Yaldo v. Allstate Property and Cas. Ins. Co., 2:08-cv-14650.

• Decision Date: 13 July 2009
• Docket Number: No. 2:08-cv-14650.,2:08-cv-14650.
• Citation: 641 F.Supp.2d 644
• Parties: Ansam YALDO, et al., Plaintiffs, v. ALLSTATE PROPERTY AND CASUALTY INS. CO., Defendant.
• Court: U.S. District Court — Eastern District of Michigan

641 F.Supp.2d 644

Ansam YALDO, et al., Plaintiffs, v. ALLSTATE PROPERTY AND CASUALTY INS. CO., Defendant.

No. 2:08-cv-14650.

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

July 13, 2009.

Michael H. Fabian, Fabian, Sklar, Farmington Hills, MI, for Plaintiffs.

James C. Klemanski, Klemanski & Assoc., Troy, MI, Phillip K. Yeager, Hopkins, Curran, ADA, MI, for Defendant.

ORDER DENYING PLAINTIFFS' MOTION FOR SUMMARY JUDGMENT (docket no. 11) AND GRANTING DEFENDANT'S CROSS-MOTION FOR SUMMARY JUDGMENT (docket no. 13)

STEPHEN J. MURPHY, III, District Judge.

This is an action for a declaratory judgment pursuant to 28 U.S.C. § 2201 to adjudicate the parties' rights and obligations under a homeowner's insurance policy issued by the defendant, Allstate Property and Casualty Insurance Company ("Allstate") to plaintiffs with respect to a fire that occurred at 30755 Helmandale Drive, Franklin, Michigan. Plaintiffs are Ansam Yaldo, the policyholder, and Wafa and Francis Yaldo, who are family members and insured persons under the policy. Jurisdiction is based upon diversity of citizenship. The Yaldos are seeking a declaration that Allstate is not entitled to conduct an Examination Under Oath ("EUO") of the Yaldos and an order of this Court appointing a neutral umpire for the parties' appraisal proceedings. Allstate seeks a declaration that it is entitled to conduct an EUO of the Yaldos, and that, by failing to submit to an EUO, the Yaldos are in breach of the insurance contract. The parties' cross-motions for summary judgment are before the Court today.

The plaintiffs' summary judgment motion will be denied and the defendant insurance company's summary judgment motion will be granted. The EUO provision in the policy is a condition precedent to suit upon the policy and, because the Yaldos have not complied with it, they are barred from bringing suit on the policy until they do. The Yaldos are not excused from complying with Allstate's request for an EUO because the EUO provision is neither explicitly barred by Michigan law, nor is it contrary to the statutory scheme of the insurance code or violative of due process. The main case that Yaldo relies upon for the proposition that the EUO provision is unenforceable is a no-fault case, and is thereby distinguishable.

FACTS

Allstate issued policy number 9 06 536803 11/28 (the "policy") to plaintiff Ansam Yaldo, insuring her against loss and damage to her home at 30755 Helmandale Drive, Franklin Michigan. The policy was in full force and effect on April 11, 2008 when a fire occurred at the Yaldo home that damaged the home and the plaintiffs' personal property.

On April 24, 2008, Allstate sent Yaldo a letter identifying the documents and information that it would consider satisfactory proof of loss. The letter stated that the plaintiffs were required to give detailed information regarding the actual cash value of the damaged items and the amount of loss suffered, complete the Sworn Statement in Proof of Loss and Personal Property Inventory Loss forms and return them to the defendant on or before June 11, 2008.

On May 6, 2008, a fire contents restoration company furnished to Allstate an inventory of items damaged in the fire which the company felt could be cleaned and repaired. On May 9, 2008, the plaintiffs delivered to Allstate proof of the amount of loss, including a contractor's estimate by Charles L. Pugh Company of the cost to repair the premises. On June 4, 2008, the plaintiffs delivered a personal property inventory setting forth the replacement cost of the contents of the property. The plaintiffs characterize these submissions as proof of the amount of loss, triggering the insurer's responsibility to respond within thirty days. Yaldo's sworn proof of loss, which is required under the policy, was not submitted until almost one month later.

On June 26, 2008, Ansam Yaldo demanded appraisal of the claim pursuant to the contract and M.C.L. § 500.2833(1)(m), naming Gary A. Matkovich as her appraiser for the building portion of the claim and Patricia Striho as her appraiser for the contents portion of the claim. On July 2, 2008, plaintiff Ansam Yaldo submitted to Allstate her Sworn Statement in Proof of Loss, dated June 26, 2008.

On July 10, 2008, Allstate rejected Yaldo's Sworn Statement in Proof of Loss as incomplete in a letter of the same date "due to disagreements with the structure and contents estimates provided." On the same date, Allstate named Michael Schwab as its appraiser. According to Yaldo, by doing so Allstate acceded to Yaldo's demand for appraisal and the amount of plaintiffs' losses were to be conclusively determined by the appraisal panel. The appraisers nominated by the parties commenced appraisal activities, exchanged information, inspected the loss site and discussed the selection of an umpire. On July 14, Allstate made a payment in the amount of $213,978.09 toward the building portion of the loss and $32,73.71 toward the contents portion of the loss. Complaint ¶ 26.

On October 3, 2008, counsel for Allstate sent a letter demanding that plaintiffs and all persons with an interest in the real or personal property involved in the claim submit to an Examination Under Oath at Allstate's attorney's office on October 15, 2008 and to produce certain documents. Yaldo claims that Allstate instructed its appraiser to cease engaging in further appraisal proceedings, but it appears that Allstate merely states in the letter that until Yaldo submits to an EUO, Allstate "is unable to accept liability for the loss or to agree with the values submitted." Plaintiffs' Exhibit 9. Allstate acknowledges that it sent a copy of its letter to its appraiser but states that it never instructed the appraiser to cease engaging in further appraisal activities. The Yaldos did not appear for the EUOs, and Allstate sent a letter dated October 15, 2008 stating that failure to appear for an EUO when requested is a breach of duties after loss and that an EUO, once requested, is a precondition to payment of any claim under the policy and a precondition to litigation under the policy and Michigan law. Complaint Exhibit 9.

The plaintiffs objected to the EUO through counsel by letter dated October 24, 2009 on the grounds that they believed that Allstate did not have the right to require an EUO at this stage in the proceedings when the Yaldos did not have similar rights to take testimony, demand documents and obtain discovery from Allstate. Plaintiffs' Exhibit 7. Allstate replied in a letter dated October 27, 2009 that it disagreed with plaintiffs' reading of the legal authorities supporting its position.

Plaintiffs commenced this declaratory judgment action on November 3, 2008. The action seeks (1) a declaration that it is not a breach of contract to seek a judicial declaration of the rights and obligations of a party to a homeowner's policy, (2) a declaration that Allstate may not thwart the appraisal process by unilaterally suspending appraisal pending its receipt of Examination Under Oath and production of documents, (3) a declaration that Allstate cannot conduct one-sided discovery during appraisal by demanding Examinations Under Oath and the production of documents from its insureds, who do not have reciprocal rights, and when the demands were otherwise not timely made within the statutory scheme for claim payment and resolution (4) an order compelling Allstate to proceed with appraisal, and (5) appointment of a neutral umpire. Allstate answered and asserted affirmative defenses of breach of contract and misrepresentation or fraud, among other affirmative defenses. In its breach of contract defense, Allstate asserts that Yaldo is prohibited from seeking declaratory relief under the contract because her failure to appear for an EUO is a material breach of a condition precedent to recovery or litigation under the contract.

The Court issued an order on January 14, 2009, following a scheduling conference with the parties, which stayed discovery and set forth a briefing schedule for summary judgment motions. The Court also entered a stipulated order on January 15, 2009 which provided that the appraisal process shall continue and permitted the defendant to amend its answer and affirmative defenses eliminating Allstate's claims that the plaintiffs have wilfully failed to comply with the policy conditions, breached the terms and conditions of the insurance policy and engaged in misrepresentation, concealment or fraud that would void the policy or result in the forfeiture of benefits. The stipulation was without prejudice to the parties reasserting these claims later. The order thereby limited the scope of this declaratory judgment action to the question of whether Allstate is entitled to Examinations under Oath in this matter and whether the appraisal procedures shall continue and determine the amount of loss.

DISCUSSION

Both plaintiff and defendant have moved for summary judgment. The Yaldos have moved for a declaration by this court that they are not obligated to submit to EUOs requested by Allstate. Allstate has cross-moved for a declaration by this Court that the Yaldos are obliged under the policy to submit to EUOs, and that by failing to do so they are in breach of the insurance policy and thereby barred from bringing this declaratory judgment action.

Rule 56(c) of the Federal Rules of Civil Procedure provides that summary judgment "should be rendered if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Summary judgment is appropriate if the moving party demonstrates that there is no genuine issue of material fact regarding the existence of an essential element of the nonmoving party's case on which the nonmoving party would bear the burden of proof at trial. Celotex Corp. v. Catrett,...