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Karoumi v. Allstate Vehicle and Property Insurance Co.

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

August 21, 2019




         Homeowners Zena Karoumi and Basil Y. Karoumi are suing Defendant Allstate Vehicle and Property Insurance Company (“Allstate”) in connection with an insurance coverage dispute. Plaintiffs assert that Allstate breached its obligations under their insurance policy by refusing to cover water damage to their home allegedly caused by a broken water-supply line in 2017. Allstate denied Plaintiffs' claims on the grounds that the loss was not accidental, that Plaintiffs willfully concealed and misrepresented material facts about the loss and, further, that they failed to fully comply with the policy's terms. Both sides have moved for summary judgment but for reasons discussed below both parties' motions for summary judgment (ECF Nos. 16, 20) will be denied.[1]


         Plaintiffs Zena and Basil Y. Karoumi, a married couple, purchased homeowner's insurance policy number 960 628 056 from Allstate. ECF No. 16-2 PageID.119. That policy insured Plaintiffs' home, located at 37339 Calka, Sterling Heights, Michigan, from October 9, 2016 through October 9, 2017. ECF No. 16-2 PageID.122. In the event Plaintiffs, the insureds, sought coverage for a loss under the policy, Allstate asserted “a right to reasonable and safe opportunities to view and inspect the loss as often as necessary, unimpeded by actions of you or others . . . .” ECF No. 16-12 PageID.157. The policy further provided that the insureds were obligated to “show [Allstate] the damaged property” “as often as [Allstate] reasonably require[d].” Id. Failure to comply with these and other policy provisions, according to the policy's language, obviated Allstate's duty to provide coverage if the insureds' noncompliance was prejudicial to Allstate. Id. In addition, the policy mandated that “[n]o suit or action may be brought against [Allstate] unless there has been full compliance with all policy terms.” ECF No. 16-2 PageID.173.

         According to Plaintiffs, they arrived home from a family trip to Cedar Point, an amusement park in Sandusky, Ohio, on July 3, 2017 to find their house flooding. ECF No. 16-3 PageID.180 (Basil Karoumi Dep.); ECF No. 16-4 PageID.188 (Zena Karoumi Dep.). In deposition testimony, they described finding a significant amount of water in the basement, as well as puddles of water in the kitchen and living room. See ECF No. 16-5 PageID.208-09 (Mariana Karoumi Dep.); ECF No. 16-3 PageID.182. Basil Karoumi traced the origin of the leaking water to a cabinet under the kitchen sink. ECF No. 16-3 PageID.180; ECF No. 16-5 PageID.208. He testified that, upon identifying the source of the flooding, he turned off the water main to prevent further damage to the house. ECF No. 16-3 PageID.181; see ECF No. 16-5 PageID.208.

         That same evening, Zuhoor Danha, Plaintiff Zena Karoumi's sister-in-law, called Allstate to file an insurance claim for the water damage to Plaintiffs' home. ECF No. 16-4 PageID.188 (Zena Karoumi Dep.); ECF No. 16-5 PageID.208, 2011 (Mariana Karoumi Dep.); ECF No. 20-11 PageID.556 (Zuhoor Danha Dep.). Zuhoor Danha and her husband had been in Cedar Point with Plaintiffs, along with several other family members, and were dropping off some things at Plaintiffs' house when the water damage was discovered. ECF No. 20-11 PageID.556. Consistent with Danha's testimony, Allstate's records show the insurance company received notice of the water damage on July 3, 2017, at approximately 9:07 p.m. ECF No. 16-7 PageID.236 (Christopher Decker Aff.); ECF No. 16-8 PageID.239 (Allstate First Notice of Loss Snapshot). Allstate's initial loss description describes the damage as: “Water pipe broke under sink causing interior water damage to kitchen, two living rooms, 3 bathrooms, 3 bedrooms and entire basement with 4 rooms, flooring walls, ceilings in basement.” ECF No. 16-8 PageID.240.

         On either July 3, 2017, the evening Plaintiffs discovered the flooding, or the next day (or both-the record is unclear), Kelly Putros, a handyman and friend of Basil Karoumi's cousin, came to the house to examine the leak. Compare ECF No. 16-3 PageID.181 (Basil Karoumi Dep.) (“Q: Okay. And this was, this was the day after you found the water, right, when Kelly was out there? A: Yes, the next day.”), and ECF No. 16-5 PageID.209 (Mariana Karoumi Dep.) (“[Putros] came the next day because it was really late that day [the day Plaintiffs discovered the damage]”) with ECF No. 16-6 PageID.225-26, 228-29 (Putros Dep.) (suggesting Putros came by the house the night Plaintiffs discovered the leak) and ECF No. 20-7 PageID.519 (Basil Karoumi Aff.) (“Mr. Putros came to the Home two times[, ] on July 3, 2017, and July 4, 2017”).

         Putros is a self-taught handyman and does not have any kind of plumbing license. ECF No. 16-6 PageID.232. According to Basil Karoumi, on July 4, 2017, Putros, after examining the water-supply line below the kitchen sink, told Karoumi, “this pipe is loose and it is rusty as well.” ECF No. 16-3 PageID.181. He then replaced the supply line with a new one he purchased at Home Depot or Lowe's and put the discarded supply line in his tool box. ECF No. 16-6 PageID.226-27. Putros testified that he is unsure where the old supply line is and believes he most likely threw it away. ECF No. 16-6 PageID.227; ECF No. 20-7 PageID.519 (“Mr. Putros threw [away] the broken cold-water supply line on July 4, 2017.”). According to his sworn affidavit, before throwing away the supply line Putros inspected the line and found no evidence that it had been intentionally broken or improperly installed. ECF No. 25 PageID.890. He further averred that Plaintiffs neither instructed nor authorized him to dispose of the allegedly broken supply line. Id.

         After Zuhoor Danha's initial July 3, 2017 call to initiate an insurance claim on Plaintiffs' behalf, Allstate had difficulty reaching Plaintiffs to follow up. Claims Service Representatives attempted to reach Basil Karoumi by phone through an Arabic interpreter on July 3, 5, and 6, 2017. ECF No. 16-7 PageID.237. But Karoumi did not answer any of those phone calls and did not have his voice mail set up for Allstate representatives to leave a message. ECF No. 16-7 PageID.237. Christopher Decker, an Allstate Claims Service Representative, also emailed Basil Karoumi on July 6, 2017 “asking him to contact Allstate about his claim.” ECF No. 16-7 PageID.237. The next day, Plaintiffs' daughter, Mariana Karoumi, contacted Decker to advise him that, because she is a fluent English-speaker, she would be the contact person for her parents' claim. ECF No. 16-7 PageID.237. In a subsequent conversation with Decker, Mariana Karoumi advised him that “a plumber had not yet been out to the house.” ECF No. 16-7 PageID.237. Mariana Karoumi also told Andrew Feher, another Allstate Claims Service Representative, on July 7, 2017, that “the plumbing repairs had not yet been completed.” ECF No. 16-10 PageID.249 (Andrew Feher Aff.).

         During the July 7 phone call, Feher specifically advised that the Karoumis “should not throw away whatever was damaged” when plumbing repairs were ultimately made because “Allstate would need to inspect the damaged parts.” Id. It is uncontested that this is the first time Allstate expressly instructed anyone to preserve the allegedly damaged water-supply line. ECF No. 20-10 PageID.548 (Mariana Karoumi Aff.).

         During a subsequent site inspection, Mariana Karoumi told Karrie Koneczny, one of the adjusters, that the plumbing repairs had actually been completed as soon as the Karoumis discovered the flooding but she was unsure of the identity of the plumber. ECF No. 16-9 PageID.246 (Karrie Koneczny Aff.); see ECF No. 16-7. Karoumi explained that, at the time of her earlier conversations with Decker and Feher, she had not yet realized “that Mr. Putros had already disposed of the cold-water supply line.” ECF No. 20-10 PageID.548. After examining damage to the Karoumis' home, Koneczny said she “questioned the extent of the damages being claimed by the Karoumis” as “they were not consistent with what I was seeing at the property.” ECF No. 16-9 PageID.247.

         While the water damage to Plaintiffs' house was being remediated, they and their six family members lived, at least part of the time, at the home of Plaintiff Basil Karoumi's brother, Ziad Karoomi. See ECF No. 16-5 PageID.215. It was Ziad Karoomi's wife, Zuhoor Danha, who first called Allstate to file the insurance claim on Plaintiffs' behalf. ECF No. 16-4 PageID.188 (Zena Karoumi Dep.). Ziad Karoomi and his wife Zuhoor Danha had also accompanied Plaintiffs on their trip to Cedar Point, from which they returned to discover the water leak. Plaintiffs stated in deposition testimony that they were paying $4, 000 per month to live in Ziad Karoomi's home. ECF No. 16-5 PageID.215. Accordingly, they sought additional living expenses (“ALE”) in the amount of $4, 000 per month from Allstate. ECF No. 16-12 PageID.271-72 (Lori Davis Aff.). Allstate was “concerned” by the magnitude of this ALE demand, which it deemed excessive and potentially fraudulent. ECF No. 16-12 PageID.272.

         Spurred in part by the unusually large ALE claim, Allstate's Claims Service Representative decided to investigate Ziad Karoomi's insurance claim history. Id. She found that in 2014 Karoomi had also filed a water damage claim-with Farm Bureau Insurance Company-that was almost identical to the one Plaintiffs submitted to Allstate in 2017. See Id. Like Plaintiffs, Karoomi had reported water damage to his house caused by a broken supply line under his sink. Id.; see ECF No. 16-13 (Report on Karoomi's 2014 Claim). Remarkably, Karoomi had also told his insurer that he discovered the water damage after returning home from a water park in Sandusky, Ohio. ECF No. 16-13 at PageID.275. Karoomi's 2014 claim also involved Kelly Putros and Peggy Pauley-the same handyman and water mitigation vendor used by Plaintiffs. Id. Additionally, in connection with his 2014 insurance claim, Ziad Karoomi told Farm Bureau Insurance Company that he was paying Putros $2, 500 per month to reside at a house owned by Putros while his own home was being restored. ECF No. 16-13 PageID.280.

         Allstate ultimately denied Plaintiffs' insurance claim on November 2, 2017, on the basis that “[t]he damage from the claimed July 3, 2017 water damage incident was not accidental, but was instead intentionally caused by you, and/or at your direction, and/or with your knowledge and consent.” ECF No. 16-15 PageID.306 (Allstate Denial of Coverage). Allstate further asserted that Plaintiffs had “willfully concealed and misrepresented facts and circumstances of a material nature, and ha[d] otherwise engaged in fraudulent conduct in connection with these claims.” Id. Additionally, Allstate explained that under the policy Plaintiffs could not bring any action against the insurer unless ‚Äúthere has been full ...

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