Docket No. 71946.
Decided September 11, 1984.
James T. Miller, for plaintiffs.
Plunkett, Cooney, Rutt, Watters, Stanczyk Pedersen (by Robert G. Kamenec), for Nationwide Insurance Company.
The trial court granted summary judgment in favor of plaintiffs and against garnishee-defendant Nationwide Insurance Company on the ground that there was no genuine issue of material fact. GCR 1963, 117.2(3). Garnishee-defendant appeals as of right.
Kim Roberts, while living in Robert Roberts's household, participated in the commission of a robbery. During the course of this robbery, Howard R. Havens was shot.
The plaintiffs then brought a negligence action against Defendants Robert and Kim Roberts. Nationwide hired counsel to defend both Robertses, but reserved the right to deny coverage. Plaintiffs obtained a judgment against Kim Roberts.
Howard and Vonnie Havens then proceeded to garnish defendant Nationwide Insurance Company contending that Nationwide had an obligation to satisfy the judgment pursuant to a homeowner's policy issued to Robert Roberts. That policy excluded coverage for bodily injury "caused intentionally by or at the direction of an Insured". Kim Roberts was insured under the policy.
We first consider whether the previous judgment against Kim Roberts based on negligence precludes the insurance company from asserting a defense based on the policy's intentional act exclusion. The doctrine of res judicata bars a cause of action if: (1) the prior action was decided on the merits; (2) the issue raised in the second case was raised in the first; and (3) both actions involve the same parties or their privies. San Joaquin County, California v Dewey, 105 Mich. App. 122, 130-131; 306 N.W.2d 418 (1981).
We feel that it would be improper to apply the doctrine of res judicata to this case. The parties are not the same. It was in Kim Roberts's best interest to have any judgment against her based upon negligence so that the exclusion would not apply and Nationwide, rather than herself, would have to pay. Her lawyer, although hired by Nationwide to represent her, was ethically bound to represent her best interests. Nationwide is now entitled to argue that the exclusion is applicable. In American Surety Co of New York v Coblentz, 381 F.2d 185 (CA 5, 1967), the Court of Appeals for the Fifth Circuit considered facts very similar to those in the instant case. The Court stated:
"The court below, by its judgment, concluded that the state court `finding' that the fatal shooting was due to the insured's `negligence' and was therefore an `accident' within the terms of the policy was binding upon appellant and could not be attacked in garnishment proceedings. Appellant merely asks that it be given the opportunity to raise this issue as a defense to garnishment. Both our sense of justice and the case law convinces us that appellant may not properly be precluded from raising this issue and that the summary judgment rendered below must be reversed." 381 F.2d 187.
We note that the general rule is that the garnishee defendant is generally barred from challenging the validity of the judgment entered in the original action. Morrill v Gallagher, 370 Mich. 578, 586-587; 122 N.W.2d 687 (1963). An insurer may, however, raise an exclusionary clause as a defense if that issue has been preserved. Morrill, supra. In the instant case, Nationwide agreed to defend the original action while specifically reserving the right to contest coverage. Nationwide may now properly contest coverage.
We next consider whether the trial court erred in finding that there was no genuine issue of material fact. Garnishee-defendant argues that there was an issue of material fact, claiming that one of Kim Roberts's accomplices in the robbery stated that Ms. Roberts directed the accomplice to shoot Mr. Havens. Apparently the accomplice gave this statement to his probation officer. Probation officers' reports are absolutely privileged and cannot be a subject of discovery. MCL 791.229; MSA 28.2299. Nationwide's allegation, however, raises factual questions which make the grant of summary judgment improper. This case should, therefore, be reversed and remanded for further proceedings. On remand, Nationwide should be given the opportunity to present admissible evidence to support its allegation. The trial court may continue to properly exercise its discretion in limiting discovery. We note that on appeal Nationwide continues to argue that it should be given the opportunity to review the probation officer's files. This report is absolutely privileged and cannot be a subject of discovery. As stated in the statute, this confidence "shall remain inviolate". MCL 791.229; MSA 28.2299.
Reversed and remanded for proceedings consistent with this opinion.