Anika & Associates, Inc. v. Hartford Casualty Insurance Company

Filing 27

Memorandum and Order Granting Plaintiff/Counter-Defendant's 21 Motion for Partial Summary Judgment. Signed by District Judge Avern Cohn. (SCha)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

ANIKA & ASSOCIATES, INC.,
Plaintiff/Counter-Defendant,
vs.

Case No. 11-12534

HARTFORD CASUALTY INSURANCE
COMPANY,

HON. AVERN COHN

Defendant/Counter-Plaintiff.
______________________________________/
MEMORANDUM AND ORDER GRANTING
PLAINTIFF/COUNTER-DEFENDANT’S MOTION
FOR PARTIAL SUMMARY JUDGMENT (Doc. 21)

I. INTRODUCTION
This is a breach of contract case. Defendant/Counter-Plaintiff, Hartford Casualty
Insurance Company (Hartford) issued the Plaintiff/Counter-Defendant, Anika & Associates,
Inc. (Anika), an insurance policy covering Anika’s commercial property in Dundee,
Michigan. Anika claims that, on June 6, 2010, a tornado damaged its property. The
incident resulted in a disagreement concerning the amount of loss. Anika says that
Hartford breached the policy and Mich. Comp. Laws § 500.2833(1)(m) when it refused to
submit the dispute to an appraisal. Hartford counterclaimed for declaratory judgment that
the policy was voided by Anika’s concealment and misrepresentations regarding the
amount it paid to replace the building’s roof and siding. Anika’s first amended complaint
is in three counts:

Count I:
Count II:
Count III:

breach of contract/Unfair Trade Practices Act (UTPA);
fraudulent misrepresentation; and
abuse of process.

After the complaint was filed, the claim was submitted to a panel of appraisers. Now
before the Court is Anika’s motion for partial summary judgment on count I of the first
amended complaint, and on Hartford’s affirmative defenses and counterclaim. (Doc. 21).
The Court heard oral argument on the motion on April 3, 2013. For the reasons that follow,
the motion is GRANTED.
II. BACKGROUND
A. The Tornado
Anika owned an industrial building located at 100 Research Parkway, Dundee,
Michigan (the building) in Monroe County. (Doc. 26 at 1). The building is divided into two
parts: (1) a finished section with business offices, and (2) a larger industrial space. (Doc.
24-6 at 2; Doc. 24-7 at 2). On June 6, 2010, a tornado extensively damaged the building.
(Doc. 26 at 2). The tornado damaged the roof, destroyed masonry walls and siding, and
severely damaged the interior. (Id.).
B. The Insurance Policy
At the time of the tornado, Hartford was the insurer of the building under a
commercial property insurance policy. (Id.). The policy provides that, in the event of a
physical loss or damage, Hartford has the option to pay either the actual cash value (ACV)
of the physically damaged property or the replacement cost value (RCV) of repairing or
replacing the physically damaged property. (Doc. 23-8 at 2-3). The policy states as
follows:
5.

Loss Payment
2

In the event of physical loss or physical damage
covered by this policy:
a.

At our option we will either:
(1) Pay the value of the physically lost or
physically damaged property, as described in
paragraph d. below;
(2) Pay the cost of repairing or replacing the
physically lost or physically damaged property,
plus any reduction in value of repaired items;
(3) Take all or any part of the property at an
agreed or appraised value; or
(4) Repair, rebuild or replace the property with
other property of like kind and quality.
....

c.

We will not pay you more than your financial
interest in the Covered Property.

d.

We will determine the value of Covered Property
as follows:
(1)

At replacement cost (without deduction for
depreciation), except as provided in (2)
through (7) below.

(a)

You may make a claim for physical loss or
physical damage covered by this
insurance on an actual cash value basis
instead of on a replacement cost basis.
In the event you elect to have physical
loss or physical damage settled on an
actual cash basis, you may still make a
claim on a replacement cost basis if you
notify us of your intent to do so within 180
days after the physical loss or physical
damage.

(b)

We will not pay on a replacement cost
3

basis for any physical loss or physical
damage:
(i)

Until the physically lost or
physically damaged property is
actually repaired or replaced; and

(ii)

Unless the repairs or replacement
are made as soon as reasonably
possible after the physical loss or
physical damage.
....

(c)

We will not pay more for physical loss or
physical damage on a replacement cost
basis than the least of:
(i)

(ii)

(2)

The cost to replace, on the same
premises, the physically lost or
physically damaged property with
other property of comparable
material and quality and which is
used for the same purpose; or
The amount you actually spend
that is necessary to repair or
replace the physically lost or
physically damaged property.

If the Actual Cash Value - Buildings
option applies, as shown in the
Declarations, paragraph (1) above does
not apply to Buildings. Instead we will
determine the value of Buildings at actual
cash value.

(Doc. 23-9 at 2-3).
In addition, the policy provides for a 15% reduction in the calculation of the ACV loss
for property that was vacant at the time of the loss; the parties agree that Anika’s building
was vacant at the time of loss. (Doc. 24-11 at 31; Doc. 21-5 at 24). Finally, the policy
4

voids coverage if the insured conceals or misrepresents material facts in connection with
the claim, or otherwise acts fraudulently. (Doc. 23-9 at 5).
C. Dispute Over Amount of Loss
Anika timely notified Hartford of the June 6, 2010 loss and made an ACV loss claim.
(Doc. 26 at 3). The ACV loss is calculated by taking the replacement cost for like kind and
quality materials that existed prior to the loss, and subtracting a depreciation value. To
date, Hartford has paid $721,123.63 on the claim as “advances or [for] settlement
purposes.” (Doc. 21-5 at 73). However, the parties disputed the total amount of loss.
Anika, therefore, invoked a provision in the policy, as well as Mich. Comp. Laws §
500.2833(1)(m), and demanded that the claim be submitted to binding appraisal.
The policy’s appraisal provision states, in pertinent part:
2.

Appraisal
If we [Hartford] and you [Anika] disagree on the amount
of loss, either may make written demand for an
appraisal of the loss. In that event, each party will
select a competent and impartial appraiser. The two
appraisers will select an umpire. If they cannot agree,
either may request that selection be made by a judge of
a court having jurisdiction. The appraisers will state
separately the amount of loss.
If they fail to agree, they will submit their differences to
the umpire. A decision agreed to by any two will be
binding. Each party will:
a.

Pay its chosen appraiser; and

b.

Bear the other expenses of the apprisal and
umpire equally.

If there is an appraisal, we [Hartford] will still retain our
right to deny the claim.

5

(Doc. 23-9 at 2). The appraisal provision in the policy is modeled after the statutory
requirement in Mich. Comp. Laws § 500.2833(1)(m) that requires disputes concerning the
amount of loss to be submitted to binding appraisal.
Hartford refused to submit the claim to an appraisal. The parties continued to
disagree over the amount of loss, and Anika continued to reject Hartford’s settlement
offers. By May of 2011, Anika had demanded, and Hartford had rejected, an appraisal on
four different occasions. Finally, on May 16, 2011, Anika sent a final settlement offer to
Hartford. (Doc. 21-22 at 2). Anika offered “a walkaway cash out payment of $1,184,000,
contingent on receiving the settlement proceeds on or before May 25, 2011." (Id.). On
May 31, 2011, Hartford rejected the offer. (Doc. 21-24 at 2).
On June 10, 2011, Anika submitted to Hartford what it described as “final Sworn
Statement in Proof(s) of Loss for the Building Claim and for the Business Income Extra
Expense claims. . . .” (Doc. 24-8 at 2). In addition, Anika filed this lawsuit. (Doc. 1). Three
days later, on June 13, 2011, Anika asked Hartford to stipulate to binding appraisal for the
fifth time. (Doc. 21-27 at 2). Hartford rejected Anika’s request and filed an answer to the
complaint on July 5, 2011. (Doc. 3). In its affirmative defenses, Hartford, for the first time,
claimed that Anika voided the policy by misrepresenting and concealing facts in connection
with its claims. Specifically, Hartford says that the roof replacement and siding estimates
relied on in support of Anika’s sworn statement is a misrepresentation, and that Anika
concealed several roofing and siding invoices. Hartford says that after its representatives
visited the building, it learned that Anika replaced the roof with a lower quality roof than was
relied on in the sworn statement, and that it still provided Hartford with the higher amount
in its calculations. On these same grounds, Hartford counterclaimed for declaratory
6

judgment that the policy was voided by Anika’s actions.
While the case was pending, the claim was submitted to binding appraisal and the
parties stipulated to an appraisal protocol. (Doc. 18). On November 1, 2012, the appraisal
panel unanimously found that the ACV of the damages totaled $1,094,218.31 at the time
of loss, and that temporary repairs loss totaled $28,229.39. (Doc. 19). After all appropriate
deductions, the ACV loss totals $930,085.55. The parties dispute the amount of the
outstanding balance owed by Hartford under the appraisal award; Anika claims it is
$237,191.23, while Hartford claims it is $232,956.32.1
Subsequent to the appraisal, Hartford exercised its right under the policy to deny the
claim. The policy states that Hartford retains its right to deny a claim even after it has been
appraised.2
III. STANDARD OF REVIEW
Summary judgment will be granted when the moving party demonstrates that there
is “no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” Fed. R. Civ. P. 56(a). There is no genuine issue of material
fact when “the record taken as a whole could not lead a rational trier of fact to find for the
non-moving party.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587

1

Anika, for purposes of this motion only, agrees with Hartford’s calculation. If the
parties cannot reach an agreement as to the balance owed under the appraisal award,
they should bring their disagreement to the attention of the Court.
2

Discovery also revealed that Anika filed for bankruptcy in the Northern District of
Mississippi prior to filing this lawsuit. Hartford suggests that the building is subject to
the claims of creditors in the bankruptcy court proceeding. However, the bankruptcy
court has released the building from the bankruptcy proceedings. (Doc. 24-2). Hartford
did not raise this issue at oral argument.
7

(1986). The nonmoving party may not rest upon his pleadings; rather, the nonmoving
party’s response “must set out specific facts showing a genuine issue for trial. Chappell
v. City of Cleveland, 585 F.3d 901, 906 (6th Cir. 2009). The Court “must construe the
evidence and draw all reasonable inferences in favor of the nonmoving party.” Hawkins
v. Anheuser-Busch, Inc., 517 F.3d 321, 332 (6th Cir. 2008). Determining credibility,
weighing evidence, and drawing reasonable inferences are left to the trier of fact. See
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986).
IV. DISCUSSION
Anika says it is entitled to summary judgment on count I of the first amended
complaint, and that Hartford must pay the balance of the appraisal award, as well as
interest under the Unfair Trade Practices Act (UTPA).

Under the UTPA, an insurer is

required to “pay . . . to its insured . . . 12% interest . . . on claims not paid on a timely basis.”
Mich. Comp. Laws § 500.2006. “If benefits are not paid on a timely basis the benefits paid
shall bear simple interest from a date 60 days after satisfactory proof of loss was received
by the insurer at the rate of 12% per annum.” Id. § 500.2006(4). Anika contends that there
is no genuine issue of material fact that payment is in fact untimely because it submitted
its final statements in support of the claim, at the latest, on June 10, 2010, but still has not
been paid the balance of the appraisal award.
Hartford disagrees. Hartford says it is not responsible for the balance of the
appraisal award based on the following:
1.

Appraisal was premature;

2.

“Coverage issues” exist. Specifically, Hartford says issues regarding the
amount of electrical damage still exist;

8

3.

Anika failed to mitigate its damages. Hartford says Anika allowed water to
accumulate in the building, which led to additional mold damage;

4.

Anika made material misrepresentations and concealed receipts. Hartford
says that Anika misrepresented the amount it paid to replace the building’s
roof and siding; and

5.

The Policy’s provision which states: “We will not pay you more than your
financial interest in the Covered Property,” limits Anika’s claim to the market
value of the property, which Hartford says is less than the ACV loss
calculated by the appraisers.

The Court rejects Hartford’s arguments and agrees with Anika that it is entitled to
the balance of the appraisal award, as well as interest under the UTPA. The reasons
follow.
A. Appraisal Moots Hartford’s Arguments
Hartford does not deny that the arbitrators’ determination of the ACV of the loss
encapsulates (1) the amount of electrical damage; (2) any issues regarding Anika’s failure
to mitigate damages; and (3) the ACV loss of the roof and siding. Thus, once the appraisal
occurred, it mooted Hartford’s arguments. At oral argument, Hartford agreed that the
parties’ differences over the cost of repairs, or how much to depreciate certain items, was
presented to, and resolved by, the appraisers.

Likewise, there is no question that

Hartford’s claim that appraisal was premature is moot, considering that there has been an
appraisal award.
B. Merits of Hartford’s Affirmative Defenses
Even if the Court concludes that Hartford’s affirmative defenses were not mooted
by the appraisal award, they are devoid of merit.
1. “Coverage Issues” Over Electrical Damage
First, Hartford says that coverage issues exist over the amount of electrical damage
9

loss. In response to Anika’s second demand for binding appraisal, Hartford informed
Anika’s counsel that Hartford wanted to perform “megger” testing, which determines the
amount of damage to the building’s electrical system. (Doc. 21-15 at 2). In late January
of 2011, Klein Electric & Lighting Co. (Klein), a contractor retained by Hartford, performed
megger testing at the building. (Doc. 23-10 at 2). In a report dated January 22, 2011, Klein
detailed the damage believed to have occurred as a result of the tornado. (Id. at 2-3). Both
parties agreed to Klein’s estimate of the electrical damage caused by the tornado. (Doc.
24-6 at 6).

On February 28, 2011, Hartford sent Anika a check in the amount of

$80,124.68. (Doc. 21-31 at 2). The check represented the amount “due for electrical
scope of work.” (Id.). This amount was a portion of the overall $721,123.63 that Hartford
has, to date, paid on the claim as “advances or [for] settlement purposes.” (Doc. 21-5 at
73).
Hartford fails to explain how, if it retained its own contractor to perform megger
testing, and subsequently paid Anika for the “electrical scope of work,” there is any question
about “coverage issues” relating to the electrical damage loss. Indeed, there remain no
genuine issues of material fact that the electrical damage loss has been properly accounted
for.
2. Mitigation of Damages
Second, Hartford says Anika failed to mitigate its damages by allowing water to
accumulate in the building, which led to mold causing further damage. The problem,
however, aside from the fact that this would have been taken into consideration by the
appraisers and reflected in their ACV loss valuation, is that Hartford has not proffered any
evidence that shows that the ACV loss was increased due to mold damages.
10

While it is true that, under Michigan law, “[i]t has long been recognized that the law
should encourage a potential plaintiff to take reasonable actions to minimize the extent of
damages arising from the wrongful breach of a contract,” M & V Barocas v. THC, Inc., 216
Mich. App. 447, 449 (1996) (citations omitted), that is not the case here. The burden falls
on the defendant to prove that “the plaintiff failed to take reasonable steps in mitigation of
[its] damages.” Id. (citation omitted). Hartford has not met that burden; indeed, it has not
even established that a genuine issue of material fact exists.
Hartford relies on the deposition of William Martin, its corporate designee, for its
position that Anika failed to mitigate its damages. Martin testified that “[t]he building sat
there for . . . a year . . . , and nothing was done to it.” (Doc. 21-5 at 77). Martin agreed that
“[t]here were some temporary repairs done. . . .” (Id.). However, he offered the following
hypothetical:
I’ll give this example and it may not be germane to this
particular situation. If you have wet drywall and you just let it
sit there and you don’t cut it out and it gets to be moldy and it
causes mold, mitigation would have to be done to the building,
that could have been rectified immediately if it was mitigated.

(Id. at 78).
In addition, Hartford’s general adjustor, Christopher Wilkie, stated in an affidavit that
he “observed mold growing in the building” during his inspections. (Doc. 23-2 at 3). Wilkie
stated that, “Anika’s delay in taking measures to replace the roof and perform HVAC or
electrical system repairs or replacement and otherwise dry out the building allowed
corrosion to continue and mold to grow inside the building.” (Id.).
Martin’s testimony and Wilkie’s affidavit fail to create a genuine issue of material fact

11

on the mitigation of damages issue. Taking as true Wilkie’s statement that mold had
accumulated in the building, Hartford fails to proffer any evidence showing that the ACV
loss was increased due to mold accumulation in the building. Wilkie’s affidavit does not
detail any specific costs that were increased due to mold problems. In fact, the entire
record is devoid of any mention of mold problems in the building. None of the estimates,
either from Hartford’s contractors or Anika’s contractors, mention any costs associated with
mold damage. Aside from Wilkie’s affidavit, Hartford has never mentioned to Anika that
any mold issues existed in the building. Indeed, Anika’s contractor met with Hartford’s
adjustors and worked through mitigation of damages issues, including drying out the portion
of the building that contained business offices. (Doc. 24-7 at 3-4). Hartford even approved
specific mitigation efforts, which Anika undertook. Thus, Hartford has not proffered any
admissible evidence that establishes Anika’s claimed failure to mitigate increased the ACV
loss of the building.
Further, Hartford fails to point to any policy language or Michigan law that states that
an insured’s failure to mitigate damages voids the policy altogether. If Hartford had a valid
mitigation claim, which it does not, it would not void the policy ab initio. Rather, Hartford
would be entitled to deduct that amount from the total amount owed. Hartford again
concedes that this was taken into consideration by the appraisers.
3. Roofing and Siding Concealment/Misrepresentations
Third, Hartford says that Anika concealed material facts relating to the roofing and
siding replacement immediately after the loss. The policy states that coverage is void “in
any case of fraud by [Anika]. . . .” (Doc. 23-9 at 5). Further, the policy states that it is void
if Anika intentionally conceals or misrepresents a material fact concerning (1) the policy;
12

(2) the covered property; (3) Anika’s interest in the property; or (4) a claim under the policy.
(Id.). Consistent with the policy, section 500.2833(1)(c) of Michigan’s Insurance Code
states, in pertinent part, that a policy “may be void on the basis of misrepresentation, fraud,
or concealment.” Mich. Comp. Laws § 500.2833(1)(c).
After the loss, Hartford’s general adjustor directed Anika to provide it with all
replacement costs, estimates and bills, and quotations from Anika’s contractors. However,
Hartford says Anika did not provide it with multiple quotes and estimates that it received
from Royal West Roofing (Royal West), a roofing contractor. Subsequently, in January of
2011, Anika replaced the roof with a 45 mil roof, which is a substantially lower quality roof
than the one which existed prior to the tornado, at a cost of $156,990.00. (Doc. 23-5 at 3).
Anika did not provide the roofing bill to Hartford. In addition, in its final proof of loss
submitted on June 10, 2011, Anika listed an ACV loss of $240,321.00 for the roof. (Doc.
21-25 at 31). Anika also claimed an ACV loss of $89,517.75 for siding replacement, even
though Hartford says Anika’s actual siding costs were only $7,400.00. (Id.). Hartford did
not learn of these facts until litigation started and Royal West was subpoenaed. Hartford
says this amounts to concealment and misrepresentation that voids the policy. Hartford
is incorrect.
Anika’s actions do not void the policy for two reasons. First, both parties agreed to
rely on the estimates provided by Hartford’s contractor for the roofing and siding costs.
These estimates were agreed to as early as December 12, 2010, when Anika submitted
its “Partial Sworn Statement in Proof of Loss.” Hartford’s own contractor, Damschroder
Construction, LLC, determined that the cost to replace the roof was $320,428.00. (Doc.
21-11 at 38). Similarly, Hartford itself estimated, and Anika did not disagree, that siding
13

replacement totaled $113,027.00. (Doc. 24-13 at 24). After accounting for depreciation,
Hartford calculated the ACV loss of the roof to be $240,374.72, and the ACV loss of the
siding to be $75,733.50. Thus, Hartford’s representation that Anika concealed estimates
and receipts– when the parties had agreed to use the estimates of Hartford’s own
contractors– is disingenuous.
Second, assuming arguendo that Anika intentionally concealed invoices, or
misrepresented

the

actual

replacement

cost

of

the

roof

and

siding,

the

concealment/misrepresentations are not material to the claim. Indeed, the actual roofing
and siding installed by Anika is irrelevant to its ACV claim. As explained above, an ACV
claim requires calculating replacement cost for like quality and kind materials, and
subtracting from that value the depreciation amount. Anika did not make a replacement
cost value (RCV) claim. Replacement cost coverage “was devised to remedy the shortfall
in coverage which results under a property insurance policy compensating the insured for
actual cash value alone.” Salesin v. State Farm Fire & Cas. Co., 229 Mich. App. 346, 365
(1998) (citation omitted). Because Anika did not seek coverage based on the RCV loss,
which is presumably higher than the ACV loss,3 the actual amount it paid for the roof is not
relevant to its claim. It would only become relevant if Anika made a RCV claim. Thus,
Hartford’s claim does not have any merit and does not create a genuine issue of material
fact.
C. Policy’s “Financial Interest” Limiting Provision
Next, Hartford says that, regardless of the ACV loss calculated by the appraisers,
3

Indeed, in the estimates, RCV loss was consistently calculated higher than ACV loss.
See (Doc. 21-11 at 29; Doc. 21-25 at 33).
14

it is not responsible for more than the market value of the building at the time of the tornado
loss. The policy states: “We [Hartford] will not pay you [Anika] more than your financial
interest in the Covered Property.” Anika’s financial interest, Hartford says, limits Anika’s
claim to the market value of the building at the time of the tornado.3 Hartford is mistaken.
Hartford misplaces its reliance on Evanston Insurance Co. v. Cogswell Properties,
LLC, 730 F.Supp.2d 748 (W.D. Mich. 2010), aff’d 683 F.3d 684 (6th Cir. 2012). In
Evanston Insurance, Cogswell purchased twenty interconnected buildings for $70,000.00
in a tax foreclosure sale. Id. at 749. Cogswell purchased an insurance policy that provided
coverage of $1,000,000.00 for real property and $250,000.00 for business personal
property. Id. On the day the policy was issued, a portion of the property was destroyed
in a fire. Id. After the claim was submitted for appraisal, the umpire used two different
methods to determine ACV:
First, using [a] market value-based valuation of the Property,
he determined that the value was $1,540,000.00. Second,
using [a] replacement cost of $1,534,135.28 for the damaged
portion (or loss), reduced by . . . depreciation . . . , the umpire
determined the value of the loss to be $736,384.89.
Id. at 751.
The court held that the umpire erred by applying two separate valuation methods,
one method to determine the ACV of the property and another method to determine the
ACV of the loss. Id. at 753. This error, the court reasoned, “substantially affected the
award” and “produced a result that is both illogical and contrary to the purposes of the
3

The Court notes that, unlike Hartford represented at oral argument, this is purely a
legal question, and not a coverage question. See Evanston Ins. Co. v. Cogswell
Properties, LLC, 730 F. Supp. 2d 748, 756 (W.D. Mich. 2010), aff’d 683 F.3d 684 (6th
Cir. 2012).
15

broad evidence rule.”4 Id. at 754.
Next, the court determined whether the insurer’s liability to Cogswell was limited to
the $70,000.00 it paid for the property at the tax foreclosure sale. Id. at 755. The
insurance policy contained a provision that the insurer “will not pay you [the insured] more
than your financial interest in the Covered Property.” Id. at 755 (emphasis in original).
Relying on Auto-Owners Insurance Co. v. Hansen Housing, Inc., 604 N.W.2d 504 (S.D.
2000), the court determined that the insured’s financial interest in the property “is the fair
market value rather than the purchase price.” Id. at 758.
Drawing from the language of Evanston Insurance, Hartford argues that Anika’s
claim is limited to the fair market value of the property at the time of the tornado, which
Hartford has calculated at $800,000.00. See (Doc. 23-8 at 4). Unlike Evanston Insurance,
however, the policy here is not ambiguous and explicitly addresses how to calculate ACV
loss. Here, the policy requires payment based on replacement cost less depreciation, and
the reference to financial interest speaks to whether Anika owns part or the whole property.
If, for example, Anika owned 50% of the building at the time of the tornado, it would be
limited to 50% of the total ACV loss.
The Michigan Court of Appeals addressed an identical clause limiting an insurer’s
liability to the insured’s “financial interest in the property” in J.D.’s Pub & Grub, Inc. v. North
Pointe Insurance Co., No. 256634, 2006 WL 2271306 (Mich. Ct. App. Aug. 8, 2006).
Because the policy did not define “financial interest,” the court of appeals turned to the
dictionary definition:
4

Under Michigan law, the purpose of the broad evidence rule “is to allow appraisers to
select an appropriate valuation method.” Evanston Ins. Co., 730 F.Supp.2d at 754.
16

“Financial” is commonly understood to pertain or relate to
“money matters; pecuniary.” Random House Webster’s
Dictionary (2d college ed, 1997). “Interest” may be understood
to pertain to:
. . . . 5. A business, cause, etc., in which a person has a share,
concern or responsibility. 6. a legal share, right, or title, as in
the ownership of property or in a business undertaking. . . .
[Id.].
Id. at 3-4 (alterations in original). The court of appeals concluded:
Contrary to [North American]’s argument, because [J.D’s] had
an ownership interest in the property, its financial interest in the
property was greater than its equity interest and included the
value of the property as reflected by the total sale price. In
Singer v. American States Ins., 245 Mich. App. 370, 380
(2001), the Michigan Supreme Court held:
It is undisputed that [the plaintiff] insured the whole
property, not simply the amount that she owed under
the land contract. Therefore, the amount for which
defendant is liable depends on each parties’ interest in
the property, not any amount still owed under the land
contract.
Id. at *4.
Here, Hartford does not contest Anika’s “financial interest,” i.e. its ownership interest
in the building. Indeed, Anika owned 100% of the building at the time of the tornado.
Hartford’s definition of “financial interest”– which seeks to limit Anika’s recovery to the
market value of the building at the time of the loss– is inconsistent with the court of appeals’
definition of financial interest in J.D.’s Pub and Grub. Nor does Hartford’s definition of
financial interest make sense when read in the context of the policy. The policy provides
explicit instructions on how to calculate ACV loss. The provision limiting Hartford’s liability
to Anika’s financial interest in the property is not contained in those instructions.
The Court’s interpretation of Michigan law is supported by a recent unpublished
17

Michigan Court of Appeals case. See Hicks v. Auto Club Grp. Ins. Co., No. 295391, 2012
WL 205795 (Mich. Ct. App. Jan. 24, 2012) (On Remand) (per curiam). In Hicks, a fire
destroyed Roxanne and Ricky Hicks’s home. Id. at *1. The home was insured by an
insurance policy. Id. The insurer argued that Roxanne was only entitled to her financial
interest in the property, e.g. one-half of the available insurance proceeds. Id. The court
of appeals disagreed:
The insurance policy at issue states that defendant will not pay
more than “the insurable interest an insured person has in the
covered property at the time of loss.” As the trial court
correctly found, Roxanne is the only party with an insurable
interest in the real property. . . Defendant contends that this
Court should deem Ricky and Roxanne to be tenants by the
entireties for the real property on the ground that Ricky
provided financial consideration for the property and sustained
a loss by the destruction of the property. However, defendant
presents no facts of record to indicate that Ricky and Roxanne
actually owned the property as tenants by the entireties.
Rather, the record demonstrates that Ricky’s name was not on
the contract for the purchase of the property. Given the lack of
factual support for defendant’s argument and the undisputed
fact that Ricky was not a party to the land contract, we
conclude that Roxanne retained all of the insurable interest in
the real property. Roxanne is thus entitled to all of the
recoverable insurance proceeds under the policy.
Id.
Hicks confirms that insurance policies limiting coverage to the insured’s financial
interest in the property at the time of loss do not limit recovery to the market value of the
property at the time of loss. Instead, such provisions limit the insured’s recovery to the
legal financial interest the insured has in the property, i.e. whether the property is subject
to a mortgage, whether the insured owns the whole of the property, etc. Accordingly, the
Court rejects Hartford’s argument that Anika’s recovery is limited to the market value of the

18

property at the time of the tornado.
D. Balance of Appraisal Award/UTPA Fees
Having determined that Hartford does not have any valid defenses, there is no
genuine issue of material fact that Hartford is liable for the balance of the appraisal award.
Likewise, there is no genuine issue of material fact that Hartford has indeed not timely paid
on the claims, in violation of the UTPA.
The UTPA states, in pertinent part,
Sec. 2006. (1) A person must pay on a timely basis to its
insured, an individual or entity directly entitled to benefits under
its insured’s contract of insurance, or a third party tort claimant
the benefits provided under the terms of its policy, or, in the
alternative, the person must pay to its insured, an individual or
entity directly entitled to benefits under its insured’s contract of
insurance, or a third party tort claimant 12% interest, as
provided in subsection (4), on claims not paid on a timely
basis. Failure to pay claims on a timely basis or to pay interest
on claims as provided in subsection (4) is an unfair trade
practice unless the claim is reasonably in dispute.
Mich. Comp. Laws § 500.2006.
Under Michigan law, a first-party insured is entitled to payment of penalty interest
under the UTPA for claims that are not timely paid, regardless of whether the claim is
reasonably in dispute. Griswold Properties, L.L.C. v. Lexington Ins. Co., 276 Mich. App.
551, 566 (2007). Thus, “if the claimant is the insured or an individual or entity directly
entitled to benefits under the insured’s contract of insurance, and benefits are not paid on
a timely basis, the claimant is entitled to 12 percent interest, irrespective of whether the
claim is reasonably in dispute.” Id. (citation omitted) (internal quotations omitted).
There can be no dispute that, as of June 10, 2011, Anika submitted its final sworn
statements in support of the building loss and the business income loss. Attached by letter
19

to the sworn statements of loss, Anika informed Wilkie as follows:
Pursuant to your request please find enclosed the final Sworn
Statement in Proof(s) of Loss for the Building Claim and for the
Business Income Extra Expense claims in connection with the
tornado which occurred on or about June 6, 2010.
(Doc. 24-8 at 2). The sworn statements were supplemented with detailed estimates and
invoices. As explained above, Hartford’s claim that multiple loss categories remained open
even after the sworn statements were submitted on June 10 does not persuade. Anika
clearly alerted Hartford that its statements were final. Therefore, Hartford knew that Anika
would not be making further claims on the building or business income loss. Sixty days
have long since passed and Hartford has not paid in full on the claims that are due. As
such, Hartford is statutorily required to pay 12% interest on the claim pursuant to Mich.
Comp. Laws § 500.2006(1) and (4).5
V. CONCLUSION
For the reasons stated above, Anika’s motion for partial summary judgment is
granted. Judgment will be entered in favor of Anika on Count I of the first amended
complaint, and on Hartford’s affirmative defenses and counterclaim. In addition, Anika is
entitled to interest under Mich. Comp. Laws § 500.2006. The case proceeds as to counts
II (fraudulent misrepresentation) and III (abuse of process) of Anika’s first amended
complaint.6
5

Having paid a substantial portion of the claim as settlement advances, the interest
Hartford is required to pay shall be calculated based on the amount of the claim that
remains unpaid.
6

The case manager will set a status conference to:
1.
Discuss the procedures to be followed to determine the exact amount of
the judgment to be entered in plaintiff’s favor;
20

11-12534 Anika & Associates, Inc. v. Hartford Casualty
SO ORDERED.

S/Avern Cohn
AVERN COHN
UNITED STATES DISTRICT JUDGE

Dated: April 10, 2013

I hereby certify that a copy of the foregoing document was mailed to the attorneys of record
on this date, April 10, 2013, by electronic and/or ordinary mail.

S/Sakne Chami
Case Manager, [phone]

2.
3.

Discuss the procedures to determine the exact amount of interest owed to
plaintiff; and
Discuss the procedures to be followed in adjudicating counts II and III.
21