Court must serve as arbiter in nasty credibility dispute between two insurers

Auto Owners and XL Insurance Company became embroiled in a nasty dispute after a wood-burning stove fire consumed the home of Carl and Molly Reinhardt.  XL had insured the manufacturer of the stove, and Auto Owners claimed it should be reimbursed for the expenses it incurred as the Reinhardt's homeowners' insurance.  The manufacturer apparently went bankrupt and the two insurers engaged in a long-running set of negotiations.  Ultimately, Auto Owners sued, however, XL claimed it was never properly served with the pleadings and that it was improperly defaulted by the judge.

The Court of Appeals affirmed the lower court's proceedings which resulted in a judgment against XL, holding that even though AutoOwners had not complied with the Court Rules governing service of process, the representations of Auto Owners' attorneys established "actual notice" of the lawsuit and compliance with minimal standards of due process.  It would be startling if the Michigan Supreme Court applied this same common sense standard to rules governing the actions of Michigan insureds:  their claims against insurers are routinely dismissed for failure to meet the precise language of judicial rules, "regardless of prejudice."