Order Michigan Supreme Court
Lansing, Michigan
March 20, 2009 Marilyn Kelly,
Chief Justice
137526 Michael F. Cavanagh
Elizabeth A. Weaver
Maura D. Corrigan
Robert P. Young, Jr.
Stephen J. Markman
GENESEE FOODS SERVICES, INC. and Diane M. Hathaway,
GENESEE MANAGEMENT, L.L.C., Justices
Plaintiffs-Appellees,
v SC: 137526
COA: 274517
Genesee CC: 05-082958-NM
MEADOWBROOK, INC. d/b/a
MEADOWBROOK OF SAGINAW, RICK
SMITH, and STEVE SMITH,
Defendants-Appellants.
_________________________________________/
On order of the Court, the application for leave to appeal the July 17, 2008
judgment of the Court of Appeals is considered, and it is DENIED, because we are not
persuaded that the question presented should be reviewed by this Court.
KELLY, C.J. (concurring).
Defendant, an independent insurance agency, had an agreement with nonparty
Citizens Insurance Company of America (Citizens), whereby defendant wrote and sold
insurance contracts for Citizens. Defendant sold a Citizens insurance policy to plaintiff
that was in effect when a fire destroyed plaintiff’s business facility. Plaintiff made and
settled an insurance claim against Citizens and released Citizens and its “agents” from
any actions relating to events that occurred before the execution of the release. Later,
plaintiff sued defendant, claiming that the coverage that defendant had advised it to
obtain was inadequate. Defendant moved for summary disposition, arguing that the
language of the release unambiguously barred plaintiff’s claim. The trial court denied the
motion, and the Court of Appeals affirmed.
On appeal to this Court, defendant asserts that the lower courts erred. The release
in question states, in pertinent part:
In consideration of . . . payment . . . the Undersigned do hereby
release and forever discharge Citizens . . . and each of its servants, agents,
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adjusters, employees, attorneys, related companies, parent companies and
subsidiaries of and from any and all claims, debts, dues, actions, causes of
action, and demands which the Undersigned now have or may have against
the . . . Releasees for or on account of any matter or thing that has at any
time heretofore occurred . . . . [Emphasis added.]
The trial court concluded that a factual issue exists about whether defendant was
an agent of Citizens, of plaintiff, or of both, and whether the release extinguished
defendant’s liability to plaintiff. The trial court also noted that it was “impressed that
[plaintiff] had no knowledge of the written agency agreement [between Citizens and
defendant] when it signed the release.”
The Court of Appeals agreed with the trial court. It held that, when an
independent insurance agent facilitates the sale of an insurance policy, it is considered an
agent of the insured; it is not an agent of the broker.1 Accordingly, defendant had a
primary fiduciary duty of loyalty to plaintiff. On that basis, the Court of Appeals
affirmed the trial court and held that a factual question exists regarding whether the
release exempted defendant from liability.
I agree with the trial court and the Court of Appeals. West American Ins Co is
persuasive in that, because defendant was acting as an independent insurance agent when
it assisted plaintiff, its primary fiduciary duty of loyalty was owed to plaintiff. Plaintiff
could therefore depend on this duty of loyalty to ensure that defendant was acting in its
best interest. This included finding an insurer that could provide plaintiff with
comprehensive coverage and ensuring that the insurance contract properly addressed
plaintiff’s needs. Thus, because defendant was an agent of plaintiff, not Citizens, the
release did not free defendant from liability. As the Court of Appeals aptly pointed out:
Were we to hold otherwise, we would have to conclude that
plaintiff[], in signing the release of Citizens and its agents, intentionally
released their own agents (defendants) regarding the very transaction for
which defendants owed plaintiffs the primary duty of loyalty and expertise.
Such a conclusion would violate reason and common sense.2
I believe that the Court of Appeals correctly held that whether defendant is a
“related company” of Citizens within the meaning of the release is a question of fact.
The term “related company” is not defined in the release. It could have several
1
Genesee Foods Services, Inc v Meadowbrook, Inc, 279 Mich App 649, 659 (2008),
citing West American Ins Co v Meridian Mut Ins Co, 230 Mich App 305, 310 (1998).
2
Id at 657.
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meanings. Thus, a factual determination is necessary to resolve whether the parties
intended defendant to be released from liability as a “related company.”
Finally, I believe it is appropriate to deny leave to appeal in this case because
plaintiff was unaware of the relationship between defendant and Citizens. It makes no
sense to construe the release as extinguishing defendant’s liability when plaintiff was
unaware of the underlying relationship.
For these reasons stated, I believe that the Court of Appeals analysis is correct.
The trier of fact could ultimately determine that the release covered defendant. However,
I do not believe that the Court should substitute its judgment for that of the trial court or
play the role of fact-finder. The case should proceed to trial. Accordingly, I concur in
the Court’s decision to deny leave to appeal.
CORRIGAN, J. (dissenting).
I respectfully dissent from the order denying defendant’s application for leave to
appeal. While I generally concur with Justice Markman’s analysis, I write separately to
underscore the errors in the Court of Appeals published decision. I would either
peremptorily reverse or grant leave to appeal in this action involving claims of
negligence, breach of fiduciary duty, and breach of contract because the Court of Appeals
erroneously affirmed the order denying defendant’s motion for summary disposition
under MCR 2.116(C)(7) (settlement and release). The unambiguous language of the
compromise settlement release and hold-harmless agreement precluded plaintiff’s cause
of action. In my view, Judge Kirsten Frank Kelly’s dissent correctly states the governing
legal principles. Genesee Foods Services, Inc v Meadowbrook, Inc, 279 Mich App 649,
658-661 (2008).
Defendant Meadowbrook, an independent insurance agency, executed an
agreement with Citizens Insurance licensing it to sell, accept, and bind Citizens to
insurance contracts. The 1988 agreement between Meadowbrook and Citizens
specifically provided, “[b]y signing this agreement you become an agent for the
companies indicated above.” Accordingly, Meadowbrook became Citizens’ agent. In
March 2001, defendant arranged for plaintiff Genesee Foods to purchase commercial
general liability and property insurance through Citizens. After a fire destroyed almost
all of plaintiff’s property in August 2003, plaintiff’s business became inoperable.
Plaintiff submitted a claim to Citizens for property damage and business
interruption loss because of the fire. In November 2003, plaintiff and Citizens settled
their claims and executed a release that provides in relevant part:
the Undersigned do hereby release and forever discharge the
Citizens Insurance Company of America and each of its servants, agents,
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adjusters, employees, attorneys, related companies, parent companies and
subsidiaries (hereinafter “Citizens Releasees”) of and from any and all
claims, debts, dues, actions, causes of action and demands, whatsoever,
which the Undersigned now have or may have against Citizens Releasees
for or on account of any matter or thing that has any time heretofore
occurred, particularly, but without limiting the generality hereof, all claims
and demands arising out of its policy number . . . .
Citizens issued its final check to plaintiff on November 23, 2005. Soon thereafter,
plaintiff filed suit against defendant, alleging that defendant had not procured sufficient
insurance coverage for plaintiff and that defendant Meadowbrook was its agent, not the
agent of Citizens.
Defendant moved for summary disposition under MCR 2.116(C)(7) (settlement
and release). Defendant argued that the unambiguous language of the release precluded
plaintiff’s cause of action because plaintiff’s suit fell within “any and all claims, debts,
dues, actions, causes of actions and demands, whatsoever.” The trial court denied the
motion. In a divided published opinion, Judge Owens and Chief Judge Saad affirmed the
trial court. Judge Kelly dissented because she concluded that the terms of the release
were unambiguous and should be enforced as written.
I agree with Judge Kelly. Unambiguous contracts are enforced as written unless a
contractual provision violates law or public policy. Rory v Continental Ins Co, 473 Mich
457, 491 (2005). Moreover, a release must be fairly and knowingly made to be valid.
Batshon v Mar-Que Gen Contractors, Inc, 463 Mich 646, 649 n 4 (2001). If the language
of a release is clear and unambiguous, the intent of the parties is ascertained from the
plain and ordinary meaning of the language. Id.
Here, the unambiguous language of the release uses the unmodified term “agents.”
The release does not restrict or otherwise limit the class of agents to be released. The
1988 agency agreement explicitly stated, “[b]y signing this agreement you become an
agent of the companies listed above.” Neither party disputes the existence of this agency
agreement. Defendant acted within the scope of its agency agreement when it arranged
for plaintiff to purchase insurance through Citizens. I do not think that cases stating that
an independent agent is ordinarily an agent for the insured are pertinent when the
defendant establishes its agency agreement and the release squarely absolves agents from
all claims and demands. As Judge Kelly concluded, the language of the release is
expansive and all-inclusive. Because defendant is an undisputed agent of Citizens,
defendant falls within the broad scope of the release between Citizens and plaintiff. The
plain language of the release permits no other result. Accordingly, I would grant leave to
appeal or peremptorily reverse and order summary disposition for defendant.
YOUNG and MARKMAN, JJ., join the statement of CORRIGAN, J.
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MARKMAN, J. (dissenting).
It is well established that “‘competent persons shall have the utmost liberty of
contracting and that their agreements voluntarily and fairly made shall be held valid and
enforced in the courts.’” Terrien v Zwit, 467 Mich 56, 71 (2002), quoting Twin City
Pipeline v Harding Glass 283 US 353, 356 (1931); see also Port Huron Ed Ass’n v Port
Huron Area School Dist, 452 Mich 309, 319 (discussing the “‘fundamental policy of
freedom of contract,’” under which “‘parties are generally free to agree to whatever
specific rules they like’”) (citation omitted). By denying leave to appeal in this case, the
majority disregards this principle.
Meadowbrook wrote and sold insurance policies for Citizens. Genesee Foods
Services, Inc. (GFS), bought one of these policies from Meadowbrook. GFS’s facility
was destroyed in a fire. GFS settled its claim against Citizens, and signed a release in
favor of Citizens and all its agents. GFS then brought this action against Meadowbrook,
and the trial court denied Meadowbrook’s motion for summary disposition. In a
published and split decision, the Court of Appeals affirmed. Genesee Foods Services, Inc
v Meadowbrook, Inc, 279 Mich App 649 (2008).
(A) The release pertains to “each of [Citizens’] . . . agents”; (B) Meadowbrook is
one of these agents as evinced by the fact that it had entered into an agreement with
Citizens stating, “By signing this agreement you become an agent for the companies
indicated above,” and “Citizens” is one of the companies indicated above; and (C)
therefore, the release pertains to Meadowbrook.
The Court of Appeals held that although Meadowbrook “signed an agreement to
become an agent for Citizens,” id. at 650, Meadowbrook’s “primary fiduciary duty of
loyalty rested with [GFS].” Id. at 656. However, the release here applies to “each” of
Citizens’ agents. Thus, the pertinent question is not to whom does Meadowbrook owe a
greater or lesser fiduciary duty, but only whether Meadowbrook is Citizens’ “agent.”
Because Meadowbrook indisputably is Citizens’ agent, the release applies to
Meadowbrook. The contract here could not be more clear. Furthermore, I am not aware
of any authority, and the concurring justice cites none, that supports the proposition that
the party signing a release must know who all of the other party’s agents are in order to
release all those agents from liability.
While the instant contract in dispute may not seem to be of great consequence
beyond the parties, it is entirely typical of thousands of such contracts freely entered into
by “competent persons” throughout this state each day. And it is essential to the rule of
law that these contracts be respected and that this Court provide the leadership and
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direction to ensure that this occurs. Although it is well established that “courts cannot
rewrite the parties’ contracts,” McDonald v Farm Bureau Ins Co, 480 Mich 191, 197
(2008), the majority today allows the Court of Appeals to do just that. Accordingly, I
would reverse the Court of Appeals judgment.
CORRIGAN and YOUNG, JJ., join the statement of MARKMAN, J.
I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the
foregoing is a true and complete copy of the order entered at the direction of the Court.
March 20, 2009 _________________________________________
s0317 Clerk