
admissions, an attorney’s statements must be deliberate, clear and unambiguous.”
18
MacDonald v. Gen. Motors Corp., 110 F.3d 337, 340 (6th Cir. 1997); see also Commercial
Money Ctr., Inc. v. Ill. Union Ins. Co., 508 F.3d 327, 336 (6th Cir. 2007) (noting that “legal
conclusions are rarely considered to be binding judicial admissions”).
The statements relied on are not unambiguous. All of the representations were made
before XL exhausted the underlying policy by settling the Pfizer action in February 2009.
At the time the statements were made, both Stryker and TIG anticipated that XL would cover
Stryker’s settlements of the direct DUK claims. There is nothing in the record to suggest that
these statements were made with the intention of relinquishing the “consent to settle”
requirement. Stryker cited these same statements in support of its argument before the Sixth
Circuit that TIG had admitted that its liability turned solely on the XL policy. (Stryker II
Appeal, Doc.: 006111072871, Stryker Br. passim.) The Sixth Circuit nevertheless found that
TIG “is not precluded from raising its own defenses to coverage on remand.” 681 F.3d at
825. This Court concludes that TIG did not waive its “consent to settle” defense through its
lawyer’s representations to the Court.
D. CLAIM PRECLUSION
Stryker also moves for summary judgment on the basis that TIG is barred from raising
claims or defenses it could have raised in Stryker III. Stryker contends that TIG was
obligated to assert all of its defenses to coverage when it sought a declaratory judgment
against Stryker in Stryker III. Stryker III was dismissed, and TIG failed to appeal the
dismissal. As a result, Stryker contends that principles of claim preclusion bar TIG from
asserting any coverage defenses.
19
As a general rule, “[c]laim preclusion applies not only to bar the parties from
relitigating issues that were actually litigated but also to bar them from relitigating issues that
could have been raised in an earlier action.” J.Z.G. Res., Inc. v. Shelby Ins. Co., 84 F.3d 211,
214 (6th Cir. 1996). Although TIG might technically have been able to raise the issue of its
duty to cover Stryker’s settlements of the direct DUK claims in Stryker III, this Court finds
that Stryker’s preclusion argument appears to be foreclosed by the Sixth Circuit’s opinion
in Stryker II. The Sixth Circuit ruled that because TIG was not in privity with XL, TIG is not
bound by the rulings in Stryker I, and “is not precluded from raising its own defenses to
coverage on remand.” 681 F.3d at 825. Before arriving at this determination, the Sixth
Circuit considered the effect of Stryker III. The Sixth Circuit held that “claims raised by TIG
in the Stryker III action are subject to claim preclusion and TIG is barred from relitigating
them.” 681 F.3d at 824. As an example, the Sixth Circuit noted that because TIG raised the
issue of allocation of losses between the 1999 and 2000 policy periods in Stryker III, TIG
could not raise the issue again on remand. Id. at 824-25. The Sixth Circuit followed this
with the statement that “[w]ith regard to potential defenses not previously raised by TIG,
issue preclusion does not apply.” Id. at 825. The Court concludes from the language of the
Sixth Circuit’s opinion in Stryker II that TIG is not precluded from raising issues on remand
that were not raised in Stryker III, even if an argument can be made that the defenses could
technically have been raised there.
20
III.
For the reasons stated, Stryker’s motion, joined by XL, for summary judgment against
TIG (Dkt. Nos. 261, 280), and TIG’s motion to bar or strike references to settlement
negotiations (Dkt. No. 295) will both be denied.
An order consistent with this opinion will be entered.
Dated: June 27, 2013
/s/ Robert Holmes Bell
ROBERT HOLMES BELL
UNITED STATES DISTRICT JUDGE
21
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?