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Michigan Millers Mut. Ins. Co. v. North American Reinsurance Corp.

Court of Appeals of Michigan

January 17, 1990, Submitted ; February 21, 1990, Decided

Docket No. 108919


 [*412]   [**842]  Plaintiff appeals as of right from a circuit court order granting defendant's motion for summary disposition pursuant to MCR 2.116(C)(10). We affirm.

This case involves a liability dispute between insurance companies under a policy of reinsurance. The dispute arose following the settlement of an underlying action brought against plaintiff's insured, Transcriptions, Ltd. Plaintiff provided Transcriptions with a $ 1 million umbrella policy in which Transcriptions was required to maintain $ 300,000 of underlying coverage. Under the terms of the umbrella policy, plaintiff agreed to provide additional coverage up to $ 1 million after the underlying limit of $ 300,000 was exhausted. Plaintiff then obtained a separate policy of reinsurance from defendant, whereby defendant agreed to insure plaintiff for ninety-five percent of plaintiff's liability under the umbrella policy issued to Transcriptions.

After a personal injury [***2]  action was filed against Transcriptions, it was discovered that Transcriptions' underlying policy with its primary insurer, Insurance Company of North America (INA), provided for only $ 100,000 of primary coverage. It was unclear who was responsible for the $ 200,000 gap in coverage. Theories advanced in the lower court attributed the error to either the Feldman Agency, which sold the policies, or to plaintiff, which had formerly acted as Transcriptions' primary insurer pursuant to a $ 100,000 policy. Plaintiff, incidentally, was also the secondary errors and omissions insurance carrier for the Feldman Agency.

 [*413]  The underlying lawsuit against Transcriptions was settled for $ 240,000. Towards this amount, Transcriptions' primary insurer, INA, contributed their policy limit of $ 100,000; Utica Mutual, the errors and omissions carrier for the Feldman Agency, contributed another $ 100,000; Transcriptions contributed $ 15,000 from its own funds; and plaintiff contributed the final $ 25,000. Plaintiff then sought from defendant reimbursement of the $ 25,000 principal amount and certain expenses, premising defendant's liability on the contract of reinsurance. After defendant [***3]  denied plaintiff's claim, plaintiff commencedthe instant action. After both parties filed cross motions for summary disposition, the trial court granted defendant's motion, and plaintiff now appeals as of right.

A contract of reinsurance has been defined as a contract whereby one insurer for a consideration contracts with another to indemnify it against loss or liability by reason of a risk which the latter has assumed under a separate and distinct contract as the insurer of a third person. 13A Appleman, Insurance Law & Practice, § 7693, p 523.

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182 Mich. App. 410 *; 452 N.W.2d 841 **; 1990 Mich. App. LEXIS 38 ***


Disposition:  [***1]  Affirmed.


reinsurance, insurer, settlement, umbrella policy, coverage, contributed, underlying insurance, primary coverage, reinsurance contract, impose liability, excess policy, binding, limits

Insurance Law, Types of Insurance, Reinsurance, Rights Against Reinsurers, Settlements