Gongwer News Service
A claim that a party to a lawsuit engaged in a bad-faith refusal to settle a case is insufficient to allow the party making the accusation to trigger garnishment proceedings, the Supreme Court ruled Friday.
The decision in Hairston v. LKU et al (MSC Docket No. 166473) overturned a 51-year-old Court of Appeals precedent. The Michigan Court Rules allow Court of Appeals panels to rule against a published prior Court of Appeals opinion predating November 1, 1990. Further, the opinion written by Justice Kyra Harris Bolden says that prior precedent had been superseded by subsequent court rules. The rest of the court signed the opinion except Justice Kimberly Thomas, who did not participate because she was not yet serving when the court heard the case.
Darnell Hairston lost his arm and forearm in an incident at a soybean processing facility where he was employed. A jury found the company was negligent, and the court entered a nearly $13.5 million judgment. Approximately $9.7 million was paid by two insurers under the terms. Hairston sought to collect the remaining balance, and supplemental proceedings were requested to enter a judgment against the insurers on a bad-faith basis. The plaintiff and the company alleged the insurers had blocked a settlement offer.
An Ottawa Circuit Court judge denied the request for garnishment proceedings, saying a new lawsuit would be required to address whether the two insurers had engaged in bad faith. The court further granted the insurers' motion to quash and dismiss Hairston's garnishment attempt.
But the Court of Appeals, in a published opinion, reversed the Ottawa Circuit Court, citing a 1974 precedent called Rutter v. King as binding and allowing a plaintiff claiming bad faith refusal to settle could litigate the matter in a garnishment proceeding.
The plaintiffs appealed to the Supreme Court on the question of whether a claim of bad-faith refusal to settle by an insurer can be litigated in a writ of garnishment.
On Friday, Bolden and her colleagues ruled that the Court of Appeals erred by relying on Rutter rather than analyzing relevant statutes and court rules governing garnishment proceedings. She also wrote that the bench believed Rutter was wrongly decided to the extent it suggests courts may look beyond relevant statutes and court rules to determine jurisdiction in garnishment proceedings.
The bench remanded the case to the Ottawa Circuit Court for further proceedings.
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