New Hamilton Liquor Store, Inc. v. Amguard Ins. Co.

Decision Date23 July 2020
Docket NumberCase No. 17-13077
Citation474 F.Supp.3d 922
CourtU.S. District Court — Eastern District of Michigan

Ann-Marie E. Earls, Melamed, Dailey, Levitt & Milanowski, P.C., Huntington Woods, MI, Mark L. Dailey, Akeel & Valentine, PLC, Troy, MI, for Plaintiffs.

Denise L. Mitcham, Conklin Benham, P.C., Bingham Farms, MI, for Defendant.


Arthur J. Tarnow, Senior United States District Judge

Plaintiffs bring this diversity suit against their insurance company to enforce their contractual rights to their insurance coverage. After Plaintiffs’ liquor store burned down, Defendant, the insurance company AmGuard, refused to pay the claim. It reasoned that the coverage was excluded by Plaintiffs’ failure to maintain an automatic fire alarm. Parties have filed cross-motions for summary judgment [36 & 37]. The motions are fully briefed, and the Court held a hearing on the motions on June 17, 2020. For the reasons articulated below, Defendant's motion will be granted, and Plaintiffs’ motion will be denied.


Talib Hermiz bought New Hamilton Liquor Store, Inc., along with the company Mr. K & Hamilton, LLC—which owned the building 12150 Hamilton Ave in Highland Park—on March 17, 2009. (Hermiz Deposition, ECF No. 37-11 at 18-19, 54). Hermiz consulted with an insurance agent Rod Kathawa regarding this business. (Id. at 46). Starting in April or May of 2016, Hermiz met three times with Kathawa. At the second meeting, they decided on the insurance plan which was offered through Defendant Amguard. (Id. at 89-93). Kathawa asked Hermiz if he had an alarm. (Id. at 126). Hermiz said that he did, and Kathawa asked no further questions of alarms. On the third meeting Hermiz signed the contract, which was thereafter mailed to him. The contract contained a Protective Safeguard Endorsement ("PSE"). Hermiz acknowledged that he read the PSE, but he stated that he "did not understand." (Hermiz Dep. 125).

The PSE was headlined, in all caps, "THIS ENDORSEMENT CHANGES THE POLICY, PLEASE READ IT CAREFULLY." (ECF No. 36-2). The PSE had a table listing, under "Protective Safeguards Symbols Applicable," the code "P-2." Next to that box, there was another box labelled "Description of "P-9" if Applicable." The box beneath that read "Local Burglar Alarm Fire Alarm." Sub-part A of this page-long contract modification defined both "Automatic Sprinkler System" and "Automatic Fire Alarm." "P-9" was defined as "the protective system described in the schedule." Sub-part B amended the contract's provisions on exclusions. (Id. ). It provided as follows:

We will not pay for loss or damages caused by or resulting from fire, if prior to the fire, you:
1. Knew of any suspension or impairment in any protective safeguard listed in the schedule above, and over which you had control, in complete working order.
2. Failed to maintain any protective safeguard listed in the Schedule above, and over which you had control, in complete working order.

(Id. ).

Mr. Hermiz had only three motion-detecting alarms in his store. Each alarm was located near a door. (ECF No. 37-16, PageId. 2569). On Sunday, August 28, 2016, at 3:51:10, 3:51:11, and 3:51:13, all the alarms went off, alerting to motion within the store. (ECF No. 36-6, PageId. 2041). The alarm center then placed two calls to the store to ascertain if anyone was there, and a third call to the local police department. The Police Department dispatched an officer to the scene, and, either by the officer's call, or by some third party's actions, the Highland Park Fire Department was notified at 3:54. Firefighters arrived at 3:58. (Erwin Deposition, ECF No. 36-8, pg. 19). Though the fire was not under control until 6:10 a.m., active flames were quenched within 10 to 15 minutes of the firefighters’ arrival. (Id. at 23). Mr. Hermiz saved no inventory from the store, and has not since reopened the store, which remains shuttered. Subsequent investigation established that the fire was an arson. Someone placed a ladder next to the store, climbed to the roof, cut a hole through the roof with a power saw, and then poured gasoline into the hole. (Id. at 29).

After sending an expert, Joseph Nowikowski, into the store to investigate, Amguard denied Hermiz's claim. They based their denial on the fact that he had failed to install an automatic fire alarm as required by the contract.


Plaintiffs brought this suit on September 1, 2017 in Circuit Court for the County of Wayne. Defendants removed the suit to federal court on September 17, 2017. (ECF No. 1). Plaintiffs and Defendant filed these cross-motions for summary judgment on February 21, 2020, and February 24, 2020. (ECF Nos. 36, 37). Defendant has also filed a motion to exclude the testimony of Robert Trenkle. (ECF No. 38). The Court held a remote hearing on June 17, 2020 and took all three motions under advisement.


Both parties move for summary judgment under Rule 56 of the Federal Rules of Civil Procedure. When evaluating movantsmotions for summary judgment, the Court must consider the evidence on the record, drawing all inferences in non-movants’ favor. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). "The question on summary judgment is whether the moving party has demonstrated that the evidence available to the court establishes no genuine issue of material fact such that it is entitled to a judgment as a matter of law." Dobrowski v. Jay Dee Contractors, Inc. , 571 F.3d 551, 554 (6th Cir. 2009). The moving party has the burden of establishing that there are no genuine issues of material fact, which may be accomplished by demonstrating that the nonmoving party lacks evidence to support an essential element of its case. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

A genuine issue of material fact exists if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The nonmoving party "may not avoid a properly supported motion for summary judgment by simply arguing that it relies solely or in part upon credibility considerations ... [but instead] must present affirmative evidence." Fogerty v. MGM Group Holdings Corp., Inc. , 379 F.3d 348, 353 (6th Cir. 2004) (quoting Cox v. Ky. Dep't of Transp. , 53 F.3d 146, 150 (6th Cir. 1995) ).


At issue is whether or not Plaintiffs’ motion sensor alarm system qualified as an "automatic fire alarm" under the Protective Safeguard Endorsement of the insurance contract. Michigan law governs this diversity action.

I. Contractual Interpretation

In eliminating the doctrine of reasonable expectations, the Michigan Supreme Court held that "one's alleged ‘reasonable expectations’ cannot supersede the clear language of the contract." Wilkie v. Auto-Owners, Ins. Co. , 469 Mich. 41, 60, 664 N.W.2d 776 (2003). Whether or not Hermiz reasonably believed that he was in compliance with his insurance company is therefore not relevant. See id. at 58-60, 664 N.W.2d 776 ; see also VanDyke v. League General Ins. Co. , 184 Mich. App. 271, 457 N.W.2d 141 (1990) ("An insured is obligated to read his or her insurance policy and to raise questions concerning coverage within a reasonable time after the policy is issued."). The PSE is a condition-precedent of the contract, and a Plaintiff's failure to abide by its terms will preclude coverage, as contemplated by subpart B of the PSE. See, e.g., Am. Way Cellular, Inc. v. Travelers Prop. Cas. Co. of Am. , 216 Cal. App. 4th 1040, 1054, 157 Cal.Rptr.3d 385 (2013) (surveying cases nationally to opine that failure to install fire sprinklers where required in PSE negated fire insurance coverage).

A. Plain Language of the Contract

The Court's first task is to determine whether or not the contract was ambiguous. "If no reasonable person could dispute the meaning of ordinary and plain contract language, the Court must accept and enforce the language as written, unless the contract is contrary to law or public policy." Harbor Park Mkt., Inc. v. Gronda , 277 Mich. App. 126, 130, 743 N.W.2d 585 (Mich. Ct. App. 2007). The meaning of such clear and unambiguous contract language is a matter of law. Id. When the words used by the parties are unambiguous and have a definite meaning, the court should not review extrinsic evidence to determine the parties’ intent. State Farm Fire & Cas. Co. v. Liberty Ins. Underwriters, Inc., 613 F. Supp. 2d 945, 954 (W.D. Mich. 2009) ; Zurich Ins. Co. v. CCR & Co., 226 Mich. App. 599, 606-07, 576 N.W.2d 392 (1997).

By contrast, an ambiguous contract provision can raise a question of fact as to the interpretation of extrinsic evidence. "An ambiguity exists where the terms of an insurance contract could suggest ‘more than one meaning when viewed objectively by a reasonably intelligent person who has examined the context of the entire integrated agreement and who is cognizant of the customs, practices, usages and terminology as generally understood in the particular trade or business.’ " Read Prop. Grp. LLC v. Hamilton Ins. Co. , No. 16 CV 457, 2018 WL 1582291, at *7 (E.D.N.Y. Mar. 30, 2018) (quoting Morgan Stanley Grp. Inc. v. New England Ins. Co. , 225 F.3d 270, 275 (2d Cir. 2000) ); see also Farm Bureau Mut Ins. Co. v. Nikkel , 460 Mich. 558, 566, 596 N.W.2d 915 (1999) ("A contract is said to be ambiguous when its words may reasonably be understood in different ways."). "[A]mbiguity does not exist simply because the parties urge different interpretations," Hugo Boss Fashions, Inc. v. Federal Ins. Co. , 252 F.3d 608, 616 (2d Cir. 2001).

The term "automatic fire alarm" in the PSE included no definition for...

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