TOV Injury and Safety Blog

Insurance company owes nothing to renter after fire: court holds he did not "substantially comply" with proof of loss

Jevon Johnson's apartment was gutted by fire in April of 2010.  He had renter's insurance with MemberSelect Insurance Company.  The insurer's contract required that Johnson file a proof of loss within sixty days; it also demanded that he appear for a sworn statement with "copies of police and fire reports, any photographs of the apartment, anhy lease agreements, various financial records, telephone records, any original documents relating to the purchase of destroyed personal property, a detailed contents estimate and all records supporting additional living expenses."

Fired builder cannot demand direct payment from fire insurer

Sparkle Builders I, Ltd. sued George and Brenda Boines and Farmers Insurance Exchange, arguing that the insurer should make direct payment to Sparkle for the profit it would have earned in remediating the Boines' fire-damaged home.  The Boines had retained Sparkle to make repairs and had fully paid the builders to make temporary repairs and "board up" the home.  The Boines were apparently dissatisfied with Sparkle's work and refused to retain them to make permanent repairs.  The builders then attempted to seize their insurance payments from Farmers in order to recoup the profit the builders "would have earned" under the contract. 

The Court denied them this remedy, noting that the "irrevocable assignment" of insurance proceeds in the builder's contract applied only to money actually due for repairs effected and the assignment was terminated when the contract was revoked.

Woman cannot collect damages from insurer where it did not explain one-year delay in fire loss adjustment

Sherrill Travier's home in Lincoln Park burned.  Police identified it as a possible arson but the investigation was inconclusive and no evidence tied Travier to an arson claim.  Nevertheless, the Auto Club, her homeowner's insurer simply ignored her indemnity claim.  It simply did not respond to her Proof of Loss or her attorney's letters.  When she filed suit prior to the one-year limitation period, the Auto Club "neither admitted nor denied" her claim, alleging lack of information.  Ultimately, the insurer issued full payment for the claim approximately one year after the fire. 

Pioneer State compelled to pay mold loss after mismanaging claims procedure

Barbara Pearson's cottage in Iosco County was damaged when a pipe broke and the furnace malfunctioned.  She alleged that the insurer re-started the furnace without adequately addressing the leaked water, resulting in a pervasive mold problem.  The insurer was not satisfied with the Proof of Loss Pearson filed and demanded supplemental proofs.  When those were provided it demanded a supplemental, signed proof of loss.  When that was filed, Pioneer's counsel refused to authorize a settlement of the claim because the [amended] Proof of Loss was not "timely" filed (within 60 days).  Pearson sued, and ultimately the Court of Appeals upheld her claim, although the judges' reasoning differed.  Two judges deemed the insurer at fault in failing to adequately document to Pearson the deficiencies in her original Proof of Loss and supporting data. The third judge concluded that regardless of Pioneer's conduct, the insured had "substantially complied" with the policy terms, rendering her claim enforceable.

Insurer must honor its obligations to innocent co-insured despite fraud by another insured in claiming fire-damaged contents

Roxanne Hicks was denied any insurance proceeds after her home burned because her husband had mis-stated some of the contents damaged in the dwelling. The Supreme Court recently ruled that Hicks, an innocent victim of the fire and the husband's fraud, was not prohibited from collecting for her losses.  Her sympathetic story is explained in a prior decision at 490 Mich 888.  On remand to the Court of Appeals, the insurer, the Auto Club, argued that an exclusion in its policy allowed it to refuse to compensate even an innocent co-insured after fraud by a claimant.

Court reverses another summary disposition wrongly based on "contract immunity."

Richard Burns lost his home in a fire caused by a defective wood stove.  He and his insurer, USAA, sued JCS Fireplace and a contractor, arguing that the negligent installation of the wood stove made the contractor, JCS (and their insurers) liable for the resulting fire damage.  The trial court dismissed the negligence case, citing the Republican Supreme Court's much-criticized "contract immunity" holding. 

Court "harmonizes" policy coverages and exclusions by eliminating coverage despite lack of evidence.

Lawrence and Laura Williams suffered water and mold damage in their basement when a storm knocked their power out.  They argued that the damage--some $38,000.00 worth--should be covered under their homeowners' insurance policy with Home-Owners Insurance Company (a subsidiary of Auto Owners).  Their policy covers related damage if it results from a storm-related power outage, so they thought they were set.  The insurer pointed to another exclusion, however, that limited coverage to $5,000.00 if the damage was caused by a non-operating sump pump.  The insurer argued that this provision "trumped" the coverage provision and the Court of Appeals agreed. 

The Williams also objected that there was no direct proof to support the insurer's claim that the damage was caused by the sump pump stopping.  The Court essentially held that no such direct proof was required.

Mortgage holder who forecloses after fire cannot also grab insurance proceeds

In a rare win for consumers in Michigan's courts, the Court of Appeals followed old precedent and ruled that Wells Fargo Bank, N.A. could not grab the $38,000.00 in insurance money owed by State Farm on a fire policy.  Wells Fargo had already foreclosed on the property and sold it for $64,000.00.  In doing so, under existing Michigan law, Wells Fargo extinguished its right to keep the insurance proceeds payable after the fire.  We'll see how long this decision holds up, once Wells Fargo appeals to the current insurance-beholden Republican majority on Michigan's Supreme Court.  They have shown no reluctance to overturn longstanding precedent where it will benefit their campaign benefactors.

Property insurance claim is denied based on "animal exclusion."

Lawrence P. Nolan sued Auto-Owners' Insurance Company, seeking insurance coverage for damage caused to a rental home by the tenants' 18 animals.  According to Nolan, he didn't realize that the tenants were violating their lease by keeping the animals, primarily dogs, until after they had caused considerable damage.  Auto-Owners pointed to the exclusionary language in the policy and refused to honor Nolan's claim.  Nolan argued that the policy language involving "kept" animals did not apply because he was unaware of the presence of the animals and that the damage actually resulted from the tenants' total failure to address the animals' feces and urine.  He also argued that the language addressed to "wear and tear" damage did not apply to this catastrophic situation.  The Court disagreed and upheld the parties' "utmost liberty of contracting."  It also argued that Nolan did not meet his duty of showing that he did not receive notice of AutoOwners' alleged change in the policy language.

Insurers 2 for 2 today in denying homeowners' coverage, winning dispute

Fremont Insurance Company and IDS Property Casualty Insurance Company each avoided insurance coverage to an insured this week.  Fremont ducked coverage for an ATV injury caused by its insured Nathan Kadau, while IDS avoided paying for a theft from its insureds, Steven and Helen McGuinness.

Payment with bounced check does not initiate homeowners insurance policy

Danetta Simpson purchased homeowners coverage with MemberSelect Insurance Company on April 7, 2008.  When she went to the bank to deposit money to cover the homeowners insurance check, the teller told her that the account had been deactivated and would not allow her to make the deposit.  On April 12 she discovered significant water damage to her home.  When she made a homeowners claim for the water damage, the insurer pointed to language in the Application for Insurance that rendered "null and void" any application supported by a dishonored check. The Court held that the insurer did not need to comply with the policy provisions (and state law) governing cancellation of insurance because no policy had ever been purchased.

Week delay precludes homeowner from any recovery for home destroyed by fire

Dominique Nelson sued American Fellowhip Mutual Insurance, her homeowners insurer, after her home was destroyed by fire in February of 2007.  She notified her insurer of the fire five days after it occurred. She negotiated with the carrier for a number of months before it denied her claim in its entirety on October 4.  The insurer claimed that Nelson had misrepresented the contents of the home destroyed in the fire, thus wiping out her coverage entirely.  Nelson was slow in making her way to court and didn't file a lawsuit until October 6 of the following year. The Court dismissed her claim as untimely.

Homeowner insurance claim denial is upheld by Court

State Farm denied Basim Aljazi's claim arising out of cracks on the first floor of his home.  It had previously paid for damage to the foundation and second floor caused by a burst pipe, but its inspector claimed that the first floor cracks must have pre-existed the water damage.  Aljazi disputed this claim, however, he was late in responding to State Farm's Motion for Summary Disposition and the trial court dismissed his claim.  The Court of Appeals could not decipher a proper foundation for the claims contained in his late response, so it upheld the lower court's dismissal.

Supreme Court repudiates K. F. [Kirsten] Kelly opinion denying insurance benefits to fire victim

Back in May of 2011, Judge K.F. (Kirsten) Kelly and Judge Peter O'Connell reversed a Manistee County trial judge's opinion granting fire insurance benefits to Roxanne Hicks.  The trial judge had ruled that while "unsophisticated, uneducated and naive" Ricky Hicks had attempted to defraud the Auto Club Insurance Company by including false claims for property loss, his wife, Roxanne, had not participated in the attempted fraud.  The trial judge pointed out that Roxanne, who had lost two nephews in a previous fire, was rendered virtually helpless after this fire, in part because she hadn't yet moved into the home and was pregnant with her fifth child.  The Judge held that her errors were not intentional and that she was still entitled to compensation for her losses.  Judge K.F. Kelly, who always sides with the insurer in every dispute, accepted the less-than-accurate factual summary of the Auto Club, apparently, and reversed the lower court on the assumption that Roxanne must have participated in the fraud.  She gave no deference to the trial judge's assessment of credibility and ruled there was "clear error."

Plaintiff wins causation or speculation argument between two insurers

Nationwide Mutual Fire Insurance Company paid its coverage to the Isham family after their home burned down, and then sued, under its subrogation rights, a propane company and contractor for negligence.  Nationwide argued that Parker's Propane Gas Company and Staley Plumbing and Heating caused the fire when they installed a compromised flexible gas line behind the Isham's oven.  The Defendants argued that Nationwide's claim was based entirely on speculation about whether a leak fueled a fire in the oven-drawer for several hours, or whether the fire was caused by a faulty temperature regulator.

Farm Bureau succeeds in another effort to eliminate coverage

The Plaintiff Raynice Starr argued that Farm Bureau owed coverage for her home damaged by fire, even though she had been sent a notice of cancellation days before.  She claimed that the "continuous renewal" and "cancellation" provisions in the policy were conflicting and ambiguous and should be interpreted against the drafter, Farm Bureau.  The Court found no ambiguity in the policy language and a failure by the Plaintiff to preserve the ambiguity issue in the lower court.

Court allows insurer to void policy; discounts insured's claim of fault by agent in application

In Sahabi Convenience Store, Inc. v. State National Insurance, the plaintiff sued his commercial liability insurer to cover damages resulting from three incidents that occurred in 2007 and 2008. The insurer argued that there were material misrepresentations in the application for insurance that justified it in voiding the policy and refusing to pay claims.  The insured argued that he provided accurate information to the agent, that his limited English may have contributed to flaws in the application, but that in any event, there was no proof of intentional wrong-doing.

Court of Appeals reduces fire victim's insurance judgment against AAA

Shawana Williams' home burned in 2003.  AAA insured the home and made a partial payment of benefits but refused to pay Williams' demand for related expenses while she could not live at home.  The trial court awarded her damages but did not give AAA the credit it sought for an initial payment.  AAA appealed seeking application of the credit and a reduction of the judgment for living expenses.  The Court of Appeals overturned the lower court's failure to apply the initial credit but upheld the living expense award.

Court overturns summary disposition in favor of insured; Auto-Owners granted trial on exclusion and damage limits imposed

Thomas and Kristin Kennedy suffered extensive water damage to the home they had insured with AutoOwners.  The Kennedys were attempting to sell the home after moving to a new home.  They had initiated several precautions (including enhanced insulation, use of multiple furnaces, using a "winter watchman" temperature monitoring device and making regular visits to the home) to prevent the pipes from freezing, but AutoOwners contended that they remained subject to a policy exclusion that denied any coverage for damages caused by freezing pipes "unless you take precautions...(b) [to] maintain heat in the building."

Farm Bureau avoids homeowner obligation through fine print and delay

Gary Johnson insured his home with Farm Bureau.  He probably doesn't any longer.  He bought Farm Bureau "Country Estate" coverage which provided structure coverage for the out-buildings on his non-farm home. When a structure on the "estate" burned, Johnson made a claim for the fire loss of the building and its contents.  The building was worth more than the insured value of $50,000.00, so that amount was paid without dispute.  The outbuilding contained extensive materials Johnson had purchased and stored with an eye toward building a fence around the "estate."  Farm Bureau argued that its policy did not cover personal property stored in any outbuilding under "Country Estate" language, and that Johnson would have needed to purchase a farm policy to secure coverage for these materials and other personal property stored in the outbuilding.  The parties exchanged several letters arguing about the language of the policy, and Johnson did not sue Farm Bureau within 12 months of the insurer's initial denial of the personal property claim.  The court held that under the policy language, the statute of limitations had run and Johnson could not pursue any claim for insurance coverage of the fencing materials.

Court upholds exclusion for damage caused by ice and wind

Dennis and Elaine Kibby suffered $28,000.00 dollars in damage to their home after wind and ice shifted it off the foundation. The insurer, Auto-Owners, argued that the damage was excluded because all damages caused to a home foundation by any form of ice or wind were excluded in the insurance policy. The Court of Appeals upheld the application of the exclusion.

State Farm loses fight to invalidate insured's choice of appraiser

Steven and Gail White suffered a major home fire and experienced difficulty in negotiating a pay-off with their insurer, State Farm Fire & Casualty.  They invoked the statutory arbitration agreement, and selected their appraiser to serve as their representative on the arbitration appraisal panel.  State Farm filed a declaratory judgment action and attempted to remove the insureds' appraiser because he was to be paid on a contingent basis.  State Farm wanted to apply to the parties' designees the same rules applicable to the umpire-appraiser. 

Farmers Mutual loses Wexford County arson allegations; must pay fire coverage

Jason and Melaney Cardinal's home was virtually destroyed by fire one morning as they were preparing to leave for work.  The fire started in a joist channel in the basement above the water heater. The local fire authorities deemed the cause "undetermined," however, Farmers hired experts who claimed the cause must be arson because they could not find an electrical explanation.

Insurers are 5-0 on the day; fire claim by innocent wife is overturned on appeal

Roxanne Hicks did not finish high school; she has four kids and was pregnant with a fifth when the home she was moving in to burned to the ground.  She was required to sign a loss form for the Auto Club, documenting the items lost.  The record showed that she was particularly distressed at the time because years earlier she had lost several close family members in a house fire.  The Trial Court found that her husband inflated the value of the personal goods destroyed in the fire, resulting in a false Proof of Loss.  The Auto Club took advantage of the evidence of a falsified claim to deny payment of any claim on the fire, but the Court found that Roxanne was an innocent party to the misrepresntations and allowed her to recover for her property.

Court upholds Nationwide's denial of homeowner coverage for water seeping from upstairs plumbing

 Steven and Karen Schwartzenfeld noticed water staining on the ceiling of their downstairs dining room.  They called in a plumber who identified problems with the upstairs bathroom that had created a slow seepage.  The water had recently penetrated the ceiling plaster after ruining the sub-floor and would cost about $40,000.00 to repair.

Nationwide claimed an exclusion in the policy covered slow leaks and that it did not have to provide any payment for the necessary repairs.  It also claimed that the insureds had waited too long to make a claim because the water seepage happened more than a year earlier.  The homeowners  claimed that the damage to the ceiling had just happened and that  Nationwide should have to cover the "new" damage.  The court disagreed and dismissed their claim based on the "fine-print" exclusion.

Home-Owners' insurance denial overturned on appeal

Home Owners Insurance Company refused to pay Ginger Stein's homeowner's fire insurance claim because it claimed she had misrepresented a material fact in her application for benefits after the loss.  The trial judge summarily granted judgment in favor of the insurer, concluding that Stein "did not tell the truth," and Stein's attorneys appealed.  The higher court reversed and sent the case back to be resolved after the trier-of-fact had the opportunity to assess the parties' credibility.  It noted that a judge may not make credibility determinations in granting summary disposition.

Court allows insurer to deny payment because owner didn't file formal proof of loss in 60 days

James Durall's home in Flint burned to the ground.  When the adjuster inspected it the day after the fire, it was "in the basement" with only a chimney standing.  By  law, the insurer, Home-Owners, a division of Auto Owners, was obligated to provide Durall with a Proof Of Loss form withinn 30 days of the fire.  By contract with Auto Owners, Durall was then obligated to return the formal proof of loss within 60 days.  AutoOwners denied Durall's claim and refused to pay for the insurance he purchased because he was late filing the Proof of Loss.

Farm Bureau avoids paying for fire damage

Terrence Barr's home in Genessee County and Farm Bureau, his insurer, refused to provide the coverage he had paid for.  Barr had been unemployed for several months, the home was in foreclosure, and  Farm Bureau believed that Barr had a "guilty connection" to the fire.  Even though authorities found no evidence of use of an accellerant in the fire,  the fire consultant hired by Farm Bureau concluded from his examination of the burn pattern that an accelerant had been used.  When Barr sued, Farm Bureau presented these circumstances to the jury and achieved a verdict that it was not required to honor its insurance contract.

Insurer's subrogation action dismissed where it presents no evidence confirming causation

MEEMIC Insurance Company sued DTE Engery and MichCon after it paid claims arising from a housefire.  MEEMIC's insured testified that he heard a hissing sound behind his home and found the rear wall--near the gas meter--engulfed in flames.  MEEMIC argued that the fire resulted from a defect in the meter, however,  the expert whom it retained to testify could confirm only that the meter "could not be eliminated" as a cause of the fire. 

Court upholds insurer's expert's testimony underlying verdict against homeowner

Terrance Barr sued Farm Bureau to collect on the fire insurance he purchased for the home he lived in.  Barr is one of many Genessee County's unemployed citizens, and his  home burned while it was in the process of foreclosure.  He and his girlfriend and another friend escaped the fire but he could not collect his insurance proceeds because Farm Bureau decided he had a "guilty connection" to the fire.

The State Police investigated and could not find evidence of accelerants.  They did not charge anyone with arson.  Nevertheless, Farm Bureau hired its own investigator,  who couldn't conduct a complete investigation.  Despite the lack of accelerants in the samples taken by fire authorities, this man testified that he believed the fire was arson resulting from the use of accelerants. Barr's attorneys attempted to exclude his evidence on the grounds that he did not follow the methodology in NFPA 921 and therefore his scientific opinion was not admissible under MCL 600.2955(1).

The Court of Appeals upheld the trial court's decision that Farm Bureau expert's testimony was admissible, despite the fact that his opinion contradicted the Fire Marshall's failure to find evidence of the use of accelerants.  It concluded that he adequately explained why his methodology diverged from the recommendations  of the National Fire Protection Association's standards. 

Two principles can be deduced from this outcome:  the first  is that courts will almost never overturn a jury verdict.  Verdicts only get over-turned when a jury has awarded an injury victim more money than the reviewing court can stomach.  The second principle this outcome demonstrates, is the practical impact of the "scientific" limitation on expert testimony.  If an interested person researches the statute and compiles the result of cases applying it, he or she will discover that it is only used to exclude injury victims' expert testimony.  By our count, it has never been drawn upon to limit insurer's or defendant doctor's expert testimony, regardless of the inadequacy of the methodology alleged.

Insurer avoids responsibility for E and O claim because of late notice

Daniel Johns sued his title company's Errors and Omissions insurance carrier, Evanston Insurance Company, after the title company conducted a closing that allegedly relied upon a forged deed.  Johns' took an assignment of the title company's coverage rights,  allowing him to attempt to pursue the company's insurance coverage.

Immediately after the suspect closing, the attorney for Johns--a purported buyer of the subject property--had written to Johns' title insurance agency, alerting the company to Johns' third-party interest in the property.  The involved parties attempted to negotiate a settlement unsuccessfully, and Johns ultimately took the assignment from the title company and sued the E and O carrier for coverage.

Claim against building inspector is dismissed

Ira and Yolanda Gordon sued their builder and the Chikaming Township Building Inspector, Howard Gaul, after the roof of their new home collapsed.  According to the appellate judicial opinions, the builder, Jim Lippens Construction, Inc., had literally designed and built the roof to fail, by failing to comply with standard buiding codes and specifications.  According to the family, the building inspector was grossly negligent in failing to recognize significant deviations that resulted in an unstable structure, and in allowing construction to continue without  interruption or repair.

Allstate wins coverage battle; overturns jury verdict for damage caused by frozen pipes

Mary McGrath insured her home in Gaylord with Allstate for years.  In 1992, she began spending winters in Florida and executed a "keep full" agreement with Gaylord Gas in order to assure that the home stayed heated during the months she was gone.  In 1998, McGrath developed dementia and her daughter, Cathy, moved in with her to care for her.  By 2003, however, Cathy could not adequately care for McGrath and mother and daughter moved to a Farmington Hills apartment to be nearer to family support.  Cathy notified Allstate of the change in billing address but it did not occur to her to Allstate that the house would now remain vacant most of the year.  In the meantime, Gaylord Gas failed to deliver during the winter of 2005, the pipes froze and burst, and the house suffered substantial damage.  Allstate refused to pay for the damage and McGrath's Conservator filed a lawsuit.

Insurance Company wins fight to deny insurance claim arising out of vacant building

In 2005, a Genessee County judge issued an order closing the Fisher Hotel, which it deemed a public nuisance.  The owners then purchased coverage on the vacant buildings involved.  In 2007, the buildings were damaged by vandalism, however, the insurer refused to pay the owners' claim, relying on a vandalism exclusion applicable to property that is unoccupied for 60 days or more.  The trial court upheld this exclusion and granted the insurer summary disposition, and the owners appealed.

Families of fire victims cannot sue oxygen supplier who continued deliveries to "careless smoker"

The agents of Senior Home Health Care, Inc.  apparently observed that one Mr. Renwick was carelessly smoking in close proximity to the oxygen they were delivering to him.  They apparently made record of this fact, but continued deliveries of oxygen for 17 months, until Renwick caused a fatal apartment fire in which the plaintiff families suffered injuries and fatalities.  The families then filed suit against Senior Home Health, arguing that it was negligent to continue providing oxygen to Renwick after determining that he would not stop carelessly smoking near the oxygen.

Insurer avoids payment for water damage caused by defective workmanship

TMW Enterprises purchased an existing building and insured it with Federal Insurance Company under an "all risks" policy.  Soon after buying the building, TMW discovered that the building had suffered substantial water damage caused by errors made during its original construction.  TMW undertook repairs, totaling several million dollars, and argued that Federal should be responsible for some of its repair costs.  Federal argued in response that any damage to the building was excluded from coverage under a policy exclusion relating to defective workmanship. 

Court rules that an independent insurer may owe a duty to the insured in giving advice

In the recent National Association of Investors v. Dobson-McOmber Agency case, the Court of Appeals overturned the lower court's dismissal of the Plaintiff's negligence claim against its insurance agent.  In a previous case, the "Engler Majority" of the Michigan  Supreme Court had held that insurance agents are mere sales staff for the insurer and owe no duty to advise an insured.  The lower court applied this ruling to independent agents who were not directly affiliated "captive agents" with a particular insurer, and also ruled that the agency defendant had assumed no "special duty" to the Plaintiff.

Farm Bureau slapped down over misinterpretation of its own definition of "unoccupied" dwelling

Kathleen McNeel sued Farm Bureau for wrongfully denying payment on the Bundy farmhouse, which she had purchased in the 1970s, after it burned to the ground in 2003.  McNeel had purchased Farm Bureau insurance on the house, which she occupied only sporadically.  Farm Bureau took the position that no coverage was due because the house was "vacant" and "unoccupied" under the policy.  After discussing these issues with a public adjuster representing McNeel for more than a year, Farm Bureau also claimed that she had delayed too long in filing suit.

AutoClub was provide coverage for homeowners after accidental shooting

Jason Evans moved in to care for his mother after she became bed-ridden with multiple sclerosis. Evans was a convicted felon who was not allowed to own a handgun.  Nevertheless, he had purchased one and was showing it to a guest in 2006 when it discharged and wounded her in the chest.  Forensic work supported Evans' claim that the gun discharged as he was attempting to eject the magazine, with the bullet first striking a kitchen counter and then ricocheting into the guest, Wooten.  Wooten sued both Evans' and their homeowners insurance, the Auto Club, sought a declaratory judgment that it was not required to defend the claim.

State Farm wins judgment that it has excluded coverage for "business pursuit"

The Estate of Troy Fournier sued Richard Balogh for wrongful death, after Balogh negligently electrocuted Fournier by operating a crane into a high voltage line with Fournier standing near the crane.  The men were roofers who were planning to transport steel to be recycled on a day when their employer had no work.  The lower court entered judgment finding Balogh negligent and Fournier innocent of negligence, but determined that Balogh's homeowner's coverage with State Farm did not apply to the incident.  The Fournier Estate argued that the crane should be covered because it was not a motor vehicle "being used as a motor vehicle" under no fault definitions.  It also argued that the crane was "in dead storage" at the time of the incident, as described in the policy language.  The Court of Appeals held that regardless of Michigan's no fault "motor vehicle" definitions, the State Farm policy definition excluded coverage for Balogh's operation of this vehicular crane at the employer's location.

Insurer cancels policy on rental home after fire; avoids payment

Alvin Matheny owned several rental homes in Detroit.  His wife insured one of them with Homesite Insurance Company over the phone.  In November of 2007, the insurer sent a cancellation notice voiding the policy because the property was a rental.  Within days, it was burned immediately after a tenant was evicted.  Homesite claimed that when the policy was first issued, Matheny's wife must have lied to the sales representative and told the company that the home was a "secondary residence" rather than a rental.  Matheny's wife explained that she did not remember what questions were asked, but claimed that she answered the questions honestly.  Homesite refused to pay for the insurance purchased and Matheny filed suit.

Polygraph examinations just aren't admissible....period. Farm Bureau gets new trial

Farm Bureau refused to pay Randall Dillard's homeowner's claim for vandalism and theft.  It pointed to evidence that suggested an "inside" job, despite that fact that Dillard too, and passed, a polygraph.  When the case went to trial, the Judge allowed Dillard to offer into evidence the fact of passing the polygraph and perhaps for that reason, the jury ruled in his favor.  On appeal, the Court of Appeals noted that currently neither Michigan nor Federal courts allow for the admission of polygraph evidence.  Both court systems consider the evidence to be too unreliable.  Dillard will have to prove his case without the polygraph corroboration.

Home-Owners Insurance loses apparently frivolous bid to recover subrogated expenses

Home-Owners, a subsidiary of AutoOwners, was forced to pay its insured's claim for damages sustained to an Allendale building that suffered a fire.  It sued the Brigade Fire Protection company, alleging that Brigade was negligent in the design, configuration and installation of a fire suppression/sprinkling system for the building.  At trial, however, Brigade moved to dismiss Home-Owners' claim, alleging that Home-Owners had not raised a reasonable basis to conclude that Brigade was negligent.  The Judge agreed and granted a directed verdict, finding that there was NO EVIDENCE to support Home-Owners' claim. 

No homeowner coverage for defective workmanship or mold

Hometowne Building Company built a house for a customer in South Lyons and then experienced problems with water seepage and mold.  After several unsuccessful attempts at remediation, the owner sued Hometowne and ultimately, one of its insurers, the North American Specialty Insurance Company (NASIC) settled the claim with the owners.  NASIC then sued Amerisure Mutual to force it to contribute to the settlement.  Amerisure argued that two exclusions in its policy let it off the hook, and the Court of Appeals agreed. 

The Court concluded that the "defective workmanship" exclusion precluded coverage for any damage to the structure caused by mistakes made by Hometowne.  This would leave limited liability for Amerisure to cover injury or damage to contents caused by defective workmanship, however, the policy also contained a "fungi or bacteria" exclusion which eliminated any contents coverage for damage caused by mold, fungi or mildew or their ramifications.

Court reaffirms: no remedy for Michigan insureds when Farm Bureau acts in bad faith

Shirley Nixon sued Farm Bureau General after it refused to pay benefits under her homeowner's policy and accused her of intentionally setting fire to her home.  The trial court refused to dismiss her "bad faith" claim or her cause of action for "intentional infliction of emotional distress."  Farm Bureau appealed to the Court of Appeals, arguing that even if it acted in "bad faith" and wrongfully denied Nixon's purchased benefits, she had no claim for damages.

Citing an earlier case where Blue Cross wrongfully refused to pay for treatment of Stage IV metastatic breast cancer treatment, the Court of Appeals reversed the lower court ruling in Nixon's case and dismissed her claim for "bad faith."  The Court held that "the mere failure to pay insurance benefits" does not create a cause of action against the insurer in Michigan.  Unlike most states, Michigan does not recognize a cause of action for bad-faith refusal to pay an insurance claim, no matter how egregious the insurer's conduct, as "[f]ailure to pay a contractual obligation does not amount to outrageous conduct, even if it is willful or in bad faith."  

Do you still have doubt about the power of insurance companies to control the law in Michigan?

Home owner cannot hold insurer responsible for allowing fraudulent "agent" to cancel policy

Robert Gaines purchased a home which he immediately sold to a realtor-friend.  The realtor-friend was authorized to manage the transaction, and she allowed her boyfriend to purchase homeowner's coverage.  Before Gaines could sell the home to his friend, however, the house burned.  When Gaines sought coverage from Michigan Basic, he was informed that "his son" [actually the friend's boyfriend]had cancelled the coverage prior to the sale.  Gaines sued the insurer for negligence in allowing a third-party to cancel coverage, however, his claim was dismissed.  The Court pointed to the fact that Notice of Cancellation had been mailed to the proper address, precluding Gaines from arguing that the insurer should be estopped from cancelling.  The Court also rejected his claim that he should be treated as an "equitable subrogee," noting that the protection provided under that doctrine applies only to a third-party who pays the legal debt of another.

Insurer limits pay-out from vandalism claim related to plumbing removal

Acorn Investment Company [AIC] owned a single-family rental home in Detroit that was insured with Michigan Basic.  After the tenants moved out, vandals removed copper piping and other fixtures, resulting in substantial water damage to the home. Michigan Basic relied on several exclusions in the policy to deny payment to AIC, which then filed suit.  The lower court granted judgment in favor of the insurer, relying on language in the policy related to both vandalism and earth movement, and AIC appealed.

Bank can't grab fire insurance proceeds to pay off loan

Since the economy has turned home equity upside-down on so many people, a new problem has surfaced.  When a structure suffers damage that is insured, the mortgagee bank is tempted to grab the money for repayment of its loan, rather than allowing the home to be re-built.  That's exactly what happened to Allen and Julie Hilliker in Ogemaw County after their home suffered a fire loss.  They were insured by Wolverine Mutual and elected to have the home re-built.  Rebuilding would cost $185,859.51, but the actual cash value of the home was only $119,127.13---less than the $140,000.00 mortgage. 

Commercial tenant held responsible for damage caused by fire

In American States Insurance and Ratcliff v. Hampton, dba VIP Truck & Trailer, a building owner and his insurer sued the tenant who caused a fire in the leased premises for the damage caused to his building.  Under the parties' written lease, Hampton had assumed responsibility for any damage resulting from "his negligence or the negligence of invitees or guests."  Hampton argued, however, thast Ratliff's purchase of fire insurance and his admission that his building was under-insured constituted proof that the landlord had assumed the risk associated with a fire caused by Hampton.

The Courts rejected this analysis, and distinguished this case from a prior case where the tenant's only relevant leasehold duty was to pay the insurance premiums incurred by the landlord.

Insurer avoids claim for water damage after corporate identity change

The owners of the Alexis Manor Apartments decided to convert them to condomimiums.  To facilitate the change, they created a second corporation and transferred title to the building.  They maintained the same insurance policy with Michigan Millers.  When they suffered water damage, they attempted to collect on the policy, but were denied.  The court ultimately ruled that despite taking the owners' money for coverage, the insurer and the agent who sold the insurance owed the owners no duty to procure the proper coverage, because only the predecessor corporation was a "client" of the insurer and agent.  By accepting premiums from the new corporation, the insurer and agent did not incur any obligation to the property-owning corporation.  The case is Belfor USA Group, Inc., v. Alexis Manor Apartments, et al.