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### STATE OF MICHIGAN

COURT OF APPEALS

MICHIGAN TOWNSHIP PARTICIPATING 1 PLAN,

Plaintiff-Appellant, UNPUBLISHED April 13, 2017

v No. 331109 Macomb Circuit Court CHARTER TOWNSHIP OF HARRISON, VIJAY PARAKH, FJN LLC, FRANK’S HOLDINGS LLC, doing business as GINO’S SURF, FRANK NAZAR, SR., and FRANK NAZAR, JR., LC No. 2015-001046-CK

Defendants-Appellees.

Before: O’C ONNELL , P.J., and G LEICHER and B OONSTRA , JJ.

P ER C URIAM

. Plaintiff insurer appeals by right the trial court’s order gra nting summary disposition in favor of defendants Charter Township of Harrison (the “Township ”) and Vijay Parakh (“Parakh”) pursuan t to MCR 2.116(C)(10). 2 We affirm.

I. FACTUAL BACKGROUND

Plaintiff sought a declaratory judgment regarding the applicab le liability limit under a liability insurance policy (the “Policy”) that it had issued to the Township. Plaintiff’s claim

1 Although the majority of the docum ents in the lower court reco rd refer to plaintiff as Michigan Township Participation Plan, the record also reflects, and this Court was informed at oral argument, that the plaintiff’s correct name is as captioned. T his is confirmed by this Court’s references to plaintiff in other cases before it. See, e.g., Michigan Twp Partic ipating Plan v Federal Ins Co , 233 Mich App 422; 592 NW2d 760 (1999).

2 The trial court also granted summary disposition in favor of d efendants Frank’s Holdings LLC, d/b/a Gino’s Surf, Frank Nazar, Sr., and Frank Nazar, Jr. (coll ectively the “Nazar defendants” or the “Nazars”) pursuant to MCR 2.116(C)(8). Plaintiff has not a ppealed that aspect of the trial court’s order.-2- relates to an underlying federal court action in which a jury f ound that the Township and Parakh had violated the substantive due process rights of the Nazar de fendants, who were the plaintiffs in that case. 3 The trial court in this case rejected plaintiff’s argument th at the wrongful conduct adjudged (in the federal court case) to have occurred fit withi n the Policy’s definition of a “Regulatory Taking of Private P roperty.” Under the Policy, the liability limit for a “Regulatory Taking of Private Property” is $1 million, whereas the liabilit y limit otherwise is $5 million.

A. THE UNDERLYING FEDERAL CASE

The Nazar defendants owned a 16,848 square foot restaurant and banquet hall located in Harrison Township called Gino’s Surf. The original facility ha d been in operation for at least 50 years. The Nazars submitted a plan to the Township for two additions to the facility, which would be constructed in two phases. Phase I was the constructi on of a patio and “tiki bar,” for which they received a certificate of occupancy in January 2008. Phase II was the construction of a 5,540 square foot area to include an antique car museum and a restaurant, which was to be connected to the north side of the existing banquet hall so tha t it could be served by the existing kitchen. The Phase II addition was on the same parcel of land as the original Gino’s Surf’s structure and had an adjoining wa ll. The Township approved the plan for Phase I in May 2007 and issued a building permit in March 2008.

The Nazars applied for a certificate of occupancy for Phase II from Parakh, a building official for the Township, on February 4, 2009. Harrison Towns hip Zoning Ordinance § 16.01 states that a building official “shall not refuse to issue a pe rmit when the conditions imposed by this ordinance are complied with by the applicant.” Another or dinance, Harrison Township Zoning Ordinance § 16.03(6), required Parakh to issue the certi ficate within five days if the project was in accordance with the zoning ordinances; if not, it required Parakh to notify the applicant within the same five-day period that the application was being denied and to provide the reason for the denial. Parakh neither issued the certifica te of occupancy nor denied the Nazars’ application as required. The Nazar’s eventually filed suit in federal court in October 2009. In their federal court comp laint, the Nazars alleged tha t, instead of fulfilling his statutory duties, Parakh harassed them rep eatedly through such actions as shutting down their grand opening party, issuing false tickets and sending them to the wr ong address, and demanding that the Nazars correct deficiencies that had nothing to do with the requirements for the certificate of occupancy for Phase II, which requirements had already been met . Parakh conducted an inspection pursuant to a court order on January 18, 2010—approx imately 11 months after the Nazars first applied for the certificate of occupancy. A tempo rary certificate of occupancy was issued shortly thereafter. It is undisputed that both the orig inal Gino’s Surf facility and the tiki bar remained operational at all relevant times.

3 See FJN LLC v Parakh , unpublished order of the United States District Court for the Eastern District of Michigan, Southern Division, entered December 12, 2 014 (Docket No. 2:09-cv14262).-3- The federal court ultimately dismissed the Nazars’ state law c laims and certain of their federal claims, allowing the Nazar ’s case to proceed to a jury trial on the issue of whether Parakh had violated their substantive due process rights by refusing t o issue a certificate of occupancy despite the Nazars’ compliance with Township ordinances, and th e issue of whether the Township was also liable for that violation under 42 USC § 1983 based on Parakh’s possession of final decision-making authority in issuing certificates of o ccupancy. 4 After finding that Parakh and the Township had violated the Nazars’ substantive du e process rights, the federal court jury awarded the Nazars $1,210,000, which included histor ical and future lost profits, outof-pocket costs, and a $400,000 punitive damages award against Parakh. The federal district court upheld the verdict and all damages awarded except the $50 0,000 for historical lost profits, which it remitted to $493,755. 5 After the entry of the federal court judgment, plaintiff reac hed a settlement with the Nazars and paid the judgment.

B. THE INSTANT CASE

Plaintiff then filed suit in the trial court, seeking a declar atory judgment regarding the applicable liability limit under the Policy. The Policy includ ed coverage for three categories of “Wrongful act(s),” with varying liability limits: (1) a genera l category of wrongful acts, excluding “Violations of Civil Ri ghts,” which is subject to a l iability limit of $5,000,000; (2) a second category of wrongful act s constituting “Violations of Ci vil Rights,” which is also subject to the general liability lim it of $5,000,000; and (3) a sub-cat egory of “Violations of Civil Rights” that are also “Regulatory Taki ngs of Private Property,” which i s subject to a liability limit of $1,000,000. Plaintiff sought a declaration that the applicable limitation of liability was the sublimit of $1,000,000 for a “Regulatory Taking of Private Prop erty.” Plaintiff also sought a judgment against the Township and Parakh for the amount it had paid over that $1,000,000 sublimit—an amount that would be equal to the settlement paymen t minus whatever amount of the $1,000,000 sublimit that would remain after the costs of de fense were subtracted. 6

All of the parties moved for summary disposition. The trial c ourt granted the Nazar defendants’ motion for summary disposition pursuant to MCR 2.11 6(C)(8), and dismissed them from the case, because those defendants were neither parties to , nor third-party beneficiaries of, the Policy. The Nazar defendants are not party to this appeal. The trial court denied plaintiff’s

4 FJN LLC v Parakh , unpublished order of the United States District Court for the Eastern District of Michigan, Souther n Division, entered March 28, 2012 (Docket No. 2:09-cv-14262).

5 The court also awarded attorney fees to the Nazars’ counsel in the amount of $272,789.75 and denied the Nazars’ attorneys’ motion to recover over $40,000 in costs. The court, however, ordered that the Nazars’ attorneys could file a bill of costs w ith the clerk of the court to recover costs in the amount of $6,099.08, which represented their costs minus a fee paid to an expert witness.

6 Under the terms of the Policy, costs were to be paid over and above the liability limit if the $5,000,000 limit applied, but were included in coverage for wrongful acts to which the $1,000,000 limit applied.-4- motion for summary disposition and granted summary disposition in favor of the Township and Parakh pursuant to MCR 2.116(C)(10), holding that there were no genuine issues of material fact regarding the applicable limitation of liability, that the gene ral liability limit of $5,000,000 applied, and the Township and Parakh were entitled to judgment as a matter of law. The trial court therefore rendered judgme nt in favor of the Township and Parakh, declaring that the $5,000,000 general liability coverage limit applied to the verd ict against them in the underlying federal court case.

This appeal followed. After filing their claim of appeal, def endants filed a motion for partial reconsideration with the trial court, which the trial c ourt denied for the reason that it lacked jurisdiction once an appeal had been filed pursuant to M CR 7.208(A). Defendants then moved this Court to remand for the trial court to consider a re newed motion for partial reconsideration, which this Court granted. 7 The trial court then considered, and granted, defendants’ motion for partial reconsideration, holding that it had improperly ruled that the punitive damages assessed against Parakh were excluded from the coverage under the $5,000,000 policy limit when no party had raised or briefed tha t issue. The trial court therefore vacated the portion of its original opinion and order discussin g that issue.

II. STANDARD OF REVIEW

We review de novo decisions gran ting or denying motions for su mmary disposition. Heath v State Farm Mut Auto Ins Co , 255 Mich App 217, 218; 659 NW2d 698 (2002). MCR 2.116(C)(10) provides for summary disposition when there ar e no genuine issues of material fact and the movant is entitled to judgment as a matte r of law. We review de novo as a question of law the interpretat ion of insurance policy language

. Wilkie v Auto-Owners Ins Co

, 469 Mich 41, 47-48; 664 NW2d 776 (2003). We also review de nov o a trial court’s determination whether a regulatory taking has occurred. Schmude Oil, Inc v Dep’t of Environmental Quality , 306 Mich App 35, 50; 856 NW2d 84 (2014).

III. ANALYSIS

There are no material facts at issue in this case. Instead, t he dispositive legal issue is the amount of coverage that the Policy provides for the acts that w ere found in federal court to have violated the Nazar defendants’ substantive due process rights. Plaintiff argues that the trial court erred when it held that the $5,000,000 general liability limit applied in this case instead of the $1,000,000 sublimit, because the wrongful acts constituted a “R egulatory Taking of Private Property” as defined in t he Policy. We disagree.

A. INTERPRETATION OF I NSURANCE CONTRACTS

Insurance policies, like other contracts, are agreements betwe en parties, and a court’s obligation is to determine and effectuate the parties’ intent. Heath , 255 Mich App at 218. In so

7 See Michigan Township Participation [sic] Plan v Harrison Charter Twp , unpublished order of the Court of Appeals, issued March 14, 2016 (Docket No. 331109)

.-5- doing, the contract must be read as a whole, and meaning must b e given to all terms of the policy. Id

. Terms that are defined within the policy must be given the mean ing set forth in that definition, while undefined terms are generally interpreted acc ording to their commonly used meaning. Id . Clear and unambiguous policy language must be enforced accor ding to its plain meaning. Auto-Owners Ins Co v Harvey , 219 Mich App 466, 469; 556 NW2d 517 (1996). Policy language is clear and unambiguous if it fairly admits of only one interpretation. Matakas v Citizens Mut Ins Co , 202 Mich App 642, 650; 509 NW2d 898 (1993). Policy language is not rendered ambiguous by the mere fact that a relevant term is lef t undefined. Heath , 255 Mich App at 219.

Any ambiguity in an insurance policy is to be construed in fav or of the insured. Singer v Am States Ins , 245 Mich App 370, 374-375; 631 NW2d 34 (2001). Exclusion pro visions also are to be strictly construed in favor of the insured. Auto-Owners Ins Co v Churchman , 440 Mich 560, 567; 489 NW2d 431 (1992).

B. THE POLICY LANGUAGE

The term “Wrongful act(s)” i s defined in the Policy as:

1. [A]ny actual or alleged error, misstatement, misleading sta tement, act, omission, neglect or breach of duty by any insured, other than any actual or alleged “Violation of C ivil rights;” [sic]

2. “Violation of Civil Rights” o ther than actual or alleged “R egulatory Taking of Private Property”; and

3. Subject to Paragraph IV, LIMI TS OF LIABILITY as herein amen ded, “Regulatory Taking of Private Property”

The Policy defines “Violation of C ivil Rights” as “the deprivat ion of any rights, privileges, or immunities secured by the Constitution and laws, including disc rimination . . . .” The Policy defines “Regulatory Taking of Pri vate Property” as “the enactme nt or enforcement of any regulation or ordinance which unconstitutionally and temporally restricts the use of private property.”

The parties agree that, because the federal court trial establ ished that the Township had violated the Nazars’ right to substantive due process, the wron gful acts were a “Violation of Civil Rights” under the Policy. If the wrongful acts were not also a “Regulatory Taking of Private Property,” then the general wrongful act policy limit o f $5,000,000 would apply. When the $5,000,000 general limit applies, plaintiff is also obligat ed to make “Supplementary Payments,” which include any costs taxed against the Township a s well as post-judgment interest. 8 If, on the other hand, the Township’s wrongful acts were a “R egulatory Taking of

8 The Policy provides:-6- Private Property,” then the sublimit of $1,000,000 would apply and would include Supplementary Payments only to the extent that they would not c ause the payment to exceed the sublimit. 9

C. INTERPRETATION OF THE POLICY LANGUAGE

Plaintiff argues that the wrongful acts in question fit within the Policy’s definition of “Regulatory Taking of Private Pro perty” because the Township’s enforcement of its zoning codes unconstitutionally (through denying the Nazars’ substanti ve due process rights) and temporally (for 11 months) 10 restricted the Nazars’ use of t heir private property. We disa gree.
As noted, the Policy defines “R egulatory Taking of Private Pro perty” to mean “the enactment or enforcement” of a regulation or ordinance that off ends in the manner described. The terms “enactment” and “enforcement” are not defined within the Policy. This Court may therefore consult a dictionary f or guidance in giving these ter ms their plain and ordinary meaning. Holland v Trinity Health Care Corp , 287 Mich App 524, 527-528; 791 NW2d 724 (2010). Merriam-Webster’s Collegiate Dictionary (11th ed) defines “enact” as “to establish by legal and authoritative act.” Black’s Law Dictionary (10th ed) provides substantially the same definition. Merriam-Webster’s also defines “enforce” with regard to laws as “to carry out effectively.” Merriam-Webster’s Collegiate Dictionary (11th ed). And Black’s defines the term as “to give force or effect to” or “to compel obedience to” a l aw. Black’s Law Dictionary (10th ed).

1. Supplementary Payments. The Company [plaintiff] will pay, in addition to the applicable limit of liability:

(a) all expenses incurred by the Company, all costs taxed again st the insured in any suit defended by the Company and all interest on the entire amount of any judgment therein which accrues after entry of the judgment and before the Company has tendered or deposite d in court that part of the jud gment which does not exceed the limit of the Company’s liability thereon.

9 This provision of the Policy provides:

Notwithstanding the amount set for th in the “Wrongful Act” limi t, the most we will pay under Coverage II for th e sum of all “loss” because of “Regulatory Taking of Private Property” susta ined by any one person or orga nization is $1,000,000. Included in this amount is the supplementary payme nts defined in the conditions applicable to S ection II, 1. Supplementary Payme nts.

10 The Nazars experienced a delay in the opening of their complet ed restaurant because the Township failed either to issue a certificate of occupancy or t o formally deny the request so to allow for an appeal.-7- Here, the action that delayed t he Nazar defendants’ ability to open the addition to their business was not the Township’s le gal and authoritative establi shment of any unconstitutional laws or ordinances, or Parakh’s actions in giving force to or c ompelling obedience to such laws or ordinances. Rather, it was Parakh’s failure to perform his duties under the relevant ordinances that required him to issue a certificate of occupancy within fi ve days of application, or to deny it and state the reasons. It was his failure to do either that de prived the Nazars of their right to appeal a negative decision, which the federal jury determined w as a substantive due process violation. See FJN LLC v Parakh , unpublished order of the United States District Court for the Eastern District of Michigan, S outhern Division, entered Decemb er 12, 2014 (Docket No. 2:09- cv-14262), 1.

Therefore, giving the Policy language its plain and ordinary m eaning, Heath , 255 Mich App at 219, we conclude that the trial court did not err when i t concluded that the definition of “Regulatory Taking of Private P roperty” in the Policy “says not hing about a loss caused by the failure to apply an ordinance consistently” and that Parakh’s d elay of the final inspection and addition of additional requirement s for issuing a certificate o f occupancy did not fall into the category of “Regulatory Taking of P rivate Property,” as defined in the Policy. Although Plaintiff argues that Parakh’s affirmative acts that formed the basis of the federal court judgment constituted enforcement of various building codes, we disagree; in the end, any restriction on the Nazars’ use of their property was caused by Parakh’s refusal to fulfill his obligation to either issue a certificate of occupancy or allow the matter to proceed to appeal, not by any enforcement of a building code. Accordingl y, the trial court properly gran ted summary disposition in favor of the Township and Parakh on the ground that these defendants wer e entitled to judgment as a matter of law concerning the a pplicable policy limit. MCR 2.11 6(C)(10).

Affirmed.

/s/ Peter D. O’Connell /s/ Elizabeth L. Gleicher /s/ Mark T. Boonstra