ESTATE OF MARY J MCGRATH V ALLSTATE INSURANCE CO
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STATE OF MICHIGAN
COURT OF APPEALS
JAMES P. MCGRATH, Personal Representative
for the Estate of MARY J. MCGRATH,
FOR PUBLICATION
November 2, 2010
9:00 a.m.
Plaintiff-Appellee,
V
No. 289210
Otsego Circuit Court
LC No. 06-011967-CZ
ALLSTATE INSURANCE COMPANY,
Defendant-Appellant,
and
INERGY PROPANE, LLC a/k/a INERGY LP,
Defendant.
Before: MURRAY, P.J., and SAAD and M.J. KELLY, JJ.
SAAD, J.
Allstate Insurance Company appeals an order of judgment and an order that denied its
motion for post-judgment relief. Allstate also appeals two orders that denied its motions for
summary disposition. For the reasons set forth below, we reverse the trial court’s denial of
Allstate’s motion for summary disposition and vacate the judgment on the jury verdict.
I. Facts
In July 1992, the decedent, Mary McGrath, bought a home in Gaylord, Michigan and
insured it with Allstate. Until 1998, Mary lived in the Gaylord home for most of the year, and
spent winters in Florida. On November 5, 1992, Mary executed a “keep full” agreement with
defendant Inergy Propane, formerly known as Gaylord Gas (hereinafter, Gaylord Gas), to ensure
there was sufficient propane to heat the house during the winter. Under the agreement, Gaylord
Gas would send a delivery driver to the house on a regular basis to check the amount of propane
remaining in the tank and to add propane if needed. The agreement with Gaylord Gas required
Ms. McGrath to pay her bill and to ensure that the driveway remained reasonably clear of snow.
In 1998, Ms. McGrath developed dementia and Alzheimer’s disease and, as her condition
deteriorated, Ms. McGrath’s daughter Cathy moved into the Gaylord house to help take care of
her. By 2003, Cathy was unable to care for her mother alone, and Cathy and her siblings decided
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that Ms. McGrath and Cathy should move to and live in an apartment in Farmington Hills, where
she would be closer to family and her doctors. Cathy changed Ms. McGrath’s billing address
and notified Allstate that the insurance bills should be sent to their address in Farmington Hills.
After Ms. McGrath moved to Farmington Hills, their Gaylord house ceased to be used as a fulltime residence, though Ms. McGrath left the majority of her belongings there and family
members visited the house on occasion for weekends or holiday vacations. Ms. McGrath also
visited the Gaylord property for a few days in October 2005. The record reflects that Cathy
spent a night at the Gaylord house around Thanksgiving 2005, but no one else visited the
property during the winter of 2005-2006. In late May of 2006, Brian McGrath discovered that
his mother’s property had suffered extensive water damage. James McGrath reported the loss to
Allstate and Allstate paid for the initial cleanup and investigated the cause of the damage.
Allstate concluded that the water damage was caused by a frozen pipe that had ruptured
because of a lack of heat to the house. Sometime between November 2005 and May 2006, the
propane tank at the Gaylord property ran out of fuel, which rendered the furnace inoperable. The
record reflects that Gaylord Gas canceled the “keep full” agreement with Ms. McGrath on
December 19, 2005 after its delivery driver found the driveway impassable. It is undisputed that
the driveway of the Gaylord Property was not plowed during the winter of 2005-2006. On June
15, 2006, Allstate informed James over the telephone that it would not pay for the water damage
and Allstate sent a formal denial of coverage letter on June 22, 2006.
Plaintiff filed a complaint against Allstate for breach of contract and it also asserted a
claim of negligence against Gaylord Gas. Plaintiff settled its claim against Gaylord Gas after
case evaluation. Allstate filed two motions for summary disposition pursuant to MCR
2.116(C)(10), and the trial court denied both motions. A jury found in favor of plaintiff and,
pursuant to stipulation, Allstate was ordered to pay plaintiff $100,000. The trial court denied
Allstate’s motion for post-judgment relief on November 13, 2008.
II. Analysis
We hold that the trial court erred when it denied Allstate’s motion for summary
disposition.1
1
We review the denial of a motion for summary disposition de novo. Hastings Mut Ins Co v
Safety King, Inc, 286 Mich App 287, 291; 778 NW2d 275 (2009). A motion for summary
disposition under MCR 2.116(C)(10) tests the factual sufficiency of the case. Corley v Detroit
Bd of Ed, 470 Mich 274, 278; 681 NW2d 342 (2004). The moving party is entitled to a grant of
summary disposition if the party demonstrates that no genuine issue of material fact exists.
Coblentz v Novi, 475 Mich 558, 569; 719 NW2d 73 (2006). “A genuine issue of material fact
exists when the record leaves open an issue on which reasonable minds could differ.” Bennett v
Detroit Police Chief, 274 Mich App 307, 317; 732 NW2d 164 (2006). A plaintiff must support
its claim with pleadings, affidavits, depositions, admissions, and any other admissible evidence.
Coblentz, 475 Mich at 569. Mere speculation and conjecture cannot give rise to a genuine issue
of material fact. Quinto v Cross & Peters Co, 451 Mich 358, 371-372; 547 NW2d 314 (1996).
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The rules of contract interpretation apply to the interpretation of insurance contracts.
Citizens Ins Co v Pro-Seal Serv Group, Inc, 477 Mich 75, 82; 730 NW2d 682 (2007). The
language of insurance contracts should be read as a whole and must be construed to give effect to
every word, clause, and phrase. Klapp v United Ins Group Agency, Inc, 468 Mich 459, 467; 663
NW2d 447 (2003). Where the policy language is clear, a court must enforce the specific
language of the contract. Heniser v Frankenmuth Mut Ins Co, 449 Mich 155, 160; 534 NW2d
502 (1995). However, where an ambiguity exists, it should be construed against the insurer. Id.
An insurance contract is ambiguous if its provisions are subject to more than one meaning.
Vushaj v Farm Bureau Gen Ins Co, 284 Mich App 513, 515; 773 NW2d 758 (2009), citing
Raska v Farm Bureau Mut Ins Co of Michigan, 412 Mich 355, 362; 314 NW2d 440 (1982). An
insurance contract is not ambiguous merely because a term is not defined in the contract. Id.
Any terms not defined in the contract should be given their plain and ordinary meaning, id.,
which may be determined by consulting dictionaries. Citizens Ins Co v Pro-Seal Serv Group,
Inc, 477 Mich 75, 84; 730 NW2d 682 (2007).
In its motion for summary disposition, Allstate argued that the policy does not cover the
damage to the Gaylord property because Ms. McGrath failed to comply with the policy terms.
Specifically, Allstate asserted that, contrary to the policy, Ms. McGrath did not reside at the
Gaylord Property at the time of the loss and failed to notify appellant of the change in title,
occupancy, or use of the property. In essence, because the nature of the risk insured is greater
for an unoccupied home, Allstate’s policy required that the insured reside in the home and notify
Allstate if this changed and the insured did not meet these obligations of the policy.
We agree with Allstate that the insurance policy does not cover the damage to the
Gaylord house because, at the time of the loss, it was not a “dwelling” as defined by the policy.
The policy states that Allstate will “cover sudden and accidental direct physical loss” of covered
property, which includes “[y]our dwelling including attached structures.” As defined in the
policy, “‘You’ or ‘your’ - means the person named on the Policy Declarations as the insured and
that person’s resident spouse.” Dwelling is defined as “a one, two, three, or four family building
structure, identified as the insured property on the Policy Declarations, where you reside and
which is principally used as a private residence.” The policy further states that the insured “must
pay the premium when due and comply with the policy terms and conditions, and inform
[Allstate] of any changes in title, use or occupancy of the residence premises.” Residence
premises is defined as “the dwelling, other structures and land located at the address stated on
the Policy Declarations.”
The critical inquiry here is whether the phrase “where you reside” in the definition of the
covered “dwelling” precludes coverage because of Ms. McGrath’s extended absence from the
insured property. Plaintiff contends that the phrase “where you reside” is merely descriptive of
the property and that it constitutes only an affirmative warranty that Ms. McGrath lived in the
house when she originally entered into the insurance contract with Allstate. Allstate maintains
that the phrase “where you reside” is a statement of coverage that requires that the insured live at
the premises at the time of the loss.
We agree with Allstate. Random House Webster’s College Dictionary defines the verb
“reside” in part as “to dwell permanently or for a considerable time; live.” Random House
Webster’s College Dictionary (2000); accord The American Heritage Dictionary of the English
Language (3d ed, 1996) (“To live in a place permanently or for an extended period.”). The
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policy states that the insured premises means “the residence premises” and the coverage section
states that the insured’s “dwelling” is the covered property. The definition of “residence
premises” uses the word “dwelling,” which is specifically defined as a building structure “where
you reside and which is principally used as a private residence.” (Emphasis added.) Thus, the
term “dwelling” is an integral part of the term “residence premises,” which in turn is an
independent part of the term “insured premises.” In Heniser, 449 Mich at 167, our Supreme
Court ruled that, because the phrase “where you reside” was “not merely used to describe the
property, but an independent part of the definition of ‘residence premises,’” the phrase is not
merely an affirmative warranty, but requires that the insured reside at the premises at the time of
the loss.
This differs from the policy contrasted by the Heniser Court in Reid v Hardware Mut Ins
Co of Carolinas, Inc, 252 SC 339, 342; 166 SE2d 317 (1969), which described the property itself
as a “one story frame constructed, approved roof, owner occupied, one family dwelling.”
(Emphasis added.) In Reid, the court ruled that the phrase describing the property as “owner
occupied” “is a description merely and is not an agreement that the insured should continue in
the occupation of it.” Id. at 346. The Heniser Court further observed that the “owner occupied”
language in Reid “was in a list of statements describing the building covered by the policy,”
making it “clear that ‘owner occupied’ was simply a description of the dwelling in the same way
that stating the building had an ‘approved roof’ merely commented on the structure at the time
the policy was created.” Heniser, 449 Mich at 167 n 13. Again, here, “where you reside” is an
independent part of the definition of “dwelling,” which not only defines the covered property,
but is also incorporated in the definition of “residence premises.” The language is not merely
descriptive of the Gaylord house, but constitutes a statement of coverage; to be a “dwelling”
covered by the policy, the building must be identified in the policy declaration, the insured must
reside there, and it must be used as a private residence. This indicates not only that the insured
must reside at the property at the time the policy became effective, but at the time of the loss.
The trial court implicitly acknowledged that Ms. McGrath had to reside at the Gaylord
property when the water damage occurred, but erroneously ruled that plaintiff established an
issue of fact on this question. Specifically, the trial court ruled that, because evidence showed
that, despite her move to Farmington Hills in 2003, Ms. McGrath intended to return to the
Gaylord house at some time in the future, she “resided” in the house when the pipes burst during
the winter of 2005 or 2006. We hold that the trial court’s ruling is based on a misinterpretation
of Heniser. In Heniser, the plaintiff sold his property on a land contract and the property was
destroyed by a fire a few months later. Heniser, 449 Mich at 157. The insurer denied coverage
because Mr. Heniser did not reside in the house when the fire occurred. Our Supreme Court
noted that the term “reside” may be ambiguous in some contexts, but not in Mr. Heniser’s policy
which, again, provided that the “residence premises” is “where you reside.” The Court observed
that, in some circumstances, such as those involving the Freedom of Information Act or the
Child Custody Act, the term “reside” may have a legal or technical meaning beyond mere
physical presence, including “the intent to live at that location at sometime in the future, a
meaning similar to the legal concept of domicile.” Id. at 163. However, the Court declined to
rule that “reside” should be given a “sophisticated” meaning in the home insurance context under
the policy language at issue. Id. The Court ultimately concluded that Mr. Heniser would not
satisfy either interpretation of “reside” because, by selling the house, he did not physically live
there and he clearly lacked any intent to return. We hold that any discussion by the Court in
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Heniser with regard to Mr. Heniser’s failure to satisfy either the “general or popular meaning” or
“technical” standard was merely obiter dictum and that the term “reside” requires that the insured
actually live at the property. Again, the Heniser Court rejected the notion that a more technical
meaning should be applied in this context in order to construe an unambiguous term in favor of
insurance coverage:
The policy of interpreting ambiguities in a contract against insurers is
rooted in the fact that insurers have superior understanding of the terms they
employ, which should not bind relatively unsophisticated insureds. This goal is
not furthered by allowing insureds to employ a sophisticated version of a term to
create a claim of ambiguity.
As in Heniser, there is no ambiguity in the Allstate policy issued to Ms. McGrath. Accordingly,
it was error for the trial court to ascribe a technical meaning to the term “reside” when the
common understanding of the term required that she live at the Gaylord address at the time of the
loss. It is undisputed that Ms. McGrath did not physically live at the Gaylord address when the
pipes froze and burst or for two years before the loss and, therefore, she did not satisfy the
requirement that she “reside” in the house when the loss occurred.2
The multiple risks assumed by an insurer in exchange for an insurance premium are tied
to an understanding that the building structure covered is where the insured dwells either
permanently or for a considerable period of time, because the risks assumed are clearly impacted
by the presence of the insured in the dwelling and the associated activities stemming from this
presence. Unoccupied or vacant homes, with no resident present to oversee security or
maintenance, are at greater risk for break-ins, vandalism, fire, and water damage of exactly the
kind that occurred in this case. We recognize that an insured may be away from a property
temporarily for travel or due to illness, and the policy clearly contemplates temporary absences,
without curtailing coverage. As one example, the frozen pipes exclusion limits an insured’s
ability to recover for a loss when a building structure is vacant or unoccupied unless the insured
takes reasonable measures to prevent such damage. This exclusion implicitly recognizes that the
2
We also observe that Ms. McGrath arguably did not live at the Gaylord address when the loss
occurred or when the policy came into effect. Justice Levin argued in his dissent in Heniser that
if Mr. Heniser resided at the property when he received his homeowners insurance renewal
certificate, he may have reasonably concluded that he was covered for the policy year. Heniser,
449 Mich at 174-175. Here, in response to Allstate’s motion for summary disposition, plaintiff
pointed out that Allstate issued a renewal policy after Ms. McGrath had moved out of the
Gaylord house in 2003 and plaintiff affirmatively argued that “[t]his was a different policy
period, during which a different insurance contract was in force.” Were we to conclude that the
phrase “where you reside” in the policy does not require that an insured will be physically
present in the dwelling throughout the policy period, plaintiff’s position would suggest that Ms.
McGrath had to at least reside at the Gaylord property when she received the renewal certificate
or on the date it became effective. However, we decline to address this issue because our
holding above resolves the matter and because, despite plaintiff’s assertions, the parties did not
attach evidence of a policy renewal to their briefs below, and this issue was not argued before or
decided by the trial court.
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insured may be away from the property, but be covered for the loss. This is not inconsistent with
the definition of “reside” as defined above. Indeed, the fact that Ms. McGrath had established
the habit of vacationing in Florida during the winters in the 1990s did not change the character of
the dwelling or her living arrangements. During that time, she resided on the property, albeit for
fewer than 12 months of the year, but it remained her home-base and the residence to which she
regularly returned. At issue here is undisputed evidence that Ms. McGrath lived full-time in an
apartment in Farmington Hills for more than two years before the loss occurred. She traveled
once to the property for a very brief visit during those years and it is clear that the Farmington
Hills apartment had become her fixed residence. Because Ms. McGrath did not reside at the
Gaylord property, she failed to comply with the policy terms, and the trial court erred when it
denied Allstate’s motion for summary disposition.
We also agree with Allstate that the trial court should have granted Allstate’s motion for
summary disposition in light of Ms. McGrath’s failure to provide adequate notice of the change
in occupancy of the Gaylord property. Allstate’s argument relies on the following language
contained in the insurance policy:
In reliance on the information you have given us, Allstate agrees to
provide the coverages indicated in the Policy Declarations. In return, you must
pay the premium when due and comply with the policy terms and conditions, and
inform us of any changes in title, use or occupancy of the residence premises.
Allstate also relies on the following language: “No suit or action may be brought against us
unless there has been full compliance with all the policy terms.”
Again, Ms. McGrath moved to Farmington Hills in November 2003, and it is undisputed
that Cathy notified Allstate of the change of billing address. The question is whether Cathy’s
notification was sufficient to put Allstate on notice that there might have been a change in
occupancy of the insured property. The parties do not dispute that it is commonplace in the
context of insurance contracts that the insured’s billing address is different from the property
insured.
Importantly, the term “occupancy” in this policy is found in the phrase “any changes in
title, use or occupancy of the residence premises.” The use of the term “title” appears to
address any changes in possessory interest of the Gaylord property. Further, the policy defines
“residence premises” as “the dwelling, other structures and land located at the address,” and
dwelling is defined as structures where the insured “reside[s].” In keeping with our holding that
Ms. McGrath did not “reside” on the property, the home cannot be deemed her dwelling, and
thus not her residence premises. Accordingly, because Ms. McGrath did not reside on the
Gaylord property, she did not occupy it, which is a change requiring notification.
Plaintiff asserts that, because Ms. McGrath lived in the Gaylord home for approximately
14 years, and because no evidence showed that she had ever changed her billing address before,
Allstate should have questioned why Cathy changed the billing address. However, the policy
places upon the policyholder the responsibility to inform the insurer of a change in occupancy.
Further, a person may change a billing address for myriad reasons that would not raise a
suspicion that residency has changed. As one example, the children of an elderly person may
decide to assume the responsibility for paying a parent’s bills, and thus make arrangements for
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those bills to be sent somewhere other than the parent’s residential address. Because a billing
address may differ from the residence premises for various reasons, the act of notifying Allstate
that Ms. McGrath’s billing address had changed was insufficient as a matter of law to put
Allstate on notice that Ms. McGrath no longer lived full-time at the Gaylord property.
On this discrete question, we agree with the reasoning in Estate of Luster v Allstate Ins
Co, 598 F3d 903 (CA 7, 2010). In that case, Mrs. Luster was injured in a fall when she was 83
years old and, after a hospitalization, she moved to an extended care facility, leaving unoccupied
the home insured by Allstate. Id. at 905. Mrs. Luster executed a power of attorney to her
lawyer, Rick Gikas, who notified Allstate about his appointment and changed the billing address
for the insurance premiums. Id. Mrs. Luster never returned to the home, it remained
unoccupied, and she died four and a half years after her injury. Id. Three months after her death,
the house caught fire and Mr. Gikas filed a claim with Allstate, which denied the claim after
learning that the house was unoccupied for several years. Id. When considering whether there
was adequate notice by virtue of the change of billing address, the Court opined:
Gikas didn’t notify Allstate until after the fire that the house was
unoccupied. He argues that the notice he gave Allstate, shortly after Mrs. Luster
left the house for good―that he had a power of attorney and premiums should be
billed to his office―gave the insurance company constructive notice that the
house was unoccupied, or at least obligated the company to inquire about its
occupancy. That is a frivolous argument. Allstate knew that Luster was 83, so it
would come as no surprise to learn that she had executed a power of attorney and
that the holder of the power would be handling her finances. That did not indicate
that she’d moved out of the house. [Id. at 906.]
As in Luster, we hold that the mere change of billing address by Cathy for her elderly parent did
not put Allstate on notice that Ms. McGrath had moved away from the insured property and did
not obligate Allstate to inquire further about the occupancy of the home. Indeed, if Cathy
notified Allstate of a change in billing address, she could clearly have advised Allstate of the
crucial fact that her mother no longer lived at the Gaylord address. We will not speculate why
Cathy failed to do so, but rule only that it was the insured’s obligation to do so under the policy.
The failure to notify Allstate about the change in occupancy violated the terms of the contract
and Allstate could properly deny coverage for a loss that occurred more than two years later.
This constituted another basis on which the trial court should have granted summary disposition
to Allstate.
In light of our rulings, we need not consider the other arguments raised on appeal. For
the above reasons, we reverse the trial court’s denial of summary disposition to Allstate and
vacate the judgment on the jury verdict.
/s/ Henry William Saad
/s/ Christopher M. Murray
/s/ Michael J. Kelly
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