GREGORY BORGOWSKI V ALLSTATE INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
GREGORY BORGOWSKI and KIMBERLY
BORGOWSKI,
UNPUBLISHED
December 7, 1999
Plaintiffs-Appellants,
v
ALLSTATE INSURANCE COMPANY, ERIC
HAMMERBURG, MIAMI VALLEY BANK, and
DIME SAVINGS BANK OF NEW YORK,
No. 209571
Wayne Circuit Court
LC No. 96-647461 CK
Defendants-Appellees.
Before: White, P.J., and Hood and Jansen, JJ.
PER CURIAM.
Plaintiffs appeal as of right from an order of the trial court granting summary disposition in favor
of defendants1 Miami Valley Bank and Dime Savings Bank of New York pursuant to MCR
2.116(C)(10). We affirm.
This case arises out of a fire that damaged plaintiffs’ pole barn and the contents in it on January
27, 1996 in New Boston. Plaintiffs alleged a loss of $12,900 to the structure and $21,065 for the
contents. Plaintiffs originally had homeowner’s insurance with AAA of Michigan and in April of 1995,
plaintiffs decided to cancel their coverage by AAA and wished to change to coverage with Allstate.
Kim Borgowski contacted their insurance agent, Eric Hammerburg, but she ultimately spoke to another
person in the office concerning changing insurance companies for the homeowner’s policy. Because
plaintiffs believed that coverage had been switched, plaintiffs allowed the insurance policy with AAA to
expire.
On April 10, 1995, plaintiffs were advised by letter from Miami Valley Bank, who was then
servicing plaintiffs’ mortgage, that there was no record of homeowner’s insurance on file. Under the
mortgage agreement, an escrow account was created to collect money for insurance and property
taxes. Kim Borgowski apparently called Hammerburg’s office again and was told that coverage was in
place and that the agent would so advise Miami Valley Bank. On May 3, 1995, Miami Valley Bank
sent a letter to plaintiffs advising them that the homeowner’s policy with AAA was canceled effective
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April 28, 1995. This letter further advised plaintiffs that the property was being placed on a “blanket
fire policy” (also referred to as a “force-placed policy”) which covered only Miami Valley Bank’s
interest in the property and would not protect plaintiff’s equity interest or contents. On May 8, 1995,
Miami Valley Bank sent another letter to plaintiffs advising them that they continued to lack
homeowner’s insurance. Kim Borgowski again called Hammerburg’s office and was given the same
assurance as before.
In September 1995, plaintiffs’ loan was sold to Dime Savings Bank, who then serviced the
mortgage. Because the loan included the force-placed policy, Dime Savings Bank canceled the policy
with the company used by Miami Valley Bank and obtained a replacement policy from Cigna Insurance
Company. On February 1, 1996, a letter was sent to plaintiffs informing them that interim coverage was
placed on the house for one year, effective December 1, 1995, and that the premium for the policy
would be deducted from the escrow account. This letter specifically informed plaintiffs that the policy
might not include coverage comparable to their former policy nor provide complete insurance
protection. Plaintiffs were further informed that it was their responsibility to obtain adequate insurance,
and they were further advised to do so.
Because the homeowner’s policy with AAA was terminated on April 28, 1995, and no
homeowner’s insurance was subsequently purchased by plaintiffs, they had no insurance coverage for
the fire damage to the pole barn and its contents. Plaintiffs filed suit against defendants Miami Valley
Bank and Dime Savings Bank alleging that they were negligent in failing to continue to pay insurance
premiums to Allstate, by accepting insurance money without paying it to any insurer, and in failing to
advise plaintiffs of the insurance coverage deficiency. In January 1998, the trial court granted
defendants’ motions for summary disposition. The trial court ruled that plaintiffs voluntarily canceled
their homeowner’s insurance with AAA, attempted unsuccessfully to obtain homeowner’s insurance
with Allstate, and that defendants Miami Valley Bank and Dime Savings Bank did not misrepresent or
mislead plaintiffs. The trial court also found that these defendants had the right to buy force-placed
insurance under the mortgage agreement and that they did so with adequate notice to plaintiffs that such
insurance would probably not cover their interests in the property.
On appeal, plaintiffs argue that the trial court erred in finding that defendants did not
misrepresent the homeowner’s insurance in place on the property, that the trial court erred in finding that
no question of fact existed with respect to plaintiffs’ reliance on the fact that the escrow statement
showed that money was paid for insurance, and that the trial court erred in ruling that defendants did not
owe a duty to act in good faith to use reasonable care regarding the collection of the insurance
premiums. We disagree and affirm the trial court’s ruling.
First, there is no evidence that defendants in any way misrepresented the insurance in place on
plaintiffs’ property. In fact, Miami Valley Bank notified plaintiffs on April 10, 1995 that no
homeowner’s policy was in place for the property. Plaintiffs were again notified by letter on May 3,
1995 that insurance coverage was canceled effective April 28, 1995 and that no replacement coverage
had been obtained, that a “blanket fire policy” was placed on the property, and that this “blanket fire
policy” covered only the bank’s interest in the property. This letter further informed plaintiffs that the
premium for this policy was being charged to their account. Again on May 8, 1995, plaintiffs were
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informed of the lack of homeowner’s insurance for the house. These letters which plaintiffs did receive,
clearly set forth that they lacked homeowner’s insurance for the property, that a “blanket fire policy”
was being obtained to protect the bank’s interests, and that this premium would be charged to plaintiffs.
Plaintiffs have set forth no evidence whatsoever refuting the information contained in these letters. Thus,
plaintiffs’ claim that defendants misrepresented the insurance placed on the property is totally lacking in
evidentiary support.
Moreover, the fact that Dime Savings Bank continued to collect insurance premiums does not
create a factual dispute as to whether the bank breached any duty owed to plaintiffs. The letters sent to
plaintiffs clearly state that a “blanket fire policy” was being purchased to protect the bank’s interest in
the property, but would not cover plaintiffs’ interest, and that the premium for this policy would be paid
from the escrow account. There is simply no evidence indicating any misrepresentation on the part of
defendants. In fact, the letters are quite clear in informing plaintiffs of the lack of homeowner’s
insurance for the property and the “blanket fire policy” being placed on the property to protect the
bank.
Finally, any duty owed by the banks to act in good faith to use reasonable care regarding the
collection of the insurance premiums was not breached here. As we have stated, the letters clearly
informed plaintiffs of the fact that the homeowner’s insurance policy with AAA was terminated, that a
“blanket fire policy” was being placed on the property that would protect the bank’s interest only, and
that the “blanket fire policy” premium would be paid from the escrow account. Further, the mortgage
agreement permitted the banks to purchase this insurance. The mortgage agreement provides in
pertinent part:
5. Hazard or Property Insurance. Borrower shall keep the improvements now
existing or hereafter erected on the Property insured against loss by fire, hazards
included within the term “extended coverage” and any other hazards, including floods or
flooding, for which Lender requires insurance. This insurance shall be maintained in the
amounts and for the periods that Lender requires. The insurance carrier providing the
insurance shall be chosen by Borrower subject to Lender’s approval which shall not be
unreasonably withheld. If Borrower fails to maintain coverage described above, Lender
may, at Lender’s option, obtain coverage to protect Lender’s rights in the Property. . . .
Plaintiffs in the present case knowingly and voluntarily canceled their homeowner’s insurance
policy with AAA, attempted to change their insurance to have coverage with Allstate, were notified on
several occasions that no homeowner’s insurance was in place for the property, and were notified that a
“blanket fire policy” was being placed on the property for the benefit of the bank. This was permissible
under the terms of the mortgage agreement and plaintiffs were clearly notified that the premium for this
insurance would be paid from their escrow account. Further, the mortgage agreement clearly set forth
that plaintiffs, as the borrowers, were responsible to obtain and keep homeowner’s insurance for the
property.
Accordingly, on de novo review of the record, we conclude that the trial court did not err in
granting summary disposition in favor of defendant Miami Valley Bank and defendant Dime Savings
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Bank for the reasons given by the trial court. Smith v Globe Life Ins Co, 460 Mich 446, 454; ___
NW2d ___ (1999). Plaintiffs have failed to set forth any evidentiary support for their allegations
concerning the alleged negligence of Miami Valley Bank and Dime Savings Bank. Quinto v Cross &
Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996). These defendants are consequently entitled
to judgment as a matter of law.
Affirmed.
/s/ Helene N. White
/s/ Harold Hood
/s/ Kathleen Jansen
1
Defendants Allstate Insurance Company and Eric Hammerburg have been erroneously identified as
appellees on the appellate briefs and on this Court’s docket list. However, Allstate and Hammerburg
are not appellees and are not parties to this appeal because they settled with plaintiffs following
mediation. Therefore, any reference to “defendants” in this opinion will not include Allstate and
Hammerburg.
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