SOUTHFIELD, Mich. – Michigan First Credit Union has won over $5 million in damages against its former insurer Credit Union Mutual Insurance Society.
The jury, which took two and a half hours to deliberate, found that CUMIS breached its insurance bond with Michigan First when it refused to pay the credit union for losses resulting from hundreds of defaulted indirect auto loans that had been granted under the supervision of Michigan First's former vice president of lending.
Throughout the three-week jury trial, CUMIS maintained that Michigan First's losses were the result of its own reckless behavior and lack of oversight.
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The loans were deemed the result of intentional violations of the credit union's lending policies and the jury unanimously determined that CUMIS had wrongfully denied Michigan First's insurance claim under a faithful performance provision of the bond.
"Could Michigan First have done things differently and avoided these losses? Who knows," said co-counsel Patricia Corkery of Holzman, Ritter & Leduc. "But if failure to prevent a loss were a basis for denying coverage, then no loss would ever be covered, and the insurance would be meaningless."
Earlier in the action, the judge had ruled that if the jury found for the credit union, then CUMIS' denial of Michigan First's claim would constitute a violation of the state's Unfair Trade Practices Act.
With this ruling, since Michigan First's claim dates back to May 2004, the credit union can recover 12% penalty interest on its claim in addition to standard prejudgement interest, which could bring the total recovery closer to $9 million.
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