Mcgrath v. Allstate Ins. Co..

• Decision Date: 02 November 2010
• Docket Number: Docket No. 289210.
• Citation: 290 Mich.App. 434,802 N.W.2d 619
• Parties: McGRATHv.ALLSTATE INSURANCE COMPANY.
• Court: Court of Appeal of Michigan — District of US

290 Mich.App. 434

802 N.W.2d 619

McGRATH

v.ALLSTATE INSURANCE COMPANY.

Docket No. 289210.

Court of Appeals of Michigan.

Submitted June 15, 2010, at Lansing.Decided Nov. 2, 2010, at 9:00 a.m.

Fabian, Sklar & King, P.C. (by Patrick A. King), Farmington Hills, for James P. McGrath.Garan Lucow Miller, P.C. (by Megan K. Cavanagh, Detroit, and Michael J. Swogger, Traverse City), for Allstate Insurance Company.Before: MURRAY, P.J., and SAAD and M.J. KELLY, JJ.SAAD, J.

Defendant Allstate Insurance Company appeals an order of judgment and an order that denied its motion for postjudgment relief. Allstate also appeals two orders that denied its motions for summary disposition. For the reasons set forth below, we reverse the trial court's denials of Allstate's motions for summary disposition and vacate the judgment on the jury verdict.

I. FACTS

In July 1992, the decedent, Mary McGrath, bought a home in Gaylord, Michigan, and insured it with Allstate. Until 1998, Ms. McGrath lived in the Gaylord home for most of the year and spent winters in Florida. On November 5, 1992, Ms. McGrath executed a “keep full” agreement with defendant Inergy Propane, LLC, formerly known as Gaylord Gas (hereinafter “Gaylord Gas”), to ensure that there was sufficient propane to heat the house during the winter. Under the agreement, Gaylord Gas would send a delivery driver to the house on a regular basis to check the amount of propane remaining in the tank and add propane if needed. The agreement with Gaylord Gas required Ms. McGrath to pay her bill and ensure that the driveway remained reasonably clear of snow.

In 1998, Ms. McGrath developed dementia and Alzheimer's disease and, as her condition deteriorated, Ms. McGrath's daughter Cathy moved into the Gaylord house with Ms. McGrath to help take care of her. By 2003, Cathy was unable to care for her mother alone, and Cathy and her siblings decided that Ms. McGrath and Cathy should move to and live in an apartment in Farmington Hills, where Ms. McGrath would be closer to family and her doctors. Cathy changed Ms. McGrath's billing address and notified Allstate that the insurance bills should be sent to their address in Farmington Hills. After Ms. McGrath moved to Farmington Hills, the Gaylord house was no longer used as a full-time residence, though Ms. McGrath left the majority of her belongings there and family members visited the house on occasion for weekends or holiday vacations. Ms. McGrath also visited the Gaylord property for a few days in October 2005. The record reflects that Cathy spent a night at the Gaylord house around Thanksgiving 2005, but no one else visited the property during the winter of 2005–2006. In late May of 2006, Brian McGrath, Ms. McGrath's son, discovered that his mother's property had suffered extensive water damage. Plaintiff, James McGrath, Ms. McGrath's son, reported the loss to Allstate, and Allstate paid for the initial cleanup and investigated the cause of the damage.

Allstate concluded that the water damage was caused by a frozen pipe that had ruptured because of a lack of heat in the house. Sometime between November 2005 and May 2006, the propane tank at the Gaylord property ran out of fuel, which rendered the furnace inoperable. The record reflects that Gaylord Gas canceled the “keep full” agreement with Ms. McGrath on December 19, 2005, after its delivery driver found the driveway impassable. It is undisputed that the driveway of the Gaylord property was not plowed during the winter of 2005–2006. On June 15, 2006, Allstate informed plaintiff over the telephone that it would not pay for the water damage, and Allstate sent a formal denial-of-coverage letter on June 22, 2006.

Plaintiff filed a complaint against Allstate for breach of contract, and he also asserted a claim of negligence against Gaylord Gas. Plaintiff settled the claim against Gaylord Gas after case evaluation. Allstate filed two motions for summary disposition pursuant to MCR 2.116(C)(10), and the trial court denied both motions. A jury found in favor of plaintiff and, pursuant to stipulation, Allstate was ordered to pay plaintiff $100,000. The trial court denied Allstate's motion for postjudgment relief on November 13, 2008.

II. ANALYSIS

We hold that the trial court erred when it denied Allstate's motions for summary disposition.¹

The rules of contract interpretation apply to the interpretation of insurance contracts. Citizens Ins. Co. v. Pro–Seal Serv. Group, Inc., 477 Mich. 75, 82, 730 N.W.2d 682 (2007). The language of insurance contracts should be read as a whole and must be construed to give effect to every word, clause, and phrase. Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459, 467, 663 N.W.2d 447 (2003). When the policy language is clear, a court must enforce the specific language of the contract. Heniser v. Frankenmuth Mut. Ins. Co., 449 Mich. 155, 160, 534 N.W.2d 502 (1995). However, if an ambiguity exists, it should be construed against the insurer. Id. An insurance contract is ambiguous if its provisions are subject to more than one meaning. Vushaj v. Farm Bureau Gen. Ins. Co. of Mich., 284 Mich.App. 513, 515, 773 N.W.2d 758 (2009), citing Raska v. Farm Bureau Mut. Ins. Co. of Mich., 412 Mich. 355, 362, 314 N.W.2d 440 (1982). An insurance contract is not ambiguous merely because a term is not defined in the contract. Vushaj, 284 Mich.App. at 515, 773 N.W.2d 758. Any terms not defined in the contract should be given their plain and ordinary meaning, id., which may be determined by consulting dictionaries, Citizens Ins. Co., 477 Mich. at 84, 730 N.W.2d 682.

In its motions for summary disposition, Allstate argued that the policy does not cover the damage to the Gaylord property because Ms. McGrath failed to comply with the policy terms. Specifically, Allstate asserted that, contrary to the requirements of the policy, Ms. McGrath did not reside at the Gaylord property at the time of the loss and failed to notify Allstate of the change in title, occupancy, or use of the property. In essence, Allstate claimed that because the nature of the risk insured is greater for an unoccupied home, Allstate's policy required that Ms. McGrath reside in the home and notify Allstate if this changed. Allstate asserted that Ms. McGrath did not meet these obligations of the policy.

We agree with Allstate that the insurance policy does not cover the damage to the Gaylord house because, at the time of the loss, it was not a “dwelling” as defined by the policy. The policy states that Allstate will “cover sudden and accidental direct physical loss” of covered property, which includes “[y]our dwelling including attached structures.” As defined in the policy, “'You' or ‘ your’—means the person named on the Policy Declarations as the insured and that person's resident spouse.” “Dwelling” is defined as “a one, two, three or four family building structure, identified as the insured property on the Policy Declarations, where you reside and which is principally used as a private residence.” The policy further states that the insured “must pay the premium when due and comply with the policy terms and conditions, and inform [Allstate] of any change in title, use or occupancy of the residence premises.” “Residence premises” is defined as “the dwelling, other structures and land located at the address stated on the Policy Declarations.”

The critical inquiry here is whether the phrase “where you reside” in the definition of the covered “dwelling” precludes coverage because of Ms. McGrath's extended absence from the insured property. Plaintiff contends that the phrase “where you reside” is merely descriptive of the property and that it constitutes only an affirmative warranty that Ms. McGrath lived in the house when she originally entered into the insurance contract with Allstate. Allstate maintains that the phrase “where you reside” is a statement of coverage that requires that the insured live at the premises at the time of the loss.

We agree with Allstate. Random House Webster's College Dictionary (2000) defines the verb “reside” in part as “to dwell permanently or for a considerable time; live.” Accord The American Heritage Dictionary of the English Language (3d ed., 1996) (“To live in a place permanently or for an extended period.”). The policy states that the “insured premises” means “the residence premises” and the coverage section states that the insured's “dwelling” is the covered property. (Boldface omitted.) The definition of “residence premises” uses the word “dwelling,” which is specifically defined as a building structure “ where you reside and which is principally used as a private residence.” (Emphasis added and boldface omitted.) Thus, the term “dwelling” is an integral part of the term “residence premises,” which in turn is an independent part of the term “insured premises.” In Heniser, 449 Mich. at 167, 534 N.W.2d 502, our Supreme Court ruled that, because the phrase “where you reside” was “not used to describe the dwelling but is an independent part of the definition of ‘residence premises,’ ” the phrase is not merely an affirmative warranty, but requires that the insured reside at the premises at the time of the loss.

This differs from the policy in Reid v. Hardware Mut. Ins. Co. of the Carolinas, Inc, 252 S.C. 339, 342, 166 S.E.2d 317 (1969), which was contrasted by the Heniser Court and which described the property itself as a “one story frame constructed, approved roof, owner occupied, one family dwelling.” (Emphasis added.) In Reid, the court ruled that the phrase describing the property as “owner occupied” “is a description merely and is not an agreement that the insured should continue in the occupation of it.” Id. at 346, 166 S.E.2d 317. The Heniser Court further observed that the “owner occupied” language in Reid “was in a list of statements describing the building covered by the policy,” making it “clear that ‘owner occupied’ was simply a description of...