Heniser v. Frankenmuth Mut. Ins. Co.

Decision Date06 July 1995
Docket NumberDocket No. 97462,No. 4,4
Citation534 N.W.2d 502,449 Mich. 155
Parties, 62 A.L.R.5th 819 Richard J. HENISER, Plaintiff-Appellant, v. FRANKENMUTH MUTUAL INSURANCE, a Michigan Corporation, Defendant-Appellee. Calendar
CourtMichigan Supreme Court

Cholette, Perkins & Buchanan by Bruce M. Bieneman and Robert A. Kamp, Grand Rapids, for plaintiff.

Morrison, Mahoney & Miller by Phillip K. Yeager and Meigs M. Day, Grand Rapids, for defendant.


BOYLE, Justice.

The question presented is whether the homeowner's insurance policy in this case provides coverage for the destruction of the insured's building. We hold that the policy is unambiguous, that the destruction of the building does not fall within the scope of the policy, and thus affirm the decision of the Court of Appeals.


The facts are not in dispute. Plaintiff Heniser and his wife purchased a vacation home in Honor, Michigan. The couple lived in the house intermittently throughout the years until their divorce.

Heniser retained possession of the property after the divorce, but in November, 1988, sold the property on a land contract. At the time of the sale, the property was insured by defendant-appellee Frankenmuth Mutual Insurance Company under a homeowner's policy that expired September, 1989. Heniser did not inform Frankenmuth of the sale.

In January, 1989, the property was destroyed by fire. Heniser filed an insurance claim with Frankenmuth under his homeowner's policy seeking $20,000 for the building, $24,500 for personal property and $7,200 for related cleanup expenses. Frankenmuth denied coverage, terminated the policy, and returned the unearned premium to Heniser. Frankenmuth contended that Heniser's claim was barred because of fraud and false swearing with regard to the cash value of the personal property damaged by fire, and that the damage to the building was not covered by the policy because Heniser did not and could not reside at the property, as required by the contract, 1 at the time of the fire.

Heniser then filed suit against Frankenmuth, alleging that it had breached its insurance contract. In response, Frankenmuth asserted the aforementioned defenses.

The parties filed cross-motions for summary disposition. 2 Both motions were denied, and the Court of Appeals denied interlocutory relief.

Following mediation, the case was tried without a jury before Judge Robert A. Benson. At the close of testimony, Judge Benson held that because Heniser did not reside at the property at the time of the fire, the policy did not provide coverage for the loss of the building. Judge Benson also found that Frankenmuth had not carried its burden of proving fraud by clear and convincing evidence. On appeal, the parties stipulated to the facts and agreed that the only issue is whether the definition of "residence premise" provides coverage for destruction of the building. 3

The Court of Appeals affirmed the holding 4 that the policy did not cover the destruction of the building. 201 Mich.App. 70, 506 N.W.2d 247 (1993). We granted leave to appeal on July 22, 1994. 445 Mich. 943, 521 N.W.2d 609.


Plaintiff contends that the insurance policy is ambiguous regarding whether the policy covered his loss, even though he did not, and could not, 5 reside at the insured premises at the time of the fire. Plaintiff advances three arguments in support of claimed ambiguity: (1) the definitions section of the policy and the conditions section of the policy are internally inconsistent; (2) it is unclear whether he had to reside at the insured premises only at the time the policy was entered into or whether he had to reside at the insured location throughout the term of the policy; (3) an exclusion from coverage was deceptively placed in the definitional section.

Ambiguous provisions in an insurance contract are construed against the insurer and in favor of coverage. Group Ins. Co. of Michigan v. Czopek, 440 Mich. 590, 489 N.W.2d 444 (1992); Powers v. DAIIE, 427 Mich. 602, 624, 398 N.W.2d 411 (1986). Where the policy is clear, however, "courts are bound by the specific language set forth in the agreement." Cottrill v. Michigan Hosp. Service, 359 Mich. 472, 476, 102 N.W.2d 179 (1960); Raska v. Farm Bureau Mut. Ins. Co., 412 Mich. 355, 314 N.W.2d 440 (1982). Terms in an insurance policy must be given their plain meaning and the court cannot "create an ambiguity where none exists." Upjohn Co. v. New Hampshire Ins. Co., 438 Mich. 197, 206, 476 N.W.2d 392 (1991). An insurer is free to define or limit the scope of coverage as long as the policy language fairly leads to only one reasonable interpretation and is not in contravention of public policy. Raska, supra at 361-362, 314 N.W.2d 440. If these prerequisites are fulfilled, the policy will be enforced as written.

Heniser has not, and cannot, demonstrate that the policy covers the destruction of the building. 6 The policy in this case, read as a whole, is unambiguous and does not cover the loss because the property was not a "residence premises" at the time of the loss. 7

Our conclusion that the policy is unambiguous is further strengthened by the language Heniser included in the land contract when he sold the property. The land contract states:

Said Purchaser shall promptly pay, when due, all taxes and assessments of every nature, which shall become a lien on said premises after the date hereof, and shall, during the continuance of this contract, keep insured the buildings now on said premises or which shall hereafter be placed thereon in the name of said Seller against loss by fire and windstorm, in such company or companies and for such amount as the Seller shall approve, and forthwith deposit all policies of insurance with the Seller, with loss, if any, payable to the Seller, as his interest may appear under this contract.

Heniser included this language to protect himself in case the property was destroyed before the purchasers completed payment. This language indicates Heniser understood that his existing insurance policy would not cover the property after he sold it, and strengthens our conclusion that the policy in question does not cover the destruction of the building.


The policy is not internally inconsistent. Although the conditions section of the policy requires the insured to notify the insurer of any "changes in title or occupancy of the property during the term of the policy" before recovering for any loss, this provision does not conflict with the definitions section mandate that the insured reside at the property. The requirement in the conditions section simply allows the insurance company to guarantee that the insured had an insurable interest in the property at the time of the loss or to coordinate coverage with other potential insurers.


While the definition of "reside" may be ambiguous in other contexts, there is no ambiguity in this case. The Court of Appeals, in interpreting the term "resides" in the Michigan Freedom of Information Act 8 and in the Child Custody Act 9 has found the term to have two different meanings: a legal or technical meaning and a general or popular meaning. Curry v. Jackson Circuit Court, 151 Mich.App. 754, 391 N.W.2d 476 (1986); Kubiak v. Steen, 51 Mich.App. 408, 215 N.W.2d 195 (1974). In some contexts, the legal term means something more than actual physical presence; it includes the intent to live at that location at sometime in the future, a meaning similar to the legal concept of domicile. Id. at 413, 215 N.W.2d 195. In other contexts, the term requires actual physical presence. Id.

The policy of interpreting ambiguities in a contract against insurers is rooted in the fact that insurers have superior understanding of the terms they employ, which should not bind relatively unsophisticated insureds. This goal is not furthered by allowing insureds to employ a sophisticated version of a term to create a claim of ambiguity.

Finally, any ambiguity created by the fact that the law ascribes multiple meanings to the term "reside" is irrelevant because Mr. Heniser fails under either standard. 10 Mr. Heniser admits that he did not actually live at the insured premises at the time of the fire and that he did not intend to live there in the future. Accordingly, Mr. Heniser did not "reside" at the insured premises under either definition.


The policy is also clear that if Mr. Heniser did not "reside" at the insured property at the time of the loss, the property is not a "residence premises," as defined by the policy, and the policy does not cover the loss.

Mr. Heniser alternately contends that several courts have found similar language to require only that the insured fulfill the policy requirement at the time the policy was entered. In these cases, the language was viewed as an affirmative warranty and not a continuing warranty. 11 See Reid v. Hardware Mut. Ins. Co. of Carolinas, Inc., 252 S.C. 339, 166 S.E.2d 317 (1969); Ins. Co. of North America v. Howard, 679 F.2d 147 (C.A.9, 1982). Mr. Heniser and the author of the dissenting opinion in the Court of Appeals rely heavily on the South Carolina Supreme Court opinion in Reid.

In Reid, the insureds purchased a homeowner's insurance policy that described the insured premises as a "one story frame constructed, approved roof, owner occupied, one family dwelling." Id. at 342, 166 S.E.2d 317 (emphasis added). While the policy was in effect, the Reids sold the home and the buyer assumed the mortgage. The policy was not transferred, however, and the Reids remained the named insureds. Five months after the sale, while the insurance policy was still in effect, the house was destroyed by fire. When the Reids filed a claim of loss with the insurer, the company refused to pay contending, among other things, that the policy did not cover the home because it was no longer "owner occupied." Id. at 343, 166 S.E.2d 317. The trial court found in favor of the Reids, and on appeal, ...

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