Nationwide Prop. & Cas. Ins. Co. v. Brown

• Decision Date: 24 April 2017
• Docket Number: Case No. 15–14491
• Citation: 260 F.Supp.3d 864
• Parties: NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiff and Counter–Defendant, v. James BROWN, et al., Defendants and Counter–Plaintiffs.
• Court: U.S. District Court — Eastern District of Michigan

260 F.Supp.3d 864

NATIONWIDE PROPERTY & CASUALTY INSURANCE COMPANY, Plaintiff and Counter–Defendant,

v.James BROWN, et al., Defendants and Counter–Plaintiffs.

Case No. 15–14491

United States District Court, E.D. Michigan, Southern Division.

Signed April 24, 2017

Michael F. Schmidt, Harvey Kruse, Kurt D. Meyer, Gregory and Meyer, Troy, MI, for Plaintiff and Counter–Defendant.

James C. Klemanski, Klemanski & Assoc., Bloomfield Hills, MI, for Defendants and Counter–Plaintiffs.

OPINION AND ORDER GRANTING SUMMARY JUDGMENT AND TERMINATING MOTION TO DISMISS AS MOOT

ROBERT H. CLELAND, UNITED STATES DISTRICT JUDGE

This is an insurance dispute. Plaintiff Nationwide Property & Casualty Insurance Company seeks declaratory relief holding that the property insurance policy held by Defendant James Brown is void and does not cover water damage sustained at Defendants James and Tamara Brown's Detroit home.¹ (Dkt. # 19.) Defendants have counterclaimed for breach of contract and seek appointment of an umpire. (Dkt. # 23.)

Before the court are two motions filed by Plaintiff on January 27, 2017: a motion for summary judgment on all claims under Federal Rule of Civil Procedure 56 (Dkt. # 33) and a motion to dismiss under Federal Rule of Civil Procedure 37 (Dkt. # 34), asking the court to dismiss the counterclaims and enter a default judgment against Defendants on the primary claims. The motions are fully briefed and a hearing was held on April 17, 2017. Because the court will grant Plaintiff's motion for summary judgment, it will terminate the Rule 37 motion as moot.

I. BACKGROUND

The following facts are undisputed unless otherwise noted. On November 6, 2013, Defendant James Brown completed and an application for insurance with Nationwide for the residential property located at 13947 Bramell St., Detroit, Michigan. (Dkt. # 33–2.) The application contained the following attestation provision:

I HAVE RECEIEVED AND READ A COPY OF THE "NATIONWIDE INSURANCE PRIVACY STATEMENT". [sic] BY SUBMITTING THIS APPLICATION, I AM APPLYING FOR ISSUANCE OF A POLICY OF INSURANCE AND, AT ITS EXPIRATION, FOR APPROPRIATE RENEWAL POLICIES ISSUED BY NATIONWIDE INSURANCE COMPANY.... I HEREBY DECLARE THAT THE FACTS STATED IN THE ABOVE APPLICATION ARE TRUE AND REQUEST THE COMPANY TO ISSUE THE INSURANCE AND ANY RENEWALS THEREOF IN RELIANCE THEREON.

(Dkt. # 33–2 (emphasis in original).) James signed under this provision. (Id. ) The same day, James also completed and signed a Michigan Supplemental Application, which stated that the supplemental application "becomes a part of the application[.]" (Dkt. # 33–3.) The supplemental application included a similar attestation provision, reading:

I have read and understand all of the above questions. I confirm that the facts stated in this supplemental application are true and request the company to issue the Insurance, and any renewals, based on these facts. I understand that misrepresentation of information in the supplemental application could void some or all of my coverage.

(Dkt. # 33–3, Pg. ID 671.) James signed under this provision as well. (Id. )

The supplemental application contained a series of questions about the "covered residence" and the "insured location," both referring to 13947 Bramell St. The first question asked, "Do you own the covered residence and is this residence occupied by you?" In response, James marked "yes." He also marked "yes" in response to question three, which asked "Have you listed all owners of this property on the application?" To question six, which asked, "Are the property taxes, for the insured location, delinquent by two or more years?" James responded "no." Finally, question seven asked, "Are any business operations being conducted from the insured location?" and left a space for the applicant to describe the type of business. James checked "no" and left this space blank. (Dkt. # 33–3, Pg. ID 669.)

A. The Policy

Based on his application, Nationwide issued James a standard homeowners' insurance policy, Policy No. 91 21 HP 345848, for the property at 13947 Bramell. (Dkt. # 33–4.) The policy period ran from October 30, 2013, to October 30, 2014. (Id. )

The policy is amended by a Michigan Amendatory Endorsement (Dkt. # 33–5), which contains a concealment, fraud, or misrepresentation provision. The provision states:

2. Concealment, fraud, or misrepresentation

a) this policy was issued or renewed in reliance with the information you provided at the time of your application for or renewal of this insurance coverage. We may void this policy, deny coverage under this policy, or at our election, assert any other remedy available under applicable law, if you, or any other insured person seeking coverage under this policy, knowingly or unknowingly concealed, misrepresented or omitted any material fact or engaged in fraudulent conduct at the time the application was made or at any time during the policy period.

b) we may void this policy, deny coverage for a loss, or at our election, assert any other remedy available under applicable law, if any insured person or any other person seeking coverage under this policy has knowingly or unknowingly concealed or misrepresented any material fact or engaged in fraudulent conduct in connection with the filing or settlement of any claim.

c) if we void this policy, you must reimburse us if a claim payment was made

d) no person or organization who engaged in fraudulent conduct in connection with the applicable process or filing a claim, or engages in any material misrepresentation regarding the issuance or renewal of this policy shall be entitled to receive any payment under this policy at any time.

(Id. at Pg. ID 714 (emphases removed).) The amendatory endorsement also includes a provision requiring that the insured notify Nationwide of changes in circumstances, stating: "you have a duty to notify us as soon as possible of any change which may affect the premium risk under the policy. This may include, but is not limited to, changes ... (2) in the occupancy or use of the residence premises ."

(Dkt. # 33–5, Pg. ID 713 (emphases in original).)

The policy contains several coverage exclusions. In particular, the policy contains an exclusion for neglect that bars coverage of losses caused by neglect even if other covered perils also contributed to the loss. The neglect exclusion provides:

1. We do not cover loss to any property resulting directly or indirectly from any of the following. Such a loss is excluded even if another peril or event contributed concurrently or in any sequence to cause the loss.

...

c. neglect, meaning neglect of the insured to use all reasonable means to save and preserve property at the time of and after a loss, or when property is endangered by a covered peril.

(Dkt. # 33–6, Pg. ID 715 (emphases in original).)

The policy also contains conditions precedent to coverage in the form of duties that must be met by the insured after a loss. The relevant section of the policy, as amended by the endorsement, states:

3. Your duties after loss. In case of loss, you must:

a) give immediate notice to us or our agent....

b) protect the property from further damage. You must make repairs required to protect the property and keep a record of repair expenses.

c) as often as we reasonably require:

(1) show us the damaged property; and

(2) provide records and documents we request and permit us to make copies.

(3) submit to examinations under oath and sign same. At your or our request, the exams will be conducted separately and not in the presence of any other persons except legal representation.

...

e) assist us with any claim or suit....

(Dkt. # 33–7, Pg. ID 720; Dkt. # 33–5, Pg. ID 713.) The policy also contains a provision stating "No action can be brought against us unless there has been full compliance with the policy provisions. Any action must be started within one year after the date of loss or damage[.]" (DKt. # 33–7, Pg. ID 722.)

Nationwide sent a letter on September 15, 2014, informing James that the policy would not be renewed after it expired on October 30, 2014, because of the deteriorating condition of the residence. (Dkt. # 33–23.) Nationwide sent a second letter on October 7, 2014, stating that the policy would be cancelled for nonpayment of premiums on October 19, 2014. (Dkt. # 33–24.)

B. The Loss

On October 13, 2014, Tamara contacted Nationwide to report water damage to the house. (Dkt. ## 33–15, 33–37.) She told James Smith, the claims adjuster for Nationwide, that she had returned from a trip around 2:00 a.m. that morning and discovered "water everywhere" that she believed to be coming from the second floor. (Id. at Pg. ID 795.) In her subsequent examination under oath ("EUO"), Tamara explained that she and her sons looked around some, but the lights were not working. (Dkt. # 33–17, Pg. ID 874.) She explained that she contacted a friend that knew a plumber and, without shutting off the water, left to spend the rest of the night at her sister's home. (Id. ) She called Nationwide at around 11:30 that morning, and spoke to Smith. (Dkt. # 33–37.) Smith arrived around 2:30 that afternoon and "found the water spraying from a supply line for the second-floor bathroom toilet." (Dkt. # 33–37.) Smith closed the stop valve for the toilet and turned off the main water supply valve in the basement to prevent further flooding. (Dkt. # 33–26, Pg. ID 945.)

Nationwide had the loss inspected by a company called "Nederveld." Nederveld's investigators observed after the onsite inspection that the line looked "relatively new" found "physical indentations, deformations of the stainless steel over braided wire, and misshapen areas.... consistent with manipulations by tools or instruments unrelated to the installation or use of the equipment." (Dkt. # 33–25, Pg. ID 933.) After further examination, Nederveld found significant deformation suggesting that the damage was caused by "forcible contact" by a tool. (Dkt. # 33–26, Pg. ID 945–46.) Nederveld concluded these deformations were...