UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF MICHIGAN

SOUTHERN DIVISION

ROMEO’S PARTY STORE, INC.,

Plaintiff,

v.

Case No. 15-11835

Hon. Terrence G. Berg

CAPITOL INDEMNITY 

CORPORATION,

Defendant.

OPINION AND ORDER GRANTING DEFENDANT’S 

MOTION FOR SUMMARY JUDGMENT (DKT. 19)

I. INTRODUCTION

Plaintiff, unsatisfied with the money recovered for property losses under an 

insurance policy with Defendant, sued for more. As the lawsuit progressed, 

Defendant learned that Plaintiff was not the owner of the insured property despite 

having represented on the application for insurance that it was. Defendant now 

moves for summary judgment on both Plaintiff’s claims and its own counterclaim. 

For the reasons stated below, Defendant’s motion is GRANTED. 

II. BACKGROUND

On June 12, 2014, Plaintiff was operating a party store in Unit 2 of a multi-unit 

building located at 70951 Van Dyke Road in Romeo, Michigan when the unit was 

damaged by fire. Dkt. 19, Pg. ID 106. At that time, Plaintiff had an insurance policy 

with Defendant. Dkt. 19, Pg. IDs 106, 109.

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 1 of 9 Pg ID 501
2

After the fire, Plaintiff submitted an insurance claim, and Defendant paid 

Plaintiff $175,088.81 for business personal property loss and business income loss. 

Dkt. 19, Pg. ID 106. Plaintiff was not satisfied with its recovery, however, and filed 

this lawsuit seeking to recover an additional $99,894.18 for improvements and 

betterments including acoustical treatment, electrical work, heating and cooling 

work, and other things. Dkt. 19, Pg. ID 106.

During discovery, Defendant learned that Plaintiff did not own Unit 2. On the 

application for insurance, however, Plaintiff had marked the box for “owner.” 

Dkt. 19, Ex. 10, p. 10. In fact, Plaintiff, the corporate entity Romeo’s Party Store, Inc.,

had never owned Unit 2; Vinisia Bahoura, who owned Plaintiff, had herself purchased 

Unit 2 on a land contract in 2010 but lost the property to Fifth Third Bank. 

Indeed, Fifth Third became the owner of Unit 2 more than two years before Plaintiff 

applied for insurance. Dkt. 19, Pg. ID 110. Fifth Third’s ownership came to pass as 

follows:

Prior to 2010: George Adams owned all units at 70951 Van Dyke Rd., 

but had loans with Fifth Third

2010: Vinisia Bahoura, owner of Plaintiff, purchased Unit 2 from Adams 

via land contract

2011: Adams defaulted on loans with Fifth Third, and a foreclosure 

receiver was appointed

2011: Foreclosure receiver notified Bahoura of Adams’s default, and 

requested that land contract payments be made to Fifth Third. Bahoura 

did not make the payments.

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 2 of 9 Pg ID 502
3

November, 2011: Foreclosure receiver filed lawsuit against Bahoura 

for possession after land contract forfeiture.

February, 2012: Fifth Third became owner of 70951 Van Dyke Rd., 

Units 2-7, via Sheriff’s Deed. 

April, 2012: Judgment of forfeiture entered against Bahoura.

June, 2012: Redemption period expired without Bahoura redeeming

Dkt. 19, Pg. IDs 110-111.

After learning these facts, Defendant filed a counterclaim to recover the difference 

between what it paid Plaintiff under the policy and the premiums Plaintiff paid for 

the policy: $172,176.81. Defendant now seeks summary judgment on both its 

counterclaim and Plaintiff’s claims. Dkt. 19.

III. ANALYSIS

A. Standard of Review

“Summary judgment is appropriate if the pleadings, depositions, answers to 

interrogatories, and admissions on file, together with any affidavits, show that there 

is no genuine issue as to any material fact such that the movant is entitled to a 

judgment as a matter of law.” Villegas v. Metro. Gov't of Nashville, 709 F.3d 563, 568 

(6th Cir. 2013); see also Fed. R. Civ. P. 56(a). A fact is material only if it might affect 

the outcome of the case under the governing law. See Anderson v. Liberty Lobby, Inc., 

477 U.S. 242, 249 (1986). On a motion for summary judgment, the Court must view 

the evidence, and any reasonable inferences drawn from the evidence, in the light 

most favorable to the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith 

Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted); Redding v. St. Edward, 

241 F.3d 530, 531 (6th Cir. 2001). 

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 3 of 9 Pg ID 503
4

“As the moving parties, the defendants have the initial burden to show that there 

is an absence of evidence to support [plaintiff’s] case.” Selhv v. Caruso, 734 F.3d 554 

(6th Cir. 2013); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the 

moving party has met its burden, the non-moving party “may not rest upon its mere 

allegations or denials of the adverse party’s pleadings, but rather must set forth 

specific facts showing that there is a genuine issue for trial.” Ellington v. City of E. 

Cleveland, 689 F.3d 549, 552 (6th Cir. 2012) (citing Moldowan v. City of Warren, 

578 F.3d 351, 374 (6th Cir. 2009)).

B. Discussion 

Defendant asserts one argument in support of summary judgment on both 

Plaintiff’s claims and its counterclaim: Defendant may rescind the policy because 

Plaintiff made a material misrepresentation in the application by stating that it

owned Unit 2 when it did not. Dkt. 19, Pg. IDs 112-113. And Defendant asserts two 

additional arguments in support of summary judgment on Plaintiff’s claims: (1) that 

Plaintiff is not entitled to compensation for its lost use-value of the improvements 

and betterments and alternatively (2) that Plaintiff had no insurable interest in the 

property at the time it applied for insurance. Dkt. 19, Pg. IDs 113, 117. Because the 

Court finds that Plaintiff’s misrepresentation as to its ownership of Unit 2 allows 

Defendant to rescind the policy, the Court will not reach the latter two arguments. 

1. Defendant may rescind the policy because Plaintiff 

misrepresented who owned Unit 2

In Michigan, “[i]t is the well-settled law . . . that where an insured makes a 

material misrepresentation in the application for insurance . . . the insurer is entitled 

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 4 of 9 Pg ID 504
5

to rescind the policy and declare it void ab initio” (void from the outset). Lake States 

Ins. Co. v. Wilson, 231 Mich. App. 327, 331 (1998) (citing Lash v Allstate Ins. Co., 

210 Mich. App. 98, 101 (1995)). When the misrepresentation is innocent rather than 

intentional, the insurer may still rescind the policy so long as the insurer relied on 

the misrepresentation when issuing the policy. Lash, 210 Mich. App. at 103.

A misrepresentation is material when, as a result of the representation, the insurer 

issued the policy when it otherwise would not have done so. See Springborn v. Allstate 

Ins. Co., 2010 Mich. App. LEXIS 1893, at *14-15 (Mich. Ct. App. 2010).

Here, Defendant offers evidence that it would not have issued the policy had it 

known that Plaintiff did not own Unit 2. Dkt. 19, Pg. IDs 112-113. 

Specifically, Defendant submits a declaration from Susan Duhr, a Regional 

Underwriting Manager of Defendant. Dkt. 19, Ex. 18. Ms. Duhr states that she 

reviewed Plaintiff’s policy application and that Defendant would not have issued the 

policy had it known that Plaintiff did not own Unit 2. Id.

Unfortunately, Plaintiff’s response to Defendant’s argument consists of only the 

following two sentences:

Dkt. 20, Pg. ID 445. This is confusing because, in citing “Exhibit 7,” Plaintiff does not 

specify whether it is referring to Defendant’s Exhibit 7 or to Plaintiff’s own Exhibit 7.

Plaintiff’s Exhibit 7 (Dkt. 20-4) is a copy of Plaintiff’s policy application. If this is the 

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 5 of 9 Pg ID 505
6

Exhibit 7 Plaintiff intends to reference, it is difficult to understand why it is “in 

contradiction to the allegations of Defendant including Exhibit 10” because 

Defendant’s Exhibit 10 is also a copy of the policy application. Dkt. 19-11. Both of 

these applications incorrectly list Plaintiff as the owner of the property, so there is no 

contradiction that the Court can see. 

If Plaintiff is referring to Defendant’s Exhibit 7, that exhibit is a copy of Plaintiff’s 

answers to Defendant’s request for admissions. Dkt. 19-8. In answer to Defendant’s 

request to admit that Plaintiff did not own Unit 2 at the time of the policy application, 

Plaintiff responds that “there had been legal proceedings” and that it had not yet been 

evicted when it applied for insurance. If Plaintiff is referring to this Exhibit 7, it is 

still difficult to understand how Plaintiff’s answer creates an issue of fact when 

compared to the policy application. If Plaintiff’s answer was intended to suggest that 

because it had not yet been evicted, it had some sort of ownership interest in Unit 2, 

this would be consistent with checking “owner” on the application—it would not be a 

contradiction that creates an issue of credibility. Such an answer would also be flawed 

because lack of eviction does not confer ownership. Plaintiff’s perception that legal 

proceedings were pending that concerned its possible eviction creates neither an issue 

of credibility nor an issue of fact. Even an innocent misrepresentation can support 

rescission where the insurance company relied on the misrepresentation. Lash, 210 

Mich. App. at 103. Plaintiff’s response creates no issue of fact upon which Plaintiff 

can rely to survive Defendant’s motion. 

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 6 of 9 Pg ID 506
7

Through record evidence including the policy application, court documents from 

the foreclosure proceedings, and Ms. Duhr’s declaration, Dkt 19, Exs. 10, 13-15, 17, 

and 18, Defendant has established that:

 Plaintiff represented in its policy application that it owned Unit 2;

 At the time of the application, Plaintiff did not own Unit 2; and

 Had Plaintiff represented in its application that it did not own Unit 2, 

Defendant would not have issued the policy

Plaintiff adduces nothing to contest these facts. Defendant’s showing is enough under 

Michigan law to allow it to rescind the policy, which defeats Plaintiff’s claims and 

means Defendant is entitled to recover the money it paid Plaintiff under the policy, 

minus the premiums Plaintiff paid for the policy. 

Before concluding, the Court notes that Ms. Duhr’s declaration suffers from an 

unfortunate lack of detail.

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 7 of 9 Pg ID 507
8

To be sure, a short declaration is not necessarily troublesome; too often lawyers 

take 20 pages to say what could be said in 10—or even in 3. But here, Ms. Duhr, with 

the benefit of hindsight, was in a position to state with clarity why Defendant would 

not have issued the policy if Plaintiff had correctly stated that it was operating a 

party store out of Unit 2 without an ownership interest in the property, with no 

formal lease agreement, and with no informal relationship with Fifth Third Bank 

that would have created a legally protectable interest in the property. 

Does Defendant have internal guidelines or rules that prevent it from issuing the 

type of policy provided here to entities or individuals with no ownership interest and

no formal or informal landlord-tenant relationship with the owner? If Defendant does 

issue such policies, would the premiums be higher? Are there aspects of the insurance 

business that would make it inappropriate for an insurer to issue a policy such as the 

one Defendant issued to Plaintiff when another entity owns the property? Would the 

insurer’s risk be higher? Although Ms. Duhr’s declaration says Defendant would not 

have issued the policy if the true facts were disclosed, the declaration does not include 

a concrete explanation of why that is so. However, in the absence of some reason to 

conclude that Defendant would have issued the policy even had it known that 

Plaintiff did not own Unit 2, the declaration provides unrebutted proof that Plaintiff’s

misstatement caused Defendant to issue a policy that it otherwise would not have

issued—evidence sufficient to prove a material misrepresentation allowing 

rescission. 

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 8 of 9 Pg ID 508
9

The Court finds that there are no issues of material fact, and that the facts would 

require a reasonable jury to find for Defendant both on Plaintiff’s claims and on 

Defendant’s counterclaim.

IV. CONCLUSION

For the reasons outlined above, Defendant’s Motion for Summary Judgment, both 

with respect to Plaintiff’s claims against Defendant and Defendant’s counterclaim 

against Plaintiff, is GRANTED. 

SO ORDERED.

Dated: December 29, 2016 s/Terrence G. Berg 

TERRENCE G. BERG

UNITED STATES DISTRICT JUDGE

Certificate of Service

I hereby certify that this Order was electronically submitted on December 29, 

2016, using the CM/ECF system, which will send notification to all parties.

s/A. Chubb

Case Manager

4:15-cv-11835-TGB-APP Doc # 26 Filed 12/29/16 Pg 9 of 9 Pg ID 509