Court of Appeals of Michigan.

AUTO-OWNERS INSURANCE COMPANY, Plaintiff-Appellee,

v.

Victor MARTIN and State Farm Mutual Automobile Insurance Company, Defendants-Appellants,

and

Paula Mapes and Stephen Mapes, Defendants.

Docket No. 281482.

 

June 16, 2009.

 

Kent Circuit Court; LC No. 07-003418-CK.

 

Before: K.F. KELLY, P.J., and CAVANAGH and BECKERING, JJ.

 

PER CURIAM.

 

In this declaratory judgment action, the issue before us is the priority of liability insurance coverage with respect to a motor vehicle accident that occurred while the allegedly at-fault driver, defendant Victor Martin, was driving a vehicle with the permission of the owner, Grand Greenville, Inc. (“Grand Greenville”), a used car dealership. Martin and his insurer, defendant State Farm Mutual Automobile Insurance Company (“State Farm”), appeal as of right the trial court’s October 9, 2007, order denying their motion for summary disposition and granting summary disposition to plaintiff Auto-Owners Insurance Company (“Auto-Owners”), Grand Greenville’s insurer. According to State Farm and Martin, the trial court erred in finding that Auto-Owners’ primary liability coverage was limited to $20,000 and that Auto-Owners had no obligation to defend Martin in the underlying negligence action. We agree. Accordingly, we reverse and remand to the trial court for a grant of summary disposition in favor of State Farm and Martin and a declaratory judgment that Auto-Owners is primarily liable for Martin’s use of Grand Greenville’s vehicle, up to its $1 million policy limit, that State Farm is only liable on an excess basis after Auto-Owners’ coverage has been exhausted, and that State Farm is entitled to reimbursement of defense costs.

 

I

 

The pertinent facts of this case are undisputed. On March 22, 2004, Martin was involved in a motor vehicle accident with defendant Paula Mapes. At the time of the accident, Martin was driving a vehicle owned by Grand Greenville. Martin was interested in purchasing the vehicle and the trial court determined that he was driving it with Grand Greenville’s permission. Grand Greenville carried garage liability insurance issued by Auto-Owners. Martin carried automobile insurance issued by State Farm on his personal vehicle, which was not involved in the accident.

 

Auto-Owners’ insurance policy provides garage liability coverage of up to $1 million. Section IV of the policy, entitled “DEFINITIONS,” provides, in part:

 

A. “INSURED” shall mean, wherever used in Coverages A and B [] and in other parts of this coverage form when applicable to these coverages, not only the named insured but also … any person while using an automobile covered by this coverage form and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is with the permission of the named insured.

 

Coverages A and B are “BODILY INJURY LIABILITY” and “PROPERTY DAMAGE LIABILITY” under Section I of the policy.

 

* * *

 

Garage customers [] are not insureds with respect to the use of automobiles covered by this coverage form except in accordance with the following additional provisions:

 

The parties agree that Martin was a “garage customer” as defined by the policy.

 

(1) If there is other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the applicable limit of the financial responsibility law of the state where the automobile is principally garaged, no damages are collectible under the policy.

 

(2) If there is other valid and collectible insurance available to the garage customer, whether primary, excess or contingent, and the limits of such insurance are insufficient to pay damages up to the applicable limit of the aforesaid financial responsibility law, then this insurance shall apply to the excess of damages up to such limit.

 

(3) If there is no other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer, this insurance shall apply but the amount of damages payable under this policy shall not exceed the applicable limit of the aforesaid financial responsibility law.

 

The section of the policy entitled “CONDITIONS” provides, in part:

 

5. FINANCIAL RESPONSIBILITY. Such insurance as is afforded by this coverage form under Coverages A and B shall comply with the provision of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of an automobile during the policy period, to the extent of the coverage and limits of liability required by such law.

 

* * *

 

9. OTHER INSURANCE…. Except when stated to apply in excess of or contingent upon the absence of other insurance, the insurance afforded by this is [sic] coverage form is primary insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the Company’s liability under this coverage form shall not be reduced by the existence of such other insurance.

 

State Farm’s insurance policy provides liability limits of $100,000 for each person and $300,000 for each accident. With respect to liability coverage for the use of non-owned cars, the policy provides:

 

3. Temporary Substitute Car, Non-Owned Car, Trailer

 

If a temporary substitute car, a non-owned car or a trailer designed for use with a private passenger car or utility vehicle:

 

a. has other vehicle liability coverage on it; or

 

b. is self-insured under any motor vehicle financial responsibility law, a motor carrier law or any similar law,

 

then these coverages are excess over such insurance or self-insurance.

 

On February 16, 2006, Mapes and her husband filed a negligence action against Martin and Grand Greenville for injuries she sustained in the accident. On April 2, 2007, Auto-Owners filed a declaratory judgment action seeking a determination as to the priority of coverage under Auto-Owners and State Farm’s insurance policies. Thereafter, State Farm and Martin moved for summary disposition pursuant to MCR 2.116(C)(10) and (I), and Auto-Owners moved for summary disposition under MCR 2.116(I)(2).

 

Following a hearing on the parties’ motions for summary disposition, the trial court determined, pursuant to Citizens Ins Co of America v. Federated Mut Ins Co, 448 Mich. 225; 531 NW2d 138 (1995) (hereinafter, “Citizens”), that Auto-Owners was responsible for paying $20,000 on behalf of Martin under Michigan’s no-fault act, MCL 500.3101 et seq., but that it “was permissible for [Auto-Owners] to exclude coverage applicable to [Martin] above the $20,000/$40,000 limits of liability.”The court ordered, “with respect to the payment of the plaintiffs in the underlying [liability] case …, that [Auto-Owners] shall be responsible for paying the first $20,000 on behalf of [Martin]; [State Farm] shall be responsible for paying the next $100,000 under its policy insuring [Martin]; and [Auto-Owners] shall be responsible for paying up to the next $980,000 pursuant to its coverage of [Grand Greenville].” The court denied State Farm’s request for defense costs. State Farm and Martin filed a motion for reconsideration, which the trial court denied. State Farm and Martin now appeal as of right.

 

II

 

We review a trial court’s decision on a motion for summary disposition de novo on the basis of the entire record to determine if the moving party is entitled to judgment as a matter of law. Maiden v. Rozwood, 461 Mich. 109, 118; 597 NW2d 817 (1999). When reviewing a motion under MCR 2.116(C)(10), which tests the factual sufficiency of the complaint, we consider all of the evidence submitted by the parties in the light most favorable to the nonmoving party. Id. at 119-120.Summary disposition should be granted only where the evidence fails to establish a genuine issue regarding any material fact. Id. at 120.Under MCR 2.116(I)(2), summary disposition is properly granted in favor of the nonmoving party if that party, rather than the moving party, is entitled to judgment. DaimlerChrysler Corp v. Wesco Distribution, 281 Mich.App 240, 245; 760 NW2d 828 (2008).

 

Insurance policies are interpreted in accordance with the principles of contract interpretation. Farmers Ins Exchange v. Kurzmann, 257 Mich.App 412, 417; 668 NW2d 199 (2003) (hereinafter, “Kurzmann ”). Insurance policies are also subject to statutory regulation, and mandatory statutory provisions must be read into them. Id. at 417-418; see also Casey v. Auto Owners Ins Co, 273 Mich.App 388, 399; 729 NW2d 277 (2006). Insurance policy provisions that conflict with statutes are invalid, but the contracting parties are assumed to have intended a valid contract. Roberts v. Titan Ins Co (On Reconsideration), 282 Mich.App 339, 358-359; 764 NW2d 304 (2009). Therefore, the policy must be interpreted in harmony with statutory requirements when possible. Id. at 359.The interpretation of clear contractual language is an issue of law reviewed de novo. Klapp v. United Ins Group Agency, Inc, 468 Mich. 459, 463; 663 NW2d 447 (2003). The determination whether the contractual language is ambiguous is also an issue of law reviewed de novo.Casey, supra at 394.While ambiguities in a contract generally raise questions of fact for a jury, if a contract must be construed according to its terms alone, it is the court’s duty to interpret the language. Klapp, supra at 469;Kurzmann, supra at 418.When the intent of the parties in an insurance contract cannot be ascertained from the evidence provided, any ambiguities should be construed against the insurer. Klapp, supra at 472, 474, 477 n 16;Kurzmann, supra at 418.

 

In Citizens, supra, our Supreme Court considered two consolidated cases, each involving a vehicle insured under an automobile liability policy issued by Federated Insurance Company to the vehicle owner, but driven by a non-owner of the vehicle. Citizens, supra at 227.“In each case, the driver of the vehicle carried insurance for a personal automobile that was not involved in the accident at issue…. Following the accident in each case, personal injury actions were initiated by the accident victims against the respective drivers.”Id. at 228.Initially, the Court found that “while subject to certain exceptions …, the no-fault act unambiguously requires that a policy of automobile insurance, sold to a vehicle owner pursuant to the act, must provide coverage for residual liability arising from use of the vehicle so insured.”Id. at 230.The Court further found that Federated’s insurance policy violated the no-fault act in that it denied “residual liability coverage to an entire class of persons” who used the vehicles that it insured, specifically “customers” who used the vehicles with the owners’ permission, unless the customer was uninsured or underinsured. Id . at 230-231.

 

The Citizens Court next considered the amount of residual liability coverage that Federated was required to provide, stating:

 

We resolve that question in accord with State Farm Mutual Automobile Ins Co v. Shelly, 394 Mich. 448; 231 NW2d 641 (1975), in which this Court held that when an unambiguous insurance policy is void because it is against the policy of the Motor Vehicle Accidents Claims Act, MCL 257.1101 et seq…., the reinstated coverage is limited to the amount required by the applicable automobile insurance law. See also MCL 500.3101…, which states that a policy represented or sold as providing security shall be deemed to provide insurance for the payment of the benefits described in § 3101 of the no-fault act.

 

In this state, the amount of residual liability coverage required by the applicable no-fault law is determined by reference to § 3009(1). See MCL 500.3131(2). Section 3009(1) requires coverage of at least $20,000 for injury or death of one person, and $40,000 for injury or death of two or more persons (20/40 coverage).MCL 500.3009(1). Therefore, Federated’s reinstated coverage must provide the 20/40 statutory minimum.

 

Moreover, Federated’s reinstated coverage is primary to any insurance benefits that may be available under policies that the drivers have purchased. Although we acknowledge that the Legislature has remained silent concerning who among competing insurers must provide primary residual liability benefits, we refuse to construe that silence as expressly authorizing an owner’s insurer, such as Federated, to unilaterally dictate the priority of coverage among insurers in a manner that shifts insurance costs to the nonowner of the vehicle. To construe the Legislature’s silence in that manner would undermine the dominant principle expressly embodied by the no-fault act: vehicle owners and their insurers are responsible for bearing the costs of injuries caused by the permissive use or operation of the vehicle. Instead, because the obligation to obtain residual liability insurance is triggered by the obligation to register a vehicle, rather than by the operation of the vehicle, we think it reasonable to conclude that the owner or registrant of the vehicle has the primary duty to provide residual liability insurance.

 

Accordingly, in each of these cases, Federated must provide primary 20/40 residual liability coverage. [Citizens, supra at 234-235 (citations omitted).]

 

The Court further found that the insurers of the drivers were only obligated to pay residual liability benefits if provided for under the terms of their respective policies. Id. at 236.

 

In this case, Auto-Owners acknowledges that pursuant to the Supreme Court’s holding in Citizens, the provision in its policy excluding residual liability coverage for “garage customers”-except when the customer is uninsured or underinsured “up to the applicable limit of the financial responsibility law of the state”-is invalid to the extent that it would preclude coverage required by the no-fault act. Thus, the primary question at hand is the amount of residual liability coverage Auto-Owners is required to provide for Martin’s use of Grand Greenville’s vehicle. As indicated, Auto-Owners argues (and the trial court found) that under Citizens, its primary liability coverage of Martin is limited to the “20/40” coverage requirement of the no-fault act. Thereafter, State Farm must provide excess liability coverage under the “non-owned car” provision of its policy, up to its policy limit of $100,000, and then Auto-Owners is responsible for up to the next $980,000 pursuant to its coverage of Grand Greenville and Grand Greenville’s liability under the owner’s liability statute. On the other hand, State Farm and Martin argue that under case law issued after Citizens, Auto-Owners is primarily liable up to its policy limit of $1 million before State Farm’s excess coverage applies.

 

In State Farm Mut Automobile Ins Co v. Enterprise Leasing Co, 452 Mich. 25; 549 NW2d 345 (1996) (hereinafter, “Enterprise”), our Supreme Court considered, in three consolidated cases, “whether Michigan’s no-fault insurance act is violated by a car rental agreement purporting to shift the responsibility for providing primary residual liability coverage on the vehicle from the owner to the driver and the driver’s insurer.”Enterprise, supra at 27.The Citizens Court had specifically declined to apply its conclusion to situations involving rental cars, determining that it was not necessary to overrule State Farm Mut Automobile Ins Co v. Snappy Car Rental, 196 Mich.App 143; 492 NW2d 500 (1992) (hereinafter, “Snappy I ”).Citizens, supra at 233.In Enterprise, however, the Court overruled Snappy I, stating, in part:

 

Our decision to let Snappy I stand was the result of an attempt to distinguish the facts of the cases. That is a distinction we no longer feel is sustainable…. We now conclude that a rental car contract is no more voluntary or mutual than the dealership’s policy at issue in Citizens.

 

… The driver is not informed that the rental car company, as the owner, is required by law to carry insurance on the vehicle that covers any permissive user. The owner cannot shift that responsibility to another party. Just as Federated was required to provide insurance coverage for permissive users in Citizens, we now hold that a car rental company, like any other car owner, must obtain insurance coverage for permissive users of its vehicles.

 

Further, subsequent developments in the case law have convinced us that the effect of leaving Snappy I intact, even if the distinction could be sustained, would be to eviscerate the intended effect of Citizens.In Citizens, we spoke strongly about the importance of placing the burden of providing primary liability coverage on vehicle owners, as intended by the Legislature….

 

* * *

 

The gravamen of our holding in Citizens is that the no-fault act requires car owners to be primarily responsible for insurance coverage on their vehicles. However, the car rental companies have been largely successful in avoiding that responsibility, as demonstrated by the Court of Appeals decisions in these cases. Under Snappy I, the Court of Appeals found that it was required to permit car owners to shift the primary responsibility for providing coverage for the use of their vehicles to the driver and the driver’s insurer. Because this violates the intent of the no-fault act, we overturn Snappy I to the extent that it holds that car owners may avoid primary responsibility for vehicle insurance coverage by agreeing to allocate that responsibility to the driver or driver’s insurer.

 

* * *

 

Even if the driver could make a voluntary election to allocate the responsibility for coverage to the driver’s insurer, the resulting agreement to allocate would still be void. Enforcing such an agreement would permit the driver to unilaterally dictate the insurance obligations of the parties. Those obligations are a matter of contract, and cannot be unilaterally reassigned. In Citizens, we declined to permit an owner’s insurer to dictate those obligations…. Under the terms of the insurance contracts, the driver cannot bind the insurance company that issued the driver’s policy of coverage for a personal automobile to provide coverage for another car.

 

The driver cannot defeat the provisions of the no-fault act by stating that the owner need not pay insurance. Because the driver cannot bind the driver’s insurer, a driver who agreed to shift coverage would remain solely liable for damages caused by use of the vehicle. The rental car would be left uninsured under the terms of the rental agreement stating that the owner provides no insurance. This lack of coverage violates the no-fault act…. Just as the car rental company cannot shift liability to a driver’s insurer, it cannot shift liability to a driver personally.Either shift of responsibility away from the owner would violate the act because it requires owners to provide primary coverage.We accordingly hold that the car rental companies and their insurers are required to provide primary residual liability coverage for the permissive use of the rental cars, up to their policy limits or the minimum required by statute.[Enterprise, supra at 33-36 (footnotes omitted and emphasis added).]

 

Notably, the Court did not specify whether the “policy limits” or the “minimum required by statute” controls in situations where the owner or owner’s insurer attempts to exclude coverage completely. The Court simply concluded that “any such shifting provision is void. Vehicle owners, including the car rental companies in these cases, are required to provide primary coverage for their vehicles and all permissive users of their vehicles.” Id. at 27 (emphasis added). The Court then remanded the cases to the trial court to allocate the liability between the primary insurers (the car rental companies’ insurers) and the excess insurers (the drivers’ insurers).Id. at 41.

 

On remand, the trial court concluded that Enterprise, which was self-insured with Travelers Insurance Company as an excess carrier for claims over $500,000, could not limit the amount of its liability and rejected Enterprise’s indemnity claim against Majid Sako, the driver. Enterprise Leasing Co v. Sako, 233 Mich.App 281, 283; 590 NW2d 617 (1998). Plaintiffs Enterprise and Travelers subsequently appealed to this Court. A panel of this Court represented the plaintiffs’ arguments, which are similar to Auto-Owners’ arguments in this case, as follows:

 

Plaintiffs argue that, because the financial responsibility act only requires insurance with minimum limits of $20,000/$40,000, Enterprise was responsible as a self-insurer only for the first $40,000 of claims by the multiple plaintiffs in the underlying action and that anything over $40,000 is excess and, therefore, State Farm’s excess coverage becomes applicable at that point. In other words, Enterprise would be liable for the first $40,000 as a self-insurer, State Farm would be responsible for the next $50,000 (the policy limits) as the excess carrier [the driver’s insurer], and then Enterprise would be liable in tort for the amounts over $90,000 as the owner of the vehicle, subject to its indemnity claim against Sako and, of course, the coverage by Travelers for amounts over $500,000. [ Id. at 283-284.]

 

In rejecting the plaintiffs’ arguments, the panel noted that the arguments were “based on the premise that a self-insurer’s responsibility is limited to the minimum coverage required by law.”Id. at 284.The panel stated that “a certificate of self-insurance issued by the Secretary of State is the functional equivalent of a commercial policy of insurance with respect to the no-fault act and the financial responsibility act. When a company applies for self-insured status, that company represents that it is able and will continue to be able to satisfy judgments obtained against it.”Id. (citations omitted). Accordingly, the panel held:

There is nothing in the financial responsibility statute that limits the self-insured’s liability to the minimum coverage requirements of the no-fault or financial responsibility acts. A self-insured’s liability extends to the full value of its assets. A company that prefers to avoid unlimited risk has the option of purchasing a commercial insurance policy.

 

We are convinced that, when a car rental company enjoys the advantages of self-insurance, it cannot attempt to limit its risks by asserting that its responsibility is limited to the minimum coverage requirements of the no-fault or the financial responsibility acts. Consequently, Enterprise is liable for the full amount of the settlement. Moreover, because State Farm’s coverage was excess to any other insurance, and because Enterprise’s self-insurance was not limited to the statutory minimum, State Farm is not directly liable for any portion of the settlement.

 

We now turn to the second issue raised, namely, whether Sako is liable for any portion of the settlement under an indemnification claim. However, in light of our resolution of the first issue, and a concession made by plaintiffs in their brief on the second issue, the indemnification issue may now be deemed abandoned. In their brief on appeal, plaintiffs, in footnote 12, concede that indemnity does not apply to the first $40,000 because the Supreme Court’s decision in this case makes Enterprise first in priority with respect to the amount of primary residual liability coverage. However, as resolved in the first issue, the limit of Enterprise’s primary liability is not $40,000 as Enterprise argues, but is the full value of their assets. Therefore, the import of plaintiffs’ concession is that indemnity does not apply to that higher amount of primary liability, i.e., the full value of Enterprise’s assets. Accordingly, in light of this discussion, we decline to address the merits of the indemnity issue. [Id. at 284-285 (footnotes omitted).]

 

Thereafter, a panel of this Court ruled in Kurzmann, supra, that in circumstances where the insurer knows or should know that an exclusionary clause in its policy is invalid, the insurer is primarily liable up to the limits of its policy. Kurzmann, supra at 419-420, 422.Kurzmann involved an automobile liability policy that violated public policy under the no-fault act by purporting to exclude coverage for bodily injury to the insured or a member of the insured’s family. Id. at 414, 418-419.The exclusion at issue had been declared void as against public policy in Michigan for over 20 years.Id. at 418.The trial court held that “the insurance policy was ambiguous because it specifically stated that it was in compliance with financial-responsibility laws and yet included an invalid limitation on bodily-injury coverage for insureds.”Id. at 416.Citing Shelly, supra, the insurer argued that while its exclusionary provision was void, any reinstated coverage should be limited to the minimum amount required by the statute. Id. at 415, 419.The insurer further argued that the language excluding coverage was unambiguous and thus the rule of reasonable expectation was inapplicable.Id. at 415.The panel rejected the insurer’s arguments and held that because the insurer knew or should have known at the time it issued the policy that the exclusion was void, the insurer was bound by the policy limits. Adopting the rationale set forth in DAIIE v. Parmelee, 135 Mich.App 567, 570; 355 NW2d 280 (1984), (hereinafter, “Parmelee ”), the Kurzmann panel explained:

 

Parmelee… held that when an insurance policy contains an exclusion that the insurer knows or should know is void,[] the insurer may not rely on the void exclusion to reduce the policy coverage to the statutory minimum. This Court declared that the exclusionary clause was ambiguous in light of the fact that the [insurer] knew the provision violated public policy and allowed its insured to pay for a policy containing additional residual bodily injury coverage beyond the amount required by law.

 

In context, this reference to a “void” policy provision plainly referred to a policy provision that was void to the extent that it would limit liability coverage required by the no-fault act.

 

* * *

 

We see no reason why Farmers [the insurer in Kurzmann ] should benefit from the statutory minimums when they knowingly placed invalid exclusionary provisions in their policy and then allowed their insureds to purchase increased coverage. Farmers’ blatant violation of the long-held public policy in this case is offensive and should not be condoned or rewarded. [Kurzmann, supra at 419-420, 422 (citations omitted).]

Given the insurer’s inclusion of a knowingly invalid exclusion, the panel held the insurer primarily liable up to the policy limits.Id. at 422.

 

The Kurzmann panel also considered Shelly and Citizens, wherein the reinstated coverage was limited to the amount required by the applicable automobile insurance law, but effectively concluded that those decisions did not preclude it from following Parmelee under the circumstances of the case:

 

Notably, Farmers completely fails to cite any authority that overrules or even criticizes the decision reached in Parmelee.Moreover, a review of the cases cited by Farmers shows that they either predate Parmelee or are distinguishable.

 

For instance, Farmers cites Shelly, supra…, for the proposition that if an unambiguous provision in an insurance contract is void, the reinstated coverage is limited to the minimum amount mandated by law. Not surprisingly, Farmers overlooks the fact that Shelly was decided before this Court’s decision in Parmelee.Indeed, as previously indicated, Parmelee, supra, actually noted the plaintiff insurance company’s reliance on Shelly for that same proposition but did not find it persuasive. Farmers’ reliance on [Citizens, supra ] is also without merit. In Citizens, supra at 227-228, the policy exclusion at issue actually dealt with an insurer’s liability when the driver of the vehicle involved in an accident carried an insurance policy for a personal automobile not involved in the accident. As explained in [Enterprise, supra ], Citizens, supra at 227, required the Court “to determine ‘the validity of a vehicle owner’s policy of liability insurance that denies coverage to any permissive user who is otherwise insured for an amount equal to that specified by the no-fault act.’ “ We also note that Citizens relied on Shelly when it determined that the reinstated coverage was limited to the statutory minimum. Citizens, supra at 234.[Kurzmann, supra at 420-421.]

 

It appears that the Kurzmann panel followed Parmelee over Shelly in part because Parmelee was decided more recently than Shelly; such reliance fails to appropriately consider the greater precedential weight of Shelly as a decision of our Supreme Court.However, the Kurzmann panel also referred to the fact that Parmelee did not find Shelly persuasive under the circumstances presented. The Parmelee panel stated that the exclusion at issue had been held void as against public policy and that the insurer “should have been aware that the policy at issue contained a clause that, if not totally void, was certainly ambiguous in the instant situation where defendants had paid for a policy containing extra residual bodily injury coverage of $100,000/$300,000 but the law, MCL 500.3009(1) …, required limits of $20,000/$40,000.”Parmelee, supra at 570 (citation omitted). The panel then applied the principle that ambiguity in a policy “must be liberally construed in favor of the insured and against the insurer who drafted it” to affirm the trial court’s holding that the contractual policy limits applied in that case.Id.

 

Further, the Kurzmann Court was not required to follow Parmelee under MCR 7.215(J)(1) because Parmelee was decided before November 1, 1990, but could find it persuasive and adopt its reasoning.

 

In Farm Bureau Gen Ins Co v. Haller, 474 Mich. 1057 (2006), our Supreme Court denied leave to appeal Farm Bureau Gen Ins Co v. Haller, unpublished opinion per curiam of the Court of Appeals, issued April 26, 2005 (Docket No. 250272) (hereinafter, “Haller ”), which applied the Kurzmann panel’s rationale. The Haller panel held that the criminal acts exclusion in the insurance policy at issue violated the no-fault act, the exclusion was unenforceable and invalid, and coverage in the amount of the policy limit was applicable. Haller, supra, slip op at 2. In holding that the policy limit rather than the statutory minimum applied, the panel stated that it agreed with the conclusion reached in Kurzmann, noting that the Kurzmann panel had distinguished Shelly and Citizens. Id., slip op at 6. Additionally, the Haller panel stated:

 

Moreover, and aside from Kurzmann and the case law discussed therein, a contractual provision of the insurance policy dictates that the $300,000 policy limit controls. The relevant provision provides:

* * *

 

M. CONFORMITY WITH STATUTE

 

Terms of this policy which are in conflict with the statutes of the state where the property described in the Declarations is located are amended to conform to such statutes.

 

Under contract law principles, this self-amending language indicates that the inclusion of an invalid provision, i.e., the “criminal acts” exclusion in this instance, results in the deletion or voiding of the offending language, while leaving intact the remainder of the contractual terms and obligations, including the provisions addressing the extent of the coverage. The insurance policy’s liability coverage requires [the insurer] to pay “all sums an ‘insured’ legally must pay as damages because of ‘bodily injury’ … to which [the] insurance applies, caused by an ‘accident’ and resulting from the ownership, maintenance, or use of a covered ‘auto.’ “ With regard to the policy’s limit regarding liability coverage, the insurance contract provides that $300,000 is the most that [the insurer] “will pay for any one accident or loss.” The policy limit of $300,000 remains intact despite the inapplicability of the exclusion for criminal acts. [Id.]

 

Like the insurer in Kurzmann, Auto-Owners knew or should have known that the exclusionary clause in the policy at issue was void. The no-fault act clearly directs that a policy sold pursuant to the act must provide residual liability coverage for use of the vehicle insured, and eight years before Auto-Owners issued its policy, our Supreme Court expressly declared the type of exclusion at issue invalid. Citizens, supra.Consequently, in keeping with this Court’s ruling in Kurzmann, we find that the exclusionary clause was ambiguous in light of the fact that Auto-Owners knew or should have known for at least eight years prior to its issuance of the policy that its attempt to exclude garage customers (a subset of permissive users) from coverage clearly violated the no-fault act, yet it nevertheless included the exclusion in its policy. As such, the policy must be construed in favor of the insured and provide coverage of policy limits to both the owner of the vehicle and its permissive users.

 

The policy was issued on September 10, 2003.

 

In an attempt to distinguish the facts of this case from those in Kurzmann and Parmelee, Auto-Owners points out that those cases dealt with different exclusionary provisions than the one at issue, provisions “applicable to all the parties and limits of liability.”Auto-Owners appears to be referencing the fact that the invalid exclusionary provision in this case only excludes coverage for “garage customers,” with certain exceptions; whereas, in Kurzmann and Parmelee, the exclusionary provisions at issue excluded coverage for the named insured. While Auto-Owners makes a valid distinction, it does not explain why this distinction is material. As we see no material distinction, we are bound to follow the holding in Kurzmann that by knowingly including an invalid exclusionary provision in its policy, an insurer renders the policy ambiguous and the policy must be construed against the insurer.

 

Auto-Owners also argues that its policy contains a statutory compliance provision that operates to reduce coverage to the statutory minimum in the face of an invalid policy exclusion. The provision states as follows:

 

5. FINANCIAL RESPONSIBILITY. Such insurance as is afforded by this coverage form under Coverages A and B shall comply with the provision of the motor vehicle financial responsibility law of any state or province which shall be applicable with respect to any such liability arising out of the ownership, maintenance or use of an automobile during the policy period, to the extent of the coverage and limits of liability required by such law.

 

Auto-Owners’ position lacks merit for several reasons. First, this Court in Kurzmann rejected a similar argument by the insurer in that case, and held that the existence of a statutory compliance provision in the face of a knowingly invalid exclusion and policy limits above the statutory minimum rendered the policy ambiguous and therefore the policy limits applied.Kurzmann, supra at 416, 418, 421.Second, the provision in Auto-Owners’ policy addresses compliance with motor vehicle financial responsibility law, which is not the law at issue in this case. Rather, Auto-Owners’ policy violates the no-fault act.Third, Auto Owners’ provision contains no amending or conforming language. It merely states that its policy shall comply with motor vehicle financial responsibility law to the extent of the coverage and limits of liability required by such law. Aside from an improper exclusion of garage users, Auto-Owners’ policy did comply with financial responsibility law, as it sold a policy that provided coverage in an amount that complied with financial responsibility law in Michigan. The provision contains no language indicating that in the event an exclusion is deemed void, only the statutory minimum applies. We cannot be expected to read into the policy language that which is not provided. Finally, if Auto Owners wished to limit its coverage of garage customers to the statutory minimum, it could have expressly stated so; it chose not to, creating the ambiguity at issue.

 

The distinction between compliance with the financial responsibility act and compliance with the no-fault act was articulated in Citizens, supra at 228 and 230 n 3. As pointed out in Citizens,“[t]he no-fault act, as opposed to the financial responsibility act, is the most recent expression of this state’s public policy concerning motor vehicle liability insurance.”Id. at 232.

 

Auto-Owners’ reliance on Cohen v. Auto Club Ins Ass’n, 463 Mich. 525; 620 NW2d 840 (2001) is also misplaced. In Cohen, the dispute involved uninsured motorist coverage, which is not required by the no-fault act. Cohen, supra at 530-531.Coverage by vehicle owners for their permissive users, on the other hand, is among those coverages that “are the bedrock of the no-fault system and … are not subject to removal by policy language that conflicts with the statute.”See Id. at 531.

 

Even if Kurzmann were not binding in this case, Auto-Owners is still liable up to its policy limits under the general principles of contract law. Under such principles, the inclusion of an invalid exclusionary provision results in the deletion or voiding of the offending language, while leaving intact the remainder of the policy’s terms and obligations, including the provisions addressing the extent of coverage. Here, the terms of the policy require Auto-Owners to pay “all sums which the insured shall become obligated to pay by reason of the liability imposed upon him by law” for damages because of bodily injury or property damage caused by “any person while using an automobile covered by” the insurance policy “provided the actual use of the automobile is with the permission of the named insured.”Deletion of the void exclusionary language leaves intact the policy language that covers as an insured any person using the automobile with the permission of the named insured. With regard to liability coverage, the insurance contract provides $1 million as the limit for each occurrence. The policy limit of $1 million remains intact despite the invalid exclusion.

 

Our finding comports with our Supreme Court’s finding in Enterprise, which affirmed and extended the gravamen of its holding in Citizens, that an owner is primarily responsible for paying residual liability benefits; that vehicle owners are required to provide primary coverage for their vehicles and all permissive users of their vehicles; and that any attempt to shift liability away from the owner to the driver violates the no-fault act and is void.

 

See Enterprise, supra at 27, 34, and 36.

 

Auto-Owners argued before the trial court that Grand Greenville engaged in a bargained-for commercial transaction, and consequently, the parties were free to enter into a contract restricting primary coverage to the extent permitted by law. It is noteworthy, however, that Auto-Owners sold Grand Greenville a $1 million policy and acknowledges that the policy covers Grand Greenville, as the owner of the vehicle involved in the accident, up to $1 million. The section of Auto-Owners’ policy entitled “OTHER INSURANCE” provides, in pertinent part:

 

Except when stated to apply in excess of or contingent upon the absence of other insurance, the insurance afforded by this coverage form is primary insurance. When this insurance is primary and the insured has other insurance which is stated to be applicable to the loss on an excess or contingent basis, the amount of the Company’s liability coverage under this coverage form shall not be reduced by the existence of other such insurance.

 

By seeking to limit its coverage to the statutory minimum of $20,000, and then any remaining amount of damages for which Grand Greenville is held liable only after Martins’ insurance coverage is exhausted, Auto-Owners is attempting to unilaterally shift a portion of the residual liability away from the owner of the vehicle to the driver and/or the driver’s insurance company, neither of which are parties to the contract. Our Supreme Court has expressly condemned such shifting as violative of the no-fault act. As stated in Citizens, supra, although “the Legislature has remained silent concerning who among competing insurers must provide primary residual liability benefits, we refuse to construe that silence as expressly authorizing an owner’s insurer … to unilaterally dictate the priority of coverage among insurers in a manner that shifts insurance costs to the nonowner of the vehicle.”Citizens, supra at 235.The Supreme Court extended its analysis of this issue in Enterprise, supra, and held that, “any such shifting provision is void. Vehicle owners … are required to provide primary coverage for their vehicles and all permissive users of their vehicles.” Enterprise, supra at 27 (emphasis added). Pursuant to the owner’s liability statute, MCL 257.401, Grand Greenville remains 100% liable for damages caused by the subject accident. In attempting to distinguish between Grand Greenville as the owner insured and Martin as a permissive user, which Auto-Owners is also statutorily required to include as an insured, Auto-Owners is attempting to unilaterally dictate priority of coverage. This it cannot do. Given our finding that Auto Owners is primarily liable up to its policy limits of $1 million, we need not address Auto-Owners’ argument regarding subrogated indemnification and State Farm’s coverage.

 

III

 

Finally, we address State Farm’s claim that it is entitled to reimbursement of defense costs from Auto-Owners for defending Martin in the underlying action. Auto-Owners asserts that State Farm waived this issue by failing to file a counter-claim seeking reimbursement of its defense costs or request reimbursement in its answer or affirmative defenses. We find that this issue was properly preserved for appellate review. Auto-Owners requested a declaratory judgment as to the rights and responsibilities of the parties at issue, together with any other relief to which it was entitled. MCR 2.605, which grants Michigan courts the power to issue declaratory judgments, also grants the courts power to issue further “necessary or proper relief against a party whose rights have been determined by the declaratory judgment.”At the hearing on the parties’ motions for summary disposition, counsel for State Farm and Martin requested that the trial court consider the issue of defense costs. The court responded, “I find that State Farm is not entitled to the costs of defense from Auto-Owners insofar as State Farm has liability under the policy that Mr. Martin is being required to pay $100,000 for purposes of completeness.”

 

In Radenbaugh v. Farm Bureau Gen Ins Co, 240 Mich.App 134; 610 NW2d 272 (2000), a panel of this Court addressed insurers’ duty to defend:

 

It is well settled that “if the allegations of the underlying suit arguably fall within the coverage of the policy, the insurer has a duty to defend its insured.”Further, an insurer has a duty to defend, despite theories of liability asserted against any insured which are not covered under the policy, if there are any theories of recovery that fall within the policy. The duty to defend cannot be limited by the precise language of the pleadings. The insurer has the duty to look behind the third-party’s allegations to analyze whether coverage is possible. In a case of doubt as to whether or not the complaint against the insured alleges a liability of the insurer under the policy, the doubt must be resolved in the insured’s favor.

 

Also, the following fundamental principles of insurance law apply:

 

It is well settled in Michigan that an insurer’s duty to defend is broader than its duty to indemnify. In order to determine whether an insurer has a duty to defend its insured, this Court must look to the language of the insurance policy and construe its terms to find the scope of the coverage of the policy…. [Radenbaugh, supra at 137-138 (citations omitted).]

 

In this case, section III of Auto-Owners’ policy includes a provision regarding its duty to defend, stating that it has “the right and duty to defend … any suit against the insured alleging such injury or destruction and seeking damages … where the Company is liable to the insured….” The provision further states that Auto-Owners has the obligation to pay certain expenses in addition to the applicable limits of liability. Auto-Owners argues that because Martin is not an “insured” under its policy and it is only obligated to provide liability coverage for Martin under the no-fault act, it has no obligation to defend Martin under the terms of its policy. But, under the holding in Kurzmann, Auto-Owners is required to provide primary residual liability coverage for Martin’s use of Grand Greenville’s vehicle up to its policy limits. Therefore, while Kurzmann did not address the issue of defense costs, it follows that Auto-Owners is obligated to defend Martin in the underlying action and that State Farm is entitled to reimbursement for those costs.

 

Reversed and remanded to the trial court for a grant of summary disposition in favor of State Farm and Martin and a declaratory judgment that Auto-Owners is primarily liable for Martin’s use of Grand Greenville’s vehicle, up to its $1 million policy limit, that State Farm is only liable on an excess basis after Auto-Owners’ coverage has been exhausted, and that State Farm is entitled to reimbursement of defense costs. We do not retain jurisdiction.

 

COMMON POLICY CONDITIONS

 

Mich.App.,2009.

Auto-Owners Ins. Co. v. Martin

— N.W.2d —-, 2009 WL 1687948 (Mich.App.)

 

END OF DOCUMENT

United States Court of Appeals,

Fifth Circuit.

AMBRACO, INC.; Great American Insurance Company, Plaintiffs-Appellants,

v.

BOSSCLIP B.V., in personam; Dockendale Shipping Company, Ltd., in personam; Faith Shipping Company, Ltd., in personam, Defendants-Appellees.

Ambraco, Inc.; Great American Insurance Company, Plaintiffs-Appellants,

v.

CLIPPER FAITH MV, her engines, tackle, apparel, furniture, etc., in rem; Bossclip B.V., in personam; Dockendale Shipping Company, Ltd., in personam; Faith Shipping Company, Ltd., in personam, Defendants-Third Party Defendants-Appellees,

v.

Pacorini Holding, LLC, Defendant-Third Party Plaintiff-Appellant.

Nos. 07-30727, 07-31156.

 

May 28, 2009.

 

PRADO, Circuit Judge:

 

Plaintiff-Appellant Ambraco, Inc. (“Ambraco”) contracted with Defendants-Appellees M/V CLIPPER FAITH (“CLIPPER FAITH”), Bossclip B.V. (“Bossclip”), Dockendale Shipping Co., Ltd. (“Dockendale”), and Faith Shipping Co., Ltd. (“Faith”) (collectively “Vessel Interests”) to transport a cargo of bailer twine from Brazil to New Orleans, Louisiana. The cargo was damaged while in the custody of the Vessel Interests or Defendant-Third-Party Plaintiff-Appellant Pacorini Holding, L.L.C. (“Pacorini”), the cargo’s discharging stevedore. Ambraco filed a maritime cargo damage case against the Vessel Interests and Pacorini. The district court dismissed the claims against the Vessel Interests for improper venue based upon a forum selection clause in the contracts of carriage, which are known commonly as bills of lading. Ambraco appeals the district court’s dismissal of its claims against the Vessel Interests, asserting that the forum selection clause is invalid as a violation of the public policy codified in the Carriage of Goods by Sea Act (“COGSA”), Pub.L. No. 74-521, ch. 229, 49 Stat. 1207 (reprinted in the notes to 46 U.S.C. § 30701).

 

In a consolidated case, Pacorini appeals the district court’s dismissal of its third-party complaint for indemnification against the Vessel Interests. The district court dismissed Pacorini’s claims after finding that Federal Rule of Civil Procedure 14(c) was not available because the Vessel Interests were not true “third-party defendants” under Rule 14(c). Pacorini asserts that Rule 14(c) expressly provides that a third-party plaintiff may implead a third-party defendant who may be liable to it for contribution or indemnity. For the following reasons, we affirm in part, vacate in part, and remand.

 

I. FACTUAL AND PROCEDURAL BACKGROUND

 

Ambraco delivered several thousand bales of bailer twine to the Vessel Interests, who were to transport this cargo from Brazil to the United States on the CLIPPER FAITH, an ocean-going cargo vessel owned by Faith. Pacorini acted as the cargo’s discharging stevedore in New Orleans.

 

The cargo was covered by seventeen bills of lading, all identical in terms and conditions, issued by Bossclip to the other Vessel Interests. The bills of lading contained three clauses critical to the present dispute:

 

1. Definitions

 

(a) “Carrier” means the carrier as stipulated on page 2 of this bill of lading, and insofar as carriage by sea is concerned, the registered owner of the vessel.

 

2. Jurisdiction

 

The contract evidenced by this bill of lading shall be governed by English law and any disputes thereunder shall be determined in England by the High Court of Justice in London according to English law to the exclusion of the courts of any other country.

 

….

 

5. Clause Paramount

 

(d) If the carriage is to or from the U.S., the Carriage of Goods By the Sea Act 1936 of the United States (“COGSA”) shall apply (whether the goods are stowed on or under deck) ….

 

These bills of lading were issued on December 28, 2005, and their validity is not in question.

 

When the cargo arrived in New Orleans, Ambraco discovered extensive damage to the bailer twine. Ambraco immediately instituted proceedings to seek compensation from the Vessel Interests and Pacorini for the damage to its cargo. First, Ambraco threatened to arrest, or seize, the vessel to gain in rem jurisdiction over the ship. The parties agreed to issue a Letter of Undertaking in the amount of $2,000,000 to stand in the place of the ship for purposes of any future in rem action. On November 14, 2006, Ambraco filed an original complaint in the District Court for the Eastern District of Louisiana against the Vessel Interests. One month later, the named in personam appellees-Bossclip, Dockendale, and Faith-filed responsive pleadings raising a defense of improper venue. On March 3, 2007, Ambraco filed a supplemental and amended complaint naming Pacorini as an additional defendant. On May 21, 2007, Faith made a restricted appearance as the owner of the CLIPPER FAITH to defend Ambraco’s in rem action.

 

On April 26, 2007, the in personam Vessel Interests filed a motion to dismiss Ambraco’s claims based upon the forum selection clause contained in the bills of lading. The district court dismissed the entire case on May 25, 2007. The district court held that the forum selection clause in the bills of lading required all disputes to be adjudicated in the High Court of England. Thus, the district court held that it lacked jurisdiction over the claim. Although Ambraco had amended its complaint to include a claim against Pacorini, Pacorini had not appeared by the time the district court dismissed the suit.

 

Ambraco moved under Federal Rule of Civil Procedure 59(e) to alter or amend the judgment. In support, Ambraco submitted an affidavit on issues of English law from English solicitor Mark Andrew Lloyd (“Lloyd”). The Vessel Interests disputed the motion to alter or amend the judgment and contested the introduction of Lloyd’s affidavit. The district court denied Ambraco’s motion to alter or amend the judgment, again concluding that the forum selection clause was valid and divested the district court of jurisdiction over the claim.

 

The district court did, however, partially reopen the case, clarifying that its judgment dismissing the Vessel Interests’ claims did not extend to Ambraco’s claims against Pacorini. The district court also asserted jurisdiction over the Letter of Undertaking, thus maintaining jurisdiction over the res.On July 18, 2007, Pacorini filed an answer and a third-party complaint under Federal Rule of Civil Procedure 14(c), naming the dismissed Vessel Interests as third-party defendants to Ambraco’s suit against Pacorini. On October 3, 2007, the Vessel Interests filed a motion to dismiss Pacorini’s claims and the district court granted this motion on November 5, 2007, holding that Rule 14(c) was not available to implead parties previously dismissed from the suit. After denying Pacorini’s motion for reconsideration, the district court granted Pacorini’s motion to certify the order dismissing the third-party complaint as a final judgment under Federal Rule of Civil Procedure 54(b). The court entered final judgment dismissing the case with prejudice on January 10, 2008.

 

II. JURISDICTION AND STANDARD OF REVIEW

 

The district court had admiralty jurisdiction over the case pursuant to 28 U.S.C. § 1333. This court has jurisdiction under 28 U.S.C. § 1291, as the appeal arises from a final judgment entered by the district court.

 

This court reviews the district court’s decision to enforce a forum selection clause de novo. Ginter ex rel. Ballard v. Belcher, Prendergast & Laporte, 536 F.3d 439, 441 (5th Cir.2008).“Our de novo review under either Rule 12(b)(1) or Rule 12(b)(3) requires us to view all the facts in a light most favorable to the plaintiff.” Id. at 448 (Dennis J., dissenting).“Moreover, under both Rule 12(b)(1) and Rule 12(b)(3), the court is permitted to look at evidence in the record beyond simply those facts alleged in the complaint and its proper attachments.” Id. at 449 (citing Lane ex rel. Lane v. Halliburton, 529 F.3d 548, 557 (5th Cir.2008) (“[T]he court may find a plausible set of facts by considering any of the following: (1) the complaint alone; (2) the complaint supplemented by the undisputed facts evidenced in the record; or (3) the complaint supplemented by undisputed facts plus the court’s resolution of disputed facts.”(internal quotation marks omitted))); Murphy v. Schneider Nat’l Inc., 362 F.3d 1133, 1138-40 (9th Cir.2004) (holding that, in the absence of factual findings made by the district court based upon an evidentiary hearing, affidavits and other evidence submitted by the non-moving party in the context of a Rule 12(b)(3) challenge are to be viewed in the light most favorable to that party).

 

This court also reviews the district court’s order dismissing Pacorini’s third-party claims de novo. See Lane, 529 F.3d at 557.

 

III. ANALYSIS

 

A. Enforcement of the Forum Section Clause

 

On appeal, Ambraco argues that the forum selection clause in the bills of lading are invalid as the forum selection clause contradicts the public policy evidenced in COGSA, specifically § 3(8), which limits a common carrier’s freedom to lessen the minimum liability contained in the Act.The district court held that the forum selection clause did not violate public policy and that the clause, as enforced, divested the court of jurisdiction.

 

Section 3 of COGSA provides “explicit standards of conduct, and it is designed to correct specific abuses by carriers.” Vimar Seguros y Reaseguros, S.A. v. M/V Sky Reefer, 515 U.S. 528, 534, 115 S.Ct. 2322, 132 L.Ed.2d 462 (1995).“In the 19th century it was a prevalent practice for common carriers to insert clauses in bills of lading exempting themselves from liability for damage or loss, limiting the period in which the plaintiffs had to present their notice of claim or bring suit, and capping any damage awards per package.” Id. at 534-35, 115 S.Ct. 2322.COGSA imposes “substantive obligations and particular procedures” with which carriers participating in international maritime commerce must comply; most critically, “§ 3(8) prohibits a carrier from altering [its substantive obligations] to its advantage in a bill of lading.” Id. at 535, 115 S.Ct. 2322.Section 3(8) provides,

 

Any clause, covenant, or agreement in a contract of carriage relieving the carrier or the ship from liability for loss or damage to or in connection with the goods, arising from negligence, fault, or failure in the duties and obligations provided in this section, or lessening such liability otherwise than as provided in this chapter, shall be null and void and of no effect.

 

COGSA § 3(8).

 

While COGSA states that carriers may not lessen their liability beyond that stipulated to by law, COGSA does not prohibit parties from agreeing to enforce the bill of lading provisions in a particular forum. Sky Reefer, 515 U.S. at 535, 115 S.Ct. 2322.Thus, a choice-of-forum clause is presumptively valid. M/S Bremen v. Zapata Off-Shore Co., 407 U.S. 1, 15, 92 S.Ct. 1907, 32 L.Ed.2d 513 (1972). It will, however, be “held unenforceable if enforcement would contravene a strong public policy of the forum in which suit is brought, whether declared by statute or by judicial decision.” Id. The critical inquiry to determining whether a clause violates public policy is whether “the choice-of-forum and choice-of-law clauses operated in tandem as a prospective waiver of a party’s right to pursue statutory remedies.” Mitsubishi Motors Corp. v. Soler Chrysler-Plymouth, Inc., 473 U.S. 614, 637 n. 19, 105 S.Ct. 3346, 87 L.Ed.2d 444 (1985); see Mitsui & Co. (USA), Inc. v. Mira M/V, 111 F.3d 33, 36 (5th Cir.1997) (per curiam); see also Haynsworth v. The Corporation, 121 F.3d 956, 963 (5th Cir.1997) (recognizing the holding in Mitsui as binding precedent that rejected a distinction between foreign arbitration clauses and forum selection clauses).“The party resisting enforcement on these grounds bears a ‘heavy burden of proof.’ ” Haynsworth, 121 F.3d at 963 (quoting Bremen, 407 U.S. at 17, 92 S.Ct. 1907).

 

Ambraco presents two arguments for why enforcement of the forum selection clause and the choice-of-law provisions would lessen the statutory remedies available under COGSA. First, Ambraco argues that English courts will not recognize the Vessel Interests as “carriers,” thus impermissibly lessening the Vessel Interests’ liability below that which COGSA guarantees. Second, Ambraco argues that English courts do not permit in rem actions, and that the right to an in rem action is substantively guaranteed.

 

1. In personam actions

 

It is undisputed that the bills of lading provide that the English High Court is the forum for all disputes. English courts have “repeatedly [been] recognized to be fair and impartial.” Haynsworth, 121 F.3d at 967.As the Supreme Court stated, “Plainly, the courts of England meet the standards of neutrality and long experience in admiralty litigation.” Bremen, 407 U.S. at 12, 92 S.Ct. 1907.Thus, English courts themselves may be presumed to be fair. The Supreme Court’s decision in Sky Reefer requires us, however, to look beyond this presumption of fairness to discern whether the English courts, in addressing the present dispute, will impermissibly limit the Vessel Interests’ liability.

 

The clause paramount of the bill of lading provides that “[i]f the carriage is to or from the U.S., the Carriage of Goods By the Sea Act 1936 of the United States (‘COGSA’) shall apply.”Despite this clause paramount, Ambraco asserts that English courts will apply English law. A brief examination of English decisions, however, suggests that English courts are likely to apply COGSA if the parties intended American law to govern the dispute. For example, the Queen’s Bench (a subdivision of the English High Court) considered what role American law should play when an “English law charter-party[] incorporates an USA clause paramount” in Mauritius Oil Refineries Ltd. v. Stolt-Nielsen Nederlands B.V. (The Stolt Sydness), [1997] 1 Lloyd’s Rep. 273. The “clause paramount” at issue expressly incorporated COGSA into the bill of lading. Id. at 274.The English court considered what effect to give this clause paramount and held that, generally, the terms of COGSA would be incorporated as terms of the contract. Id. at 281.Thus, the English court honored the clear intention of the parties to incorporate COGSA into the contract.

 

The English House of Lords, in Scruttons Ltd. v. Midland Silicones, Ltd., 1962 WL 21259, [1962] A.C. 446 (H.L.), considered whether “stevedores, who admittedly by their negligence caused damage to certain cargo consigned to the [plaintiffs] under a bill of lading …, can take advantage of a provision for limitation of liability contained in that document,”id. at 465.The bill of lading at issue included a choice-of-law provision which stipulated that COGSA would apply to all disputes over the transportation of the cargo.Id. at 449.The stevedores argued that the bill of lading contained a clause limiting liability for all “carriers,” which they asserted COGSA defines as including stevedores. Id. The House of Lords found that there was “no reason for saying that the word ‘carrier’ either in the bill of lading or in the United States [COGSA] means or includes a stevedore.”Id. at 466.The court relied upon Robert C. Herd & Co. v. Krawill Machinery Corp., 359 U.S. 297, 79 S.Ct. 766, 3 L.Ed.2d 820 (1959), in which the Supreme Court held that COGSA did not define “carrier” to include stevedores and did not intend the limitation on liability to extend to stevedores, id. at 302-03, 79 S.Ct. 766.Although the English court eventually applied English law to fill the gaps left by the American law, this decision persuades us that English courts will honor the parties intention to apply COGSA and make every attempt to comply with American law.

 

In addition, Ambraco has provided no convincing evidence that an English court, applying COGSA, would impermissibly limit the Vessel Interests’ liability.Thus, this court must assume that English courts of law would honor the clause paramount in the bills of lading and apply COGSA to the dispute at hand. Accordingly, we hold that Ambraco has not met its high burden of proving that “the choice-of-forum and choice-of-law clauses operate[ ] in tandem as a prospective waiver of a party’s right to pursue statutory remedies.” Mitsubishi, 473 U.S. at 637 n. 19, 105 S.Ct. 3346.

 

2. In rem actions

 

Ambraco also argues that enforcement of the forum selection clause would lessen the Vessel Interests’ liability because of the unavailability of an in rem action against the Clipper Faith. English courts no longer recognize an in rem action “when the ship owner is entitled to sovereign immunity, nor when the plaintiff has already obtained [or is seeking] judgment against the shipowner in personam in relation to the same dispute.”Martin Davies, In Defense of Unpopular Virtues: Personification and Ratification, 75 TUL. L.REV. 337, 342 (2000). Thus, if an in rem action is a substantive right protected under COGSA § 3(8), a failure to provide an in rem action might be unreasonable as against COGSA public policy. See Allianz Ins. Co. v. Cho Yang Shipping Co., 131 F.Supp.2d 787, 794 (E.D.Va.2000). We need not, however, decide this thorny issue here. The district court’s preservation of jurisdiction over the ship-here in the form of a surety bond-moots issue of the need for a separate in rem action. See Thyssen, Inc. v. Calypso Shipping Corp., S.A., 310 F.3d 102, 107 (2d Cir.2002) (per curiam) (holding that “[a] letter of undertaking replaces the vessel as the res and moots the question of the need for separate in rem claim”).

 

Accordingly, we hold that Ambraco has not proven that the enforcement of the forum selection clause in the bills of lading would violate public policy. Ambraco’s failure to meet this heavy burden is fatal to its claim. Cf. Sky Reefer, 515 U.S. at 537, 115 S.Ct. 2322 (holding that “[i]t would also be out of keeping with the objects of the [Hague Rules] for the courts of this country to interpret COGSA to disparage the authority or competence of international forums for dispute resolution” absent a showing that the foreign court would issue a holding contrary to public policy). We therefore affirm the district court’s order dismissing Ambraco’s claims against the Vessel Interests.

 

B. Rule 14(c)

 

In a consolidated case, Pacorini appeals the district court’s dismissal of its claim for contribution or indemnity under Federal Rule of Civil Procedure 14(c). The district court dismissed Pacorini’s Rule 14(c) tender of the Vessel Interests to Ambraco and Pacorini’s claims against the original defendants/third-party defendants. The district court held that Rule 14(c) was not available to bring claims against third-party defendants who had already been a party to the suit as original defendants, and it suggested that the proper mechanism for bringing these types of claims was through Rule 13(g). Pacorini appeals only that part of the district court’s order which dismissed its claim for contribution or indemnification against the Vessel Interests.

 

[10][11] The district court held that Pacorini could have brought its claims against the Vessel Interests by asserting a cross-claim under Rule 13(g).Rule 13(g) provides,

 

A pleading may state as a crossclaim any claim by one party against a coparty if the claim arises out of the transaction or occurrence that is the subject matter of the original action or of a counterclaim, or if the claim relates to any property that is the subject matter of the original action. The crossclaim may include a claim that the coparty is or may be liable to the cross-claimant for all or part of a claim asserted in the action against the cross-claimant.

 

FED.R.CIV.P. 13(g). By its terms, Rule 13(g) requires the cross-claimant to be a party to the lawsuit at the time the cross-claim is asserted. However, by the time Pacorini asserted its claims against the Vessel Interests, the Vessel Interests had already been dismissed from the suit and were no longer a party to the underlying suit; thus, a cross-claim under Rule 13(g) was no longer an available mechanism for asserting Pacorini’s claims against the Vessel Interests. The district court therefore erred in holding that Pacorini’s claims could have been properly brought under Rule 13(g).

 

[12] Instead, Pacorini properly brought its claims pursuant to Rule 14(c).Rule 14(c) provides,

 

(1) Scope of Interpleader. If a plaintiff asserts an admiralty or maritime claim under Rule 9(h), the defendant or a person who asserts a right under Supplemental Rule C(6)(a)(I) may, as a third-party plaintiff, bring in a third-party defendant who may be wholly or partly liable-either to the plaintiff or to the third-party plaintiff-for remedy over, contribution, or otherwise on account of the same transaction, occurrence, or series of transactions or occurrences.

 

(2) Defending Against a Demand for Judgment for the Plaintiff. The third-party plaintiff may demand judgment in the plaintiff’s favor against the third-party defendant. In that event, the third-party defendant must defend under Rule 12 against the plaintiff’s claim as well as the third-party plaintiff’s claim; and the action proceeds as if the plaintiff had sued both the third-party defendant and the third-party plaintiff.

 

FED.R.CIV.P. 14(c). That is, Rule 14(c) permits a defendant to implead a third-party defendant for two purposes: (1) to seek contribution or indemnification from the third-party defendant, and (2) to tender the third-party defendant to the plaintiff. See Tex. A&M Research Found. v. Magna Transp., Inc., 338 F.3d 394, 399-400 (5th Cir.2003) (recognizing that Rule 14(c) allows a third-party plaintiff either to seek contribution from the third-party defendant directly or to tender the third-party defendants to the plaintiff). In addition, the Rule requires the third-party plaintiff (1) to assert an action sounding admiralty or maritime, (2) that arises out of “the same transaction, occurrence, or series of transactions or occurrences” as the plaintiff’s original claim, and (3) over which the district court has jurisdiction. FED.R.CIV.P. 14(c).

 

[13] All parties agree that Ambraco asserted an admiralty claim under Rule 9(h) and that Pacorini’s claim for indemnity against the Vessel Interests stems from the same transaction as Ambraco’s original cause of action. The district court had jurisdiction over Pacorini’s claims against the Vessel Interests pursuant to 28 U.S.C. § 1333. Having met the three preconditions for asserting a claim under Rule 14(c), we can see no other justification for denying Pacorini the right to pursue its indemnification claims against the Vessel Interests. Although it is true that the forum selection clause requires the Vessel Interests and Ambraco to settle their dispute in English courts, Pacorini is not bound by a similar forum selection clause that would limit the district court’s jurisdiction. Thus, we see no reason to sustain the district court’s dismissal of Pacorini’s claims.

 

[14] We do, however, recognize that it would be the height of judicial inefficiency to conduct two separate inquiries into fault arising from the same transaction, as would happen were Pacorini’s action to proceed concurrent with or even in advance of Ambraco’s cause of action against the Vessel Interests in the English court. For this reason, the district court, on remand, may consider staying Pacorini’s claims pending a resolution of the English court’s adjudication of Ambraco’s claims against the Vessel Interests. See Pac. Employers Ins. Co. v. M/V Gloria, 767 F.2d 229, 242-43 (5th Cir.1985) (recognizing the propriety of staying a third-party plaintiff’s claims for indemnity and contribution pending arbitration). Such a resolution, however, is left to the sound discretion of the district court. See Coastal (Bermuda) Ltd. v. E.W. Saybolt & Co., 761 F.2d 198, 204 n. 6 (5th Cir.1985) (citing Landis v. N. Am. Co., 299 U.S. 248, 254-55, 57 S.Ct. 163, 81 L.Ed. 153 (1936) (recognizing that the district court’s discretionary authority to issue a stay “is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants”)).

 

For these reasons, we vacate the district court’s dismissal of Pacorini’s claims for contribution and indemnification and remand for further proceedings consistent with this opinion.

 

IV. CONCLUSION

 

The forum selection clause in the bills of lading divested the district court of jurisdiction over Ambraco’s claims against the Vessel Interests. Although Ambraco must bring its claims against the Vessel Interests in England, Pacorini may seek indemnification and contribution from the Vessel Interests in federal district court. Accordingly, we affirm in part, vacate in part, and remand.

 

AFFIRMED IN PART, VACATED IN PART, AND REMANDED.

 

“[T]his court on at least [three] previous occasions has declined to address the ‘enigmatic question of whether motions to dismiss on the basis of forum selection clauses are properly brought as motions under FED.R.CIV.P. 12(b)(1) [or] 12(b)(3).’ ” Ginter, 536 F.3d at 448 (Dennis J., dissenting) (quoting Lim v. Offshore Specialty Fabricators, Inc., 404 F.3d 898, 902 (5th Cir.2005)); see Haynsworth v. The Corporation, 121 F.3d 956, 961 (5th Cir.1997). We once again decline to settle this dispute.

 

Ambraco has filed what it terms a “protective claim” in the High Court of Justice in London. The Vessel Interests suggest that by filing this claim in the English courts, Ambraco has tacitly acknowledged that the English courts are the correct forum in which to seek relief. The district court correctly concluded that Ambraco’s pursuit of its claim in England, and thereby its attempt to protect its interests in English courts, was nothing more than common sense.

 

COGSA was “the culmination of a multilateral effort” to establish “a uniform system of international rules governing carrier and shipper liability.” Haynsworth, 121 F.3d at 968.The international community developed this uniform system, known internationally as the Brussels Convention for the Unification of Certain Rules Relating to Bills of Lading, Aug. 25, 1924, 51 Stat. 233, 120 L.N.T.S. 155 (“Hague Rules”), specifically to govern disputes such as that before us-disputes over the liability of shippers and carriers participating in international trade. The Hague Rules and COGSA-the domestic version of the Hague Rules-are meant to be applied in international forums of dispute resolution. See Sky Reefer, 515 U.S. at 536-37, 115 S.Ct. 2322.

 

Black’s Law Dictionary defines “charter-party” as

 

[a] contract by which a ship … is let to a merchant for the conveyance of goods on a determined voyage to one or more places …. The term “charter party” … designates the document in which are set forth the arrangements and contractual engagements entered into when one person … takes over the use of the whole … of a ship belonging to another.

 

BLACK’S LAW DICTIONARY 162 (6th ed.1991).

 

Ambraco has provided two sources of support for its contention that English courts will lessen the Vessel Interests’ liability, neither of which provide this court much guidance. First, Ambraco urges this court to consider an affidavit by English solicitor Lloyd. Lloyd’s affidavit discusses only the English courts’ application of English law to disputes such as these, not the English courts’ application of COGSA. In fact, Lloyd begins his analysis “on the basis that English law would be deemed to be applicable.”In addition, Ambraco relies upon a decision out of the Southern District of New York; however, the case is distinguishable from the facts at hand because it too considered only an English court’s interpretation of English law, not the English court’s interpretation of COGSA. See Cent. Nat’l-Gottesman, Inc. v. M.V. “Gertrude Oldendorff,” 204 F.Supp.2d 675 (S.D.N.Y.2002). As discussed above, this court has not been asked to decide whether English courts applying English law would lessen liability beyond that required by COGSA, but rather, whether English courts applying COGSA will impermissibly lessen the Vessel Interests’ liability. We find Ambraco’s submissions on this point unhelpful.

 

The Vessel Interests also argue that even if the English courts were to interpret the term “carrier” narrowly, Ambraco would still be able to recover the full amount of its loss from Faith. The Vessel Interests point to no authority to support their contention. Thus, their argument is insufficient to raise the claim on appeal and they have waived it. See FED. R.APP. P. 28(a)(9) (requiring an appellant to state its “contentions and the reasons for them, with citations to the authorities and parts of the record on which the appellant relies”); United States v. Lindell, 881 F.2d 1313, 1325 (5th Cir.1989).

 

The district court, however, properly dismissed Pacorini’s tender of the Vessel Interests to Ambraco. Ambraco’s direct action against the Vessel Interests had already been dismissed pursuant to the forum selection clause and any tender would violate the public policy-announced in Bremen, 407 U.S. at 9, 92 S.Ct. 1907-of enforcing forum selection clauses. See Texaco Exploration & Prod. Co. v. AmClyde Engineered Prods. Co., 243 F.3d 906, 909-12 (5th Cir.2001) (refusing “to create a Rule 14(c) exception that would allow third parties unilaterally to nullify an arbitration clause,” and staying the litigation below pending the outcome of the arbitration).

 

C.A.5 (La.),2009.

Ambraco, Inc. v. Bossclip B.V.

— F.3d —-, 2009 WL 1481340 (C.A.5 (La.))

 

END OF DOCUMENT