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Cobb v. State Farm Fire and Casualty Co.

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

November 1, 2017

EUGENE COBB, Plaintiff,
v.
STATE FARM FIRE AND CASUALTY CO., Defendant.

          OPINION AND ORDER GRANTING PROPOSED INTERVENING PLAINTIFF=S MOTION TO INTERVENE [DOC. 9], REQUIRING JOINDER OF NON-PARTY STANDARD GUARANTY INSURANCE COMPANY AND GRANTING PLAINTIFF'S ORAL MOTION TO AMEND ITS COMPLAINT

          GEORGE CARAM STEEH UNITED STATES DISTRICT JUDGE.

         This matter has come before the court on proposed intervening plaintiff U.S. Bank National Association's motion to intervene. U.S. Bank is being represented in this action by its attorney-in-fact Select Portfolio Servicing, Inc. (“SPS”). SPS moves for leave to intervene as of right, pursuant to Fed.R.Civ.P. 24(a)(2), or alternatively for permissive intervention pursuant to Fed.R.Civ.P. 24(b)(1).

         On July 21, 2005, plaintiff executed a Promissory Note evidencing a loan in the amount of $79, 800.00 he received from New Century Mortgage Corporation. The Note was secured by a Mortgage. SPS began servicing the Mortgage on November 29, 2005. On March 26, 2007, the Mortgage was assigned to Intervening Plaintiff. Plaintiff is in default under the Note.

         This action arises out of a homeowner's insurance policy (“State Farm Policy”) entered into between plaintiff Eugene Cobb and defendant State Farm Fire and Casualty Company on June 3, 2016. Plaintiff suffered a loss to the Property as a result of a fire on or about August 30, 2016. The State Farm Policy provides insurance on plaintiff's real and personal property. Pursuant to the Mortgage Clause provision, State Farm agrees to cover any loss suffered by Intervening Plaintiff as mortgagee as a result of damage to plaintiff's Property.

         On March 17, 2017, plaintiff filed his lawsuit against State Farm in Wayne County Circuit Court. On May 1, 2017, State Farm removed the matter to this court. On May 3, 2017, State Filed an Answer to the Complaint and on June 14, 2017, the court entered a scheduling order with a discovery cutoff of December 11, 2017 and a trial date of May 29, 2018.

         SPS filed its motion to intervene to protect its rights under the terms of the State Farm Policy. State Farm does not object to allowing SPS to intervene because it does not want to pay twice for the same loss. Plaintiff objects to intervention unless SPS's own insurer is also joined in the case.

         When SPS became the servicer of the Mortgage in 2005, it obtained an insurance policy with Standard Guaranty because plaintiff allegedly failed to provide proof of an acceptable insurance policy covering the Property. SPS contends that the Standard Guaranty policy is not implicated in this matter because the policy terminated by its terms prior to the date of plaintiff's loss. The “other insurance” provision states: “[c]overage on any described location provided under this certificate will be terminated on the effective date of other acceptable insurance.” SPS maintains that once plaintiff obtained the State Farm policy on June 3, 2016, the Standard Guaranty policy terminated.

         SPS points out that even if the Standard Guaranty policy was still in effect on the date of loss, it provides coverage only for excess real property loss coverage, which is not triggered because plaintiff's claimed real property loss is below the policy limits of his policy with State Farm. The “other insurance” clause of the Standard Guaranty policy states: “[i]f there is any other valid or collectible insurance which would attach if the insurance under this Certificate had not been effected, this insurance shall apply only as excess and in no event as contributing insurance and then only after all other insurance has been exhausted.”

         The court held oral argument on the motion to intervene on October 30, 2017.

         I. Intervention as of Right

         Federal Rule of Civil Procedure 24(a) provides that upon timely application, anyone shall be permitted to intervene in an action if it satisfies the following factors: (1) timeliness of the application to intervene, (2) the applicant's substantial legal interest in the case, (3) the impairment of the applicant's ability to protect that interest in the absence of intervention, and (4) inadequate representation of that interest by parties already before the court. Michigan State v. Miller, 103 F.3d 1240, 1245 (6th Cir. 1997).

         The court agrees that SPS has satisfied the requirements of Rule 24(a) and should be permitted to intervene in this case. As mortgagee, SPS has an interest in the State Farm Policy and its ability to protect this interest will be impaired if SPS is not included in the litigation. At oral argument, plaintiff's counsel stated that he does not object to permitting SPS to intervene and acknowledged that any prejudice could be addressed by amending the scheduling order.

         II. Joinder of Standard Guaranty

         The State Farm Policy insures both plaintiff and SPS in the case of a loss to the real property, and provides pro-rata coverage when a loss is also covered by another insurance policy. The Standard Guaranty Policy insures only SPS and provides excess coverage when a loss is also covered by another policy. In addition, as a forced placed policy, the Standard Guaranty Policy requires the mortgagee to ...


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