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First Class Tire Shredders, Inc. v. Employers Mutual Casualty Co.

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

December 15, 2016



          DAVID M. LAWSON United States District Judge

         The parties have filed cross motions for summary judgment in this insurance coverage dispute. They agree on many of the essential facts. The plaintiff argues that the property insurance policy (insuring “contractors' equipment” against theft, among other things) issued to it by the defendant covered a one-off, custom-built car crusher that disappeared from a storage location, and the defendant's refusal to pay the loss breaches the insurance contract. The defendant argues that the policy's “missing property” exclusion absolves it from having to pay for the loss. The Court heard oral argument on the motions on December 14, 2016. The defendant has the better argument. The undisputed facts of the case fit within the plain language of the “missing property” exclusion, and the loss of the equipment, therefore, is excluded from coverage under the insurance policy. The defendant's motion for summary judgment will be granted in part, the plaintiff's motion for summary judgment will be denied, and the complaint will be dismissed.


         The basic facts of the case are undisputed. Plaintiff First Class Tire Shredders, Inc. operates a facility in Flint, Michigan. The plaintiff's main business is collecting and shredding used tires. The owner of First Class Tire Shredders, Harry Powell, started the company more than 20 years ago. He also previously owned several other businesses, including one named First Class Homes, which operated from offices at the same location as the tire shredding company.

         In 2008, Powell constructed a mobile car crusher of his own design that was built onto a 50-foot semi-truck trailer. The crusher took about a year to build, and it originally was built by Powell for use by First Class Homes. When it was finished, the crusher measured approximately 50 feet long and stood 17 feet tall.

         Defendant Employers Mutual Casualty Company (EMC) issued a business insurance policy to First Class Tire Shredders, effective from July 3, 2011 through July 3, 2012, which insured against, among other things, “direct physical loss” of “contractors' equipment, ” including certain items listed on a schedule attached to the policy. The crusher was listed on a schedule of covered items as “Mobile Car Crusher, ” with a scheduled value of $100, 000. The policy states that it covers “scheduled equipment” that is subject to a “direct physical loss caused by a covered peril, ” including “contractors' equipment, ” unless the “property is excluded or subject to limitations.” The policy also includes a “missing property” exclusion, which states:

“We” do not pay for missing property where the only proof of loss is unexplained or mysterious disappearance of covered property, or shortage of property discovered on taking inventory, or any other instance where there is no physical evidence to show what happened to the covered property.

         At some point, after Powell closed his First Class Homes business and the crusher was not in regular use, it was moved from the First Class commercial property to a storage yard at Junk Iron & Metal, which is a salvage business operated by Powell's friend, Donald Sampson. The crusher was stored there for several years.

         On June 1, 2012, Powell sent one of his employees, Rex Moore, to retrieve the crusher from the Junk Iron facility. However, when Moore arrived, he could not find the crusher in the area where it had been kept (apparently in a space beside Sampson's residence on the lot). Moore noted that a new gravel parking lot had been constructed in the area where the crusher was stored. He searched the salvage yard and two adjacent storage facilities also operated by Sampson, but could not find the crusher anywhere. Powell called Sampson and asked where the crusher was, and Sampson said that as far as he knew it was in the usual place where it had been kept. Sampson could not explain how the crusher might have moved or where it was. Sampson, it appears, was not deposed, but Powell testified that Sampson said he was not around when the crusher was moved.

         On June 1, 2012, Powell submitted a claim to EMC for the missing crusher, claiming a loss for the full scheduled value of $100, 000. EMC responded and asked for certain documents evidencing the ownership interest in the crusher, such as a proof of title or registration for the trailer, any tax returns disclosing ownership of the crusher as a business asset, and any other invoices or documents related to its acquisition or ownership. EMC also asked Powell to submit a signed statement in proof of loss in support of his claim. Powell then submitted a number of documents, which EMC determined were not satisfactory to show that the First Class Tire Shredders, Inc. entity owned or had spent any funds to build or acquire the crusher, or that the insurable value of the crusher, if any, was as much as Powell claimed. EMC also asserts that Powell never has produced any “physical evidence” to show what happened to the crusher, and that the loss therefore is excluded under the “missing property” provision. On March 22, 2013, EMC denied Powell's claim for the loss of the crusher. This lawsuit followed.

         On February 11, 2016, First Class filed a one-count complaint in the Genesee County, Michigan circuit court alleging that EMC breached the contract of insurance by refusing to pay for the covered loss of the crusher. On March 15, 2016, EMC removed the case to this Court. Discovery closed on August 31, 2016, and the parties filed their cross motions for summary judgment thereafter.


         Defendant EMC contends that it is not liable for any breach of the policy's terms, because coverage for any alleged loss of the crusher is excluded by the “missing property” provision of the policy, where the plaintiff has failed to produce any “physical evidence” to show what happened to the crusher. The defendant also argues that coverage of the crusher was voided by a number of alleged “misrepresentations” by Powell about the machine, and that the policy ought to be cancelled outright. However, the record does not establish EMC's entitlement to relief on its second argument as a matter of law, because First Class Tire Shredders has offered sufficient evidence to rebut them. On the issue of the applicability of the “missing property” provision, however, the only question is whether the undisputed facts trigger that exclusion.

         The fact that the parties have filed cross motions for summary judgment does not automatically justify the conclusion that there are no facts in dispute. Parks v. LaFace Records,329 F.3d 437, 444 (6th Cir. 2003) (“The fact that the parties have filed cross-motions for summary judgment does not mean, of course, that summary judgment for one side or the other is necessarily appropriate.”). However, summary judgment 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). A trial is required only when “there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.” Anderson v. Liberty Lobby, Inc.,477 U.S. 242, 250 (1986). The parties have not seriously contested the basic facts of the case on the application of the policy exclusion. ...

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