Penalty interest for late payment of a claim under MCL 500.2006(4); Whether the claim arose under the commercial fire insurance policy at issue; Hearn v. Rickenbacker (MI); Richardson v. Allstate Inc. Co. (CA App.); McCarty v. First of GA Ins. Co. (10th Cir.); Hoskins v. Aetna Life Ins. Co. (OH); Picus v. Copus (WI App.); Oliver v. Perkins (MI); Florsheim v. Travelers Indem. Co. of IL (IL App.); Pleading requirements under MCL 500.2006(4); Hastings Mut. Ins. Co. v. Mosher Dolan Cataldo & Kelly, Inc. (Unpub. MI App.); Yaldo v. North Pointe Ins. Co. (MI); Federal-Mogul Corp. v. Insurance Co. of State of PA (ED MI); 1981-1982 MI Op. Att’y Gen. 326; Barker v. Underwriters at Lloyd’s, London (ED MI); Applicability of the six-year statute of limitations; MCL 600.5813; Department of Envtl. Quality v. Gomez (MI App.); MCL 600.5815; DiPonio Constr. Co. v. Rosati Masonry Co. (MI App.); Borden, Inc. v. State Dep’t of Treasury, Corp. Franchise Fee Div. (MI); MCL 600.5805

[This appeal was from the ED-MI.] In an issue of first impression, the court held that an action for penalty interest under Michigan law filed over four years after the loss in question was not governed by the commercial fire insurance policy’s two-year limitations provision. The court agreed with the plaintiff-insured (Palmer) that the claim was based on a Michigan statute, and because it did not arise under the policy, the policy’s contractual limitations provision did not apply. Rather, the six-year limitations period in MCL 600.5813 applied. The policy did not address any late payment issues, but the defendant-insurer (Scottsdale) argued that the penalty issue was “not ‘independent’ from the underlying contract claim for payment of the insured loss and thus derivatively arises under the Policy.” While Scottsdale relied on Hearn, the court found that case did not support Scottsdale’s position. Palmer was “not asserting a claim associated with nonpayment of a loss under the terms of the policy.” Rather, its claim was “associated with the payment of the claim.” It contended that Scottsdale “breached a separate statutory obligation to pay losses owed under the Policy in a timely manner.” Applying the principles of Hearn to the facts here, the court concluded that Palmer’s penalty-interest claim did “not arise from any legal duty created by the Policy.” Rather, it arose from an obligation created by MCL 500.2006(4). The court rejected Scottsdale’s argument that MCL 500.2006(4) linked the penalty-interest claim to the policy. There was no dispute that “Palmer was entitled to payment of its loss under the Policy, and Scottsdale has paid that loss. This leaves no doubt that Scottsdale had an obligation to timely make that payment under § 500.2006(4). Scottsdale failed to do so.” It also rejected Scottsdale’s claim that there is no independent cause of action under MCL 500.2006. Finally, it found that the district court erred by ruling that “Michigan’s catch-all, six-year period of limitations” in MCL 600.5813 did not apply. The court held that Palmer’s claim for penalty interest was a personal action governed by this statute of limitations. Reversed and remanded.