Court Opinion

ID: 4650107
Source: CourtListenerOpinion
Date Created: 2021-01-08 17:00:27.862643+00
Date Added: 2024-06-11T08:01:30.731134
License: Public Domain

NOT RECOMMENDED FOR PUBLICATION
                                File Name: 21a0016n.06

                                           No. 20-1361

                          UNITED STATES COURT OF APPEALS
                               FOR THE SIXTH CIRCUIT
                                                                                       FILED
 SCOTTSDALE INSURANCE COMPANY,                            )                      Jan 08, 2021
                                                          )                  DEBORAH S. HUNT, Clerk
        Plaintiff-Appellant,                              )
                                                          )
 v.                                                       )      ON APPEAL FROM THE
                                                          )      UNITED STATES DISTRICT
 ALTMAN MANAGEMENT COMPANY,                               )      COURT FOR THE EASTERN
                                                          )      DISTRICT OF MICHIGAN
        Defendant-Appellee.                               )
                                                          )

       Before: KETHLEDGE, THAPAR, and READLER, Circuit Judges.

       KETHLEDGE, Circuit Judge. The district court dismissed under Civil Rule 12(b)(6)

Scottsdale Insurance Company’s complaint against Altman Management Company. Scottsdale

appeals and argues that the court improperly delegated a dispute about insurance coverage to

appraisers. We reject Scottsdale’s argument and affirm.

       Altman managed an apartment building and bought a policy for excess insurance from

Scottsdale. The policy covered all “direct physical loss or damage” to the building, including rents

or business lost because of the damage. The policy covered losses or damages only during a

“recovery period,” which began on the date of any damage and continued for as long as “would

be required with the exercise of due diligence and dispatch” to repair the building. The policy also

provided that appraisers could resolve any dispute regarding “the amount of loss.” In that

circumstance both Scottsdale and Altman each would choose one appraiser for an appraisal panel,

which would estimate the loss and issue an award.
No. 20-1361, Scottsdale Ins. Co. v. Altman Mgmt. Co.

       In July 2017, a fire engulfed the building. The damage required extensive repairs and

forced out all the building’s tenants. Altman notified Scottsdale of the fire and submitted claims

for lost rents and the cash value of the repairs. By March 2019, Scottsdale had paid more than

$1.5 million for repairs and lost rents. That month, Scottsdale notified Altman in writing that the

“recovery period” for the building would close in April 2019, because in Scottsdale’s view Altman

had unreasonably delayed the commencement of repairs. Altman responded that it had been

diligent and that Scottsdale’s own delay in accepting estimates for the cost of repairs had caused

any construction delays. To resolve the dispute, Altman invoked the policy’s appraisal provision

and demanded that appraisers decide the length of the recovery period.

       Scottsdale then brought this suit, seeking a declaration that whether Scottsdale’s alleged

delay extended Altman’s recovery period under the policy was a question of law for the court

rather than the appraisers. Altman for its part moved to dismiss the complaint under Rule 12(b)(6).

The district court rendered a split decision. The court held that whether Scottsdale’s alleged delay

could extend the recovery period was a question of law; and the court proceeded to answer that

question, by saying that, yes, under the policy’s terms, unreasonable delay by Scottsdale could

extend the recovery period. But the court also held that whether either party had in fact

unreasonably delayed the start of the project was a “factual question about damages” for the

appraisers to decide. The court therefore granted Altman’s motion to dismiss.

       We review that decision de novo. See Valassis Commc’ns, Inc. v. Aetna Cas. & Sur. Co.,

97 F.3d 870, 873 (6th Cir. 1996). The parties agree that Michigan law governs interpretation of

the policy’s terms.

       We affirm substantially for the reasons stated in the district court’s careful opinion. The

district court has already interpreted the policy’s terms. The remaining task is to determine the

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No. 20-1361, Scottsdale Ins. Co. v. Altman Mgmt. Co.

facts to which to apply them. And in Michigan appraisers resolve (at least in the first instance)

any factual disputes about the amount of an insured’s loss. See Auto-Owners Ins. Co. v. Kwaiser,

476 N.W. 2d 467, 469 (Mich. Ct. App. 1991). The claim here is that Scottsdale unreasonably

delayed payments for the building repairs, which delayed the start of the repair project, which in

turn delayed the tenants’ return—thereby increasing Altman’s losses. Whether an insurer has

unreasonably delayed payment is a question of fact for the appraisers. See Bronson Methodist

Hosp. v. Auto-Owners Ins. Co., 814 N.W. 2d 670, 680 (Mich. Ct. App. 2012). So too, plainly

enough, is whether the delay in payments in fact delayed completion of the repair project. The

district court was therefore correct to bow out in favor of the appraisers.

       The district court’s judgment is affirmed.

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