GREAT LAKES MUTUAL INSURANCE CO V KENNETH KIRSCHNER
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STATE OF MICHIGAN
COURT OF APPEALS
GREAT LAKES MUTUAL INSURANCE
COMPANY,
UNPUBLISHED
August 4, 2011
Plaintiff-Appellant,
v
KENNETH KIRSCHNER, PAMELA
KIRSCHNER and KEN’S LITTLE BEAR, LLC,
No. 295677
Menominee Circuit Court
LC No. 09-012869-CZ
Defendants/Third-Party
Plaintiffs/Appellees,
and
DANIEL VEESER INSURANCE AGENCY, INC.
and DANIEL VEESER,
Third-Party Defendants-Appellees.
Before: RONAYNE KRAUSE, P.J., and SERVITTO and GLEICHER, JJ.
PER CURIAM.
Plaintiff appeals as of right the trial court’s order granting summary disposition in
defendants’ favor. We reverse and remand to the trial court.
Plaintiff initiated this property insurance case, asking the trial court to render a
declaratory judgment in its favor to rescind a policy of insurance plaintiff had issued to
defendants, and to preclude any claims submitted as a result of the fire that badly damaged the
subject property on February 1, 2009. Plaintiff alleged that defendants made misrepresentations
in the insurance application, and that the policy was void on the basis of the transfer of title for
the insured premises from defendants’ name into that of Ken’s Little Bear, L.L.C. On
defendants’ motion, third-party defendants (defendant’s insurance agents) were added as parties
due to their alleged wrongful actions in securing the policy at issue. Defendants moved for
summary disposition, and the trial court granted summary disposition in their favor, ordering that
plaintiff pay defendants according to the terms of the policy, together with taxable costs and
statutory attorney fees, and dismissing the third-party complaint without prejudice.
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Plaintiff first argues on appeal that the trial court erred in its conclusion that defendants
had an insurable interest in the real property and were thus entitled to recovery under the policy.
We agree.
We review a trial court’s decision to grant a motion for summary disposition de novo.
See Michigan Federation of Teachers & Sch Related Personnel, AFT, AFL-CIO v Univ of
Michigan, 481 Mich 657, 664; 753 NW2d 28 (2008). Issues of contract interpretation are
questions of law that this Court likewise reviews de novo. See Sweebe v Sweebe, 474 Mich 151,
154; 712 NW2d 708 (2006).
An insurance policy is much the same as any other contract in that it is an agreement
between its parties. Tenneco Inc v Amerisure Mut Ins Co, 281 Mich App 429, 444; 761 NW2d
846 (2008). “The primary goal in the interpretation of an insurance policy is to honor the intent
of the parties.” Id., citing Klapp v United Ins Group Agency, Inc, 468 Mich 459, 463; 663 NW2d
447 (2003).
An insurance contract must be construed to give effect to every word, clause, and phrase,
and a construction should be avoided that would render any part of the contract surplusage or
nugatory. Klapp, 468 Mich at 468. When reviewing an insurance policy dispute, this Court
must look to the language of the policy and interpret the terms in accordance with established
principles of contract construction. McNeel v Farm Bureau Gen Ins Co of Michigan, ___ Mich
App ___; ___ NW2d ___ (Docket No. 285008 issued June 29, 2010), slip op p 6, citing
Henderson v State Farm Fire & Cas Co, 460 Mich 348, 353-354; 596 NW2d 190 (1999).
Contractual terms must be interpreted to avoid absurd or unreasonable conditions or results.
Hastings Mut Ins v Safety King Inc, 286 Mich App 287, 297; 778 NW2d 275 (2009). The terms
of an insurance policy are given their commonly used meanings, unless clearly defined in the
policy. Group Ins Co v Czopek, 440 Mich 590, 596; 489 NW2d 444 (1992). A court may
establish the meaning of a term through a dictionary definition. Citizens Ins Co v Pro-Seal Serv
Group, Inc, 477 Mich 75, 84; 730 NW2d 682 (2007).
The policy at issue included the following definitions:
1.
The definitions “you” and “your” mean the person or persons named as
the insured on the “declarations.” This includes “your” spouse if a resident of
“your” household.
2.
The words “we”, “us”, and “our” mean the company providing this
insurance.
***
7.
“Insured” means:
a.
“You”;
b.
“Your” relatives if residents of “your” household;
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c.
Persons under the age of 21 residing in “your” household and in
“your” care or in the care of “your” resident relatives; and
d.
“Your” legal representative if “you” die while insured by this
policy. This person is an “insured” only for liability arising out of the
“insured premises”. An “insured” at the time of “your” death remains an
“insured” while residing on the “insured premises”.
8.
“Insured premises”
a.
Described Location: If “you” own and reside in the “residence”
shown on the “declarations” as the described location, the “insured
premises” means:
1) that “residence”; and
2) related private structures and grounds at that location.
If the “residence” is a townhouse or a row house, item 2) above
includes only related private structures and grounds at that location
used or occupied solely by “your” household for residential
purposes.
Thus, the policy provided a definition of “insured” and “insured premises.” “Insured”
includes the named insured, residents of the named insured’s household, or the named insured’s
legal representative. Further, the policy defined “insured premises” as the residence shown on
the declarations page that the insured party owns and where the insured party resides. In this
situation, the parties acknowledge that defendants were listed as the named insured individuals,
but that defendants did not “own” the premises. Title to the property was undisputedly
quitclaimed to Ken’s Little Bear, Inc, LLC in February 2008 and the LLC (of which defendant
Kenneth Kirschner was the sole member) was not a named insured. Because the policy
definition of “insured premises” under ¶ 8a, as shown above, applies where the insured party
owns the premises and defendants admittedly did not, the premises could not qualify as “insured
premises” under the policy language. 1
1
The supplemental brief argues that ¶ 8a is an “exclusion from coverage,” which does not apply
because defendants did not reside at the property. Not only does the case cited in the
supplemental authority, McGrath v Allstate Ins Co, ___ Mich App ___; ___ NW2d ___ (Docket
No. 289210, issued November 2, 2010), not support defendants’ position, their argument is
backward. The insured premises is defined as the residence shown on the declarations page that
the insured party both owns and where the insured party resides, and defendants concede that
they did not “reside” at the premises. Though plaintiff implicitly found that the residency
requirement had been met, coverage could arguably have been precluded on the basis of their
non-residency, given the policy language.
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“[U]nambiguous contracts are not open to judicial construction and must be enforced as
written.” Rory v Continental Ins Co, 473 Mich 457, 468; 703 NW2d 23 (2005) (emphasis in the
original). “Courts enforce contracts according to their unambiguous terms because doing so
respects the freedom of individuals freely to arrange their affairs via contract.” Id. Thus, under
the unambiguous terms of the policy, defendants are precluded from collecting insurance
benefits because they, as the collective “insured party,” did not own the cabin.
Additionally, the policy contains a provision which provides, “This policy may not be
assigned without our written consent.” Because title to the property was transferred, and
defendants did not obtain, or attempt to obtain plaintiff’s written consent to assign the policy to
the new owner of the property, defendants are precluded from seeking coverage for any claim
submitted as a result of the fire.
The law is well settled that an insured is held to have knowledge of the terms and
conditions contained in his policy of insurance, even though that insured may not have read it.
Marlo Beauty Supply Inc v Farmers Ins Group of Cos, 227 Mich App 309, 324; 575 NW2d 324
(1998). Because the trial court erred in interpreting the policy language to provide coverage
under these facts, we reverse and remand this case to the trial court for proceedings consistent
with this opinion. Since plaintiff is entitled to rescind the policy, a refund of the paid premiums
is in order. Burton v Wolverine Mutual Ins Co, 213 Mich App 514; 540 NW2d 480 (1995). In
light of this conclusion, we need not consider the remaining issues raised on appeal.
Reversed and remanded to the trial court. We do not retain jurisdiction.
/s/ Amy Ronayne Krause
/s/ Deborah A. Servitto
/s/ Elizabeth L. Gleicher
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