Issues: Whether plaintiff-Wells Fargo (the mortgagee) was covered under the "standard mortgage clause" (SMC) of the policy; Foremost Ins. Co v. Allstate Ins Co.; Singer v. American States Ins.; Citizens State Bank of Clare v. State Mut. Rodded Fire Ins. Co. of MI; "Valid claim of the mortgagee"; Ingersoll-Rand Fin. Corp. v. Employers Ins. of Wausau (5th Cir.); Home Sav. of Am., FSB v. Continental Ins. Co. (CA App.); Waterstone Bank, SSB v. American Family Mut. Ins. Co. (WI App.); Insurance policy interpretation; Wilkie v. Auto-Owners Ins. Co.; Whether the issue of whether the residence was covered under the policy was barred from relitigation by the doctrine of "collateral estoppel"; Monat v. State Farm Ins. Co.; Keywell & Rosenfeld v. Bithell; Husted v. Auto-Owners Ins. Co.; Null v. Auto-Owners Ins. Co. (Unpub.); Whether the order granting summary disposition to Wells Fargo in the companion case barred its claim in this case; "Judicial estoppel"; Ford Motor Co. v. Public Serv. Comm'n; Detroit Int'l Bridge Co. v. Commodities Exp. Co.; Szyszlo v. Akowitz; Paschke v. Retool Indus.; "Estoppel by laches"; Schmude Oil Co. v. Omar Operating Co.; Remand for determination of whether Wells Fargo complied with the requirements of the policy; Candelaria v. BC Gen. Contractors, Inc.
Court: Michigan Court of Appeals (Published)
Case Name: Wells Fargo Bank, N.A. v. Null
e-Journal Number: 56584
Judge(s): Boonstra, Cavanagh, and Fitzgerald
In an issue of first impression as to whether a mortgagee continues to have a "valid claim" under a SMC even though the property is not covered because it was not a "resident premises" at the time of the loss, the court held that as a matter of law the SMC afforded coverage to the mortgagee (plaintiff-Wells Fargo) despite the lack of coverage for the insured. Thus, the trial court erred in granting summary disposition to the defendant-insurer (Auto-Owners) on the issue of Wells Fargo's coverage under the policy. It also held that the doctrines of judicial estoppel and estoppel by laches did not bar Wells Fargo's claim in this case. However, the doctrine of collateral estoppel barred relitigation of whether the residence was covered under the policy. Concluding that it would be "inappropriate at this juncture to determine as a matter of law whether Wells Fargo complied with the requirements of the policy, without consideration of that issue by the trial court," the court remanded for further proceedings. This insurance dispute arose from a fire that destroyed a residence. L (defendant-Elizabeth's brother-in-law) purchased the home and obtained from Auto-Owners a homeowners insurance policy covering it. Wells Fargo held the note. L later executed a "Residential Real Estate Contract" with Elizabeth. However, the mortgage was never assigned to her and the Auto-Owners policy remained in L's name. When the fire occurred, L had not lived in the home for several years. Auto-Owners denied Elizabeth's insurance claim for damage to the home and her personal property on the ground that L did not reside there, which was a requirement under the policy. In a companion case, Elizabeth sued Auto-Owners for breach of contract, naming both Auto Owners and Wells Fargo as defendants. While the companion case was proceeding, Wells Fargo filed this case against Auto-Owners and Elizabeth, asserting that it was entitled to any insurance proceeds recovered by Elizabeth. Wells Fargo later amended the complaint and added a breach of contract claim against Auto-Owners. The court agreed with the parties that the policy contained a SMC. Wells Fargo argued that the clause provides coverage for it, as mortgagee, even though it was determined in the companion case that Elizabeth was barred from recovery. The court agreed with Wells Fargo and held that the SMC in this case was a separate contract between Wells Fargo and Auto-Owners that by its plain language afforded coverage to the mortgagee in the circumstances presented. It was "the insured's act of ceasing to reside in the residence that negated the insured's coverage." The court held that "under the rule of law announced in Foremost and Citizens State Bank, that circumstance does not negate coverage for Wells Fargo" under the SMC of the policy. The court found Ingersoll-Rand and Home Savings to be persuasive, and to support its decision that the rule of Foremost provided for coverage for Wells Fargo. It found Waterstone Bank distinguishable. Reversed and remanded.
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