United States District Court, E.D. Michigan, Southern Division
For Vertex International Management Services, L.L.C., Plaintiff: Bruce F. Rosenthal, Bruce F. Rosenthal, PC, Troy, MI; Michael S. Hohauser, Sarah E. Kuchon, Hohauser Law Firm, Troy, MI.
For State Farm Fire and Casualty Company, Defendant: Paul H. Johnson, Jr, Amy L. Wille, Patrick, Johnson, Southfield, MI.
OPINION AND ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (docket no. 15) AND DISMISSING ACTION WITHOUT PREJUDICE
HONORABLE STEPHEN J. MURPHY, III, United States District Judge.
This is an insurance coverage case. Plaintiff Vertex International Management Services, LLC (" Vertex" ), owner of a residential rental property in Detroit, alleges that State Farm Fire and Casualty Company (" State Farm" ) breached its insurance policy with Vertex when it failed to pay insurance benefits after the property was destroyed by a fire. State Farm contends that this action is barred because Vertex failed to comply with the policy's pre-suit requirements, specifically, the requirement that Vertex provide State Farm with all requested documents during State Farm's investigation. State Farm has moved for summary judgment on this defense, seeking a dismissal of the action with prejudice. A hearing on the motion was held on May 19, 2011. For the reasons stated below, the Court will grant the motion in part, and will dismiss the action without prejudice.
The following facts are either undisputed or, if disputed, stated in the light most favorable to Vertex, the non-moving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).
Mark Gordon owns Vertex, a Michigan limited liability company that buys and sells real property. Gordon Examination Under Oath (" EUO" ) 26, 41. In 2007, he purchased ownership interests from the company's earlier owners, Gordon's daughter and sister. Id. at 33, 42. He manages the business from his home in De Soto, Texas, where he has lived since 2007. Id. at 19, 38. Between 2007 and 2008, Vertex sold almost $2 million worth of real estate. Id. at 128-29. At the time of Gordon's EUO on September 21, 2009, Vertex owned four to five residential properties. Id. at 38.
At some point, Vertex purchased a Rental Dwelling Insurance Policy (" Policy" ) from State Farm to insure residential premises (and the contents therein) located at 19489 San Juan Street, Detroit, Michigan (" Property" ). Policy (Def.'s Mot. ex. A). Vertex leased the Property to Tanea Thomas beginning March 2009, for
$1,000 per month. EUO 92; Thomas dep. 15.
A fire started at the Property in the morning hours of June 21, 2009. Thomas was not home at the time. She had gone to her mother's apartment the evening prior. Thomas dep. 27. Gordon was in Texas at the time. EUO 108. Shortly thereafter, on July 20, 2009, Vertex submitted a Sworn Statement in Proof of Loss to State Farm, making a $119,983.49 claim for losses sustained to the building itself, a $3,900 claim for damage to property located in the building, and a $900 claim for lost rent. Sworn Statement (Def.'s Mot. ex. N).
State Farm assigned Ellwyn Albee to handle the claim. Albee initiated an investigation to determine the validity of Vertex's claim, in part, due to what were believed to be " suspicious circumstances" surrounding the cause of the fire. Albee Aff. ¶ ¶ 5-6. Albee hired a fire investigator, Michael J. Waite, to investigate the cause and origin of the fire. Id. ¶ 5. Waite concluded that " [b]ased on information and evidence available to me at the time of this investigation, . . . the cause of this fire is undetermined. The investigator cannot eliminate the careless disregard of smoking material into the trashcan as a possible cause of the fire." Waite Rpt. 9 (Pl.'s Resp. Br. ex. 4). State Farm did not question Thomas about the fire until after this litigation began. Therefore, her deposition testimony regarding the cause of the fire is not material to State Farm's defense of noncompliance.
Waite's report was followed by a request from State Farm that Gordon appear for an EUO and bring with him documents relating to Vertex's ownership and management structure; business and financial records; a list of all properties owned or managed by Vertex; and various other documentation relating to Vertex and the Property. Letter of Aug. 18, 2009 (Def.'s Mot. ex. D). Gordon appeared on September 21, 2009, as requested. Gordon answered every question asked, including those regarding Vertex's financial state and Gordon's personal financial situation. State Farm requested at the EUO that Gordon produce additional documentation, and Gordon agreed to do so. State Farm did not give Gordon a deadline. EUO 144-48. Shortly after the EUO, State Farm sent Gordon a letter memorializing its request and again requesting the documents. Letter of Sept. 25, 2009 (Def.'s Mot. ex. F). It again did not give Gordon a deadline or warn him of the consequences of not submitting the documents.
To date, Gordon has not provided all of the requested documents. Albee dep. 20-21. Specifically, he has not produced: 1) personal income tax returns for 2007 and 2008; 2) financial statements and/or tax returns for Vertex from 2007 and 2008; 3) monthly statements for Vertex's checking account with Chase Bank for all of 2008 and the first six months of 2009, as well as verification of the payments Gordon made to Charmaine Hill and Michelle Washington for their ownership interest in Vertex; and 4) a copy of documentation regarding Gordon's purchase of personal residential property in Texas or documentation showing that he was in the process of purchasing the property. Albee Aff. ¶ 19.
On January 8, 2010, State Farm formally denied all insurance liability on the grounds that Vertex violated the concealment and anti-fraud provisions of the Policy and because it failed to comply with the Policy's duties-after-loss provision.
This lawsuit for breach of contract followed. 
I. Legal Standards
State Farm moves for summary judgment on its defense that Vertex's failure to comply with the Policy's pre-suit requirements bars this action. " Summary judgment is proper if the evidence, taken in the light most favorable to the nonmoving party, shows that there are no genuine issues of material fact and that the moving party is entitled to a judgment as a matter of law." Schreiber v. Moe, 596 F.3d 323, 329 (6th Cir. 2010) (citation and internal quotation marks omitted); see Fed.R.Civ.P. 56(a).
" Under the long-standing Erie doctrine, in actions brought in federal court invoking diversity jurisdiction, a court must apply the same substantive law as would have been applied if the action had been brought in a state court of the jurisdiction where the federal court is located." Corrigan v. U.S. Steel Corp., 478 F.3d 718, 723 (6th Cir. 2007). Since Vertex asserts claims solely under Michigan law, the Court must apply Michigan substantive law.
The Policy states the following:
Suit Against Us.
No action shall be brought unless there has been compliance with the policy provisions and the action is started within one year after the date of loss or damage.
Policy, Section I - Conditions ¶ 8 ...