Michigan Coverage Decisions, Issue 153

Johnson v. Farm Bureau Ins. Co.

Unpublished. Decided July 28, 2011 Michigan Court of Appeals Docket No. 298048.

On July 23, 2008, a fire destroyed an outbuilding on plaintiff’s property. Farm Bureau insured plaintiff’s property under a Country Estate policy. At issue was whether fence building materials stored in the outbuilding were covered under the policy. Farm Bureau sent a letter to plaintiff dated September 18, 2008, stating all building materials related to fence building had been deleted from the inventory and why they were not included and not paid. Plaintiff filed an action for breach of contract on September 29, 2009. Farm Bureau moved for summary disposition under MCR 2.116(C)(7) alleging that the contractual one-year period of limitations expired before plaintiff filed the lawsuit because Farm Bureau denied coverage for the fencing materials on September 18, 2008.

The trial court granted summary disposition to Farm Bureau. The Court of Appeals affirmed on the basis that the claim for fencing materials was denied when the September 18, 2008 letter was sent and the one-year limitations period began to run at that time.

[su_box title=”Kallas & Henk Note”] Despite the fact that plaintiff continued to send correspondence to Farm Bureau asking it to reconsider its denial of coverage for the fencing materials, the Court of Appeals properly applied the clear language of MCL 500.2833(1)(q) in finding that the claim for fencing materials was denied on September 18, 2008 and the one-year limitations period expired on September 18, 2009. [/su_box]

 

White v. State Farm Fire & Cas. Co.

Published. Decided July 28, 2011 Michigan Court of Appeals Docket No. 298083.

Plaintiffs’ residence was damaged by fire. Plaintiffs hired a public adjusting firm to assist them in presenting their claim to defendant. Moss, a licensed public adjuster, was assigned to assist plaintiffs. Moss and plaintiffs signed a contract assigning the adjusting firm 10% of the total payment on plaintiffs’ claim. A dispute arose during negotiations between Moss and defendant, and Moss demanded appraisal pursuant to MCL 500.2833(1)(m). Defendant would not accept Moss as plaintiffs’ appraiser because he is not “disinterested” under defendant’s policy or “independent” under MCL 500.2833(1)(m). Plaintiffs brought this action seeking a declaratory judgment that Moss is “independent” under the statute and qualified to serve as an appraiser.

The trial court held that Moss is competent and independent under MCL 500.2833(1)(m) and qualified to serve as an appraiser despite having a contingency-fee contract with plaintiff. The Court of Appeals affirmed finding that a contingency-fee agreement does not prohibit an appraiser from being independent under MCL 500.2833. The Court found that Moss was “not subject to control, restriction or modification” by anyone, was not an employee of plaintiffs, and was capable of exercising his own judgment regarding the value of the loss.

[su_box title=”Kallas & Henk Note”] This is the first published decision in Michigan to directly consider the issue. The Court of Appeals looked to decisions of other jurisdictions, which were split on the issue, and followed the reasoning of the Florida Court of Appeals in Rios v. Tri-State Ins. Co., 714 So.2d 547 (Fla. App. 1998), which quoted the definition of independent from Black’s Law Dictionary and declined to interpret the term “independent” to limit the type of compensation which can be paid. The Court of Appeals focused on the fact that appraisers are required to be “independent”, not quasi-judicial or impartial. We think the outcome of this case is preposterous. For obvious reasons, a person who is receiving a percentage of the recovery is not “independent” by an objective standard.  [/su_box]

 

Great Lakes Mut. Ins. Co. v. Kirschner

Unpublished. Decided August 4, 2011 Michigan Court of Appeals Docket No. 295677.

Plaintiff sought to rescind a policy of insurance it issued to defendants and to preclude any claims related to a fire that damaged the property on February 1, 2009. Plaintiff alleged that defendants made misrepresentations on the application and that the policy was void on the basis of the transfer of title of the insured premises from defendants’ name into that of Ken’s Little Bear, LLC. The defendants were listed as named insureds but defendants did not “own” the premises. Title to the property had been quit-claimed to Ken’s Little Bear, LLC in February of 2008 and the LLC was not a named insured. The policy defined “insured premises” as the residence shown on the declarations page that the insured party owns.

The trial court granted summary disposition in favor of defendants finding that defendants had an insurable interest in the real property and were entitled to recover under the policy. The Court of Appeals reversed and remanded to the trial court finding that under the unambiguous terms of the policy, defendants are precluded from collecting insurance benefits because they did not own the premises.

[su_box title=”Kallas & Henk Note”] Plaintiff sought to rescind a policy of insurance it issued to defendants and to preclude any claims related to a fire that damaged the property on February 1, 2009. Plaintiff alleged that defendants made misrepresentations on the application and that the policy was void on the basis of the transfer of title of the insured premises from defendants’ name into that of Ken’s Little Bear, LLC. The defendants were listed as named insureds but defendants did not “own” the premises. Title to the property had been quit-claimed to Ken’s Little Bear, LLC in February of 2008 and the LLC was not a named insured. The policy defined “insured premises” as the residence shown on the declarations page that the insured party owns.

The trial court granted summary disposition in favor of defendants finding that defendants had an insurable interest in the real property and were entitled to recover under the policy. The Court of Appeals reversed and remanded to the trial court finding that under the unambiguous terms of the policy, defendants are precluded from collecting insurance benefits because they did not own the premises. [/su_box]

 

Kennedy v. Auto-Owners Ins. Co.

Unpublished. Decided August 4, 2011 Michigan Court of Appeals Docket No. 294955.

Plaintiffs’ unoccupied home sustained water damage as a result of two pipes bursting, presumably after freezing and thawing. Plaintiffs’ homeowners policy excluded coverage for freezing of plumbing or leakage caused by freezing while the building is unoccupied unless “you take precautions” to maintain heat in the building.

The trial court found the language requiring plaintiffs to “take precautions” ambiguous because it could mean that plaintiffs were required to take either reasonable precautions, successful precautions, or some precautions. The Court of Appeals noted that the trial court focused on the extent of the precautions, rather than the meaning of the phrase “precautions to maintain heat in the building.” The Court found that the phrase is not ambiguous when given its ordinary meaning. The Court consulted dictionary definitions, defining precaution as “a measure taken in advance to avert possible harm or misfortune.” However, the Court found a genuine issue of material fact regarding whether plaintiffs took advance measures to maintain heat in the building in order to avert the possible harm of freezing pipes.

[su_box title=”Kallas & Henk Note”] Unlike some homeowners policies, the subject policy does not require the insured to actually maintain heat in the building, the policy language only requires the insured “take precautions”. The Court of Appeals correctly consulted dictionary definitions to ascertain the plain and ordinary meaning of “precaution” and followed long-standing Michigan case law finding that the fact that a policy does not define a relevant term does not render the policy ambiguous. [/su_box]

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