Court re-imposes sanctions on AutoOwners Insurance for frivolous defense
The Ludington Holiday Express suffered a failure in the pool room heating system, poisoning a family of guests who were present at the time. It reported the claim to its insurer, AutoOwners, but the insurer claimed that it was not obligated to defend or compromise the family's claim because of an exclusion in the fine print of its policy. Ultimately, the family was forced to sue; the hotel owners defended and then settled the family's injury claims, and then sought a ruling that they should be reimbursed by the insurer. After several more years of litigation, the hotel owners prevailed and AutoOwners was required to cover the family's settlement and the defense costs.
The trial court had ruled that AutoOwners' defense was not exactly "frivolous" but concluded that it had no merit and awarded sanctions to the hotel's owners. On appeal the Court of Appeals pointed solely to the Judge's statement that AutoOwner's argument "wasn't frivolous" and reversed the award of sanctions. A few months ago the Supreme Court sent the case back to the lower court to analyze, on the record, whether AutoOwner's defense had merit. This week, the Supreme Court reviewed the lower court's findings and reinstated the sanctions against the insurer---concluding that the lower court was accurate in originally determining that the insurer's position was devoid of merit.