Sovereign Bank v. Federal Insurance Company , 515 F. App'x 484 ( 2013 )

NOT RECOMMENDED FOR PUBLICATION
File Name: 13a0183n.06
No. 11-2228 FILED
Feb 19, 2013
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
SOVEREIGN BANK, a Federal Savings ) ON APPEAL FROM THE UNITED
Bank, ) STATES DISTRICT COURT FOR
) THE WESTERN DISTRICT OF
Plaintiff-Appellant, ) MICHIGAN
)
v. )
)
FEDERAL INSURANCE COMPANY, )
)
Defendant-Appellee. )
Before: COOK and WHITE, Circuit Judges; and SHARP, District Judge.*
PER CURIAM. In this action for breach of contract and a declaration of rights under an
aviation insurance policy, Sovereign Bank appeals the district court’s summary dismissal of its
claims under Fed. R. Civ. P. 12(b)(6). We AFFIRM.
Sovereign loaned money to N400DE, LLC, a Michigan LLC owned by David Eyde, for the
purchase of a Mooney M20M Aircraft (the Mooney). Defendant Federal issued N400DE, LLC, an
aircraft-insurance policy that was effective from September 26, 2009 to September 26, 2010. The
policy insured the Mooney against physical damage or loss in the amount of $448,000. An
endorsement to the policy provided that Sovereign was a loss payee (to protect it against loss of its
*
The Honorable Kevin H. Sharp, United States District Judge for the Middle
District of Tennessee, sitting by designation.
1
collateral, the Mooney). On September 30, 2009, the aircraft crashed in Indiana, killing Eyde – the
only occupant. The plane was a total loss. On or about October 15, 2010, Sovereign filed a loss-
payee claim with Federal, which was denied.
On December 7, 2010, Sovereign filed suit against Federal alleging breach of contract and
seeking a declaration of rights. Federal brought a 12(b)(6) motion seeking dismissal on the basis that
Sovereign’s suit was untimely because it was filed after the 12-month contractual limitation period
ended on September 30, 2010. Sovereign argued that the aircraft policy’s 12-month limitation period
was unenforceable. In support, Sovereign cited the Michigan Insurance Commissioner’s December
16, 2005 Order of Prohibition, No. 05-050-M, which barred newly-issued insurance policies that
limit “the time to file a claim or commence suit for uninsured motorist benefits to less than three
years.”
At issue in the instant appeal is the district court’s ruling:
[Sovereign’s] cited decisions do not stand for the proposition that the Michigan
Supreme Court would extend the Commissioner’s Order to encompass insurance
causes of action beyond the “uninsured motorist benefits” claims, which alone is the
type of claim which the Commissioner’s December 2005 Order purports to govern.
[Sovereign’s] supplemental argument lacks any identifiable support in Michigan law
for the simple reason that the Commissioner’s “order and case law issued before and
after the Order” all arose in the specific context of no-fault insurance policies for
uninsured motorist coverage. The policy at issue here, by contrast, is an optional
aviation insurance policy for certain physical damage to an aircraft, rendering the
Order inapplicable and cited case law inapposite. It is not the place of a Michigan
court – let alone a federal court sitting only in diversity – to decide whether policy
considerations might warrant extending an agency’s rule or decision to a party,
transaction, contract or event which the agency’s written rule does not purport to
cover. Such development or expansion of the State’s intrusion into private contracts
is the province of the State Legislature and the executive agency to which the
legislature has delegated authority in the field. Indeed, the Michigan Supreme Court
has noted that under the applicable Michigan statute – Mich. Comp. Laws §
500.2236(5) – only the Commissioner of Insurance and Financial Services has
2
authority to invalidate insurance contract provisions on the ground of
unreasonableness.[1]
Because the district court correctly observed that Sovereign cited no authority supporting that
the 2005 Prohibition Order extended beyond uninsured and underinsured motorist coverage, or to
this aviation policy, we AFFIRM.
1
Sovereign could have but apparently did not file a complaint with the State of
Michigan’s Office of Financial and Insurance Regulation.
3