Court Orders That City of Sterling Heights Is Entitled to $10.33 Million Settlement
1/30/2007
Sterling Heights, MI (January 23, 2007) - In a written opinion issued January 19, 2007, United States District Court Judge Nancy G. Edmunds of the Eastern District of Michigan has ordered United National Insurance Company to pay the City of Sterling Heights over $10 million for coverage claims arising out of a $31 million March 2004 settlement with Hillside Productions, Inc., owners/operators of the Freedom Hill Amphitheatre located in Sterling Heights. Anderson Kill was lead counsel to the City of Sterling Heights.
Judge Edmunds has set a March 23, 2007 trial date for the City's remaining claims, including the City's claim that United National breached the covenant of good faith and fair dealing in its handling of the City's claim.
Judge Edmunds had previously determined that United National's insurance policies provided coverage for the Freedom Hill dispute. The new ruling settles a disagreement over various methods that could be used to determine the amount of United National's liability. The decision follows settlements totaling $18,750,000.00 with two other insurance companies which insured the City.
The City of Sterling Heights decision is an extremely positive development for policyholders in Michigan. In briefing before the Court, United National argued that although the City had already proven its right to coverage, it must still prove what portion, if any, of the underlying settlement was attributable to covered claims, and that because the covered claims were allegedly defensible, the City could not recover the remaining portion of the settlement. The City argued that the Court should apply one of three allocation methods to determine United National's share of the settlement, in part because United National's proposal would require the City to prove against itself the very claims it thought it had settled.
Because there was "no feasible way to separate the various covered and uncovered causes of the Underlying Plaintiffs' economic damages," Judge Edmunds adopted the "time-on-the-risk" pro-ration method, rejecting United National's request for the City to "do the impossible." Judge Edmunds did not allow United National to raise arguments against the reasonableness of the underlying settlement because United National chose not to actively participate in the settlement negotiations and did not raise its objections at the time of settlement. As Judge Edmunds recognized, any other result "would discourage settlement," allowing insurance companies to re-litigate the facts of cases their policyholders thought were settled.
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