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    1) The plaintiffs sued the defendant insurance company for refusing to defend an insured, Mr. Al Saadi, in a lawsuit resulting from an accident caused by an intoxicated driver who had been drinking at Mr. Al Saadi's establishment. 2) The insurance company claimed the policy had been cancelled before the accident due to nonpayment of premiums. However, the insured denied receiving proper notice of cancellation as required by Michigan law. 3) The district court granted summary judgment to the insurance company, finding the policy was effectively cancelled. However, the appellate court found material issues of fact in dispute regarding whether notice requirements were met, making summary judgment improper.

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    United States Court of Appeals, Sixth Circuit

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    1) The plaintiffs sued the defendant insurance company for refusing to defend an insured, Mr. Al Saadi, in a lawsuit resulting from an accident caused by an intoxicated driver who had been drinking at Mr. Al Saadi's establishment. 2) The insurance company claimed the policy had been cancelled before the accident due to nonpayment of premiums. However, the insured denied receiving proper notice of cancellation as required by Michigan law. 3) The district court granted summary judgment to the insurance company, finding the policy was effectively cancelled. However, the appellate court found material issues of fact in dispute regarding whether notice requirements were met, making summary judgment improper.

    Original Description:

    Filed: 1985-04-26 Precedential Status: Precedential Citations: 760 F.2d 114 Docket: 84-1019

    Original Title

    Douglas Curtis and Deborah Curtis, Denise Curtis, by and Through Her Next Friend, Douglas Curtis, and Fadhil H. Al Saadi v. Progressive Casualty Insurance Company, and Third Party v. Charles L. Platts, Inc., Third Party, 760 F.2d 114, 3rd Cir. (1985)

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    1) The plaintiffs sued the defendant insurance company for refusing to defend an insured, Mr. Al Saadi, in a lawsuit resulting from an accident caused by an intoxicated driver who had been drinking at Mr. Al Saadi's establishment. 2) The insurance company claimed the policy had been cancelled before the accident due to nonpayment of premiums. However, the insured denied receiving proper notice of cancellation as required by Michigan law. 3) The district court granted summary judgment to the insurance company, finding the policy was effectively cancelled. However, the appellate court found material issues of fact in dispute regarding whether notice requirements were met, making summary judgment improper.

    Copyright:

    Public Domain
    Download as PDF or read online from Scribd
    Download as pdf
    45 views5 pages

    United States Court of Appeals, Sixth Circuit

    Uploaded by

    Scribd Government Docs
    1) The plaintiffs sued the defendant insurance company for refusing to defend an insured, Mr. Al Saadi, in a lawsuit resulting from an accident caused by an intoxicated driver who had been drinking at Mr. Al Saadi's establishment. 2) The insurance company claimed the policy had been cancelled before the accident due to nonpayment of premiums. However, the insured denied receiving proper notice of cancellation as required by Michigan law. 3) The district court granted summary judgment to the insurance company, finding the policy was effectively cancelled. However, the appellate court found material issues of fact in dispute regarding whether notice requirements were met, making summary judgment improper.

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    of 5

    760 F.

    2d 114

    Douglas CURTIS and Deborah Curtis, Denise Curtis, by and


    through her next friend, Douglas Curtis, and
    Fadhil H. Al Saadi, Plaintiffs-Appellants,
    v.
    PROGRESSIVE CASUALTY INSURANCE COMPANY,
    Defendant and Third
    Party Plaintiff-Appellee,
    v.
    CHARLES L. PLATTS, INC., Third Party Defendant.
    No. 84-1019.

    United States Court of Appeals,


    Sixth Circuit.
    Argued March 6, 1985.
    Decided April 26, 1985.

    William A. Roy (argued), Roy, Shecter and Vocht, Birmingham, Mich.,


    Gerald R. Goulet, Detroit, Mich., for plaintiffs-appellants.
    Stanley Prokop, Christine D. Oldani (argued), Detroit, Mich., for
    defendant and third party plaintiff-appellee.
    Before CONTIE, Circuit Judge, and PHILLIPS and CELEBREZZE,
    Senior Circuit Judges.
    PHILLIPS, Senior Circuit Judge.

    Plaintiffs-appellants, Douglas Curtis, Deborah Curtis, Denise Curtis, and Fadhil


    H. Al Saadi, appeal from the district court's order granting summary judgment
    to defendant-appellee Progressive Casualty Insurance Company. Plaintiffs
    sought recovery from Progressive on a liquor liability insurance contract issued
    to Mr. Al Saadi.

    * The Curtises successfully sued Mr. Al Saadi after they were injured by an

    intoxicated driver who had been drinking at an establishment owned by Mr. Al


    Saadi. The accident took place on July 10, 1976. In the action under the
    Michigan Dram Shop Statute for sale of alcohol to a visibly intoxicated person,
    Progressive refused to defend the action on behalf of Mr. Al Saadi. Although
    Progressive had issued a liquor liability policy to indemnify Mr. Saadi for
    liability arising out of operations of his Playmate Lounge on December 22,
    1975, Progressive refused to defend the action on the ground that the policy
    had been cancelled on June 26, 1976.
    3

    After a bench trial in Wayne County Circuit Court, the court found against Mr.
    Al Saadi and assessed damages of $251,792. Mr. Al Saadi filed for bankruptcy
    and assigned his rights under the insurance policy to the Curtises. The Curtises
    filed a complaint on August 17, 1982 in State court alleging that Progressive
    wrongfully refused to defend the action in derogation of the insurance policy.
    Mr. Al Saadi also has sued, seeking damages for an alleged breach of
    Progressive's obligation to defend him in the prior litigation. Progressive, an
    Ohio corporation, petitioned for removal and the case was removed to the
    District Court for the Eastern District of Michigan.

    II
    4

    Mr. Al Saadi obtained his insurance policy with Progressive by means of a


    premium financing agreement with Detroit Bank & Trust. He obtained the
    policy through his agent Charles Platts, Inc. and a sub-agent, Helen Caldwell.
    Platts Company sent the application to Marketfinders, Inc., an insurance agency
    that dealt in the market of liquor liability policies. Marketfinders obtained a
    source of insurance, billed Platts, and sent it the policy, which was to cover the
    period from December 22, 1975 to December 22, 1976. The bank advanced the
    premium money to Platts, permitting Mr. Al Saadi to make payments on a
    seven month basis. Platts retained a portion to serve as a commission and
    forwarded the rest to Marketfinders. The funds were disbursed to Platts on
    April 28, 1976.

    According to Progressive, the loan agreement between the bank and Mr. Al
    Saadi contained a power of attorney authorizing the bank to cancel the policy
    on behalf of Mr. Al Saadi if he did not make his loan payments to the bank.
    After discovery, no signed agreement to this effect could be located. Instead,
    Progressive produced a blank form of a premium finance agreement as a
    facsimile purporting to be of the kind used by the bank in insurance premium
    financing agreements at the time the loan agreement was executed. Although
    Mr. Al Saadi admits signing a premium financing agreement, he denied signing
    one like the facsimile with the power of attorney provision.

    The district court accepted the blank form as adequate proof of the contents of
    the contract. The facsimile used during the court's consideration of
    Progressive's motion for summary judgment authorized the bank to cancel the
    policy and demand repayment of the unearned portion of the premium if Mr. Al
    Saadi failed to make payments within ten days after the due date. The bank was
    given power of attorney to cancel and surrender the policy and collect the
    unearned portion of the premium.

    Progressive contends that Mr. Al Saadi failed to make payments and the bank
    exercised its rights as attorney in fact to demand cancellation of the policy at
    some time prior to July 10, 1976, the date of the accident. The bank records
    show no payments received on the loan other than the original downpayments.
    Mr. Al Saadi indicated he made payments to Helen Caldwell, the sub-agent for
    Platts. The bank instructed Platts to cancel the policy for nonpayment of
    premiums. Progressive presented testimony that Platts sent a notice of
    cancellation to Marketfinders and Mr. Al Saadi on June 16, 1976, effective
    June 16, 1976. Mr. Al Saadi denies receipt of the notice. Progressive produced
    a "cancellation ticket" from Marketfinders, effective June 26, 1976, specifying
    nonpayment of premiums as the reason for cancellation. It was dated July 7,
    1976 but was stamped received by Progressive on July 19, 1976. Platts repaid
    the bank for the unpaid balance of the loan and subsequently received a refund
    from Progressive through Marketfinders.

    Jurisdiction in this case is based on diversity of citizenship. Michigan Law


    controls. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed.
    1188 (1938). The proceedings in the district court centered around the
    notification requirements under Michigan law for cancellation of an insurance
    policy. Mich.Comp.Laws Ann. Sec. 500.1511, Mich.Stat.Ann. Sec. 24.11511
    provides that a premium finance company may not cancel an insurance contract
    it finances unless it provides the insured not less than ten days' written notice
    before requesting cancellation by the insurer. This ten day period affords the
    insured the opportunity to cure the default. Similarly, Mich.Comp.Laws Ann.
    Sec. 500.3020, Mich.Stat.Ann. Sec. 24.13020 provides that the insured may
    cancel a policy at any time. Where the insurer cancels the policy, however, ten
    days written notice is required.

    Appellants moved for summary judgment asserting that there had been no
    effective cancellation because the required notices had not been sent.
    Progressive moved for summary judgment as well, arguing the policy was
    effectively cancelled because Mich.Comp.Laws Ann. Sec. 500.1501(b),
    Mich.Stat.Ann. Sec. 24.11501(b) exempted banks acting as premium finance
    companies from the notice requirements. Alternatively, it argued that the policy

    was cancelled at the request of Mr. Al Saadi or his agent pursuant to


    Mich.Comp.Laws Ann. Sec. 500.3020, Mich.Stat.Ann. Sec. 24.13020 and
    therefore that notice requirements were irrelevant.
    10

    The district court conducted hearings on the motions. It found that the bank had
    never received payments from Mr. Al Saadi other than the original down
    payments. The court, accepting the facsimile as adequate proof of the contents
    of the contract signed, held the bank had properly exercised the power of
    attorney to cancel the policy. It held that cancellation was effective upon
    issuance of the cancellation ticket by Marketfinders on July 7, 1976. It held that
    Mr. Al Saadi cancelled the policy by not making the required payments.
    Therefore it held the cancellation was effective upon notice to Marketfinders,
    the authorized agent of Progressive. The court held further that notification of
    cancellation by the bank was not required because banks are exempt from the
    notice requirements of Mich.Comp.Laws Ann. Sec. 500.1511, Mich.Stat.Ann.
    Sec. 24.11511. The court also held that the insurance company was not
    required to send notice of cancellation to Mr. Al Saadi because "an insurer need
    not provide an insured with notice when the cancellation is effectuated by the
    insured or his attorney-in-fact."

    III
    11

    Appellants contend that the issues raised in this case were not appropriate for
    summary judgment disposition. They stress that although they moved for
    summary judgment in the district court, their motion concerned only the
    adequacy of the notices actually given. The disposition of other issues
    addressed in the district court below, they maintain, was achieved only by
    making findings of fact where material facts were controverted.

    12

    In order to prevail, Progressive had to show that there was a premium finance
    agreement that contained the provision granting power of attorney to the bank.
    Exemption from the notification provisions of Michigan law depended on the
    bank's execution of the power of attorney. A signed copy of the agreement was
    not available, however, and the court relied on a facsimile produced by the
    bank. Mr. Al Saadi denied executing the document produced. This created a
    genuine issue of material fact precluding summary judgment under Rule 56(c)
    of the Federal Rules of Civil Procedure.

    13

    Progressive emphasizes that Mr. Al Saadi admitted signing a premium


    financing agreement with the bank. He expressly denied signing one containing
    the power of attorney provision exemplified by the blank form offered by
    Progressive. Moreover, appellants note that a witness, Raymond Johnson,

    testified to terms in the original agreement requiring Platts to reimburse the


    bank for unpaid premiums. These terms were not present in the facsimile
    agreement. There is an issue of material fact regarding whether the bank had
    power of attorney.
    14

    Without the express provision according power of attorney to the bank, Mr. Al
    Saadi cannot be deemed implicitly to have authorized cancellation of the policy
    by nonpayment of installments. Where an insurance company cancels a policy
    without the request of the insured, it is subject to the notification requirements
    of Mich.Comp.Laws Ann. Sec. 500.3020, Mich.Stat.Ann. Sec. 24.13020.
    Because Mr. Al Saadi denied ever receiving notification of cancellation, the
    policy may not have been cancelled properly under Michigan law. Summary
    judgment therefore was inappropriate.

    15

    REVERSED and REMANDED for further proceedings. No costs are taxed.


    The parties will bear their own costs on this appeal.

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