MICHIGAN HERITAGE BANK V FEDERAL INSUR CO
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STATE OF MICHIGAN
COURT OF APPEALS
MICHIGAN HERITAGE BANK,
UNPUBLISHED
August 12, 2004
Plaintiff-Appellee,
v
No. 245832
Oakland Circuit Court
LC No. 2000-020266-CK
FEDERAL INSURANCE COMPANY,
Defendant-Appellant.
Before: Zahra, P.J., and Talbot and Wilder, JJ.
PER CURIAM.
In this insurance dispute, defendant appeals as of right from the trial court’s judgment
awarding plaintiff damages arising from the loss of electronic data processing property (EDPP).
We affirm.1
I. Basic Facts and Procedure
This case involves an insurance policy issued by defendant to Mortgage Corporation of
America (MCA) that includes property and liability coverage. MCA, the named insured,
acquired the insurance policy from defendant through the Loomis & Associates Insurance
Agency (the “Loomis Agency”), who under its contract with defendant, is characterized as an
independent contractor. MCA filed for bankruptcy, and assigned to plaintiff certain leased
computer equipment at MCA’s offices. Because the insurance remained effective, MCA
instructed the Loomis Agency to modify the insurance policy to cover plaintiff’s interest in the
1
We note that defendant failed to include an applicable standard of review for several issues as
required by MCR 7.212(C)(7). Moreover, because defendant’s appellate brief is essentially its
motion for summary disposition, it does not address the basis of the trial court’s decision
granting plaintiff summary disposition. An appellate court need not consider granting relief if
the appellant fails to address the basis of the trial court’s decision. Joerger v Gordon Food
Service, Inc, 224 Mich App 167; 568 NW2d 365 (1997). This Court, on its own motion or that
of plaintiff, could have stricken defendant’s brief as nonconforming. MCR 7.212(I). We caution
defendant’s counsel to adhere to the provisions of the court rules regarding the requirements for
filing a brief with this Court, or sanctions for noncompliance may be appropriately ordered.
MCR 7.101(P)(1)(b); MCR 7.216(C)(1)(b).
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computer equipment. Defendant received this request, but admitted that it had inadvertently
failed to formally endorse plaintiff under the insurance policy.
The Loomis Agency nonetheless issued several documents, each entitled, “certificate of
liability coverage,” to plaintiff. These documents indicated coverage for different “types of
insurance,” including “commercial general liability,” “automobile liability,” “excess liability,”
“workers compensation and employers’ liability.” Also, the documents specifically listed under
an “other type of insurance” catagory, “property coverage (71 locations).” The documents stated
that plaintiff was a “Loss Payee and Additional Insured,” but did not specify whether this status
applied to each type of insurance, to all types of insurance, or a combination of types of
insurances. The certificates did specify that each was issued “as a matter of information only
and conferred no rights.”
After MCA initiated bankruptcy proceedings, plaintiff discovered that the leased
computer equipment was missing. Plaintiff filed the instant action after defendant denied its
insurance claim in connection with the missing computer equipment, seeking monetary damages
or equitable relief under various contract, equitable and statutory theories. In June 2001, the trial
court granted summary disposition in favor of plaintiff under MCR 2.116(C)(10) with respect to
plaintiff’s contract theory. As clarified by the trial court in October 2001, the trial court
determined that plaintiff was entitled to coverage as an “additional insured” or a “standard loss
payee” under the EDPP subsection of the property section of the insurance policy, subject to a
$1,000 deductible applied to each item of claimed property. The amount of plaintiff’s
replacement and actual cash value loss was established pursuant to an appraisal award, dated
August 27, 2002, but was expressly made subject to “all policy terms, conditions and
deductibles.”
On September 24, 2002, a jury trial was held limited to the question of the number of
deductibles to subtract from the appraisal award. The jury, by special verdict, determined that
twenty-five deductibles should be subtracted from the appraisal award. On October 9, 2002, the
trial court entered judgment in favor of plaintiff, consistent with the jury verdict and appraisal
award, of $405,514 for the net actual cash value loss and $509,513 for the net replacement cost
loss, plus statutory interest. The latter award was contingent on defendant replacing the
equipment as provided in the judgment. The trial court denied defendant’s post trial motion for
judgment notwithstanding the verdict or a new trial. This appeal followed.
II. Plaintiff’s Status Under the Insurance Policy
Defendant first argues that the trial court improperly determined plaintiff was a “standard
loss payee” or “additional insured” under the data processing property subsection of the property
section of the insurance policy.
A. Standard of Review
We review de novo a trial court’s decision on a motion for summary disposition. Beaty v
Hertzberg & Golden, PC, 456 Mich 247, 253; 571 NW2d 716 (1997). A motion under MCR
2.116(C)(10) tests the factual sufficiency of the complaint. Maiden v Rozwood, 461 Mich 109,
120; 597 NW2d 817 (1999), (1999). The trial court must consider affidavits, pleadings,
depositions, admissions, and other evidence submitted by the parties, MCR 2.116(G)(5), in the
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light most favorable to the nonmoving party. Maiden, supra. The moving party is entitled to a
judgment as a matter of law when the proffered evidence fails to establish a genuine issue
regarding any material fact. Id. Also, the proper interpretation of a contract is reviewed de
novo. Schmalfeldt v North Pointe Insurance Co, 469 Mich 422, 426; 670 NW2d 651 (2003).
B. Analysis
1. Loss Payee
The parties dispute primarily concerns plaintiff’s “loss payee” status under the property
section of the insurance policy. Plaintiff maintains it is a “standard loss payee” while defendant
claims plaintiff is an “ordinary loss payee.” The parties insist that the determination of plaintiff’s
status in this regard is dispositive. Though we disagree that plaintiff’s “loss payee” status is
dispositive, we agree with defendant that the trial court erred in finding that plaintiff was a
“standard loss payee.”
The property section of the contract contains a provision entitled, “Loss Payable Other
Than Building,” which provides in relevant part:
For covered property (other than building), in which you and a Loss Payee shown
in the Declarations have an insurable interest, we will
• adjust losses with you; and
• pay any claim for loss or damage jointly with you and the Loss Payee, as
interests may appear. [Emphasis in original.]
This provision does not specifically use the phrases “standard loss payee” or “ordinary
loss payee” to indicate a loss payee’s status. In Foremost Ins Co v Allstate Ins Co, 439 Mich
378, 383-384; 486 NW2d 600 (1992), our Supreme Court explained that there are two types of
loss payable clauses; whether coverage is available depends upon which type of clause has been
adopted by the insurer:
Generally, there are two types of loss payable clauses contained in
insurance policies which protect lienholders, the ordinary loss payable clause and
the standard loss payable clause. An ordinary loss payable clause directs an
insurer to pay the proceeds of a policy to the lienholder, as its interest may appear,
before the insured receives payment on the policy. Under this policy, the
lienholder is simply an appointee to receive the insurance fund to the extent of its
interest, and its right of recovery is no greater than that of the insured. There is no
privity of contract between the insurer and the lienholder, and a breach of the
conditions of the policy by the insured prevents recovery by the lienholder.
Under a standard loss payable clause, a lienholder is not subject to the exclusions
available to the insurer against the insured because an independent contract of
insurance exists between the lienholder and the insurer. Traditionally, insurers
have undertaken the risk that the insured will commit fraud by inserting a
standard loss payable clause in the contract for the lienholder’s protection.
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Here, the provision specifically uses the language, “as interest may appear.” The phrase
is identical to language employed by our Supreme Court to demarcate an “ordinary loss payee.”
Foremost, supra at 383. Also, leading authorities recognize that an ordinary loss payable clause
generally provides that the mortgagee will be paid as his or her interests may appear. See 4
Couch, Insurance, 3d, § 65:8, p 65-17, and 5A Appleman, Insurance Law and Practice, § 3335.
Therefore, the phrase “as interests may appear” within the controlling, “Loss Payable Other Than
Building” provision indicates that plaintiff would be deemed an “ordinary loss payee.”
Moreover, a separate provision contained within the property section of the contract
indicates that different language would have been used to indicate that a “loss payee” had rights
additional to an “ordinary loss payee.” This provision, entitled, “Lender/Loss Payee,” provides:
If the Loss Payee shown in the Declarations is a creditor whose interest in
personal property[2] is established by written evidence and both you and that
Loss Payee have an interest in lost or damaged personal property, we will
• adjust losses with you; and
• pay any claim for loss or damage jointly to you and the Loss Payee, as
interest may appear.
However, your Loss Payee has the right to receive loss payment, even though:
• you failed to comply with terms of this insurance; or
• your Loss Payee starts foreclosure or similar actions on the personal
property.
***
If we make loss payments to your Loss Payee when you fail to comply with the
terms of this insurance, you will have to pay us to the extent we pay the Loss
Payee. . . . [(emphasis in original).]
As opposed to the “Loss Payable Other Than Building” provision, the above provision
further protects the rights of a lender that is a loss payee by providing the right to receive loss
payment even though the named insured “failed to comply with terms of this insurance.” Such
specific language that provides additional rights is characteristic of a standard loss payable
clause. Couch, supra at 65-17; see also Foremost, supra at 387 n 22, 388, 392 n 34, Federal
Nat’l Mortgage Ass’n v Ohio Casualty Ins Co, 46 Mich App 587, 588-590, 208 NW2d 573
(1973). Had the parties intended plaintiff to be a “standard loss payee,” language providing
more protection to an unnamed insured’s rights would have been employed within the “Loss
2
The Property insurance form defines “personal property” as not meaning “electronic data
processing equipment.” Therefore, the instant provision is not the applicable loss payable clause.
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Payable Other Than Building” provision. Therefore, we conclude that the language of the
provision in the instant case provides that plaintiff is a mere “ordinary loss payee.” According,
the trial court erred in granting plaintiff summary disposition in this regard.
2. Additional Insured
However, as mentioned, we do not find plaintiff’s “loss payee” status under the insurance
policy dispositive on the question whether plaintiff can file a claim under the policy. There
remains an additional question whether plaintiff is an “additional insured” under the policy. The
insurance policy does not address the consequence of being endorsed as an “additional insured”
under the insurance policy, or a particular section or subsection of the insurance policy. A court
may establish the meaning of a term through a dictionary definition. Morinelli v Provident Life
& Accident Co, 242 Mich App 255, 262; 617 NW2d 777 (2000). An additional insured is
defined as “[a] person who is covered by an insurance policy but who is not the primary insured.
An additional insured may, or may not, be specifically named in the policy.” Black’s Law
Dictionary, 7th ed, p 811.
Defendant admitted that plaintiff was an “additional insured,” but only as to the liability
section, and not the property section and therefore not the EDPP subsection. Plaintiff relies on
the certificates of insurance that indicate plaintiff is a “Loss Payee and Additional Insured” as
evidence that it is an “additional insured” under the property section. Defendant expressly
disavows the significance of the certificates of insurance by repeatedly claiming that they are not
legally binding. But plaintiff also relies on two letters from Elizabeth Magyar, the Loomis
Agency’s Commercial Lines Manager in regard to the insurance policy, to Scott Roth, the
underwriter of the insurance policy, as evidence that plaintiff was added as an “additional
insured,” under the property section. The first letter, dated March 17, 1998, requests that Roth,
[a]dd $271,000 of EDP equipment which is located at various MCA Michigan
offices[.] [H]owever, we have listed this amount at the 23999 N.W. Hwy.
Location for our reference. Also[] add Additional Insured and Loss Payee for
Michigan Heritage Bank for this equipment’s lease.
The second letter to Roth, dated May 1, 1998, is in reference to “MCA Financial Corporation
Package Policy #3525-58-53,” and requests that he “[p]lease add [plaintiff] as additional insured
and loss payee for leased equipment.”
The first letter clearly refers to the value of the insured property, not to potential liability,
and therefore indicates that plaintiff would have properly been added as an “additional insured”
under the property section. The second letter confirms this finding and offers further support for
the conclusion that plaintiff was to be added “as additional insured and loss payee for leased
equipment.” Thus, plaintiff has established that it was added as an “additional insured” with
respect to the property at issue.
To support its argument on appeal that plaintiff was an “additional insured” only as to the
liability section, defendant principally relies on an affidavit from Magyar, in which she states
that “the intent of the Certificates of Insurance was to cover [plaintiff’s] interest in the leases as a
loss payee for property and additional insured for liability only as set forth in paragraph 11,
Risks of Loss and Insurance”, of the form Lease Agreements.” However, Magyar’s affidavit
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merely addresses her interpretation of the certificates of insurance sent to plaintiff, which, as
mentioned, defendant expressly claims are not legally binding. Moreover, a party or witness
may not create a factual dispute by submitting an affidavit which contradicts his or her own prior
conduct. Dykes v William Beaumont Hosp, 246 Mich App 471, 480; 633 NW2d 440 (2001);
Palazzola v Karmazin Products Corp, 223 Mich App 141, 155; 565 NW2d 868 (1997). The
letters Magyar sent to Roth that clearly reference her intent to endorse plaintiff as “additional
insured” with respect to leased equipment contradicts her affidavit. Therefore, Magyar’s
affidavit does not create a genuine issue of material fact in regard to plaintiff’s status as an
“additional insured” under the insurance policy.
Defendant also relies on the May 18, 2001, deposition of Kevin Pyne, an assistant vice
president and departmental manager for defendant, in which he avers that lessors should only
have liability coverage as additional insureds. Pyne explained his conclusion as follows:
The true request here [by Loomis Agency] should be please add as
additional insured lessor and as loss payee. The loss payee comes into play on the
property side. The additional insured lessor, which I believe Michigan Heritage
Bank is, is provided on our policy automatically and would not necessarily even
need to be added with respects to that.
Thus, defendant maintains that Pyne’s deposition testimony establishes that defendant’s past
practices with respect to the endorsement of lessors as “additional insureds” raises a factual
question to avoid summary judgment.
First, Pyne’s testimony addresses whether defendant should have endorsed plaintiff as an
“additional insured,” under the property section, not whether defendant actually intended to
endorse plaintiff as an “additional insured” under the property section, but by inadvertence,
failed to memorialize this intent. Thus, Pynes’ testimony that plaintiff should have been
endorsed as an “additional insured” is not relevant to determining defendant’s actual intent.
Moreover, even if Pynes’ testimony were considered evidence of defendant’s intent, defendant’s
endorsements of eight other entities as “additional insureds” under the property section of the
insurance policy indicates that defendant does not act in accordance with this proffered intent.
Hence, Pyne’s deposition testimony does not raise a genuine issue of material facts in this
regard. Therefore, the trial court properly granted plaintiff summary disposition on the basis that
plaintiff is an “additional insured” under the EDPP subsection.
III. Other Issues Raised In Relation to the Order of Summary Disposition
Defendant raises several issues that it had raised in its response to plaintiff’s motion for
summary disposition, including issues related to plaintiff’s claims for equitable relief, estoppel,
third-party beneficiary, and violation of the Uniform Trade Practices Act. The trial court’s order
granting plaintiff summary disposition was not based upon any of these claims, and therefore, we
conclude that defendant’s arguments concerning these claims are moot. B P 7, supra at 359.
Indeed, we deem plaintiff to have abandoned its equitable and statutory claims by not seeking an
answer from the trial court regarding these claims after the trial court’s denial of defendant’s
cross-motion for summary disposition and before entry of the final judgment. Cf. People v Riley,
88 Mich App 727, 731; 279 NW2d 303 (1979) (defendant’s failure to follow through on a
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motion and request an answer from the trial court constituted an abandonment). Hence, we
decline to address the equitable and statutory claims.
Defendant also argues that plaintiff did not have an insurable financial interest in the
leased computer equipment. We note that the trial court addressed this issue in its June 2001,
decision granting plaintiff summary disposition under MCR 2.116(C)(10). The court specifically
determined that plaintiff’s ownership interest in the leased equipment provided an insurable
interest and that the pledge of collateral in the participation agreements executed by plaintiff with
others for specific leases did not deprive plaintiff of its ownership interests. We agree with the
trial court.
Defendant’s claim that plaintiff had no insurable interest is deficient from the onset
because there was no evidence that plaintiff’s entire financial interest in all leases was sold.
Defendant concedes that not all leases were subject to a sale. Regardless, plaintiff did not sell its
ownership interest in the leased computer equipment. Defendant’s contrary claim is based on an
erroneous assumption that plaintiff’s sale of the collateral securing the loans, as used in the
participation agreements, meant that plaintiff sold its ownership in the leased computer
equipment. Construing the phrase “collateral securing the Loans” as a whole, and giving it its
commonly used meaning, Henderson v State Farm & Casualty Co, 460 Mich 348, 356; 596
NW2d 190 (1999), the only reasonable inference is that plaintiff did not sell its ownership rights.
The word “collateral” means “security pledged for the payment of a loan.” Random House
Webster’s College Dictionary (1997), p 257. Hence, even if one assumes that all the leased
computer equipment for which plaintiff sought insurance payments was collateral securing loans,
as a matter of law, plaintiff nonetheless had an insurable interest as the owner of the leased
computer equipment. Accordingly, defendant has not established any reason for disturbing the
trial court’s grant of summary disposition in favor of plaintiff on this issue.
In addition, in light of the conclusion, supra, that the trial court properly found plaintiff
an “additional insured,” we need not address as moot defendant’s argument that the leased
computer equipment did not constitute “personal property,” under the insurance policy.
IV. Issues Related to Trial
Defendant claims the trial court improperly submitted to the jury the question of how
many deductibles should be subtracted from the appraisal award. First, we conclude that this
issue need not be addressed because defendant did not object to a jury trial on the issue of the
number of deductibles. Rather, at a pre-trial conference, defendant’s attorney asserted that “[o]ur
feeling is that the umpire did not do what he was required to do by the Court” That “we are now
in a position where we either have to ask you to order the umpire to do what he was supposed to
do, or we have to come in here and have a jury trial or an evidentiary hearing.” Defendant did
not object to the jury deciding the question, rather defendant appeared to have requested a jury
trial if the trial court decided that the umpire was not to decide the deductible issue. A party’s
objection at trial on one ground is insufficient to preserve an appellate attack on a different
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ground. Meagher v Wayne State Univ, 222 Mich App 700, 724; 565 NW2d 401 (1997). Here,
defendant’s argument is not preserved for appeal, and need not be addressed.3
Finally, defendant claims that the trial court erred in denying its motion for judgment
notwithstanding the verdict (JNOV) or a new trial. An appellate court reviews de novo a trial
court’s decision to deny a motion for JNOV. Wiley v Henry Ford Cottage Hosp, 257 Mich App
488, 491; 668 NW2d 402 (2003). “We review the evidence and all legitimate inferences in the
light most favorable to the nonmoving party. The motion should be granted only if the evidence
fails to establish a claim as a matter of law.” Id. (citations omitted).
Here, the term “occurrence” could reasonably encompass more than one claim, as
opposed to defendant’s theory that each particular claim constitutes an “occurrence.” Therefore,
the term is ambiguous, and its meaning under the contract is properly left for the jury to decide.
Ascertainment of the meaning of ambiguous contractual language presents a question of fact
which must be decided by a jury. Klapp v United Auto Ins Agency, 468 Mich 459, 469; 663
NW2d 447 (2003). Defendant’s argument assumes that the jury could only have believed its
theory. However, a jury is free to disbelieve evidence, even if it stands uncontradicted. Vargo v
Denison, 140 Mich App 571, 574; 364 NW2d 376 (1985). Moreover, had the jury not believed
either theory, then consideration of extrinsic evidence failed to establish the meaning of the
ambiguity, and the term was properly construed against the drafter of the contract. Klapp, supra
at 470-471. Hence, we reject defendant’s claim that it was entitled to JNOV with respect to any
particular number of deductibles. Wiley, supra. Also for these reasons, we cannot conclude that
the trial court’s decision denying defendant’s motion for a new trial pursuant to MCR
2.611(A)(1)(e) was an abuse of discretion. Bynum v ESAB Group, Inc, 467 Mich 280, 286; 651
NW2d 383 (2002); Campbell v Sullins, 257 Mich App 179, 193; 667 NW2d 887 (2003).
Affirmed.
/s/ Brian K. Zahra
/s/ Michael J. Talbot
/s/ Kurtis T. Wilder
3
Moreover, defendant’s argument lacks merit. Defendant argues that contract remedies were not
exhausted because the appraisal award did not include a number of deductibles. While plaintiff
is required to exhaust its remedies under the insurance contract, Thermo-Plastics R & D, Inc v
General Accident Fire & Life Assurance Corp, 42 Mich App 418; 202 NW2d 703 (1972),
defendant has failed to identify any basis for concluding that the appraisal remedy was not
exhausted. The statute which defendant relies requires only an appraisal of the loss. MCL
500.2833(1)(m). Thus, defendant has failed to identify on appeal that contract remedies were not
exhausted, and therefore has not afforded a basis for finding an error of law. Eldred v Ziny, 246
Mich App 142, 150; 631 NW2d 748 (2001).
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