Thomson v. State Farm Ins. Co.

• Decision Date: 02 October 1998
• Docket Number: Docket No. 200066
• Citation: 592 N.W.2d 82,232 Mich.App. 38
• Parties: William THOMSON and Susan Thomson, Plaintiffs-Appellees, v. STATE FARM INSURANCE COMPANY, Defendant-Appellant.
• Court: Court of Appeal of Michigan — District of US

Page 82

592 N.W.2d 82

232 Mich.App. 38

William THOMSON and Susan Thomson, Plaintiffs-Appellees, v. STATE FARM INSURANCE COMPANY, Defendant-Appellant.

Docket No. 200066.

Court of Appeals of Michigan.

Submitted March 11, 1998, at Grand Rapids.

Decided Oct. 2, 1998, at 9:20 a.m.

Released for Publication Jan. 8, 1999.

Garlington & Associates (by Monica E. Garlington ), Wyoming, for the plaintiffs.

Beusse Holmes, P.C. (by Elizabeth S. Holmes ), Grand Rapids, for the defendant.

Before: RICHARD ALLEN GRIFFIN, P.J., and HOEKSTRA and WHITBECK, JJ.

WHITBECK, J.

Defendant State Farm Insurance Company appeals by leave granted the trial court's denial of its motion for summary disposition pursuant to MCR 2.116(C)(10) in this suit brought by plaintiffs William Thomson and Susan Thomson. We reverse and remand for dismissal of this case without prejudice.

I. Factual Background and Procedural History

State Farm and the Thomsons were parties to a homeowner's insurance policy. In February 1996, the Thomsons submitted a claim to State Farm seeking coverage for household goods with a value of about $25,000 that were allegedly stolen from a commercial storage facility in Ohio on November 25, 1995, or thereabout. The Thomsons eventually provided recorded statements, as well as other information, to State Farm. ¹ A representative of State Farm conducted a tape-recorded interview of William Thomson at his apartment in Grandville on December 4, 1995, which resulted in a quite lengthy transcript that is included in the record. State Farm acknowledged that it took recorded statements from both of the Thomsons. ²

The insurance policy issued by State Farm to the Thomsons included the following provisions:

2. Your Duties After Loss. After a loss to which this insurance may apply, you shall see that the following duties are performed:

* * * * * *

d. as often as we reasonably require:

* * * * * *

(3) submit to and subscribe, while not in the presence of any other insured:

(a) statements; and

(b) examinations under oath; and

* * * * * * 8. Suit Against Us. No action shall be brought unless there has been compliance with the policy provisions. The action must be started within one year after the date of loss or damage. [Emphases omitted.]

State Farm made multiple requests for the Thomsons to appear for examinations under oath (EUOs). ³ In a letter dated May 14, 1996, the Thomsons' counsel stated that he thought requiring the Thomsons to participate in EUOs would be unreasonable because an adjuster had taken a statement from William Thomson in December 1995, and State Farm had not indicated what areas needed clarification. ⁴

State Farm moved for summary disposition in this case on the basis of the Thomsons' failure to submit to EUOs. On September 25, 1996, the trial court issued an order denying State Farm's motion for summary disposition. On October 4, 1996, this Court decided Yeo v. State Farm Ins. Co., 219 Mich.App. 254, 555 [232 Mich.App. 43] N.W.2d 893 (1996), a case that we address at length below. Thereafter, State Farm moved for reconsideration of the trial court's denial of its motion for summary disposition. In a letter dated October 31, 1996, counsel for the Thomsons essentially advised counsel for State Farm that the Thomsons were willing to appear for an EUO. ⁵ In a December 6, 1996, order, the trial court (1) ordered the Thomsons to submit to an EUO within fourteen days from November 21, 1996, and (2) denied State Farm's motion for reconsideration of the trial court's denial of its motion for summary disposition. Thereafter, this Court granted State Farm's application for leave to appeal. There is no indication from the record that State Farm has ever conducted an EUO with either of the Thomsons.

II. Standard of Review

We review the trial court's denial of summary disposition de novo. Pinckney Community Schools v. Continental Casualty Co., 213 Mich.App. 521, 525, 540 N.W.2d 748 (1995). A trial court may properly grant a motion for summary disposition under MCR 2.116(C)(10) if, except with regard to the amount of damages, there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Pinckney Community Schools.

III. Yeo

In Yeo, supra at 255, 555 N.W.2d 893, the plaintiff alleged that her home, insured by State Farm (which was also the defendant insurer in that case), had been burglarized on July 22, 1994. In a September 27, 1994, letter, State Farm requested an EUO of the plaintiff on October 25, 1994. Id. On October 5, 1994, the plaintiff provided State Farm with a detailed, taped statement, but she did not appear for the EUO on October 25, 1994. In a letter dated October 31, 1994, State Farm rescheduled the EUO for November 21, 1994. However, the plaintiff filed the lawsuit in Yeo on November 2, 1994. Id. The pertinent provisions of the insurance policy in Yeo regarding EUOs contained language identical to the pertinent language of the policy in this case. Id. at 256-257, 555 N.W.2d 893. State Farm moved for summary disposition on the basis of the failure of the plaintiff in Yeo to submit to a requested EUO before filing suit, "arguing that because plaintiff failed to satisfy the condition of being examined under oath, recovery under the policy was barred." Id. at 256, 555 N.W.2d 893. The trial court dismissed the case without prejudice and with " 'hope that the parties can proceed with the examination under oath and refile [sic] this case.' " Id. State Farm appealed, arguing that the case should have been dismissed with prejudice, but this Court affirmed. Id. at 255, 555 N.W.2d 893.

In Yeo, this Court made clear that the EUO requirement contained in policies like the one at issue there, and here, is generally enforceable:

In this case, the policy language clearly establishes that, when requested, an examination under oath is a condition that must be satisfied before an insured has the right to bring an action against defendant. Such a condition "is a valid one and as a general rule enforceable, and one who without cause refuses to submit to examination should be precluded from maintaining an action on the policy." Gordon v. St. Paul Fire & Marine Ins. Co., 197 Mich. 226, 230, 163 N.W. 956 (1917). [Yeo, supra at 257, 555 N.W.2d 893.]

In our view, consistent with that of the Yeo panel, the policy provisions in question regarding EUOs necessarily allow State Farm to require an insured to appear for at least one EUO and, if the insured fails or refuses to submit to an EUO, the insured is precluded from maintaining an action on the policy. Here, the insureds failed or refused to submit to the EUO. Under Yeo, therefore, the Thomsons' action must be dismissed.

IV. Wilful Noncompliance

Yeo left open the question whether dismissal should be with or without prejudice:

Defendant argues that because plaintiff wilfully violated the condition of being examined under oath, the dismissal should be with prejudice. However, we find nothing on the record to indicate that plaintiff's failure to submit to the examination on October 25, 1994, was the result of a flat refusal to submit to such an examination. Therefore, we need not address the effect of wilful noncompliance on the general rule stated here. [Id. at 259, 555 N.W.2d 893.]

We believe it to be clear that, within the general framework of Yeo, if the noncompliance is wilful, the dismissal is to be with prejudice. On the other hand, if the noncompliance is not wilful, the implication is that the dismissal is to be without prejudice.

Yeo did not provide a definition of "wilful noncompliance." However, Yeo's conclusion that the facts of that case did not involve wilful noncompliance is instructive. As noted above, the plaintiff in Yeo provided "a detailed, taped statement" after being requested to appear for an EUO and thereafter failed to appear for a scheduled EUO. Id. at 255, 555 N.W.2d 893. After failing to appear for the EUO and after a letter in which the defendant insurer rescheduled the EUO, the plaintiff in Yeo filed suit. Id. Accordingly, it is evident that the plaintiff in Yeo knowingly declined to appear for an EUO before filing suit. Nevertheless, this Court in Yeo did not regard this as wilful noncompliance. It follows that wilful noncompliance in this context involves something more than merely knowingly failing to appear for an EUO.

Therefore, the central issue confronting us here is the one that the Yeo panel declined to address: the proper definition of wilful noncompliance. Because this is a case of first impression in Michigan, we look for guidance to pertinent cases from other jurisdictions.

In Taylor v. Fireman's Fund Ins. Co., 306 So.2d 638, 639 (Miss., 1974), the plaintiff brought suit against the defendant insurer for a claim related to a house that had burned. The insurance policy in that case included a provision that "[t]he insured, as often as may be reasonably required, shall ... submit to examinations under oath by any person named by this Company...." Id. at 639 (emphasis omitted). The transcript of the EUO reflects that the plaintiff in Taylor, in accordance with the advice of counsel, refused to answer several questions during the EUO including questions related to his financial status at the time of the fire. Id. at 640-644. The Mississippi Supreme Court concluded that the trial court properly directed a verdict for the defendant insurer, stating, id. at 644-645:

The insured was required to answer these questions fully and completely, to give the best information he had about these matters.

In Southern Guaranty Insurance Co. v. Dean, 252 Miss. 69, 172 So.2d 553 (1965), the insurance policy involved contained the exact same provisions for a sworn examination of the insured before trial. In Southern, the trial court held that the policy had not been voided by the actions of the insured. This Court, in reversing, said:

"We hold that insured failed and refused to answer...