No Garnishment for Insurer Bad-Faith Claims: Michigan Supreme Court Confines Garnishment to MCR 3.101(G)(1) and Disapproves Rutter v King

Introduction

In Darnell Hairston v. Josh LKU, Zeeland Farm Services, Inc., Zeeland Farm Soya, Inc., ZFS Licensing, Inc., Specialty Industries, Inc., Burlington Insurance Co., and Evanston Insurance Co., the Michigan Supreme Court resolved a long-simmering procedural question in insurance litigation: may a judgment creditor (or an assignee of the insured) litigate an insurer’s alleged bad-faith refusal to settle through a postjudgment writ of garnishment?

The unanimous Court, in an opinion authored by Justice Kyra H. Bolden, answered no. The Court held that an unresolved, unadjudicated bad-faith refusal-to-settle claim is not an “asset” within the garnishable categories delineated by MCR 3.101(G)(1), because such a claim is neither liquidated nor otherwise made subject to garnishment by statute or rule. In doing so, the Court reversed the Court of Appeals and disapproved, in relevant part, the 1974 decision of Rutter v King, which had permitted bad-faith claims to proceed by garnishment.

The case arises from catastrophic workplace injuries suffered by plaintiff Darnell Hairston at a soybean processing facility. After a jury returned a gross-negligence verdict against Specialty Industries, Specialty’s insurers (Burlington and Evanston) tendered their policy limits plus interest, but a large portion of the judgment remained unsatisfied. Specialty assigned its bad-faith claims against the insurers to Hairston. Rather than filed as a separate civil action, those claims were pressed via writs of garnishment—a tactic the trial court quashed and the Court of Appeals revived. The Supreme Court’s decision restores the trial court’s ruling and clarifies Michigan garnishment practice.

Summary of the Opinion

The Michigan Supreme Court held:

Garnishment jurisdiction is strictly governed by MCL 600.4011 and may be exercised “only in accordance with the Michigan court rules.”
MCR 3.101(G)(1) exhaustively lists garnishable categories. An unadjudicated claim for insurer bad-faith refusal to settle does not fit within those categories and is not “sufficiently liquidated” to be garnished.
Subrules (G)(1)(a), (d), and (g) do not apply here:
- (a) “Property” in the garnishee’s possession: the insurers had already paid policy limits and held no funds belonging to Specialty.
- (d) “Debts” owing to the defendant: any bad-faith liability was, at best, uncertain and contingent until proven; contingent debts are not garnishable absent specific authorization.
- (g) “Judgments” in favor of the defendant: there was no judgment against the insurers.
Rutter v King (1974) is not binding under MCR 7.215(J)(1) and was wrong to the extent it suggested courts may bypass statutes and court rules to expand garnishment jurisdiction. The Court of Appeals erred by treating Rutter as controlling instead of interpreting MCR 3.101(G)(1).
Bad-faith claims are complex, fact-intensive, and ill-suited to the summary nature and limited pleading mechanics of garnishment practice; they must be litigated as ordinary civil actions.

The Court reversed the Court of Appeals and remanded to the trial court. It did not reach constitutional arguments or the sanctions issue (the latter was not appealed to the Supreme Court).

Background and Procedural Posture

Hairston suffered severe injuries at a soybean processing facility operated by Zeeland Farm Services (ZFS) and Zeeland Farm Soya. Specialty Industries assisted in the machinery’s design and installation.
After case evaluation, the claims against ZFS resolved; the claims against Specialty proceeded to a seven-day jury trial. The jury found Specialty negligent and grossly negligent, attributing 80% fault to Specialty, and awarded $13,489,447.04 plus $240,451.02 in sanctions.
Burlington (primary, $1 million per occurrence) and Evanston (excess, $8 million) were not parties to the tort suit but stipulated to pay policy limits plus interest, totaling $1,108,416.47 (Burlington) and $8,640,736.94 (Evanston). A substantial balance remained.
Specialty paid $1 million and assigned its claims against the insurers, including bad faith, to Hairston, who agreed not to execute further against Specialty.
The trial court denied a motion for supplemental proceedings, indicating the bad-faith claim must be litigated separately (or potentially in the insurers’ parallel federal declaratory action).
Hairston then served writs of garnishment on the insurers. The insurers moved to quash; the trial court granted the motions and sanctioned Hairston. The Court of Appeals reversed the quashing of the writs (relying on Rutter), but affirmed sanctions.
The Supreme Court granted argument on whether bad-faith claims can be litigated by garnishment and now reverses the Court of Appeals.

Detailed Analysis

1) Precedents and Authorities Cited and Their Influence

MCL 600.4011: The statutory source of garnishment jurisdiction. Subsection (1) authorizes garnishment of personal property in a third party’s possession or obligations owed to the judgment debtor; subsection (2) mandates that courts exercise this power “only in accordance with the Michigan court rules.” This statutory constraint frames the entire decision: no court-created expansion is permitted.
MCR 3.101(G)(1): The controlling court rule enumerating garnishable assets post-judgment. The Court emphasized that these categories are exhaustive; an unadjudicated bad-faith claim is not among them.
Detroit Post & Tribune Co v Reilly (1881) and Hill v Bowman (1876): Early Michigan authority that garnishment requires an existing indebtedness; until judgment, there is nothing to garnish. The Court invokes this historic principle to underscore the requirement of a liquidated, non-contingent obligation.
Krakowsky v Margolis (1931) and Nationsbanc Mortgage Corp of Ga v Luptak (2000): Garnishment provisions are strictly construed. This undercuts any policy-driven invitation to stretch garnishment to encompass unliquidated tort-like claims.
Royal York of Plymouth Ass’n v Coldwell Banker Schweitzer Real Estate Servs (1993): Confirms that MCL 600.4011(2) compels adherence to the court rules; garnishment jurisdiction cannot be exercised outside those procedural bounds.
Commercial Union Ins Co v Liberty Mut Ins Co (1986): The Court’s framework for bad-faith claims includes a dozen non-dispositive factors and cautions against hindsight bias. Cited to show that bad-faith determinations are complex and fact-intensive—precisely the sort of issues the streamlined garnishment process is ill-equipped to handle.
Frankenmuth Mut Ins Co v Keeley (1989; on rehearing 1990): Addresses damages and collectibility in the bad-faith context. On rehearing, the Court adopted a collectibility-focused approach to insurer liability beyond policy limits. These cases reinforce the substantive complexity and remedial nuance of bad-faith litigation—again, poor fits for garnishment procedure.
Rutter v King (1974): Held that an excess-judgment bad-faith claim could be garnished because damages were “ascertainable” as the difference between the verdict and policy limits. The Supreme Court here concludes Rutter was not binding (pre-1990) and was wrongly decided insofar as it sidestepped the governing court rules and allowed garnishment of a contingent, unadjudicated claim.
MCR 7.215(J)(1) and Schaumann-Beltran v Gemmete (2022): Pre-1990 Court of Appeals cases are not binding on subsequent panels. Used to reject the Court of Appeals’ stance that Rutter constrained it.
Standards of review cases (Ray v Swager, CAM Construction, Brookdale Cemetery, Woodman, Maldonado, Pirgu, Carter v DTN Management): Applied to frame appellate review, assess legal error, and evaluate discretion in quashing writs.

2) The Court’s Legal Reasoning

The Court proceeds from a jurisdictional first principle: courts may exercise garnishment jurisdiction only as authorized by statute and rule. MCL 600.4011(2) explicitly subordinates the exercise of garnishment power to the Michigan Court Rules. MCR 3.101(G)(1) sets the boundaries of garnishable assets. Within those bounds, a claim must be “sufficiently liquidated”—i.e., wholly due and not contingent—unless an exception is expressly provided.

Applying this framework:

MCR 3.101(G)(1)(a): “Property” in the garnishee’s possession. Because the insurers had already paid policy limits, they possessed no funds belonging to Specialty when the writs were served. Moreover, the plaintiff’s theory did not target identifiable property in the insurers’ hands; it posited an unproven tort/contract claim—something other than “property” as the rule contemplates.
MCR 3.101(G)(1)(d): “Debts” owing to the defendant. Any insurer obligation based on bad faith remained contingent until adjudicated. Under longstanding principles, contingent debts are not garnishable unless specifically authorized. No such authorization applies here.
MCR 3.101(G)(1)(g): “Judgments” in favor of the defendant against the garnishee. There was no judgment against the insurers. The plaintiff sought to use garnishment to create the very judgment he wished to garnish, which the rule does not permit.

The Court further reasons that the structural features of garnishment underscore why bad-faith claims do not belong in this procedural vehicle:

Garnishment is initiated by SCAO forms and does not require complaint-level factual pleading. The notice and joinder mechanics are streamlined, not calibrated to litigate complex, multi-factor bad-faith disputes.
Although MCR 3.101(M)(1) says disputes over garnishee liability are “tried in the same manner as other civil actions,” that procedural promise presupposes a type of liability that is properly within garnishment’s scope. It does not expand the substantive categories of garnishable assets listed in MCR 3.101(G)(1).

Against this rule-bound approach, the Court rejects the Court of Appeals’ reliance on Rutter. Rutter neither analyzed the then-effective court rules nor can it be used to broaden today’s MCR 3.101(G)(1). More fundamentally, Rutter’s “ascertainable damages” rationale does not cure the contingency problem: evidence and adjudication are still required to establish bad faith itself and the measure of recoverable damages under Michigan law.

3) Impact and Prospective Significance

The decision clarifies and narrows Michigan garnishment practice and has several practical consequences:

No garnishment shortcut for bad-faith claims: Judgment creditors and assignees must bring a separate civil action (e.g., breach of contract and/or tort bad faith, or a declaratory judgment action) to adjudicate insurer bad faith. They may not litigate the merits via postjudgment garnishment.
Procedural regularity over efficiency: The Court privileges rule-based jurisdiction and due process over the efficiency concerns that motivated Rutter. Complex insurer-liability issues will proceed with full pleadings, discovery, and trial, not within the compressed garnishment framework.
Disapproval of Rutter (1974): Parties can no longer rely on Rutter to press bad-faith claims by garnishment. Trial courts should quash similar writs absent a preexisting judgment against the insurer or some non-contingent garnishable property/debt.
Litigation sequencing: After an excess tort judgment and assignment, the creditor should file a conventional bad-faith suit. If successful and reduced to judgment, the resulting judgment would itself fall within MCR 3.101(G)(1)(g) and can be collected like any other judgment—potentially via garnishment at that later stage.
Insurer strategy: Insurers facing threatened bad-faith claims may continue to seek declaratory relief in state or federal court. Today’s ruling removes the risk that they will be compelled to litigate bad faith within a garnishment proceeding.
Trial court management: Courts should deny postjudgment supplemental proceedings aimed at litigating unadjudicated bad-faith claims through garnishment and direct parties to the appropriate civil action.

Complex Concepts Simplified

Garnishment: A collection tool allowing a judgment creditor to intercept assets of the judgment debtor that are in the hands of a third party (the “garnishee”). In Michigan, what can be garnished post-judgment is strictly limited by MCR 3.101(G)(1).
Liquidated vs. unliquidated/contingent claims: A liquidated claim is certain in existence and amount—owed “wholly due and without contingency.” Bad-faith claims are unliquidated until a court determines liability (and the measure of damages under Michigan law).
Bad-faith refusal to settle: Michigan recognizes that insurers owe duties to their insureds in settlement. Whether an insurer acted in bad faith is a fact-intensive question evaluated under multi-factor guidance (Commercial Union). If bad faith causes an excess judgment, the recoverable measure has been shaped by Frankenmuth (and its rehearing decision) with emphasis on what is collectible from the insured in determining the insurer’s exposure beyond policy limits.
Assignment: An insured may assign its bad-faith claim to a judgment creditor. That assignment transfers the right to sue, but it does not transform the unadjudicated claim into a garnishable “debt” or “property.” The assignee must file a separate action to establish liability and damages.
Case evaluation sanctions: Michigan’s case evaluation system can lead to fee-shifting sanctions when a party rejects a recommended evaluation and fails to improve its position at trial. Those sanctions were part of the judgment here but do not affect the bad-faith garnishment analysis.

Key Doctrinal Clarifications

MCL 600.4011(2) is a gatekeeper: garnishment jurisdiction exists only as the court rules permit.
MCR 3.101(G)(1) is exhaustive: unless an asset fits within its categories, it cannot be reached by garnishment.
Unadjudicated bad-faith claims are not “property,” “debts,” or “judgments” within MCR 3.101(G)(1), and they are not sufficiently liquidated for garnishment.
Rutter v King is not binding and is disapproved insofar as it invites courts to look beyond statutes and rules to broaden garnishment.

Practice Pointers

For judgment creditors with an assignment: file a separate civil action against the insurer pleading bad faith, with full factual development under Commercial Union, and address damages under Frankenmuth (On Rehearing). Do not rely on garnishment to litigate the merits.
For insurers: consider early declaratory judgment actions to frame and resolve coverage and bad-faith issues in a forum designed for complex litigation, rather than in postjudgment collection skirmishes.
For trial courts: when confronted with garnishment writs seeking to adjudicate bad faith, quash the writs and direct parties to proper civil dockets. Ensure that sanctions issues (if any) are evaluated under the correct standards and orders are clearly circumscribed.

Unresolved or Narrowed Questions

This decision addresses only unadjudicated bad-faith claims. It does not foreclose garnishment where there is already “a judgment in favor of the defendant against the garnishee” (MCR 3.101(G)(1)(g))—for example, after a separate bad-faith judgment against an insurer.
The Court did not address constitutional due-process issues argued by insurers because it resolved the case on rule-based jurisdictional grounds.
The Court did not review the trial court’s sanctions award (the Court of Appeals had affirmed it) because that issue was not presented to the Supreme Court.

Conclusion

The Michigan Supreme Court’s decision in Hairston v. LKU reshapes postjudgment practice by firmly cabining garnishment within the strict terms of MCR 3.101(G)(1). A plaintiff or assignee cannot use garnishment to litigate an insurer’s alleged bad-faith refusal to settle; such claims are not liquidated, not among the enumerated garnishable assets, and are too complex for the procedural confines of garnishment. In disapproving Rutter v King and insisting upon strict adherence to MCL 600.4011 and the court rules, the Court redirects bad-faith disputes to the ordinary civil docket—where full pleading, discovery, and trial processes can unfold. The ruling provides clear guidance to litigants and courts: prove bad faith in a separate action first; garnish only what the rules allow after liability is fixed.