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Shathaia v. Travelers Cas. Ins. Co. of America

United States District Court, E.D. Michigan, Southern Division

November 21, 2013


Order Filed: December 17, 2013

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[Copyrighted Material Omitted]

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For Tam Shathaia, Shathaia Brothers Property, LLC, Shathaia Brothers, Incorporated, Doing business as Gratiot Mayfield Market, Plaintiffs: Elizabeth P. Roberts, Robert J. Morris, Kirk, Huth, Lange & Badalamenti, P.L.C., Clinton Township, MI; Raechel M. Badalamenti, Kirk and Huth, Clinton Township, MI.

For Travelers Casualty Insurance Company of America, Defendant: Michele A. Chapnick, Gregory and Meyer, Troy, MI.

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This lawsuit arises from a fire at the Gratiot-Mayfield Market in Detroit, Michigan, and Plaintiffs' claim for coverage for the resulting loss under an insurance policy issued by Defendant Travelers Casualty Insurance Company of America (" Travelers" ), Policy of Insurance #I-680-2642N436-ACJ-11 (" the Policy" ). Presently before the Court are the parties' cross-motions for summary judgment filed pursuant to Federal Rule of Civil Procedure 56. The motions have been fully briefed and the Court held a motion hearing on November 19, 2013. For the reasons that follow, Plaintiffs' motion is denied and Travelers' motion is granted in part and denied in part.

I. Summary Judgment Standard

Summary judgment pursuant to Federal Rule of Civil Procedure 56 is appropriate " if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The central inquiry is " 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, Inc., 477 U.S. 242, 251-52, 106 S.Ct. 2505, 2512, 91 L.Ed.2d 202 (1986). After adequate time for discovery and upon motion, Rule 56 mandates summary judgment against a party who fails to establish the existence of an element essential to that party's case and on which that party bears the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986).

The movant has the initial burden of showing " the absence of a genuine issue of material fact." Id. at 323, 106 S.Ct. at 2553. Once the movant meets this burden, the " nonmoving party must come forward with specific facts showing that there is a genuine issue for trial." Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986) (internal quotation marks and citation omitted). To demonstrate a genuine issue, the nonmoving party must present sufficient evidence upon which a jury could reasonably find for that party; a " scintilla of evidence" is insufficient. See Liberty Lobby, 477 U.S. at 252, 106 S.Ct. at 2512.

" A party asserting that a fact cannot be or is genuinely disputed" must designate specifically the materials in the record supporting the assertion, " including depositions, documents, electronically stored information, affidavits or declarations, stipulations,

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admissions, interrogatory answers, or other materials." Fed.R.Civ.P. 56(c)(1). The court must accept as true the non-movant's evidence and draw " all justifiable inferences" in the non-movant's favor. See Liberty Lobby, 477 U.S. at 255, 106 S.Ct. at 2513.

A court reviewing cross-motions for summary judgment, must evaluate each motion on its own, applying the above standard. Westfield Ins. Co. v. Tech Dry, Inc., 336 F.3d 503, 506 (6th Cir. 2003) (citing Taft Broad Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991)).

II. Factual and Procedural Background

In 2008, Plaintiff Tam Shathaia was presented with the opportunity to purchase the Gratiot-Mayfield Market (" GMM" ), a party/convenience store located at 13105 Gratiot Avenue in Detroit, Michigan, from Yassir Hakim. Mr. Shathaia formed two entities to complete the purchase: Plaintiff Shathaia Brothers Property, LLC (" SBP" ) to purchase the building in which GMM operates and Plaintiff Shathaia Brothers, Inc. (" SB-Inc." ) to purchase the business, including all of its inventory and equipment. Mr. Shathaia is the sole member or shareholder of these entities. On March 2, 2009, SB-Inc. registered with the State of Michigan to transact business under the assumed name of " Gratiot-Mayfield Market." (ECF No. 55 Ex. 1.)

On May 23, 2008, Mr. Shathaia and Mr. Hakim entered into a purchase agreement with respect to the business and property related to GMM. (ECF No. 41 Ex. 5.) In the agreement, Mr. Hakim agreed to sell and Mr. Shathaia agreed to buy the business (including its fixtures, equipment, goodwill, a covenant not to compete, and inventory) and the real estate. ( Id. ) Mr. Shathaia executed assignments on July 30, 2008, effective June 11, 2008, in which he assigned his purchase rights to SBP (with respect to the real estate) and SB-Inc. (with respect to the business). ( Id. )

On February 27, 2009, SB-Inc. acquired GMM's business assets from Mr. Hakim for $103,147.39. ( Id. Ex. 6.) On the same date, SBP executed a Land Contract to acquire the real estate on which GMM operated for $100,000.[1] ( Id. Ex. 7.) The Land Contract required SBP to inter alia pay $1,680.99 each month for six years, pay all taxes for the property, and keep the buildings and land insured against loss and damage. ( Id. ) In a lease agreement dated July 22, 2008, SBP leased the premises to SB-Inc. for a period of five years beginning August 1, 2008, for a monthly rent of $1,700.00. (ECF No. 52 Ex. 4.) The lease agreement required SB-Inc. to surrender the property at the end of the lease " in as good condition as the commencement of the term." ( Id. ¶ 6.) It required SBP to carry fire and extended coverage insurance covering the premises " in an amount equal to the replacement value of the building", although the agreement required SB-Inc. to pay the entire cost of the insurance. ( Id. ¶ 13.)

On February 26, 2009, the Policy was issued providing " coverage" for inter alia the " building" and the " business personal property" located at GMM's address. (ECF No. 52 Ex. 10.) The " named insured" on the Policy is " Gratiot Mayfield Market" with a mailing address of " 13104 Gratiot Ave[nue]." ( Id. at 000295.) The Policy insured the building located at 13104 Gratiot Avenue up to $496,458.00 and the business personal property up to

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$250,000.00. ( Id. at 000298.) Specifically, the coverage provisions provide in part:

A. Coverage
We will pay for direct physical loss of or damage to Covered property at the premises described in the Declarations caused by or resulting from a Covered Cause of Loss.
1. Covered Property
Covered Property, as used in this Coverage Form, means the type of property described in this Paragraph A.1., and limited in Paragraph A.2. . . .
a. Building, meaning the building or structure described in the Declarations . . .
b. Business Personal Property located in or on the buildings described in the Declarations . . ., including:
(1) Property owned by you and used in your business;
(2) Property of others that is in your care, custody or control;
(3) Your use interest as tenant in improvements and betterments. . . .

( Id. at 000306.) The Policy also provides coverage for actual loss of " business income" sustained " due to the necessary 'suspension' of [the insured's] 'operations' during the 'period of restoration.'" ( Id. at 000307.) The basis for determining the amount Travelers will pay for business income loss is set forth in the Policy. ( Id. at 000336-37.) The Policy limits Travelers' " loss payment" with respect to the building and personal property to the insured's " financial interest in the Covered Property." ( Id. at 000333.)

The policy excludes coverage for loss or damage caused by inter alia " [d]ishonest or criminal acts by you [the insured], or any of your partners, 'members', officers, 'managers', 'employees' . . ., directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose . . .." ( Id. at 000330.) Pursuant to the Policy's terms, coverage also is void in the event of concealment, misrepresentation, or fraud by the insured:

This Coverage Form is void in any case of fraud by you. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning:
a. This Coverage Form;
b. The Covered Property;
c. Your interest in the Covered Property;
d. A claim under the Coverage Form.

(Id. at 000337.) The insured must further satisfy certain conditions for coverage. ( Id. at 000332-33.) For example, the Policy requires the insured to send Travelers " a signed, sworn proof of loss containing the information [it] request[s] to investigate the claim." ( Id. at 000333.)

On March 16, 2011, GMM suffered direct physical loss caused by a fire. There is no dispute that ...

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