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Sweet v. Liberty Mutual Group, Inc.

United States District Court, Eastern District of Michigan, Southern Division

May 28, 2015

SAMUEL D. SWEET, Chapter 7 Bankruptcy Trustee, Plaintiff,
v.
LIBERTY MUTUAL GROUP, INCORPORATED, Defendant.

MEMORANDUM AND ORDER GRANTING DEFENDANT’S MOTION FOR RECONSIDERATION (DOC. 18) AND DISMISSING CASE

AVERN COHN UNITED STATES DISTRICT JUDGE

I. Introduction

This is an insurance case. Plaintiff Samuel D. Sweet, a Chapter 7 bankruptcy Trustee (Trustee), filed a complaint in state court naming Liberty Mutual Group Incorporated (Liberty Mutual) as defendant. The Trustee seeks a declaration of coverage for a water damage claim to a home occurring in January 2013 under a renewed a homeowners policy issued to Reginald and Cassandra Hayes.

As will be explained, Liberty Mutual filed a motion to dismiss and the Trustee filed a motion for leave to file an amended complaint. The Court denied Liberty Mutual’s motion and granted the Trustee’s motion. (Doc. 15)

Before the Court is Liberty Mutual’s motion for reconsideration. (Doc. 18). For the reasons that follow, the motion will be granted.

II. Legal Standard

E.D. Mich. LR 7.1(h)(3) governs motions for reconsideration, providing in relevant part:

Generally, and without restricting the court’s discretion, the court will not grant motions for rehearing or reconsideration that merely present the same issues ruled upon by the court, either expressly or by implication. The movant must not only demonstrate a palpable defect by which the court and the parties have been misled but also show that correcting the defect will result in a different disposition of the case.

A “palpable defect” is a defect which is obvious, clear, unmistakable, manifest or plain. Marketing Displays, Inc. v. Traffix Devices, Inc., 971 F.Supp. 262, 278 (E.D. Mich. 1997)(citing Webster's New World Dictionary 974 (3rd ed. 1988)). A motion for reconsideration which presents the same issues already ruled upon by the court, either expressly or by reasonable implication, will not be granted. Czajkowski v. Tindall & Associates, P.C., 967 F.Supp. 951, 952 (E.D. Mich. 1997).

III. Background

The Trustee filed this declaratory judgment action to recover benefits under LibertyGuard Deluxe Homeowners Policy No. H37-248-320390-400, effective February 28, 2012 to February 28, 2013, issued to Reginald G. Hayes and Cassandra R. Hayes for a January 29, 2013 water loss claim.

Liberty filed a Motion to Dismiss (Doc. 3) that principally argued that the Trustee lacked standing to pursue this action because the water loss claim was not property of the Hayes’ bankruptcy estate. In denying Liberty’s motion, the Court found that the water loss claim is the property of the Hayes’ Bankruptcy Estate because it is a “a pre petition (pre reopened) asset, not a post petition asset.” (Doc. 15). Liberty says this ruling was in error because the Court did not apply or misapplied the “sufficiently rooted” test followed by the Sixth Circuit[1] in finding that the water loss claim was property of the estate such that the Trustee could bring a claim against Liberty for denial of coverage for it.

IV. Discussion

In determining whether an asset is “property” of a bankruptcy estate, courts, including the Sixth Circuit, analyze whether the asset is “sufficiently rooted in the pre-bankruptcy past” of the debtor. Tyler v. DH Capital Management, Inc., 736 F.3d 455 (6th Cir. 2013) citing In re Edmonds, 263 B.R. 828, 830 (E.D. Mich. 2001); In re Richards, 249 B.R. 859, 861 (Bankr. E.D. Mich. 2000) (emphasis added). Application of the test considers the following: “First, pre-petition conduct or facts alone will not “root” a claim in the past; there must be a prepetition violation.” Tyler at 462. ‚ÄúSecond, all causes of action that hypothetically could have been brought ...


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