Source: https://thompsononeillaw.typepad.com/tov_blog/fire-and-casualty-insurance/
Timestamp: 2019-04-21 10:38:47+00:00

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In Williams v. Jerviss-Fehtke Insurance Co., the plaintiff sued to secure insurance benefits for a gas explosion at a neighbor's house that damaged his property. He initially sued his insurer, Auto Owners, which claimed that he wasn't eligible for this coverage and that it was excluded in his policy. The trial judge granted Auto Owners summary disposition leaving Williams with only the argument that his agent had negligently arranged his coverage. The judge then ruled that he could not prove negligence by the agent and Williams appealed.
The Court of Appeals ruled that the trial judge had not erred in holding against Williams because "regardless of whether [the agent] was negligent in procuring an insurance policy for plaintiff, there was no evidence that any negligence on [the agent's] part resulted in damages..." The Court based this holding on a claim by the agent that no companies would offer the coverage that Williams sought. It also rejected Williams' attempt to introduce evidence that other property owners did, in fact, secure such coverage. It also rejected Williams' argument that he should be allowed to admit correspondence documenting the agent's failure to secure mortgage coverage on the property.
Farm Bureau sued its insured and the victim's family, seeking a declaratory judgment that it did not owe coverage under a homeowner liability policy. Michelle Schoemer's was the Personal Represerntative of Carl Schoemer, who died in a fire. He was living above the garage of Edward and Diana Walsh, Farm Bureau's insureds. The trial court held that the Farm Bureau policy should apply to cover Schoemer's liability claim against the Walshs, and Farm Bureau appealed.
The Court of Appeals reviewed the record and concluded that judgment should not have entered against Farm Bureau. It held that there was a question of fact with regard to whether Farm Bureau could exclude the Walsh's liability from its coverage, based on the argument that Walsh sometimes repaired vehicles in his garage and was therefore operating an excluded "business." The appeals panel rejected the insurer's argument that the insured "premises" should not include coverage for a tenant or for the garage. The Appeals Court also rejected Farm Bureau's argument that the Walsh's violation of a City ordinance was a "criminal act" that invalidated coverage.
When the Elkins' son, Steve, negligently caused a fire in their rented home, the landlord sued the Elkins and Steve for damages. They argued that tenants can be liable for property damage to the landlord's estate and that in any event, Steve wasn't a "tenant" and therefore was subject to liability. Most likely the landlord was pursuing the Elkins' renter's insurance policy.
In any event, the trial judge relied on prior Michigan law to hold that a tenant is not responsible for damage to the premises caused by negligence. The Court of Appeals affirmed this decision, pointing out that the lease did not "uneqivocally" waive Michigan's common law tenant immunity.
The landlord went on to cite recent decisions that refused to grant tenant protections to unnamed occupants of a rental property, and argued on appeal that since Steven wasn't named as a tenant, he was not entitled to immunity from suit. The Court of Appeals held that as the tenants and landlord had the same mutual expectation of Steven's occupancy of the property, he should be deemed a tenant and enjoy immunity from suit.
This seems like the right result, but is it overly cynical to point out that Judge Saad stretched the rights of an occupant to protected "tenant" status, only in the situation where it benefitted the tenant's insurer?
Theater group wins appeal after arbitration award against Secura Insurance Co.
After the Theater Group 3, LLC suffered water damage in its basement, it presented a claim o its insurer, Secura. It was ordered to arbitration, where it prevailed against an argument that the water damage wasn't covered under the policy. The trial judge upheld the arbitration award when Secura refused to pay, and Secura appealed to the Court of Appeals. This week, the Court of Appeals upheld the four year old damage claim award.
Secura's argument was that there was no evidence to contadict its defense that water seeped into the basement, and therefore the damage was excluded under the Theater Group's insurance policy. The high court pointed out, however, that "it was clear" that the water originated with a broken drain line from the icemaker in a storage room. Although workers had to "dig down" under the floor to repair the pipe, that did constitute unimpeachable proof that the water originated from beneath the ground outside the building. The insurer also raised several other arguments to the effect that the arbitrator exceeded her authority, that she misinterpreted the law, and that a tenant's lease should not have been admitted into evidence. The Court found none of these arguments to have merit. Judge Wilder issued a separate opinion, stressing the insurer's stipulation to transfer the case to arbitration and rejecting the insurer's attempt to set aside the result.
Home-Owners Insurance Company sued Mary Griffith, seeking a ruling that it did not owe her fire loss benefits. Griffith was insured by the company when she suffered a fire in her Inkster home. After the fire, the insurer demanded that she provide her date of birth, Social Security number, all former names and "her financial information." Griffith's Proof of Loss was due to the insurer on May 27, by the terms of the policy, however, she didn't mail it until that day; she hand-delivered another copy six days later.
Home Owners argued that it owed nothing to Griffith because she failed to cooperate in its investigation and failed to comply with the policy requirement that she file a proof of loss within 60 days. She argued that the demanded information was irrelevant and that she substantially complied with the POL time limit. Although Michigan has historically recognized the "substantial performance of contract rule," the Court of Appeals held that her postal cancellation date did not prove that her package was mailed on that date, and that in any event the initial POL was not signed--signature was apparently six days late. On that basis the Court held that Griffith was not in substantial compliance and could collect nothing on the policy.
Citing evidence that Griffith lived in a home that experienced a fire seven years earlier during a contentious divorce, the Court also held that "no reasonable juror could conclude" that her refusal to provide personal identification was anything other than an "intent to conceal material information from the insurer." It reached this conclusion even though, apparently, she was not a claimant in the 2003 fire loss. In a typical Henry Saad-Kathleen Jansen opinion, the appellate judges acted as jurors and interpreted the facts to allow summary disposition in favor of an insurer.
1) In Younkin v. Zimmer, the Supreme Court overturned the lower court and held that workers compensation cases need not be held in the County where the injury occurred. Younkin had objected to attending court in Dimondale, more than 70 miles from his Genessee County home, and the Court of Appeals held that pursuant to statute, which provides that the hearing must be held in "the locality where the injury occurred," he was entitled to a hearing in Flint. The Supreme Court upheld the State's decision to hold hearings only in 11 regional locations, reversed the Court of Appeals, and told Younkin that "locality" doesn't mean the same county.
2) In Ford v. Woodward Tap, Inc., the Court of Appeals reversed the trial judge and summarily dismissed the injury victim's case against a bar where a drunk struck the victim with a bottle. The Court first cited our Supreme Court's recent holding that a victim cannot prove a drunk was served, while "visibly intoxicated," through the use of a toxicologist's testimony. The Court then went one step further and held that the victim's observation that the drunk appeared to be drunk---before striking him---was inadmissible to prove visible intoxication. It also held that the victim could not hold the bar accountable for allowing the video surveillance tape from that night to be erased.
3) In DuPree v. Auto-Owners Insurance Company, the Supreme Court overturned a judgment for a woman whose home burned, and granted the relief requested by her homeowners' insurance. She had bought replacement cost coverage on her personal effects but had to take the company to arbitration for payment. The arbitrator awarded her $167,923, including depreciation of $39,673.48. Auto Owners maintained that she was not entitled to the depreciation amount because she hadn't gone out and bought the items lost, yet. The Circuit Court granted her summary judgment and the Court of Appeals upheld that decision in July of 2013. The Supreme Court reversed and ruled that since she had not yet purchased replacements (before having the money to do so...) she was not entitled to replacement value coverage--whether she thought that was what she was buying or not. Interestingly, the high Court characterized paying for damaged property as "awarding plaintiff the replacement cost," as though it were an unearned, and un-paid benefit like winning the lottery. Normally arbitration decisions are binding absent fraud or misconduct, but in this case, the Court ruled that since the decision involved a question of "coverage," it was not binding.
4) In VIa v. Beaumont Health System, et al., a panel of the Court of Appeals ruled that a malpractice victim's claim should be summarily dismissed. Via had been admitted to the Hospital, where she suffered a choking episode resulting in intubation, cardiac arrest and resuscitation. It turned out that she had a pill wrapper stuck in her esophagus. The Beaumont nurse testified that she had fed Via six pills with applesauce, but that she hadn't accidentally fed her a pill wrapper or left one where the confused, semi-conscious woman could have ingested it on her own. The family presented the testimony of a nurse expert who testified that this kind of event should not happen. The expert offered the opinion that the nurse had either negligently fed Via the pill wrapper or left it where it the admittedly confused, semi-conscious patient could self-ingest it.
The Court held that the nurse expert's testimony was too speculative and that the family could not prove that the pill wrapper came from the nurse--since the nurse denied that she accidently administered it or left it where the patient could reach it. The Court went on to hold that the family had NOT proved that this kind of event does not usually occur without negligence "because this type of injury does not ordinarily occur at all;" and therefore it could not be in the "common understanding" that it would not occur in the absence of negligence. It held that the pill package was not in the hospital's exclusive control because the husband had visited the woman. It held that the family had not proved that the pill package was not consumed by the voluntary action of the (confused, semi-conscious) patient--even though the nurse denied leaving pill packages in her vicinity; and D) that "the true explanation of the event" was not more readily available to the Hospital (even though the woman had virtually no memory of the entire hospitalization).
Does this sound like a level playing field to a reasonably objective observer?
Allstate managed to persuade 5 of 7 jurors that its insured had made a material misrepresentation in the aftermath of a home fire that was litigated in Robinson v. Allstate Prop. & Cas. Robinson, the home-owner, appealed, arguing that Allstate's attorney had attacked her character with irrelevant issues and tainted the jury's analysis of the case. The Court of Appeals upheld the verdict and affirmed the holding. It concluded that because of inconsistencies in her statements and testimony, Robinson was not entitled to collect any damages from the homeowners insurance that she had purchased.
Richard Rose's home burned down. The cause of the fire was undetermined and arson and intentional ignition could not be proved. Nevertheless, Rose was the only one home, at the time, leaving his insurer with heightened suspicion. State Farm set out upon a thorough investigation that included subjecting Rose to a mandatory "sworn, recorded statement under oath." In response to general questions about his financial status, Rose did not disclose that he had pending tax liens and judgments. On this basis, State Farm alleged that he was entitled to no insurance recovery because he was guilty of material misrepresentations that voided his coverage. The trial judge agreed and granted summary disposition in favor of State Farm.
The Sixth Circuit reversed. It held that the allegations by State Farm created a question of fact with regard to whether Rose had mis-led State Farm's investigators. After hearing all of the evidence, a jury must decide whether he intentionally made a material misrepresentation that should void his coverage. After all, contrary to the belief of many Republican judges who bow to the will of their insurer-buddies, people do still enjoy the Constitutional right to a jury trial by their peers.
Nadia Sleman and her insurer, Nationwide, sued Bissell Homecare after a fire damaged the Sleman home. They argued the fire was caused by a Bissell carpet cleaner. Sleman was ultimately awarded a verdict of $40,000.00 and Nationwide was awarded $150,000.00 by case evaluators, and Bissell conditionally accepted this award "if both plaintiff accepted." Nationwide rejected the award, and at trial the jury agreed with the evaluators, pretty much, and awarded Sleman $31,000 and Nationwide $130,000.00.
The trial judge rejected Bissell's claim for case evaluation sanctions because the verdict, plus interest, was ten percent better than the evaluators had predicted. Bissell appealed this outcome and also appealed the award to Sleman, to the extent it included damages for emotional distress suffered as a result of propety damage. The Court of Appeals noted that in 2013, the Republican majority of Michigan's Supreme Court rejected a claim similar to Sleman's and limited recoverable damages to "economic" injury. On that basis, Sleman's verdict was reduced to her deductible of $1,000.00.
On the other hand, the higher court ruled that the trial judge erred by failing to grant case evaluation sanctions to Bissell against Nationwide: it clearly did not achieve the ten percent improvement over the $130,000.00 case evaluation that would have allowed it to avoid sanction against an "accepting" adversary.
This week the Court of Appeals reversed a trial judge's decision to grant AutoOwners summary disposition in a dispute over fire damage. KEN Holdings, LLC was forced to sue AutoOwners after a fire badly damaged the building it was buying from the titled owner Ed Wenzel. AutoOwners contended that the fire was set by Wenzel and that any defenses it had to a claim by Wenzel would also apply to all other insureds, including KEN Holdings.
The appeals court reviewed the relevant language in the loss payable provisions of the policy (where KEN Holdings was identified as an insured/loss payee). It determined that "the relationship between the loss payable provisions and the commercial property coverage declaration is unclear." Since the policy language written by AutoOwners was ambiguous, it must be interpreted to afford coverage if the unclear language reasonably created an expectation of coverage in the insured. The case was sent back to the trial judge to sort out.
Homeowners insurer's right to void policy is limited because language requires proof of "prejudice."
IDS Property and Casualty Insurance Company refused to pay Luis Villarreal and Julie Villarreal any benefits under their homeowners' policy after they suffered a fire in the home. The Villarreals had refused to give sworn statements to the insurer because they were being investigated for arson at the time and wanted to preserve their right against self-incrimination. When they got around to cooperating with the insurer, after Julie Villarreal pleaded no contest to an amended charge of attempted insurance fraud, IDS argued that it was too late and that the Villarreal's insurance was invalidated by their failure to give sworn statements when demanded.
The Villarreals appealed the trial judge's dismissal of their case. The Court of Appeals recognized that the Constitution's Fifth Amendment right to avoid self-incrimination applies only to criminal cases and not to pending civil actions. Nevertheless, it reversed the trial judge's decision because unlike prior pro-insurance rulings on this topic, the IDS policy allowed IDS to void its coverage only if the insureds' non-cooperation prejudiced IDS's rights. Since IDS provided no evidence of prejudice resulting from the delay in interviewing the Villarreal's, they should not have been granted summary disposition of the fire loss claim.
It should be noted that Julie Villarreal's "no contest" plea to the amended "attempted" charge is not an admission of guilt that establishes her culpability. That plea allows her to be punished criminally, and is often utilized by prosecutors and criminal defendants to extract themselves from a case (perhaps expensive and risky) that neither feels comfortable about winning.
The owners of Welch's Steak and Ribs, Inc., were forced to sue their insurance company after a fire destroyed the restaurant. At trial the insurer introduced evidence which the trial judge deemed irrelevant and prejudicial, and as a result, the judge overturned the jury verdict in the insurance company's favor. The insurer, North Pointe Insurance Company, appealed the judgment entered against it.
The Court of Appeals held that while the evidence introduced by the insurer was in fact irrelevant and prejudicial, the trial judge exceeded his authority when he entered judgment in favor of the insureds. The case was instead remanded for a new trial with the prejudicial evidence to be excluded.
The jury had held that the restaurant owners had not committed fraud, however, it apparently concluded that they may have substantially over-stated their losses. The trial judge and the higher court concluded that a combination of the admission of irrelevant evidence and instructional ambiguity required that the case be re-tried.
This week, Wells Fargo Bank prevailed in a claim against Auto-Owners Insurance after a fire in the home of Elizabeth A. Null. Null had lost her claim against the insurer because she had taken over the home and the insurance after her brother went "off the deep end," but had never put the policy in her own name. The Court held that since the original insured, Null's brother, no longer lived in the house [he had gone to jail], the premiums that Null had paid for at least five years did not entitle her to coverage under the policy because the home wasn't the "named insured's" residence.
This week the Court held that the law applies differently to banks, however. The Court examined the language of the Auto Owners policy and determined that even though Wells Fargo originally claimed that its rights were derivative of the insured's claim, Wells Fargo's rights weren't controlled by the outcome of the Null case. The Court pointed out that it could summarily dismiss Wells Fargo's claim, because Wells Fargo did not "preserve" an independent claim, but the judges decided to overlook that deficiency.
The Court ruled that Wells Fargo's recovery depended upon whether the mortgage clause in this policy created an "ordinary" or a "standard" mortgage policy. It concluded that this was not an "ordinary" policy under which the mortgaging bank or lien holder has rights no greater than the insured. Instead, this was a "standard" policy creating a direct duty on the part of the insurer to the bank.
After an extraordinary 19 pages of analysis, the opinion held that Wells Fargo's rights had not been adjudicated in the case brought by the homeowner, and that it was entitled to prove that it had complied with the terms of an independent contract with the insurance company. Summary disposition was overturned and the case sent back for further adjudication.
So insurers and banks write the contracts, courts enforce them as written, and consumers find themselves with less protection than a similarly-situated bank. An insured makes payments for five+ years on an insurance policy that protects only the bank, because the name on the policy is that of a sibling who has moved out. This is justice in Michigan's courts.
The roof of the More Food 4 Less Grocery store in Oakland County collapsed under the weight of snow. The owners had insured the building with North Pointe Insurance Company, but the insurer refused to cover the losses. The collapse resulted from a weaking of roof trusses resulting from chemical treatment of the trusses with fire retardant at installation.
It was undisputed that the owners were unaware of the weakening trusses, but the insurer argued that its coverage exclusion for "decay, deterioration, hidden or latent defects" that cause property to "destroy itself...or collapse" applied even though the exclusion specifically did not apply to collapse caused by "weight of snow, ice or sleet." The insurer argued that the terms of the policy should be modified by an understanding that "decay" provisions related only to "organic" decay and not "chemical" decay. The Court rejected this absurd argument, noting multiple dictionary definitions of "decay" that included non-organic decomposition.
The Court also rejected the insurer's argument that the collapsing trusses were not "defective" because they had been installed in accordance with existing building codes and lasted for fifty years. The appellate court agreed with the trial judge that the trusses were in fact "defective"--a term not defined in the policy--because the trusses were "faulty"--the most prevalent definition of "defective."
Court says insurer can avoid contractual obligation because victim's "proof of loss" not sworn.
Johny Salmo was forced to sue his homeowners' insurance company, Memberselect, when it delayed payment on his claim. Although the opinion authored by Kirsten Kelly and others is not clear, it appears that Salmo initially filed a proof of loss with the company but had not signed it under oath. When he later submitted a sworn proof of loss, the company rejected it.
In the meantime, the company told Salmo it "had enough information to evaluate his claim" and paid for his occupancy in a temporary dwelling. Ultimately, however, the insurer simply raised the obligation to file the sworn proof of loss within 60 days as a complete defense to its claim and stopped any further payment under the insurance contract. Salmo sued. The Court held that even though the insurer had enough information to evaluate Salmo's loss--and admitted such, and even though it continued to pay his expenses initially, it had not waived its right to a sworn POL and therefore could completely stop payment of the claim. So, the lack of a signature on the form--even in the context of the insured understanding that the insurer no longer needed it--was enough to wipe out the insurer's paid obligation.
Ginger Stein's mobile home burned in 2007. She filed a claim with her insurer, the Home-Owners Insurance Company, but the insurer claimed that the home was burned with Stein's consent and denied any compensation. The evidence cited by the insurer included a neighbor seeing a car in Stein's driveway while Stein was away, and an investigator's claim that the fire appeared to have been intentionally set by an amateur.
Stein filed suit and the case went to trial. At trial, the jury awarded Stein a total judgment of just under $200,000.00. The insurer appealed, arguing that the judge instructed the jury improperly because he told jurors that Home-Owners must prove its arson with consent exclusion with "clear and convincing" evidence. The judge adapted this instruction from the standard jury instructions relating to allegations of fraud.
This week the Court of Appeals overturned the verdict and ruled that even though the insurer is alleged fraud by the insured, it need not proved its fraud defense with "clear and convincing evidence." Unlike other parties alleging fraud, the Court held that an insurer who puts a fraud defense in its policy need only prove the contract defense by a "preponderance of the evidence." Stein will be forced to try her case again, six or eight years after the fire, and the insurer won't be held to the normal standard of proof for fraud claims.
Elizabeth Null's Cassopolis home was destroyed by fire in 2009. She and her husband had moved into the home with her brother in 1998, after he developed problems relating to alcoholism. They executed a land contract to buy the home from the brother in 1997 and recorded it at the Register of Deeds. The brother gradually stopped living in the home by 2004 and Elizabeth took over the mortgage and insurance payments by 1998, forwarding them through an escrow account. Another relative was given the brother's power of attorney and the insurer was notified of a change of address to send mailings to the attorney in Indiana in 2002 or 2003.
The insurer continued the policy with mailings to the Indiana relative and paid two small claims arising out of a roof leak in 2001 and 2006. Nevertheless, when the home burned down after collecting 11 years of premiums from Elizabeth, the insurer refused to honor its obligations, citing a clause in the policy that required the original named insured (in this case the brother who originally bought the policy in 1994) to be a resident of the home.
Two judges of the Court of Appeals wrote an opinion that allowed Auto-Owners to deny its obligations. Judge Shapiro wrote a stinging dissent, pointing out that the equities operated in favor of holding the insurer to its contract obligations, given the fact that it collected 15 years of premiums and had ample notice of the original insured's change of address.
Court holds that insurers don't bear normal obligation to prove fraud by "clear and convincing evidence."
Because fraud is such a damning accusation, it normally must be proved not merely by a preponderance of the evidence, but rather by "clear and convincing evidence." As a result, historically, if someone sets out to prove fraud, they take on a heightened burden of proof and must meet a higher standard of evidence. When Ginger Stein's home burned and she sued her insurer, Home-Owners Insurance Company, the insurer argued that she had fraudulently misrepresented both the cause of the fire and the extent of her damages.
Stein secured a verdict of just under $200,000.00, and the insurer appealed. It argued that the trial judge had committed error by instructing the jury that the insurer must prove its Affirmative Defenses with "clear and convincing evidence."
The Court of Appeals overturned the trial judge's holding, pointing out that not all of the alleged Affirmative Defenses were founded upon claims of fraud, and therefore the judge erred by instructing on a higher burden of proof. The panel then went beyond this holding and issued an opinion asserting that the insurer need not prove fraud by "clear and convincing evidence" because it was merely seeking to enforce contractual obligations in its insurance contract. In essence, the judges held that by incorporating anti-fraud language in its poloicy, the insurer reduced the standard of proof normally required to establish fraud.
The decision is a sad commentary on current special interest influences in the law: there is no logical reason why the standard for alleging and proving "fraud" should be higher for other victims of fraud than it is for insurers allegedly victimized by fraud.
Johna Benefield sued the Cincinnati Insurance Company, the Village at Stonegate Pointe Condo Association and North Management, Inc., when the refused to repair the damaged common elements of her condominium after another resident blew apart the plumbing through the negligent discharge of a handgun. Despite the clear contract language obligating the Association and its manager to repair damaged common areas, the defendants refused to make repairs, arguing that Benefield's only recourse was against the shooter and his host.
John Haley and Linda Haley sued their homeowner insurance company, Farm Bureau, after it refused to pay for fire damage to their home and contents. After a trial before a jury, the Haleys were awarded about $50,000.00 in personal property damages and $132,000.00 in damageto the structure. Farm Bureau appealed, making broad allegations of fraud and misrepresentation against the homeowners. The Court noted that the insurer took multiple statements from the insureds (as allowed under Michigan law) and that the inconsistencies attributed to John Haley by Farm Bureau could readily be explained by confusion and sloppy questioning. It specifically noted that the inconsistencies did not display an intent to deceive and were not contradicted by the evidence adduced at trial.
The trial judge and the Court of Appeals refused to disturb the jury's verdict, pointing out that Farm Bureau had thoroughly examined the issues before the jury, which had concluded that the policy should not be voided based on the evidence Farm Bureau considered damning. Farm Bureau also asked the Appeals Court to overturn the verdict for lack of expert testimony, despite the fact that it was supported by one "cause and origin" burn expert, two firefighters with a combined 50 years of experience, and one public adjuster with twenty years' experience. The court also noted that the conclusionn that the fire was "unintentional" was fully corroborated by thee firefighter's discovery of heat gun near the washing machine where John Haley indicated he was attempting to thaw a frozen pipe. Haley had given the fire department this explanation at the time they responded to the fire.
Walter Radu was a long-time firefighter in Dearborn. His car burned in a neighboring park and he filed a vehicle damage claim. The Auto Club, his insurer, asked Herndon & Herndon to investigate. The ACIA investigator concluded the fuel line had been intentionally cut and that Radu's actins were suspicious, and asked the Oakland County Sheriff's Office to investigate.
The Fire Investigator for the Sheriff conclude that Radu set the fire and the Prosecutor issued a warrant. Ultimately the Prosecutor chose not to pursue the claim and Radu sued the Auto Club. It resolved the claim with the insurer and exectuted a Release that was final as to ACIA and "its representatives." Radu then sued the investigators.
Michele DuPree was forced to sue Auto Owners to enforce the decision of the arbitration panel whom the parties chose to decide DuPree's Replacement Cost claims. Even after the appraisal/arbitration process ended in a judgment in DuPree's favor, Auto Owners attempted to require her to produce receipts in order to enforce the decision. The Court held that Auto Owners was illegally attempting to undermine the judgment and to challenge the arbitrators' decision.
AutoOwners also argued that DuPree's patience in wading through this process should be "rewarded" by a ruling that she could not enforce the judgment because she didn't sue within one year of AutoOwners' formal denial. Under Michigan law, the statute of limitations for a casualty claim is "tolled" or extended during negoitations and investigation, but begins to run when a "formal" denial is issued. AutoOwners' argued that its adjuster's letter that called plaintiff's receipts "incomplete and insufficient" but then stated "I look forward to... helping [you] complet the claim" ABSOLUTELY COULD NOT be interpreted as an "explicit and unequivocal" expression that she must "pursue further relief in court."
Toni Hall was killed when a trailer towed by Thomas Dells detached from Dells' van, crossed the centerline, and struck the windshield of her car. Her family sued for wrongful death. Dells had homeowners liability insurance that generally excluded liablility arising out of "motor vehicles" and "towed trailers." The family argued that at the point of impact and death, the trailer was not "towed" and therefore Pioneer's liability coverage should apply to compensate the Hall family for the death.
The Court held that while this was a clever argument--and while it seems to fit the exact insurance language (regardless of intent), the trailer fell within the exclusion for "motor vehicles" and "towed trailers" because the towing van "played an integral and indispensable role" in causing Hall's death. It held that the death would not have occurred if the trailer had not been towed, regardless of whether it was "towed" at the moment of impact.
The decision makes sense in a common sense sort of way, but similar "common sense" interpretations of insurance language are ignored if the precise language would appear to insulate an insurer from coverage. It seems like another example of legal interpratation of insurance contracts in the insurer's favor--either on the basis of the precise language, or on the basis of "common sense" despite the precise language. Insurers seem to win either way.
Marvin and Debrah Micheau sued their insurance agency and agent Steven Patrick Braun in Delta County Circuit Court. They had experienced a fire in one room before purchasing insurance and decided they needed coverage. The house was then destroyed by a second fire several months later. The insurance policy they had purchased did not cover the fire because the insurance company claimed Micheaus had misrepresented the fact that the home was "under construction."
According to Debrah, when they purchased coverage, she called Braun and answered his insurance application questions over the phone. She claimed that she explained to Braun that they had experienced a fire, that they were making repairs, and asked Braun to mail the policy to her temporary rental address. She claimed that by Braun's explanation to her, the house was not "under construction" at the time the damaged ceiling was being repaired.
Oak Creek Apartments hired Manuel Roofing to repair the roof of one of its buildings. The roofer was required, under the contract, to secure the interior against inclement weather. Unfortunately, it apparently didn't do an adequate job and the residents incurred substantial interior damage. When the Apartment complex sued Manuel, it sought coverage from its commercial liability carrier, Hastings Mutual. Hastings argued that it owed no indemnfication under its liability coverage because the damage resulted from Manuel's deficient performance and did not constitute an "occurrence" under the policy.
The Court rejected Hastings' analysis, pointing out that it was inconsistent with existing law relating to work product and "occurrence." The Court acknowledged that there was a difference of opinion with regard to what constitutes an "occurrence" but that Hastings' defense did not qualify under either interpretation. Since the damage involved property in addition to Manuel's work product (the roof) the damage was an "occurrence" under the liability policy: The only disagreement with this analysis was a previous holding that would require proof that the contractor actually intended for the damage to occur. Under either of these analyses, Manuel had paid for coverage for the apartment owners' interior property.
Kendall and Louise Boutwell sued their neighbors, the Smiths, after the Smiths used a bulldozer to clear the property line. No one claimed that the Boutwells had actually given the Smiths permission to enter their property and knock down trees, and the Boutwells sought statutory treble damages for the damages the Smiths caused. The Smiths claimed that the Boutwells' failure to object to their plan constituted implied consent and the Smiths' insurer defended the trespass claim brought by the Boutwells.
A jury placed a value of only $2600 on the damage caused by the Smiths' bulldozer and the damages were not trebled under the statute. Because this value was less than 90 percent of the case evaluation procedure value, the Smiths' insurer sought recovery of their attorneys' fees. The attorneys charged $135-$150 per hour, so the judge awarded the latter amount in sanctions, even though he considered that $250 per hour would also be a reasonable charge.
Both parties appealed these outcomes. Unfortunately for the Boutwells, they drew an appellate panel composed of Christopher Murray, Jane Markey and William Whitbeck, all staunch Republican conservatives who believe that the justice system is an impediment on commerce. Judge Murray, in particular, virtually always rules in favor of wealthy "special interest" defendants like insurance companies, health care providers and the like.
Not only did the appellate panel uphold the jury's decision on damages and its failure to award statutory damages, it also reversed the trial judge and awarded $250.00 per hour in attorney fee sanctions. The trespassers will be rewarded for entering the Boutwells' property by a recovery of an additional 67% on top of their insurers' attorneys' fees. One doubts whether the Boutwells believe that justice was served in this case and it is hard to blame them.
Cheyenne Usewick and her husband purchased homes and sold or rented them for a number of years. They insured the homes through Safeco and a local agent, the Marsh Agency in Genessee County. In 2008, a home they owned in Davison was severely damaged by fire. When Usewick made a claim under the policy, Safeco filed suit to void the policy, claiming that the application for coverage contained material misrepresentations.
The trial judge agreed and granted summary disposition, and Usewick appealed. Safeco pointed to four statements it deemed "material misrepresentations:" Under "maintenance condition," a box had been marked "excellent," a fact that the insureds agreed was inaccurate. The agent had checked this box after a "drive-by" investigation and a review of the appraisal. He later testified that if he had checked the interior of the dwelling, he would have described the condition as "poor."
Safeco argued that although the condition of the interior played no role in causing the fire, it would not have underwritten coverage on the home if it new the interior was in poor condition and the dwelling unoccupied. The insureds argued that they did not describe the interior as "excellent" and did not notice that their agent had. The Court held that it did not matter where the misrepresentation originated: having signed the application for insurance, the insureds were responsible for the misrepresentation and it allowed Safeco to rescind the coverage.
The Court also pointed out additional misrepresentations that would have entitled Safeco to rescind: the application box asking whether the property was currently "for sale" had been marked "no," which the Court deemed incorrect. The home was occupied by a renter who had signed a contract to purchase the property from Usewick. Furthermore, the Court pointed to the fact that the Usewicks testified they had a general intent to sell every investment home they purchased and the husband had identified another potential buyer for the instant home. Based on these facts, the Court "inferred" that the home was, in fact, for sale at the time of the fire. Again, the fact that the property may have been intended for sale was unrelated to the fact of the fire.
Next, the Court pointed to the box on the application that asked whether the property was "vacant." Although the Court looked to the fact that a tenant had moved in and signed a purchase agreement as demonstrating the property was for sale, it also noted that the tenant testified that he moved in about one month after the Usewick purchase of the home to hold that the home was actually "vacant" when it was insured. The insureds maintained that Safeco's position failed to take into account prior rulings holding that rented dwellings will always be vacant for a temporary period between tenants, making the question of "vacancy" one of timing and intent.
Lastly, the Court pointed to the fact that the application box addressing "under construction or significant renovation." The box had been marked "no" and the Usewicks claimed that restoring the kitchen did not qualify factually, and that, in any event, they did not make this entry or give this information to their agent. They considered this entry to be the agent's professional opinion. The Court deemed the entry to be a material misrepresentation given that substantial drywall work needed to be done on the first floor and the kitchen had been gutted.
Lastly, the Court held that the lower court had not erred in summarily dismissing the Usewick claim against the local insurance agent. The court held that since Usewick did not supply any evidence that she had provided the agent with more accurate information, she could not argue that the agent was responsible for errors he had included in the application that Usewick signed.
High Pointe Oil Company mistakenly pumped Beckie Price's basement full of 400 gallons of fuel oil. It was necessary to build a new home on the site as Price's home of 32 years was not salvageable. She sued for non-economic damages, arguing that she suffered mental anguish resulting from the loss of her long-time home. The Michigan Supreme Court's Republican Majority issued an opinion (4-0) rejecting any claim for damages beyond the repair or replacement of the property.
Ronald Brownlow and Susan Travis suffered a microwave fire in their home. State Farm's adjuster retained "McCall Enterprise Inc." to clean up. McCall removed the family from the home for the weekend and operated an ozone generator at a high setting to eliminate smoke damage. When the family moved back in, many home furnishings were ruined by high ozone exposure. The also alleged that they suffered health problems from lingering high ozone levels. State Farm offered only pennies on the dollar for the personal property damage, so the family sued.
The trial judge dismissed both their injury claims and their claims under the Michigan Consumer Protection Act (MCPA). Adding insult to injury, it awarded the contract more than $50,000.00 in costs against the family. The family appealed only the property damage claim against the contractor.
Antonio Washington bought property in Detroit in 2008 and insured it with Allstate. Allstate did not dispute that Washington requested a landlord or "rental dwelling" policy, which he paid for with his debit card. When the policy arrived, however, under its technical terms, it was a "homeowner policy" rather than a rental policy. In the fine print, the policy required Washington to live on the premises. Washington testified that he read what he thought were the important policy terms, but did not detect the exclusionary non-rental terms that Allstate relies on.
About a year later, Washington secured a renter for the property, however, it was almost immediately damaged by arson. When Allstate realized Washington was not living in the home at the time of the fire, it refused to cover the property loss it had insured. Suit was filed and Washington argued that Allstate's evidence in favor of its defense should be limited by Allstate's failure to produce the tape recording of his telephone application for renter's insurance. The judge rejected this argument and Washington's entire claim and granted Allstate summary disposition.
Statute of limitations is tolled when insurer discussed "final" offers but does not make statutory "formal denial"
Under the AAA policy in this case, an insured homeowner who suffers a loss must bring a legal action within one year of the loss; this is typical Michigan homeowners' insurance language. Under Michigan law, however, the statute of limitations on a homeowners' claim cannot expire if the insurer has not issued a "formal denial." In this case, Tyrosh Brown v. AAA Michigan, the parties were unsuccessful in negotiating a property loss and Brown did not sue within one year. The trial court judge granted summary disposition at AAA's request, based on the statute of limitations.
The Court of Appeals reversed, pointing out that there was no evidence in the case to support AAA's claim that it had issued Brown a "formal denial" under the statute. The Court pointed out that under longstanding law, simply making an offer that is less than demanded by the insured does not constitute a "formal denial."
Triangle Business Center, LLC, insured a commercial building with Hartford Casualty and Insurance Company through the Meadowbrook Insurance Group. Triangle received a notice of cancellation for non-payment at an obsolete business address, and two months later suffered a fire. Triangle argued that Meadowbrook, an independent agency, owed it a duty to inform Hartford of Triangle's change of address and to notify it when the cancellation notice was received.
The Court held that Meadowbrook did not owe either duty to the insured. The Court also held that while the insured's expert could testify about the standard of practice in the industry, this testimony did not create a question of fact with regard to the agency's duty to its insured. The Court explained that nothing that Meadowbrook did or did not do was sufficient to create a special duty to the insured, including its prior notification of a cancellation notice from an earlier year.
The court questioned whether the insured suffered any injury and whether it could have paid the premium if it had received notice. It ruled that the insured's agent, Meadowbrook, was not under a duty to correlate changes of address or cancellation notices such that a need to detect and inform an insured of an undelivered notice would have been identified.
American Fellowship Mutual Insurance concluded that Carey and Michael Torrice's insured home burned as a result of arson. It sued to recover the amount of mortgage payments it made to the Torrices' bank. After a trial, the jury awarded the insurer a judgment worth approximately $60,000.00, including costs and fees. The Torrices appealed, arguing a number of procedural and evidentiary errors, but the verdict was upheld.
Wael Dokho fell while delivering mail to Michael Jablonowski. Jablonowoski lived in his mother's home for several months and renewed his mother's home-owner's policy with AAA after she died. Dokho ultimately filed an injury lawsuit, but had to make substituted service on Jablonowski because he could not be located. Eventually a default judgment was entered against Jablonowoski and Dokho attempted to enforce it against the AAA policy.
AAA argued that it never agreed to insure Jablonowski and didn't know that its insured had died. It pointed to contract language that allowed it to refuse to renew the policy for a new insured and refused to pay the judgment in favor of Dokho. It also argued that it was under no duty to preserve the underwriting file which might have established that AAA had in fact agreed to insure Jablonowski after his mother died.
The court ruled that AAA owed no duty to maintain the underwriting file, even though it was on notice of the underlying liability claim. The court held that failing to keep the file created an inference that it would have been against AAA's interest, but did not create a presumption that there was adverse evidence in the file. On this basis, the court then concluded that the insurer was within its rights to apply the policy language to exclude any coverage for an event that occurred after Jablonowski's mother (the "named insured") died, even though it had written a policy renewal.
The Acorn Investment Company suffered a fire and sought to collect limited damages from its insurer, MBPIA. "Michigan Basic" denied the claim, so Acorn sued. The Court granted Acorn summary disposition and the parties then agreed to submit the claim to statutory appraisal to determine the amount of the loss. In the interim, Michigan Basic rejected a case evaluation of $11,000.00. The appraisal came back at $20,000.00 and was enforced by the trial court.
Nevertheless, the court refused to grant Acorn case evaluation sanctions, which Acorn sought pursuant to the Court rule governing case evaluation. Even though the insurer did not improve on the case evaluation by ten percent--as required to avoid sanctions under the Court Rule--the court denied sanctions because the statutory appraisal is deemed not comparable to a "jury verdict," which is the precise language of the Rule.
So the insurer wrongfully denied a claim on the basis of a defense that was summarily rejected, then rejected an evaluation that was barely half of the actual loss, but will not be required to compensate the insured for the true legal cost of holding the insurer to its contractual obligations.
Gerald and Jonna Heaton were building a home in Shiawassee County with the help of Pristine Home Builders as General Contractor. Pristine hired Great Lakes Superior Walls to install "Precast concrete foundation walls," which, unfortunately collapsed allowing the home under construction to shift. It had to be razed, and the Heatons obtained a negligence judgment against the two contractors for approximately $270,000.00.
Pristine's insurer, Auto-Owners, paid the 60% of liability attributed to Pristine. The foundation sub- did not pay its 40% share of fault, however, and the Heatons attempted to collect that balance from Auto-Owners through garnishment. The Heatons argued that under the General Contractor's insurance policy, Auto-Owners remained liable for the negligence of the general contractor's agents.
Thomas Van Duinen runs the DeZaak Management company in Alpena, renting apartments. He insured the properties with AutoOwners. When one of the tenants trashed an apartment, Van Duinen made a claim which he alleged that AutoOwners devalued. When the parties couldn't achieve a settlement, he sued. On the first day of trial, the judge interrupted his testimony to question whether he could testify about the value of the damaged property in the apartment. The judge offered the opinion that the language of the insurance agreement only allowed him to collect the diminution in market value and not the repair or replacement cost. The judge also suggested that Van Duinen was not qualified to talk about the depreciation in the value of the apartment. The judge then suggested the parties discuss settlement before the case was dismissed, and allegedly told VanDuinen privately that if he didn't settle, the case would be dismissed with sanctions.
The parties agreed to settle the claim for $4500, but almost immediately Van Duinen attempted to back out. He alleged that the settlement was based on the judge's mistaken interpretation of the law and that he was pressured into an involuntary settlement. The Court of Appeals held that since Van Duinen agreed in court that the settlement was "knowing and voluntary," he was not justified in attempting to renounce the settlement. The Court pointed out that the trial judge never actually ruled on the damage and expertise issues, and that if Van Duinen disagreed with the Judge's application of the law, he should have waited until the court ruled and then appealed the ruling. Instead, he compromised the claim under pressure.
The Court also ruled that even if the Judge discussed the case privately with Van Duinen and pressured him to settle, this did not constitute grounds for invalidating the settlement.
Kung and So Chu allowed their homeowners insurance with the Grange Insurance Company to lapse for non-payment during December of 2009. They received the proper notices of cancellation and reinstatement, although the insurer did not comply with the legal requirement that Chus' mortgage insurer be notified. The Chus suffered a home fire on New Years Day and immediately attempted to reinstate their policy by paying the premium demanded in the cancellation notice.
The fine print of the policy and cancellation notice provided that when coverage was reinstuted after cancellation, however, it would not be effective during the period of cancellation, and the Court enforced that language against the Chus. It also held that, although the insurer did not comply with the requirement that it notify the mortgagee of the cancellation, this violated a right held by the bank and not by the Chu family.
Jeff and Cindy Brittingham purchased homeowners' coverage with Michigan Insurance Company. They suffered a flooding loss on July 8, 2008. The employed a company named ServPro to clean their ducts work and on Jluy 24, it sprayed an anti-microbial that caused the family to suffer illness. They were forced to leave the home for a period and made a claim against their insurer. While it was undisputed that the insurer was on notice of the claim, it argued that a new notice was required with regard to spraying the antimicrobial.
The Court ultimately agreed and held that since more than one year passed before the family sent a written notice regarding their intent to claim damages relating to vacating the home during the anti-microbial treatment, they could not collect for those damages.
The pertinent Michigan statute requires home insurers to include a policy provision that "tolls" (or extends) the statute of limitation from the date of notice until a claim is formally denied, and the Michigan Insurance Company policy did not include this provision. The Court then incoporated the statutory language into the policy, however, since it deemed that a notice of the "new" claim had never been given in writing, it held that the tolling period did not apply and the claim was filed too late.
The Tooling, Manufacturing and Technologies Association (TMTA) is a trade group. It insured itself against employee misconduct through an employee fidelity policy with the Hartford Fire Insurance Company. It sells insurance to members and collects premiums through a subsidiary called TMTA Insurance Agency, and the premiums from these sales are apparently its primary source of income.
Although TMTA is the sole owner of the Agency and although it listed several subsidiary operations as "named insureds" under the Hartford policy, it did not list TMTA Agency separately. Thus, when Mark Tyler pilfered premiums totaling more than $700,000.00 from the Agency, Hartford argued that TMTA had suffered no loss because the losses were incurred only by the Agency. TMTA argued that this defense elevated form over substance, since the premiums would have accrued entirely to TMTA and were merely collected by the Agency.
The District Court ruled that reading the insurance policy's technical terms, regardless of what was intended, the insurer had not agreed to cover any loss that was directly suffered by an entity that was not a "Named Insured." On that basis, it denied TMTA's policy claim. The trade organization appealed. The Sixth Circuit majority upheld the decision of the lower court.
Great Northern Insurance Company insured the Rivers Edge Community Credit Union and had to pay to clean up the office after a sewer back-up occurred in the City of Allen Park on June 22, 2009. Great Northern wrtote to the "Wayne County Drain Commission," an entity that doesn't exist, at the Department of Environment, to give it written notice of the insurer's subrogation claim. A paralegal wrote back, providing a claim form and informing Great Northern that it was required to file the form within 45 days of the damage being suffered. The insurer didn't comply until several months later. When the claim was denied for non-compliance with the statutory notice provision, Great Northern sued. It alleged "substantial compliance" with the notice provision and a lack of prejudice to the municipality.
Andrew Kokas sued Citizens Insurance Company, his own insurer, after his kitchen nook fell away from the house and required substantial repair. He had purchased a "deluxe" policy from Citizens which purported to cover "collapses" of a building--or part of a building--but did not cover damages caused by "settling" or earth shifting.
In all-too-typical adjuster fashion, the Citizens representative argued that the nook had not "collapsed" because an insured collapse must be "complete, with the structure flattened." The homeowner argued that the undefined term included a shift in structure large enough to separate the nook from the kitchen and to make the floor so uneven that a tennis ball would not remain stationary on the floor. The parties also presented opposing experts' theories about what caused the nook to fall away from the kitchen.
Ultimately, the jury agreed with the homeonwer that he had purchased coverage, and granted his request for a verdict. Citizens appealed, arguing the verdict was against the great weight of the evidence, that it violated the policy language and that it was too large, given the proofs. The Court of Appeals struck down each of these arguments. It noted that there was ample evidence to support the jurors' determination of cause; that the trial judge's and jurors' interpretation of "collapse" was a reasonable interpretation of the policy language; and that the homeowner had presented adequate evidence of his resulting expenses.
North Pointe Insurance Company refused to pay Daisy Simpson's insurance claims after fire destroyed her home. The insurer filed suit to seek judicial control of the process, and after the Court defined the insured coverage under the contract, the parties stipulated to arbitrate. Both sides selected an appraiser and the appraisers selected an umpire. After the umpire reached his decision, the parties stipulated to the entry of a judgment for $118,000.00. The insurer then brought various motions in the Circuit Court to expand the record, diminish the judgment or set it aside. Earlier motions had already been decided against North Pointe by the appellate court and this last-gasp effort was also rejected. The court held that the method utilized by the Umpire to calculate the insured's recovery was a recognized approach to compensation and that the insurer was wrong in describing it as a "manifest mistake" or error of law.
Evanston Insurance Company sued its insured, Cogswell Properties, LLC, after a mutually-selected umpire awarded Cogswell a fire insurance recovery. Cogswell had purchased a large complex of buildings--at a "fire-sale" price--and one of the buildings burned to the ground almost immediately. There was an enormous discrepancy between the market value of the buildings and the replacement cost, and the company had insured the buildings at a hybrid value that was more than market but less than replacement.

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