United States District Court, E.D. Michigan, Southern Division
OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR
SUMMARY JUDGMENT 
G. Edmunds United States District Judge
around February 2, 2012, Plaintiff's vacant apartment
complex was nearly gutted, resulting in over $1 million in
direct physical loss. Plaintiff submitted a claim with its
insurer-Defendant Scottsdale Insurance-and, after a
protracted review and appraisal process, was reimbursed up to
the policy limit. Over four years after the loss was first
reported, Plaintiff filed this action seeking penalty
interest under Michigan law. The success of Plaintiff's
claim boils down to two issues: first, whether penalty
interest is considered a claim "on the policy" and,
if so, whether Michigan's tolling provision applies to
surplus line insurers like Defendant.
before the Court is Defendant's motion for summary
judgment pursuant to Federal Rule of Civil Procedure 56. For
the reasons stated more thoroughly below, the Court GRANTS
Defendant's motion. 
parties principally agree on the material facts giving rise
to this dispute. Plaintiff Palmer Park Square
("Palmer") was the owner of a vacant apartment
complex at 843 Whitmore Street in Detroit, Michigan (the
"Property"). At all times relevant to this action,
the Property was insured under a policy (the
"Policy") issued by Defendant Scottsdale Insurance
("Scottsdale"). (Def.'s Mot. Ex. B, Commercial
Policy). Between February 2-3, 2012, the Property was broken
into and vandalized. (Id. Ex. C, Police Report).
Approximately 18 months later, Palmer submitted a property
loss notice to Scottsdale. (Id. Ex. D, Property Loss
Notice). The following month, on November 18, 2013,
Scottsdale acknowledged its receipt of the notice and wrote
to Palmer highlighting a number of coverage restrictions
under the Policy. (Id. Ex. F, Nov. 18, 2013 Letter).
Significantly, Scottsdale noted that, under section D of the
"commercial property conditions", Palmer was
prohibited from instituting a legal action unless "there
has been full compliance with all of the terms of [the
Policy] . . . and [t]he action is brought within 2 years
after the date on which the direct physical loss or damage
occurred." (Id. at 5).
some amount of back and forth, Palmer invoked its right to an
appraisal for a damages assessment. At the conclusion of that
process, the parties' representatives agreed that the
total "building ACV loss" was $1, 642, 796.
(Def.'s Mot. Ex. I, Appraisal Award). In the end,
Scottsdale conceded that Palmer was entitled to the Policy
limit, and issued three separate payments totaling $1
million. (Id. at Ex. K, July 14, 2015 Letter).
after receiving Scottsdale's final payment, Palmer
raised-seemingly for the first time-the concept of
"penalty interest." (Id.). Specifically,
Palmer demanded $125, 754 in penalty interest stemming from
Scottsdale's purported failure to satisfy the claim in a
timely manner. See Id. ("[s]tatutory interest
is to be paid by an insurer at the time of issuing any late
payment."). Perhaps not surprisingly, Scottsdale denied
Palmer's request, maintaining that "all payments
were timely made once the amounts owed were determined, [and
thus] no penalty interest is due . . . ." (Plf.'s
Resp. Ex. 3, Oct. 26, 2015 Letter).
March 2016, Palmer initiated this litigation. According to
the complaint, because Scottsdale failed to remit payment
within 60 days of receiving the notice of loss, Palmer is
entitled to 12% interest. The success of this claim hinges on
the applicable limitations period, which Scottsdale asserts
has long passed.
well established that summary judgment under Federal Rule of
Civil Procedure 56 is proper when the movant “shows
that there is no genuine dispute as to any material fact, and
that the movant is entitled to judgment as a matter of
law.” Fed.R.Civ.P. 56(a); S.E.C. v. Sierra
Brokerage Servs., Inc., 712 F.3d 321, 326-27 (6th
Cir.2013) (citing Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986))
(quotations omitted). When reviewing the record, “the
court must view the evidence in the light most favorable to
the non-moving party and draw all reasonable inferences in
its favor.” Id. Furthermore, the
“substantive law will identify which facts are
material, and summary judgment will not lie if the dispute
about a material fact is ‘genuine, ' that is, if
the evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id. When
considering the material facts on the record, a court must
bear in mind that “[t]he mere existence of a scintilla
of evidence in support of the plaintiff's position will
be insufficient; there must be evidence on which the jury
could reasonably find for the plaintiff.”
Anderson, 477 U.S. at 252, 106 S.Ct. 2505.
core, Scottsdale's motion raises two distinct issues.
First, the Court must consider whether penalty interest under
Mich. Comp. Laws § 500.2006 is considered a "claim
on the policy" or an entirely separate cause of action.
The answer to this question determines the applicable statute
of limitations, and thus the viability of Palmer's claim.
Assuming the Policy does control, and Palmer's claim is
presumptively time-barred, the Court must then determine
whether it is saved by Michigan's mandatory tolling
provision. See Mich. Comp. Laws § 500.2833(1).
the Michigan Insurance Code, "if benefits are not paid
on a timely basis, the benefits paid bear simple interest
from a date 60 days after satisfactory proof of loss was
received by the insurer at the rate of 12% per annum, . . .
." Mich. Comp. Laws § 500.2006(4). The application
of the penalty provision is fairly mechanical; absent a few
limited exceptions, "a first-party insured is entitled
to interest if benefits are not paid within 60 days after
satisfactory proof of loss is provided", regardless of
whether the claim is "reasonably in dispute."
Griswold Properties, L.L.C. v. Lexington Ins. Co.,
741 N.W.2d 549, 557 (Mich. Ct. App. 2007). Here, although the
question of Scottsdale's timeliness is not before the
Court, there is seemingly no dispute that Palmer's claim
was not paid within the 60-day window under the statute.
Nevertheless, the parties' dispute hinges on the
applicable limitations period. According to Scottsdale, the
Policy is clear: "[n]o one may bring a legal action . .
. unless [t]here has been full compliance with all of the
terms of the Coverage Part; and [t]he action is brought
within 2 years after the date on which the direct physical
loss or damage occurred." (Def.'s Mot. Ex. B, Policy
No. CPS1462253). While there is no question that this action
was filed more than two years ...