Society St. Vincent Archdiocese v. Mt. Hawley Ins.

• Decision Date: 06 May 1999
• Docket Number: No. 98-71598.,98-71598.
• Citation: 49 F.Supp.2d 1011
• Parties: THE SOCIETY OF ST. VINCENT DE PAUL IN THE ARCHDIOCESE OF DETROIT, Plaintiff, v. MT. HAWLEY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

Page 1011

49 F.Supp.2d 1011

THE SOCIETY OF ST. VINCENT DE PAUL IN THE ARCHDIOCESE OF DETROIT, Plaintiff, v. MT. HAWLEY INSURANCE COMPANY, Defendant.

No. 98-71598.

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

May 6, 1999.

James Klemanski, Troy, MI, for Plaintiffs.

Paul Hines, Southfield, MI, for Defendants.

MEMORANDUM OPINION AND ORDER DENYING PLAINTIFF'S MOTION FOR PARTIAL SUMMARY JUDGMENT AND GRANTING DEFENDANT'S MOTION FOR PARTIAL SUMMARY JUDGMENT

EDMUNDS, District Judge.

This insurance dispute arises out of an April 24, 1997 fire that destroyed Plaintiff's second hand store located at 28417 N. Telegraph Road in Flat Rock, Michigan. The building and its contents, along with other commercial properties, are insured by Defendant pursuant to Commercial Property Policy No. MCP119474 for the period October 1, 1996 through October 1, 1997. After the fire, Plaintiff submitted an insurance claim to Defendant. Defendant does not deny there is coverage for the loss. Rather, the dispute concerns the amount of the loss.

Plaintiff's complaint alleges that Defendant has failed to timely pay, as required under the insurance policy, the $614,000 "agreed value" for the Flat Rock building, the $25,000 "agreed value" for the building's contents, as well as amounts owed under the policy for debris removal and business interruption. Plaintiff's complaint asserts that Defendant's conduct constitutes: (1) a breach of the insurance contract; (2) a bad faith breach of an insurance contract; (3) a violation of Michigan's Uniform Trade Practices Act ("UTPA"), Mich. Comp. Laws § 500.2001 et. seq.; and (4) a violation of Michigan's Consumer Protection Act, Mich. Comp. Laws § 445.901, et. seq.

This matter comes before the Court on cross-motions for partial summary judgment. Plaintiff contends that it is entitled to summary judgment on its claims that: (1) the policy entitles it to the $614,000 "agreed value" of the building and the $25,000 "agreed value" of its contents; (2) the policy entitles it to a $755,112.54 "replacement cost" of the building as limited by the $614,000 "agreed value" coverage limit; (3) alternatively, it is entitled to a declaration that the "actual cash value" of the building is $581,654.71; (4) it is entitled to 12% penalty interest under Michigan's UTPA for the six month period between August 1997 (when the claim was filed) and February 1998 (when Defendant made partial payment of the claim); and (5) it is entitled to 12% prejudgment interest on all sums awarded. Defendant's cross-motion contends that Plaintiff is entitled under the policy to receive the "actual cash value" of the destroyed Flat Rock building at the time of the loss and makes a demand, pursuant to the terms of the policy, that the amount of the loss be determined by the appraisal process set forth in the policy. Defendant's motion further contends that Plaintiff does not have a viable tort claim for bad faith breach of an insurance contract; a viable claim for damages under Michigan's Uniform Trade Practices Act; or a viable claim under Michigan's Consumer Protection Act.

Plaintiff's motion is DENIED, and Defendant's motion is GRANTED. To the extent Plaintiff's breach of contract claim is premised on an "agreed value" argument, it is dismissed. The unambiguous terms of the parties' insurance policy provides that Plaintiff's loss is to be measured by the actual cash value of the destroyed building at the time of the loss. The policy further provides that either party may demand that disputes concerning the amount of the loss be resolved by the appraisal process described therein. Defendant has made such a demand here and thus the amount of the loss is to be determined by the appraisal process set forth in the insurance policy. To the extent Plaintiff alleges a tort claim for bad faith breach of the insurance contract, it is dismissed. Michigan does not recognize any such claim. Plaintiff's claim against Defendant for an alleged violation of Michigan's Consumer Protection Act is likewise dismissed. Plaintiff is not a consumer who purchased Defendant's policy for personal, family or household purposes and thus is not entitled to the protection provided under that Act.

Plaintiff's claim for damages under Michigan's Uniform Trade Practices Act is dismissed. There is no private cause of action under the UTPA. Plaintiff's motion for partial summary judgment as to its right to 12% penalty interest under the UTPA for the six month time period from August 1997 (when it filed its claim) and February 1998 (when Defendant tendered payment for the building loss to Plaintiff) is DENIED AS MOOT. Defendant has offered to pay Plaintiff 12% interest for that six month period. Plaintiff's remaining claims for the 12% penalty interest under the UTPA for the period commencing after February 1998 are DISMISSED because Plaintiff's claim for a larger loss payment is reasonably in dispute and thus exempt from the UTPA's 12% penalty interest provision.

Finally, Plaintiff's motion for partial summary judgment as to prejudgment interest under Mich. Comp. Laws § 600.6013(5) is DENIED WITHOUT PREJUDICE as premature. Future events; i.e., settlement or an appraisal award in an amount equal to the amount Defendant has already tendered to Plaintiff, may affect Plaintiff's right to prejudgment interest under § 600.6013(5).

I. Facts

A. Claim for Fire Loss

Subsequent to the April 24, 1997 fire, Plaintiff filed a claim with Defendant. Defendant does not deny that the loss is covered under its policy; rather, it disputes only the amount of the loss. Plaintiff contends that, pursuant to the policy's "agreed value" provisions, the amount of loss for the subject building is $614,000. Plaintiff also contends that a figure close to this amount reflects the actual cash value of the burned building. Defendant, on the other hand, contends that the policy's "agreed value" optional coverage provision serves only to suspend the policy's coinsurance provisions and thus addresses how much of a loss will be paid by the Defendant and not how the loss itself will be valued. Rather, other provisions address how the dollar value of the loss is to be determined in the first instance; i.e., by determining the building's actual cash value. It is Defendant's position that the actual cash value of the building is $247,147.58 (including debris removal and clean up), and Defendant tendered this amount to Plaintiff on February 4, 1998.¹ In its motion for partial summary judgment, Defendant demands, pursuant to Section E.2 of the parties' insurance policy, that an appraisal panel determine the actual cash value of the subject building.

B. Relevant Policy Provisions

The policy at issue here is a "manuscript" policy. This means it was the product of negotiations between Plaintiff and Defendant. See Complt. ¶¶ 6-8. The following provisions are relevant to the parties' cross motions for partial summary judgment.

Declarations Page: Lists 25 covered items, each with a separate "amount of coverage" and coinsurance percentage of "0%." The "optional coverages" section states that it is "applicable only when entries are made in the schedule below." There are entries under the "Agreed Value" portion but not under the "Replacement Value" portion of this section. See Def.'s motion, Ex. B at 1.

Supplemental Declarations Page: Lists as Prem. No. 9, the building located at 28417 Telegraph, Flat Rock, Michigan, and lists $614,000; $25,000; and $185,000 as the "Amount of Coverage" for the building, personal property, and business income respectively. It also lists a 0% coinsurance percentage for each item. Id. at 3.

Limits of Insurance: This provision provides that "[t]he most we will pay for loss or damage in any one occurrence is the applicable Limit of Insurance shown in the Declarations." Id. at 8, § C.

Appraisal Provision: Provides that if the insurer and insured "disagree on the value of the property or the amount of loss, either may make written demand for an appraisal of the loss. In this event, each party will select a competent and impartial appraiser. The two appraisers will select an umpire. If they cannot agree, either may request that selection be made by a judge of a court having jurisdiction. The appraisers will state separately the value of the property and amount of loss. If they fail to agree, they will submit their differences to the umpire. A decision agreed to by any two will be binding." Id. at 9, § E.2.

Loss Payment: Provides that "[i]n the event of loss or damage covered by this Coverage Form, at our option, we will either: (1) Pay the value of lost or damaged property; (2) Pay the cost of repairing or replacing the lost or damaged property, subject to b. below; (3) Take all or any part of the property at an agreed or appraised value; or (4) Repair, rebuild or replace the property with other property of like kind and quality, subject to b. below." Id. at 10, § 4.a.

This provision further provides that the insurer "will pay for covered loss or damage within 30 days after we receive the sworn proof of loss, if you have complied with all of the terms of this Coverage Part and: (1) We have reached agreement with you on the amount of loss; or (2) An appraisal award has been made." Id. at 10, § 4.g Valuation: Provides that the insurer "will determine the value of the Covered Property in the event of loss or damage as follows:

a. At actual cash value as of the time of loss or damage, except as provided in b., c., d., e. and f. below." Id. at 11, §§ 7 and 7.a.

Coinsurance: Included under Section F, "Additional Conditions" and provides that "[i]f a Coinsurance percentage is shown in the Declarations, the following condition applies.

a. We will not pay the full amount of any loss if the value of Covered Property at the time of loss times the Coinsurance percentage shown for it in the Declarations is greater than the Limit of Insurance for the property.

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