Arrowood Indemnity Company v. Michael Louis Cristini

NOT RECOMMENDED FOR PUBLICATION
File Name: 15a0743n.06
No. 15-1257
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
ARROWOOD INDEMNITY COMPANY,
Plaintiff – Appellee,
v.
MICHAEL LOUIS CRISTINI,
Defendant – Appellant,
U.S. FIRE INSURANCE COMPANY,
Third-Party Defendant – Appellee,
ALICE INGLES; CITY OF WARREN, MI;
PATRICK MCQUEENY, aka Personal
Representative of the Estate of Donald Ingles,
Defendants.
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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE EASTERN
DISTRICT OF MICHIGAN
BEFORE: ROGERS and DONALD, Circuit Judges; ROSE, District Judge.
ROGERS, Circuit Judge. Michael Cristini appeals the district court’s dismissal of his
fraud, silent fraud, civil conspiracy, and negligent misrepresentation claims against two insurers.
In settling for $1.5 million, Cristini was allegedly misinformed that the City of Warren’s
available insurance was no more than $2.32 million. Because it was not reasonable for Cristini
 The Honorable Thomas M. Rose, United States District Court for the Southern District of Ohio, sitting by
designation.

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to rely on the insurers’ misrepresentation in settling for the far lesser amount, the district court
properly dismissed each claim.
In 1991, Michael Cristini and Jeffrey Moldowan were jointly convicted of kidnapping
and rape. An eyewitness statement exculpating Cristini and Moldowan surfaced and resulted in
retrials and acquittals for both individuals. This came after Cristini and Moldowan spent
approximately 13 years in prison. Following their acquittals, Cristini and Moldowan filed
separate complaints against the City of Warren and the estate of Detective Donald Ingles,
alleging, among other claims, that Detective Ingles withheld exculpatory evidence and that the
city engaged in malicious prosecution. Because of procedural issues, Moldowan’s case
progressed at a faster rate than Cristini’s case.
In October 2011, the parties in the Moldowan case settled for approximately $2.8 million.
The Warren defendants had insurance policies with Arrowood Indemnity Company and U.S. Fire
Insurance Company, and of the $2.8 million settlement amount, Arrowood contributed $1.12
million, U.S. Fire contributed $1.43 million, and the city contributed $250,000. Although the
Moldowan case was settled, the Cristini case continued. Cristini alleges, and we accept as true
for the purposes of review, that on July 18, 2013, counsel for the Warren defendants informed
Cristini that Arrowood was denying coverage for Cristini’s suit, and that Arrowood refused to
contribute to or participate in any settlement. Arrowood confirmed this position by filing a
separate action for declaratory judgment, asking the district court to declare that Arrowood’s
policy with the Warren defendants did not cover Cristini’s claims.
In the Cristini suit, the Warren defendants informed Cristini that Arrowood’s refusal to
involve itself in any potential settlement meant there was less insurance coverage available for
Cristini’s case than there was available for Moldowan’s case. On November 7, 2013, Cristini’s

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counsel memorialized in writing its understanding that “there is no longer the same amount of
insurance coverage as there was in the Moldowan case.” Shortly thereafter, Cristini made a
settlement demand for $2.8 million. This amount exceeded the insurance coverage that the
Warren defendants said was available at that time, and in a status conference on November 12,
2013, the Warren defendants stated that they would refuse to consider any settlement demand
from Cristini unless the demand was within their insurance policy limit. In response to a demand
from Cristini to know the insurance policy limit, counsel for the Warren defendants stated that
$2.32 million would exhaust its available coverage, and that all of its available coverage came
from the policy with U.S. Fire.
In a subsequent status conference on December 3, 2013, counsel for the Warren
defendants refused to entertain a settlement demand or a consent judgment that exceeded
$2.32 million. At this status conference, counsel for the Warren defendants again stated that the
maximum available insurance was $2.32 million because Arrowood would not participate in any
settlement. Less than 10 days after this status conference, Cristini made a settlement demand of
$2.32 million—the exact amount of the insurance policy limit as represented by the Warren
defendants. That same day, counsel for the Warren defendants confirmed receipt of the demand
and stated that it had “already communicated it to the necessary carrier and [the counsel’s]
clients.”
The Warren defendants rejected the $2.32 million settlement demand and did not propose
a counteroffer. Counsel for the Warren defendants sent the rejection via written message,
stating:
I have just concluded a lengthy telephone conference with representatives of the
City of Warren and US Fire. As a result of that conference, I have been asked to
restate to you our belief that the entire cause of action set forth on behalf of the
plaintiff is barred by the applicable statute of limitations. Additionally, we

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believe that it will be extremely difficult for the plaintiff to meet his burden of
proof on the two remaining claims, Brady and failure to train.
US Fire has also asked me to advise you that they are resolute in their willingness
to proceed to trial. With that, I have been instructed to reject your most recent
settlement demand of $2,320,000.00. I have been advised that there will be no
counter-offer from defendants until the demand of plaintiff is much more
reasonable.
Nowhere in this message is any reference to Arrowood. For the next two weeks, the parties
engaged in further settlement discussions. Cristini and the Warren defendants reached a
settlement shortly before their scheduled trial, and the parties stated on the record that they
agreed to settle for $1.5 million.
Following the settlement, counsel for the Warren defendants circulated a draft release.
The draft revealed that Arrowood would contribute $500,000 to the Cristini settlement; this news
surprised Cristini, due to the previous representations regarding Arrowood’s refusal to involve
itself. Feeling tricked, Cristini filed an eight-count counterclaim and third-party claim against
Arrowood and U.S. Fire on February 12, 2014.1 The eight counts consisted of (1) fraud as to
Arrowood; (2) fraud as to U.S. Fire; (3) civil conspiracy to commit fraud as to Arrowood and
U.S. Fire; (4) silent fraud as to Arrowood; (5) silent fraud as to U.S. Fire; (6) civil conspiracy to
commit silent fraud as to U.S. Fire and Arrowood; (7) negligent misrepresentation by Arrowood;
and (8) negligent misrepresentation by U.S. Fire.
Arrowood and the Warren defendants resolved their claims in the declaratory judgment
suit. Thus, the only claims that remained were Cristini’s claims against Arrowood and U.S. Fire.
Arrowood and U.S. Fire each filed motions to dismiss under Federal Rule of Civil Procedure
12(b)(6), arguing that Cristini did not plausibly allege the elements of fraud. The insurers also
1 This was a “counterclaim and third-party claim” because Cristini filed it in the declaratory judgment action that
Arrowood had previously filed.

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argued that Cristini’s fraud allegations did not satisfy the heightened pleading requirements of
Federal Rule of Civil Procedure 9(b).
The district court dismissed each of Cristini’s claims based on the lack of reasonable
reliance on the insurers’ misrepresentation. The insurers argued that Cristini had the ability to
determine for himself whether the Warren defendants were covered under the Arrowood
insurance policy and that necessarily means that Cristini’s reliance was not reasonable. The
district court agreed with this argument but stated: “that is not the only way to read Cristini’s
pleadings.” The district court proceeded to address what it considered a more forceful argument
on Cristini’s behalf: that Cristini relied not only on the provisions of the policy but on
Arrowood’s flat refusal to contribute to a settlement.
The district court found, however, that Cristini’s reliance on the representation that
Arrowood would not participate in or contribute to the final settlement of the case was not
reasonable because there were other sources of funding from which Cristini could ultimately
collect. While acknowledging that Cristini did indeed rely to his detriment on Arrowood’s
misrepresentation, the district court engaged in a further analysis and asked, “was it reasonable
for Cristini to rely on Arrowood’s false representation when making his decision to settle his
case for $1.5 million?” The answer to this question, according to the district court, is “no.” The
court reached that conclusion by considering the facts that the Warren defendants were “readily
collectable” and that the Arrowood insurance policy was not the only source from which Cristini
would be able to collect a potential debt. Thus, as a result of Cristini’s lacking reasonable
reliance in his allegations, the district court dismissed his fraud, silent fraud, and negligent
misrepresentation claims.

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Based on its reasoning regarding the fraud and silent fraud claims, the district court also
dismissed Cristini’s civil conspiracy claims. According to the opinion, Cristini failed to plead a
plausible civil conspiracy claim because the underlying tort pleadings failed the plausibility test.
The court stated that without the viable intentional tort claims, the conspiracy claim must fail as
well. Thus, the district court found that all of Cristini’s claims failed due to a lack of reasonable
reliance.2
In a timely motion for reconsideration, Cristini characterized the insurers’
misrepresentation as pertaining to the Warren defendants’ “maximum amount of insurance
coverage available.” This was a change from how Cristini characterized the misrepresentation in
his counterclaims and third-party claim, and the district court noted this change in its order
denying the motion for reconsideration, saying Cristini’s new position was “considerably
weaker.” Thus, the court found no palpable defect in its original opinion and denied Cristini’s
motion for reconsideration. Cristini now appeals.
Cristini failed to allege plausibly that his reliance on the insurers’ misrepresentation was
reasonable. This is true whether, first, the alleged misrepresentation was that the amount of
coverage was $2.32 million, or second, the alleged misrepresentation was that Arrowood would
simply not contribute to a Cristini-settlement. As to the first, Cristini possessed copies of the
Warren defendants’ insurance policies with Arrowood by virtue of his being named a defendant
in the declaratory judgment suit; the Arrowood policies were attached to the complaint. If
someone has either “full knowledge to the contrary of [the] representation,” Montgomery Ward
& Co. v. Williams, 47 N.W.2d 607, 611 (Mich. 1951), or “the means to determine that [the]
representation is not true,” Nieves v. Bell Indus., Inc. 517 N.W.2d 235, 238 (Mich. Ct. App.
2 With regard to the silent fraud and negligent misrepresentation claims, the district court also considered whether
the insurers had duties to disclose under Michigan law. The district court further addressed the insurers’ mitigation-
of-damages, election-of-remedies, and Federal Rule of Civil Procedure 14(a)(1) arguments.

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1994), then that individual cannot plausibly assert reasonable reliance on the representation. In
the present case, Cristini could have compared the insurers’ representations regarding the
insurance coverage amount with the policy, and this capability to determine the falsity of the first
misrepresentation keeps Cristini’s claim from entering the realm of reasonable reliance.
The foregoing principle applies with particular force in the context of an insurer’s
misrepresentation: “when the insurer has made a statement that clearly conflicts with the terms of
the insurance policy, an insured cannot argue that he or she reasonably relied on that statement
without questioning it in light of the provisions of the policy.” Cooper v. Auto Club Ins. Ass’n,
751 N.W.2d 443, 451-52 (Mich. 2008). If the insurers falsely represented that the Warren
defendants had $2.32 million of insurance coverage, Cristini could have simply examined the
policies to determine whether the representations were indeed false.
Cristini also failed to allege plausibly that he reasonably relied on the insurers’ statements
that Arrowood would not contribute. Cristini alleged that the insurers, through the Warren
defendants’ counsel, stated that Arrowood would neither participate in nor contribute to any
potential settlement in the Cristini suit. As the district court noted in its opinion, this allegation
does not depend on the insurance coverage under the written documents. Cristini argues that he
settled his claims for $1.5 million because of the defendants’ misrepresentation that Arrowood
would not participate in the settlement. Even if Arrowood did not participate in the settlement,
the Warren defendants had other assets—including tax receipts—they could use to pay off an
amount higher than $1.5 million (or the $2.32 million U.S. Fire policy limit). See Mich. Comp.
Laws § 600.6093(1).
In deciding to accept the $1.5 million settlement rather than go to trial, Cristini could not
have reasonably thought that more than $1.5 million could be negotiated if Arrowood

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participated in the settlement. Arrowood would only have added to the $2.32 million coverage
that Cristini already knew Warren had. In addition, as the district court reasoned, Cristini would
also have known that the City of Warren could pay even more from its own funds, as it had in the
Moldowan case. It is thus simply not plausible that Cristini could reasonably have relied upon
the allegedly fraudulent statements indicating that Arrowood could not or would not contribute
to a Cristini settlement.
This does not mean that a settlement for less than an insurance cap could never be based
on reliance upon a false statement that the cap was lower than it actually was. If a defendant has
few resources beyond its insurance, it may not be possible to get defense counsel to settle for the
entire amount of the insurance coverage. Something like that was going on in Kordis v. Auto
Owners Ins. Co., 18 N.W.2d 811 (Mich. 1945), a case that Cristini relies upon. Kordis involved
a plaintiff who settled for $2,000 after being told that $2,000 was the limit of the defendant’s
insurance policy. Id. at 812. The plaintiff obviously had no way to know that the defendant had
additional resources. The plaintiff was unrepresented and without anyone to evaluate
professionally the defendant’s settlement offer. Id. Further, the plaintiff was in the hospital and
“still suffering from injuries received in the accident and was physically and mentally unfit to
transact business” when the insurer’s agent made the relevant misrepresentation. Id. In the
present case, Cristini was represented by attorneys who were presumably physically and
mentally fit to transact business with the Warren defendants and the insurers. Kordis is therefore
inapposite.
MacDonald v. Thomas M. Cooley Law School, 724 F.3d 654 (6th Cir. 2013) supports the
conclusion that Cristini’s reliance on the misrepresentation was not reasonable. In MacDonald,
the Sixth Circuit held that it was unreasonable for students to rely on a school’s published

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employment statistics when the school “expressly contradicted” those statistics in the same
publication. Id. at 665. As stated previously, Cristini had the means to determine the
truthfulness or accuracy of the insurers’ statements: he had copies of the insurance policies and
notice of the Warren defendants’ assets. Thus, like the students in MacDonald, Cristini had
ready access to information that contradicted the insurers’ statements. Cristini argues that
MacDonald and similar cases stand for the proposition that an express, contradictory statement
from the defendant is necessary for reliance to not be reasonable, but these cases do not stand for
such a sweeping requirement. For the foregoing reasons, MacDonald supports the district
court’s conclusion that Cristini’s reliance was not reasonable.
The lack of reasonable reliance disposes of each claim in this case. Under Michigan law,
reliance is an essential element of the tort of fraud. See Hi-Way Motor Co. v. Int’l Harvester
Co., 247 N.W.2d 813, 815-16 (Mich. 1976). Furthermore, “under Michigan law, a court may
determine, based on the complaint, that a plaintiff’s reliance was unreasonable.” MacDonald,
724 F.3d at 664 (citing Novak v. Nationwide Mut. Ins. Co., 599 N.W.2d 546, 549 (Mich. App.
1999)). Reasonable reliance upon the defendant’s failure to disclose is also an essential element
of a silent fraud claim in Michigan. See Tocco v. Richman Greer Prof'l Ass’n, 553 F. App’x 473,
477 (6th Cir. 2013). With regard to Cristini’s civil conspiracy claims, the Michigan Court of
Appeals has stated that “a claim for civil conspiracy may not exist in the air; rather, it is
necessary to prove a separate, actionable tort.” Early Detection Ctr., PC v. New York Life Ins.
Co., 403 N.W.2d 830, 836 (Mich. Ct. App. 1986). Thus, because the fraud and silent fraud
claims fail for want of reasonable reliance, the civil conspiracy claims also fail. Finally,
justifiable and detrimental reliance is an essential element of negligent misrepresentation under
Michigan law. See Law Offices of Lawrence J. Stockler v. Rose, 436 N.W.2d 70, 79 (Mich. Ct.

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App. 1989). Because each of Cristini’s claims requires reasonable reliance in order to be
actionable, the district court properly dismissed each claim. We need not address the district
court’s alternative grounds for dismissing some of these claims.
The judgment of the district court is affirmed.

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