Nationwide Mutual Fire Insurance Company v. McDermott
Filing
59
OPINION and ORDER granting Nationwide's 48 Second MOTION for Summary Judgment and denying McDermott's 47 MOTION for Summary Judgment. (Proposed judgment due by 4/22/2014). Signed by District Judge Thomas L. Ludington. (SGam)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
NORTHERN DIVISION
NATIONWIDE MUTUAL FIRE
INSURANCE COMPANY,
Plaintiff/Counter-Defendant,
Case No. 12-11863
Honorable Thomas L. Ludington
v.
KASEY McDERMOTT,
Defendant/Counter-Plaintiff.
/
OPINION AND ORDER GRANTING PLAINTIFF/COUNTER-DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT, DENYING DEFENDANT/COUNTER
PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT, AND DIRECTING
SUBMISSION FROM PLAINTIFF/COUNTER DEFENDANT
On January 13, 2012, Brien Mathews—while manufacturing and smoking marijuana—
accidentally started a fire that burned down the home he lived in with Kasey McDermott. After
making payments of well over $100,000 for the loss, Nationwide Mutual Fire Insurance
Company (Nationwide)—which had issued a fire-insurance policy on the home—denied
McDermott’s claim for coverage. The Court agreed with Nationwide’s decision, concluding
that, as a matter of law, McDermott’s loss is not covered by the applicable policy. See July 15,
Op. & Order 13–19, ECF No. 26.
But that does not mean McDermott should be liable to Nationwide for the payments it
made as a result of the fire. Both parties have moved for summary judgment on the issue. Based
on what follows, Nationwide’s motion will be granted and McDermott’s motion will be denied.
I
The facts underlying this case were detailed in the Opinion and Order granting
Nationwide summary judgment on the coverage issue. See id. at 1–10. Accordingly—aside
from those facts essential to the question presented here—only a cursory background will be
provided.
In September 2005, McDermott purchased the home located at 202 South Woodbridge
Street in Bay City, Michigan. She took up residence along with her two children from a previous
marriage and Brien Mathews.1 At that time, McDermott entered into a homeowner-insurance
agreement (the Policy) with Nationwide. Under the Policy, McDermott made periodic payments
and Nationwide provided “the insurance described in th[e] policy.” Pl.’s First Mot. Ex. 2, at A1,
ECF No. 15.
While living in McDermott’s home, Mathews manufactured marijuana in the basement
using a process known as “butane extraction.” The process involves drawing liquid butane
through chopped marijuana leaves, and as one might expect, it can be dangerous. On January 13,
2012, Mathews made a mistake, introduced an open flame to a butane-rich environment, and
burned the Woodbridge Street residence to the ground.
So McDermott filed a claim for coverage under the Policy. On January 13, 2012, the
same day as the fire, Nationwide issued an advance payment of $5,000 to McDermott. Stordeur
Aff. ¶ 5, attached as Pl.’s Second Mot. Ex. 1, ECF No. 48. McDermott signed a reservation of
rights agreement when she received the payment.2 That reservation of rights agreement made
clear that repayment of the advance, in the event McDermott’s claim was denied, was
mandatory:
In good faith and to prevent any undue hardship which this loss may cause you,
we offer to advance to you $5,000.00 on the loss under the following terms and
conditions.
1
Although Mathews and McDermott were dating in September 2005, they were married on February 23, 2006.
2
McDermott dated the reservation of rights agreement “1/14/11,” see Pl.’s Second Mot. Ex. 2, but presumably this
was simply an error—she did not receive the $5,000 payment until one year later (after the January 2012 fire).
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(1)
that this advance shall not be considered payment under any portion of the
policy.
(2)
that if either the policy or the claim is not valid and payment is not
required by us, you will repay the advance, and
(3)
we, in making this advance, reserve and do not waive any right or
requirement under the policy number 172150 whether procedural or
substantive.
Pl.’s Second Mot. Ex 2. The reservation of rights agreement also established that with her
signature, McDermott understood “that [Nationwide] reserve[d] all rights and requirements”
under the Policy. Id.
The undisputed facts show that Nationwide also made payments to McDermott (or on her
behalf) on January 27 and 30, 2013. Those payments amount to $2,981.75. Stordeur Aff. ¶¶ 11–
22.
Nationwide hired Rehmann Corporate Investigative Services to investigate the origins of
the January 13, 2012 fire. On January 31, 2012, Kevin G. Pike, one of Rehmann’s investigators,
authored an opinion concerning the cause for McDermott’s house fire. In his report, Mr. Pike
established that the fire was caused by Mathews’s marijuana production:
[Mathews] stated that he was the only person home at the time of the fire. He
stated he was downstairs in the basement doing a butane extraction with THC.
Per [Mathews], he is a medical marijuana license holder. [Mathews] stated that
he was packing the marijuana in a quart jar with butane to remove the THC, and it
is then poured into four pie plates. [Mathews] stated that he waits for the butane
to evaporate and as wax builds up, he scrapes it off with a razor. [Mathews]
stated that he used a lighter to melt the wax from the razor blade when an ember
or spark of wax landed in a pie plate, which caught fire.
Pike Report 2, attached as Pl.’s Second Mot. Ex. 3. Mr. Pike also concluded that “[b]ased on the
information obtained by myself, reconstruction of the scene, and fire patterns analyzed, this fire
is an accidental fire.” Id. at 3. It is undisputed that Nationwide received Mr. Pike’s report on
February 3, 2012. See Pl.’s Second Mot. 5; Def.’s Second Resp. 3, ECF No. 51.
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Long before the fire, McDermott obtained mortgage financing on the 202 South
Woodbridge property from J.P. Morgan Chase Bank NA (Chase), and Chase is named in the
Policy as the first (and only) mortgagee. See Policy Declarations 2, attached as Pl.’s Second
Mot. Ex. 4. In fact, the mortgage agreement between McDermott and Chase required her to
obtain insurance on the property:
Borrower shall insure all improvements on the Property, whether now in existence or
subsequently erected, against any hazards, casualties, and contingencies, including fire, for
which Lender requires insurance. . . . The insurance policies and any renewals shall be held by
Lender and shall include loss payable clauses in favor of, and in a form acceptable to, Lender.
Mortgage Agreement ¶ 4, attached as Pl.’s Supp. Br. Ex. 1, ECF No. 57.
Pursuant to the Mortgage Agreement, McDermott’s Policy with Nationwide contains a
mortgage clause that provides, “[i]f a mortgagee is named in this policy, a loss payable under
Coverage A or B will be paid to the mortgagee and you, as interests appear.” Policy E3,
attached as Pl.’s Second Mot. Ex. 5.
Further, under the Policy, if Nationwide pays “the
mortgagee for loss” but later denies payment to the insured, it is “subrogated to all the rights of
the mortgagee granted under the mortgage on the property,” or, at Nationwide’s option, it “may
pay to the mortgagee the whole principal on the mortgage plus accrued interest.” Id. If
Nationwide elects the latter route, it “will receive a full assignment and transfer of the mortgage
and all securities held as collateral to the mortgage debt.” Id.
Pursuant to the Mortgage Clause in the Policy, Nationwide issued a check for
$131,859.29 on March 23, 2012. The check is made out to McDermott, Chase, and Michigan
Fire Claims, Inc. See Pl.’s Second Mot. Ex. 6, at 3. At some point, Michigan Fire President Nik
Kalaj endorsed the check, as did McDermott. Id. at 4. Then McDermott sent the check to Chase
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on April 18, 2012.
Id. at 5.
She requested that Chase “accept the enclosed check from
Nationwide Insurance in the amount of $131,859.29 to pay off the above referenced mortgage
loan. Please send the overage to: 2126 Fourth St. Bay City, MI 48708.” Id. Chase then
processed the payment, and returned an overpayment of $2,638.50 to McDermott, which she
kept. Id. at 7, 8.
On April 25, 2012, counsel for Nationwide sent McDermott a letter denying her
insurance claim and asserting a reservation of rights. See Pl.’s Second Mot. Ex. 7. The letter
established that Nationwide made payments, to McDermott or on her behalf, amounting to
$160,209.50 (including the $5,000; $2,981.75; and $131,859.29 payments detailed above).
However, Nationwide now seeks only the return of the three amounts that have been discussed—
totaling $139,841.04—so the remaining payments for $20,368.46 are of no import. The letter
also explained why Nationwide was denying McDermott’s claim for coverage, id. at 3–7, and
then indicated that Nationwide had filed this lawsuit “to determine the rights and obligations of
the parties under the policy, and to obtain reimbursement of the amounts paid to date on this
claim,” id. at 7.
As indicated above, the Court concluded that—as a matter of law—McDermott’s loss
was not covered because it was not the result of an accident, see July 15, 2013 Op. & Order 13–
16, and that even if it was, recovery under the Policy was precluded by an “Increased Hazard
exclusion,” id. at 16. The Court provided time for the parties to brief the issue concerning
whether McDermott should be required to repay the money Nationwide issued to her or on her
behalf. Based on the parties’ supplemental briefs, the Court denied summary judgment as it
related to the recovery of payments. See Sept. 10, 2013 Op. & Order, ECF No. 42.
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The parties then requested, and were provided, the opportunity to file additional motions
for summary judgment concerning whether McDermott is liable to Nationwide for the payments
it made as a result of the fire. They both capitalized on that opportunity, filing cross motions on
October 31, 2013.
II
Summary judgment is proper when there are no genuine issues of material fact and the
moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). The focus must
be “whether the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.” Anderson v. Liberty
Lobby, 477 U.S. 242, 251–52 (1986). All justifiable inferences from the evidence must be drawn
in the non-moving party’s favor. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986). “Entry of summary judgment is appropriate ‘against a party who fails to make
a showing sufficient to establish the existence of an element essential to that party’s case, and on
which that party will bear the burden of proof at trial.’ ” Walton v. Ford Motor Co., 424 F.3d
481, 485 (6th Cir. 2005) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986)).
III
In her motion for summary judgment, and in her response to Nationwide’s second motion
for summary judgment, McDermott presents a number of arguments for why she is not liable to
Nationwide for the money it paid to her or on her behalf.3 First, in her own motion, she argues
that Nationwide is not entitled to subrogation because “an insurer may not subrogate against its
3
While McDermott claims generally that “Michigan law does not allow for reimbursement of [the] voluntary
payments” made by Nationwide, see Def.’s Mot. 1, she does not differentiate between the $131,859.29 paid in
March 2012 and the other $7,981.75 paid in January 2012. Indeed, it appears that the majority of McDermott’s
arguments pertain only to the $131,859.29 that was paid after receipt of Mr. Pike’s causation report in February
2012. Accordingly, whether McDermott is liable for that amount will be addressed first, with the other amounts to
follow.
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own insured.” Def.’s Mot. 2 (citing Prestige Ins. Co. v. Michigan Mutual Ins. Co., 99 F.3d 1340,
1352 (6th Cir. 1996)). In her response to Nationwide’s second motion for summary judgment,
McDermott asserts a second reason that Nationwide is not entitled to be subrogated to Chase’s
interests: Nationwide delivered the check to her, and then she “elected to pay off the mortgage.”
Def.’s Second Resp. 2.
McDermott’s next line of argument—presented in her response to Nationwide’s second
motion—is that Nationwide made a voluntary payment, not a contractually-obligated one,
because Chase never “rendered a ‘signed, sworn proof of loss.’ ” Id. at 3. McDermott concludes
that because Nationwide was not contractually required to pay Chase, subrogation cannot apply.
Another argument that McDermott asserts, in both her motion for summary judgment and
her response to Nationwide’s second motion, is that, “[p]resumably [Nationwide] is seeking
reimbursement from Defendant McDermott under the policy language which states: ‘If we void
this policy, you must reimburse us if a claim payment was made.’ ” Def.’s Mot. 5. She then
asserts that Nationwide “has no contractual rights . . . to seek reimbursement . . . because it did
not ‘void this policy.’ ” Id. at 6.4
Finally, McDermott argues in her response to Nationwide’s motion that even assuming
Nationwide’s payments were the result of mistakes of fact, she “had no reason to believe the
payments were a mistake” and that “[t]he equities favor Ms. McDermott . . . .” Pl.’s Second
Resp. 5, 6. Upon review, and discussed below, each of these arguments is without merit.
Nationwide’s motion for summary judgment will be granted and McDermott’s will be denied.
4
In her response to Nationwide’s second motion for summary judgment, McDermott repeats the argument and
claims that “[t]here is no justification for seeking contractual reimbursement.” Def.’s Second Resp. 6.
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A
McDermott’s primary argument is that Nationwide is not entitled to subrogation. She
argues that an insurer may “not subrogate against its own insured,” Def.’s Mot. 2, and that even
if Nationwide could do so, it paid McDermott, not Chase, and so Nationwide did not “step into
the shoes of Chase.” Def.’s Second Resp. 4. On both fronts, McDermott is incorrect.
1
In Prestige, the Sixth Circuit did indicate “the general rule is that an insurer may not
bring a subrogation action against its own insured.” 99 F.3d at 1352. But the court only noted
the general rule; it went on to conclude that “the right to subrogate arises by contract, and since
Bogle is not a party to Michigan Mutual’s insurance contract, Michigan Mutual cannot impose
the subrogation provisions in their policy against him.” Id. Thus, the Sixth Circuit did not
preclude subrogation because an insurer may never bring a subrogation action against its insured,
only because the parties involved had not entered into an enforceable subrogation agreement.
And though subrogation by an insurer against its insured is not the norm, numerous
Michigan courts, and federal courts applying Michigan law, have enforced subrogation
provisions like the one between McDermott and Nationwide in the Policy. As explained in
French v. Grand Beach Co., 215 N.W. 13 (Mich. 1927), Michigan courts have recognized two
forms of subrogation:
The doctrine of subrogation rests upon the equitable principle that one, who, in
order to protect a security held by him, is compelled to pay a debt for which
another is primarily liable, is entitled to be substituted in the place of and to be
vested with the rights of the person to whom such payment is made, without
agreement to that effect. This doctrine is sometimes spoken of as “legal
subrogation,” and has long been applied by courts of equity. There is also what is
known as “conventional subrogation.” It arises from an agreement between the
debtor and a third person whereby the latter, in consideration that the security of
the creditor and all his rights thereunder be vested in him, agrees to make
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payment of the debt in order to relieve the debtor from a sacrifice of his property
due to an enforced sale thereof.
Id. at 14 (citing Stroh v. O’Hearn, 142 N.W. 865 (Mich. 1913)). The Michigan Supreme Court
explained in Stroh that “[s]ubrogation is an equitable doctrine depending upon no contract or
privity, and proper to apply whenever persons other than mere volunteers pay a debt or demand
which in equity and good conscience should have been satisfied by another.” 142 N.W. at 869.
In Wilson v. Home Owners Mut. Ins. Co., 384 N.W.2d 807 (Mich. Ct. App. 1986), the
Michigan Court of Appeals acknowledged that the language of the “Michigan Standard
Policy”—a form of insurance policy adopted by statute for general use throughout Michigan—
allowed for “an insurer [to] make a payment of loss to a mortgagee, and to the extent of that
payment, . . . be subrogated to all the mortgagee’s rights of recovery . . . .” Id. at 809.
Accordingly, courts have recognized that in Michigan a subrogation provision between an
insurer and an insured is standard and enforceable.
The Wilson decision was based, in part, on a Michigan Supreme Court decision
establishing that subrogation provisions between insurers and insureds are enforceable: “The
mortgage clause, quoted supra, provides for subrogation upon payment to the mortgagee and
claim that as to the mortgagor or owner no liability exists.” McAlpine v. State Mut. Fire Ins. Co.
of Michigan, 295 N.W. 224, 226 (Mich. 1940); see also Lee v. Royal Indem. Co., 108 F.3d 651,
653 (6th Cir. 1997) (“Under the insurance contract, it is undisputed that National Mortgage
would have had the right to receive payment from the insurer for the amount of its interest, i.e.,
the mortgage”).
It follows that Michigan courts will uphold a subrogation provision like the one involved
in McDermott’s policy, and that Nationwide is not foreclosed from recovering simply because
McDermott is its insured. As the Sixth Circuit established in Shelby Cnty. Trust & Banking Co.
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v. Security Ins. Co. of New Haven, Conn., 66 F.2d 120 (6th Cir. 1933), a district court does not
error in awarding subrogation where a contract “specifically provided that on payment to such
mortgagee of any sum for loss or damage under the policy, to the extent of such payment the
insurer should be subrogated to the mortgagee’s right of recovery and claim upon the collateral
to the mortgage debt.” Id. at 122; see also Reed v. Fid. Nat. Ins. Co., No. 07-13775, 2010 WL
446177, at *4 (E.D. Mich. Jan. 27, 2010) (applying Michigan law and concluding that plaintiffs
“were not entitled to claim the portion of the proceeds that went to pay the mortgagee” even if a
jury returned a verdict in their favor because the insurer was “entitled to a setoff of the proceeds
paid to the [plaintiffs’] mortgagees.”).
McDermott relies on the so-called “antisubrogation” rule to support her argument that
Nationwide cannot collect here. But as she acknowledges, the antisubrogation rule establishes
that “no right of subrogation can arise in favor of an insurer against its own insured or coinsured
for a risk covered by the policy, even if the insured is a negligent wrongdoer.” Def.’s Mot. 2
(quoting Buckey State Mutual Ins. Co. v. Humlicek, 822 N.W.2d 351, 354 (Neb. 2012)). But this
is not a case where Nationwide seeks subrogation “for a risk covered by the policy,” the Court
has already concluded that McDermott’s losses were not entitled to coverage. See July 15, 2013
Op. & Order 13–16.
2
It is also irrelevant that Nationwide delivered the check to McDermott and not directly to
Chase, as the check was made out to three parties but not in the alternative. Indeed, the check
indicates that it is payable to “Kasey McDermott and JPMORGAN CHASE BANK NA and
Michigan Fire Claims, Inc.” Pl.’s Second Mot. Ex. 6, at 3 (emphasis added). Under Michigan
law, “[i]f an instrument is payable to 2 or more persons not alternatively, it is payable to all of
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them and may be negotiated, discharged, or enforced only by all of them.” Mich. Comp. Laws §
440.3110(4). The applicable UCC commentary explains the operation of a note payable to more
than one party in the conjunctive:
An instrument payable to X and Y is governed by the second sentence of
subsection (d). Section 3-301. If an instrument is payable to X and Y, neither X
nor Y acting alone is the person to whom the instrument is payable. Neither
person, acting alone, can be the holder of the instrument. The instrument is
“payable to an identified person.” The “identified person” is X and Y acting
jointly. Section 3-109(b) and Section 1-102(5)(a). Thus, under Section 1-201(20)
X or Y, acting alone, cannot be the holder or the person entitled to enforce or
negotiate the instrument because neither, acting alone, is the identified person
stated in the instrument.
UCC Comment to Mich. Comp. Laws § 440.3110(4). Thus McDermott’s argument that she
“elected to pay off the mortgage” is incorrect, see Def.’s Second Resp. 2, for she could not
negotiate the note without Chase’s approval. Accordingly, when Nationwide delivered the check
to McDermott, and then she notarized it and delivered it to Chase for payment of the mortgage,
Nationwide was entitled to credit for paying off the mortgage balance. See, e.g., Knapp Transit
Mix Co. v. Highland Greens, Inc., 216 N.W.2d 84, 86 (Mich. Ct. App. 1974) (providing that
check made payable to two parties could be divided as the parties “saw fit, but not to the
detriment of [the payor]. It was entitled to credit on its account”).
Therefore, subrogation is not precluded because of McDermott’s relationship with
Nationwide or because Nationwide delivered the check to McDermott instead of Chase. Under
the Policy, Nationwide is entitled to be subrogated to Chase’s legal position after paying the
principal on McDermott’s mortgage. See Sept. 10, 2013 Op. & Order 9.
B
McDermott further contests the applicability of subrogation by asserting that Nationwide
was “not required to make payment to the mortgagee” because Chase never submitted “a signed,
sworn proof of loss.”
Def.’s Second Resp. 3.
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But this argument conflates two different
provisions of the Mortgage Clause in McDermott’s Policy, and it is directly contradicted by
arguments she has previously made. Thus, it is without merit.
The Mortgage Clause only requires a mortgagee to submit a “signed, sworn proof of
loss” in order to retain a valid claim when the mortgagor’s claim is denied but it has yet to be
paid. See Policy E3. Instead, as here, when Nationwide first pays the “mortgagee for loss” and
then denies payment to the insured, it is “subrogated to all the rights of the mortgagee granted
under the mortgage on the property.” Id. Under these circumstances, the mortgagee has already
been paid, and so there is no need to submit a signed, sworn proof of loss in order to preserve the
mortgagee’s rights.
Additionally, although she now claims that Nationwide was not obligated to pay Chase,
McDermott previously took the opposite position; she argued that Nationwide was contractually
obligated to pay Chase.
See Def.’s Supp. Br. 2, ECF No. 40 (McDermott indicated that
Nationwide’s payment to Chase was not recoverable because Nationwide had “a separate
enforceable contract between the insurer and mortgagee, entitling the mortgagee to payment if
the insured’s claim is denied.”). Because the Court agreed with McDermott that Nationwide was
obligated to pay Chase pursuant to the “standard mortgage clause” outlined in the Policy, she
cannot now switch gears just because it would be helpful to her fresh arguments. Under the
judicial estoppel doctrine, “where a party assumes a certain position in a legal proceeding, and
succeeds in maintaining that position, he may not thereafter, simply because his interests have
changed, assume a contrary position . . . .” New Hampshire v. Maine, 532 U.S. 742, 749 (2001)
(quoting Davis v. Wakelee, 156 U.S. 680, 689 (1895)). So even if Nationwide was not obligated
to pay Chase—which it was5—McDermott is estopped from raising the argument.
5
In Michigan, “[a] standard mortgage clause constitutes a separate and distinct contract between the mortgagee and
the insurance company for payment on the mortgage.” Marketos v. American Employers Ins. Co., 612 N.W.2d 848,
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C
McDermott also argues, in both her motion and her response to Nationwide’s second
motion, that Nationwide never voided the policy, and thus there is “no justification for seeking
contractual reimbursement.” Def.’s Second Resp. 6; see also Def.’s Mot. 5–6. This argument,
however, is wholly without merit.
Nationwide agrees that it is “not voiding the policy” but argues it “has no need to do so to
recover its payments in this case.” Pl.’s Resp. 15. Nationwide is correct. As the Court
previously held, McDermott is not entitled to any payments under the Policy because her loss is
not covered. See July 15, 2013 Op. & Order 13–16. There is no need for Nationwide to void the
Policy to deny coverage.
Moreover, Nationwide has ample justification for seeking
reimbursement of the three payments totaling $139,841.04: the subrogation provision of the
Mortgage Clause as to the $131,859.29; the reservation of rights agreement as to the $5,000; and
the fact that the other $2,981.75 comprised voluntary payments made before the origin of the fire
was known.
D
McDermott’s final argument—that she should not be liable to Nationwide because she
“had no reason to believe the payments were a mistake,” Pl.’s Second Resp. 5—can only apply
to Nationwide’s January 2012 payments totaling $7,981.75. Discussed above, Nationwide paid
off McDermott’s mortgage balance because it was contractually obligated to do so per the
Mortgage Clause in the Policy, and it is therefore subrogated to Chase’s interests. Accordingly,
McDermott is liable to Nationwide for the amount it paid to Chase—$131,859.29.
853 (Mich. Ct. App. 2000), rev’d in part on other grounds, 633 N.W.2d 371 (Mich. 2001). “[U]nder a standard
mortgage clause, payment must be made to the mortgagee to the extent of its interest, and then the balance of the
insurance proceeds, if any, can be sought by the mortgagor.” Id. at 853.
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Michigan law also provides “that money paid under a mistake of material facts may be
recovered back” unless “the situation of the party receiving the money has been changed in
consequence of the payment, and it would be inequitable to allow a recovery.” Wilson v.
Newman, 617 N.W.2d 318, 321 (Mich. 2000) (quoting Walker v. Conant, 31 N.W. 786 (Mich.
1887)). The money Nationwide paid to McDermott in January 2012, before it received Mr.
Pike’s causation report, was made pursuant to a mistake of fact (Nationwide had yet to discover
the origins of the January 13, 2012 fire). So McDermott must repay those amounts unless she
can demonstrate a change in consequence that would make repayment inequitable. See Wilson,
463 N.W.2d at 322 (“If the plaintiffs can demonstrate a change of position or detrimental
reliance . . . they may be entitled to retain all or part of the funds mistakenly paid by
Allmerica.”).
But McDermott has not carried her burden of showing a change in circumstances. She
simply argues that she “did not know her claim would not be paid” and thus “had no reason to
believe she would be required to reimburse Plaintiff Nationwide.” Def.’s Second Resp. 5, 6.
Other than quickly claiming that she “works 40-45 hours a week as a dispatcher [and] cannot
reimburse Plaintiff Nationwide,” id. at 6, McDermott makes no other arguments to support her
contention that she should not be required to repay Nationwide its January 2012 payments.
McDermott’s assertion that she did not know she would have to repay Nationwide, or
that her claim would be denied, matters not. As the Michigan Supreme Court established in
Wilson, mistaken payments “which induces the belief that the other party is entitled to receive
the payment when, in fact, the sum is neither legally nor morally due to him, may be recovered . .
. .” 617 N.W.2d at 321 (citation omitted) (emphasis added).
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And requiring McDermott to repay the remaining $7,981.75 would work no inequity. As
to the $5,000 Nationwide paid to McDermott on January 13, 2012, McDermott signed an
agreement expressly establishing that if her “claim is not valid” she would “repay the advance.”
Pl.’s Second Mot. Ex. 2. Nationwide rightfully denied McDermott’s claim, and thus she is
required to pay back the $5,000 advance. McDermott does not contest the point in her motion
for summary judgment or in her response to Nationwide’s second motion for summary judgment.
Likewise, McDermott has not demonstrated that requiring repayment of the January 27
and 30, 2013 payments totaling $2,981.75 would be inequitable. As established by Capital Title
Ins. Agency Inc. v. Towne Mortg. Co., No. 278712, 2009 WL 609561 (Mich. Ct. App. Mar. 10,
2009), to foreclose recovery of mistaken payments, a payee must “demonstrate that it relied to its
detriment on the payor’s mistaken payment, e.g., if the means to collect the money owed is no
longer available, then return of the payor’s money is unjust.” Id. at *4. McDermott has not
demonstrated that the means to collect the money owed would have been available but for
Nationwide’s mistaken payment. She also has not demonstrated that the means to collect the
money owed is not available at all. Thus there is no inequity in requiring her to repay the
$2,981.75 Nationwide paid by mistake.
It follows that McDermott is liable to Nationwide for all three amounts it seeks: the
$131,859.29 paid toward McDermott’s mortgage (pursuant to the subrogation provision in the
Mortgage Clause of the Policy); the $5,000 paid on January 13, 2012 (pursuant to the reservation
of rights agreement); and the $2,981.75 paid on January 27 and 30, 2012 (as those payments
were made before the origin of the fire was known and McDermott has not demonstrated it
would be inequitable to require repayment).
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IV
Accordingly, it is ORDERED that Nationwide’s second motion for summary judgment,
ECF No. 48, is GRANTED.
It is further ORDERED that McDermott’s motion for summary judgment, ECF No. 47,
is DENIED.
It is further ORDERED that McDermott is liable to Nationwide in the amount of
$139,841.04.
It is further ORDERED that Nationwide prepare and submit, to both the Court and
McDermott, a proposed judgment consistent with this opinion as well as the Court’s July 15,
2013 Opinion and Order. Nationwide’s submission is due on or before April 22, 2014.
Dated: April 15, 2014
s/Thomas L. Ludington
THOMAS L. LUDINGTON
United States District Judge
PROOF OF SERVICE
The undersigned certifies that a copy of the foregoing order was
served upon each attorney or party of record herein by
electronic means or first class U.S. mail on April 15, 2014.
s/Tracy A. Jacobs
TRACY A. JACOBS
-16-
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