Michele Dupree v. Auto-Owners Insurance Company , 497 Mich. 1 ( 2014 )

Michigan Supreme Court
Lansing, Michigan
Syllabus
Chief Justice: Justices:
Robert P. Young, Jr. Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Corbin R. Davis
DUPREE v AUTO-OWNERS INSURANCE CO
Docket No. 147647. Decided November 18, 2014.
Michele Dupree brought an action in the Wayne Circuit Court against Auto-Owners
Insurance Company, seeking to recover, under her homeowners’ insurance policy, the full cost of
repair or replacement for the personal property that was destroyed in a fire at her home. Because
the parties did not agree on the extent of the personal property loss, the parties submitted
separate appraisals to an umpire under the process set forth in the insurance policy as mandated
by MCL 500.2833(1)(m). The umpire issued an appraisal award that set forth the full
replacement cost, the applicable depreciation, and the actual cash value loss of the property.
Defendant paid plaintiff the actual cash value of the property but refused to pay the full
replacement cost on the ground that plaintiff had failed to submit proof, in accordance with the
replacement-cost provision of her insurance policy, that she had actually replaced the damaged
property. The court, Daniel P. Ryan, J., denied defendant’s motion for summary disposition and
granted summary disposition to plaintiff under MCR 2.116(I)(2), and defendant appealed as of
right. The Court of Appeals, STEPHENS, P.J., and WILDER and OWENS, JJ., affirmed in an
unpublished opinion per curiam issued July 18, 2013 (Docket No. 310405), holding that the
umpire’s appraisal award under MCL 500.2833(1)(m) was conclusive with regard to the amount
of loss and that, because the award constituted a judgment, it superseded the policy’s
replacement-cost provision. Defendant appealed.
In an opinion per curiam signed by Chief Justice YOUNG and Justices MARKMAN, KELLY,
ZAHRA, MCCORMACK, and VIVIANO, the Supreme Court, in lieu of granting leave to appeal and
without hearing oral argument, held:
Plaintiff was not entitled to the full replacement cost of her property. Although judicial
review of appraisal awards under MCL 500.2833(1)(m) is generally limited to instances of bad
faith, fraud, misconduct, or manifest mistake, that deference was inapplicable because the award
at issue could not be read as a conclusive judgment for replacement cost. Therefore, the terms of
the replacement-cost provision in plaintiff’s homeowners’ policy controlled the scope of her
appraisal award. Because plaintiff failed to submit proof of actual loss in accordance with that
provision, defendant was liable for only the actual cash value of plaintiff’s damaged personal
property.
Court of Appeals judgment reversed; case remanded to the Wayne Circuit Court for entry
of an order vacating its ruling in plaintiff’s favor and granting summary disposition in favor of
defendant.
Justice CAVANAGH would have denied the application for leave to appeal.
©2014 State of Michigan
Michigan Supreme Court
Lansing, Michigan
Opinion
Chief Justice: Justices:
Robert P. Young, Jr. Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
FILED NOVEMBER 18, 2014
STATE OF MICHIGAN
SUPREME COURT
MICHELE DUPREE,
Plaintiff-Appellee,
v No. 147647
AUTO-OWNERS INSURANCE
COMPANY,
Defendant-Appellant.
BEFORE THE ENTIRE BENCH
PER CURIAM.
After her home and much of its contents were damaged by fire, plaintiff sought
coverage under the terms of a homeowners insurance policy issued by defendant.
Although the parties were able to settle plaintiff’s claim for damages to her dwelling,
they were unable to agree on the extent of the loss incurred to plaintiff’s personal
property. Consequently, the parties invoked the policy’s fire loss appraisal provision,
which provided in relevant part as follows:
If you and we [defendant] fail to agree on the actual cash value or
amount of loss covered by this policy, either party may make written
demand for an appraisal. . . .
The appraisers shall then appraise the loss, stating separately the
actual cash value and loss to each item. If the appraisers submit a written
report of an agreement to us [defendant], the amount agreed upon shall be
the actual cash value or amount of loss. If they cannot agree, they will
submit their differences to the umpire. A written award by two will
determine the actual cash value or amount of loss.[1]
After the parties’ respective appraisers submitted their differences, the umpire issued an
appraisal award, which read in pertinent part:
We the undersigned, pursuant to the within appointment, DO
HEREBY CERTIFY that we truly and conscientiously performed the duties
assigned us, agreeably to the foregoing stipulations, and have appraised and
determined and do hereby award as the Actual Cash Value of said property
on the 12th day of August 2005 and the amount of loss thereto by the fire
on the [sic] that day, the following sums, to wit:
(1) THE FULL COST OF REPAIR OR REPLACEMENT IS ……...
$167,923.60
1
This appraisal process is statutorily mandated by MCL 500.2833(1)(m), which states:
(1) Each fire insurance policy issued or delivered in this state shall
contain the following provisions:
* * *
(m) That if the insured and insurer fail to agree on the actual cash
value or amount of the loss, either party may make a written demand that
the amount of the loss or the actual cash value be set by appraisal. . . . The
appraisers shall then set the amount of the loss and actual cash value as to
each item. If the appraisers submit a written report of an agreement to the
insurer, the amount agreed upon shall be the amount of the loss. If the
appraisers fail to agree within a reasonable time, they shall submit their
differences to the umpire. Written agreement signed by any 2 of these 3
shall set the amount of the loss. . . .
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(2) APPLICABLE DEPRECIATION ………………………………
$39,673.48
(3) THE ACTUAL CASH VALUE LOSS IS ………………………
$128,250.12
Defendant compensated plaintiff $128,250.12 for the actual cash value of her
damaged personal property, but it refused to pay the additional depreciation amount of
$39,673.28 on the basis that plaintiff had failed to comply with the policy’s replacement
cost provision, which provided that, as a prerequisite to payment, plaintiff submit proof
that she actually replaced her damaged personal property:
If the full cost to replace all damaged covered property under the
provisions of this section exceeds $500, we [defendant] will pay no more
than the actual cash value of such property until actual repair or
replacement of such property is completed. Actual cash value includes a
deduction for depreciation.[2]
Plaintiff sued to recover the additional depreciation amount and the circuit court granted
summary disposition in her favor. The Court of Appeals affirmed. Dupree v Auto-
Owners Insurance Company, unpublished opinion per curiam of the Court of Appeals,
issued July 18, 2013 (Docket No. 310405).
The sole issue before this Court is whether plaintiff’s appraisal award entitled her
to only the actual cash value of her damaged personal property or whether defendant is
2
The propriety of this provision is not in dispute as it was authorized by MCL 500.2826,
which reads in pertinent part:
A fire policy issued pursuant to this section may provide that there shall be
no liability by the insurer to pay the amount specified in the policy unless
the property damaged is actually repaired, rebuilt, or replaced at the same
or another site.
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liable for the full replacement cost of that property, i.e., actual cash value plus the
applicable depreciation amount.
To determine the extent of defendant’s liability, it is necessary to ascertain the
scope of the appraisal award. While matters of coverage under an insurance agreement
are generally determined by the courts, the method of determining the loss is a matter
reserved for the appraisers.3 And because the statutorily mandated appraisal process set
forth in MCL 500.2833(1)(m) is regarded as a “substitute for judicial determination of a
dispute concerning the amount of a loss,”4 “the amount of loss attributable to personal
property damage, as determined by the appraisers, is conclusive.”5 Given this
conclusiveness, judicial review of an appraisal award is therefore “limited to instances of
bad faith, fraud, misconduct, or manifest mistake.”6 Applying these principles to the
facts in this case, if the appraisal award is read as awarding plaintiff the replacement cost
of her damaged property, then the award is conclusive in that respect and, absent bad
faith, fraud, misconduct, or manifest mistake, it will supersede the insurance policy’s
replacement cost provision. If, however, the appraisal award is viewed as involving a
matter of coverage under the insurance contract, then the award is not afforded
3
See Auto-Owners Ins Co v Kwaiser, 190 Mich. App. 482, 487; 476 N.W.2d 467 (1991);
MCL 500.2833(1)(m).
4
Kwaiser, 190 Mich. App. at 486, quoting Thermo-Plastics R & D, Inc v Gen Accident
Fire & Life Assurance Corp, Ltd, 42 Mich. App. 418, 422, 202 NW2d 703 (1972).
5
Kwaiser, 190 Mich. App. at 488.
6
Id. at 486, citing Port Huron & N R Co v Callanan, 61 Mich. 22, 26; 34 N.W. 678 (1887);
Davis v Nat’l American Ins Co, 78 Mich. App. 225, 232; 259 NW2d 433 (1977).
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conclusive effect, the policy language is not beyond the scope of judicial review, and the
limiting terms of the insurance policy’s replacement cost provision will remain
determinative.
A plain reading of the appraisal award does not support the lower courts’
determination that plaintiff is entitled to the full replacement cost of her damaged
personal property, particularly where the informing language states, “We . . . do hereby
award as the Actual Cash Value of said property . . .” (emphasis added). Indeed, if any
part of the appraisal award constitutes a binding and conclusive judgment, it is the part
that awards plaintiff the actual cash value of her damaged property. While we are
mindful that review of appraisal awards is especially limited, that deference is
inapplicable because the issue here pertains to a condition precedent that has not been
met under the terms of the insurance policy, namely, submission of proof of actual loss.
Accordingly, before it can be determined that the appraisal award constituted a
conclusive judgment for replacement cost that superseded the insurance policy’s
replacement cost provisions, there is the preliminary question concerning whether the
appraisal award entitled plaintiff to the replacement cost or the actual cash value of her
damaged personal property.
Because the appraisal award cannot be read as a “conclusive” judgment for
replacement cost, the terms of the replacement cost provision under the insurance policy
control the scope of plaintiff’s appraisal award. Consequently, plaintiff’s failure to
submit proof of actual loss in accordance with that provision entitles her to only the
actual cash value of her damaged personal property. In lieu of granting defendant’s
application for leave to appeal, we reverse the judgment of the Court of Appeals and
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remand this case to the Wayne Circuit Court for entry of an order vacating its ruling in
plaintiff’s favor and granting summary disposition in favor of defendant.
Robert P. Young, Jr.
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
CAVANAGH, J. I would deny the application for leave to appeal.
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