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Alterra Excess & Surplus Insurance Co. v. Excel Title Agency, LLC

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

October 31, 2016

ALTERRA EXCESS & SURPLUS INSURANCE CO., Plaintiff/Counter-Defendant,


          STEPHEN J. MURPHY, III United States District Judge

         The present matter arises from an insurance coverage dispute. Before the Court is Plaintiff Alterra-Excess & Surplus Insurance Company's ("Alterra") motion for summary judgment, and it is opposed by Defendant Western American Properties, Inc. ("WAP"). For the following reasons, the Court will grant the motion.


         I. Factual and Procedural Background

         WAP brought a separate action in the Court against Defendants Excel Escrow Services, LLC ("EES") and Excel Title Agency ("ETA"), ETA's owner Janel Chipman ("Chipman"), Metro Equity Group, LLC ("MEG"), and MEG's owner Corey Howard ("Howard"). Case No. 2:10-cv-14207 ("WAP II"). WAP II arose from a real estate purchase agreement ("Agreement") between WAP and MEG, pursuant to which MEG would acquire real estate properties and sell them to WAP for 50% of their fair market value. See Agreement, ECF No. 50-1. Under the Agreement, WAP would deposit 10% of the total amount in escrow with ETA for use as earnest money deposits toward the purchases. Id. Other investors entered into similar agreements with MEG, including Hanover Exchange ("Hanover"), Lincoln Properties of Ruston, LLC ("Lincoln"), and Mt. Tai Asset Management Corporation ("Mt. Tai"). See ECF Nos. 50-2, 50-3, 50-4.

         After WAP's funds were allegedly transferred - without WAP's knowledge or consent - from ETA to EES, and then from EES to MEG, WAP's president James Perley ("Perley") e-mailed Howard, Chipman, and others demanding the escrowed funds be returned:

I want you to know that unless suitable inventory or funds are returned by October 22, 2009, I will take all action available against you. There will be no extensions on the 90 days; you have to either deliver the suitable inventory or the money owed to me. This is the remaining deposit of $374, 900 held by Excel Title and Escrow, and my money that was diverted to you outside of my instructions and direction of $649, 800 on one occasion, and $536, 446 on another separate occasion, by both Excel Title and Escrow, Janel Chipman, and Outlook Escrow, Karen Gardner. Sun [sic] of the amount owed is $1, 561, 146. If this does not happen by October 22, 2009, I will begin to proceed with all civil and criminal action, both state and federal against you, Metro Equity Group, . . . Excel Title and Escrow, Janel Chipman, . . . Outlook Escrow, and Karen Gardner among others.

E-mail, ECF No. 13. Perley sent the e-mail on July 28, 2009. Id.

         On October 20, 2010, WAP filed the WAP II complaint, alleging breach of agreement, breach of contract, negligence, breach of duty, and conversion. See WAP II Compl., ECF No. 50-25. Before WAP initiated WAP II, each individual investor had filed a lawsuit in the Eastern District of Michigan against MEG and Howard that contained similar allegations. Compare Complaints, Case Nos. 2:08-cv-14791 (filed 11/14/08), 2:08-cv-14897 (filed 11/23/08), and 2:09-cv-10685 (filed 2/24/2009) with Case No. 2:10-cv-14207 (filed 10/20/2010). On November 12, 2012, the Court entered judgment in WAP's favor and against EES and ETA, jointly and severally, in the amount of $1, 546, 986 plus post-judgment interest. Judgment, No. 2:10-cv-14207, ECF No. 33.

         Alterra issued a Title Agents, Abstractors and Escrow Agents Professional Liability Insurance Policy ("the Policy") to ETA that addressed amounts relevant to the WAP II case up to $1, 000, 000. See Policy, ECF No. 50-33. A writ of garnishment issued against Alterra to collect on the WAP II judgment; Alterra filed a motion to dismiss it, and the Court denied the motion without prejudice to resolution of the instant case. See Docket, No. 2:10-cv-14207, ECF Nos. 36, 38, 44. A month later, Alterra filed the instant complaint for a declaratory judgment that the Policy should be rescinded and that it had no duty to indemnify ETA or any other party for the WAP II judgment. Compl., No. 2:13-cv-11672, ECF No. 1. WAP filed counterclaims for breach of contract and declaratory judgment, and the Court dismissed the breach of contract counterclaim on January 21, 2014. ECF Nos. 7, 31.

         A protracted discovery period followed and included numerous disputes, two stipulated scheduling extensions, and one Court-ordered extension that set discovery and dispositive motion deadlines at October 15, 2015 and November 15, 2015, respectively, along with disallowance of any further extensions. See ECF No. 40. Alterra filed the instant motion on November 15, 2015, but discovery disputes continued into and through June 2016. In an order resolving the discovery disputes, the Court gave Alterra an opportunity to supplement its summary judgment motion by August 26, 2016. See Order, ECF No. 64. Having received no additional briefing, the Court will now address the motion.

         II. The Policy

         The Policy provides "claims-made" coverage that - in contrast to occurrence coverage - indemnifies an insured for any claims made against him during the policy period, subject to certain restrictions. The Policy period ran from April 10, 2010 to April 10, 2011, and the "Retroactive Date" was set at February 15, 2006. Policy 1, ECF No. 50-33. After the Policy expired, Alterra renewed the policy for April 10, 2011 to April 10, 2012. Renewal, ECF No. 53-4. ETA tendered the WAP II complaint to Alterra in an e-mail dated April 4, 2011. E-mail, ECF No. 53-5. The next day, Alterra acknowledged receipt and issued a reservation of rights letter. Letter, ECF No. 53-6. The relevant provisions of the Policy and Application for the Policy are provided below.


In consideration of payment of the premium, and in reliance upon the statements made in the Application and its attachments and any materials submitted therewith, all of which are made a part hereof, and subject to the Declarations and all the terms and conditions of this Policy, including any endorsement hereto, we agree with you as follows . . .

Section I. 1. a. ("Insuring Clause"):

We shall pay on behalf of the "Insured" those sums in excess of the deductible that the "Insured" becomes legally obligated to pay as "Damages" and "Claims Expenses" as a result of a "Claim" first made against the "Insured" and reported to us in writing during the "Policy Period" or "Extended Reporting Period" by reason of a "Wrongful Act" in the performance of or failure to perform "Professional Services" by the "Insured" or by any other person or entity for whom the "Insured" is legally liable. The "Wrongful Acts" must have been committed on or subsequent to the "Retroactive Date" specified in the Declarations and before the end of the "Policy Period".

Section II. ("Definitions"):

B. "Claim" means a written demand for monetary damages arising out of or resulting from the performance or failure to perform 'Professional Services.'"
I. "Professional Services" means only those services performed by any "Insured" for others for a fee in any of the following ...

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