Scottsdale Insurance Co. v. Altman Management Co.

          ORDER GRANTING DECLARATORY JUDGMENT IN PART, DISMISSING THE REMAINDER OF DECLARATORY JUDGMENT, GRANTING MOTION TO DISMISS IN PART, AND DIRECTING IMPLEMENTATION OF THE APPRAISAL PROVISION OF THE POLICY

          THOMAS L. LUDINGTON UNITED STATES DISTRICT JUDGE

         On May 10, 2019, Plaintiff Scottsdale Insurance Company (“Scottsdale”) filed a complaint against Defendant Altman Management Company (“Altman”). ECF No. 1. The complaint seeks a declaratory judgment addressing a policy of commercial insurance issued by Scottsdale to Altman, its insured. Id. at PageID.2. More specifically, Scottsdale seeks a judicial determination that Altman's period of recovery under the policy is a legal question for the Court and thus not to be determined by an appraiser under the policy. Id. at PageID.7.

         On July 8, 2019, Altman filed a Motion to Dismiss the Complaint. ECF No. 4 at PageID.98. For the following reasons, the motion will be granted in part and denied in part.

         I.

         Altman Management Company is a Florida corporation and manager of an apartment complex located at 1010 Eastlawn Drive, Midland, Michigan, 48642 (“Building”). ECF No. 1 at PageID.1. Altman purchased a commercial property insurance policy for excess coverage from Scottsdale effective February 1, 2017 to February 1, 2018 (“Policy”). Id. at PageID.2.

         A.

         The Policy provided coverage for business interruptions. It provides:

11. Business Interruption

A. Gross Earnings

1. Loss due to the necessary interruption of business conducted by the Insured, whether total or partial, including all interdependencies between or among companies owned or operated by the Insured, resulting from physical loss or damage insured herein and occurring during the term of this policy to real and/or personal property insured herein.

Id. at PageID.52.

         The policy also provides for coverage for Altman's loss of rental value or rental income, providing as follows:

14. Rental Value and Rental Income

1. This policy provides coverage for Loss of Rental Income and/or Loss of Rental Value of the Insured caused by physical loss or damage insured herein occurring during the term of this policy to property and/or premises rented, leased or occupied by the Insured and/or rented or leased by the Insured to others.

2. Rental Income shall include the following:

(a) The total anticipated gross rental income from tenant(s) of the Insured's building(s) and structure(s), and

(b) The amount of all charges assumed by tenant(s) except those charges which do not continue, which would otherwise be obligations of the Insured, and

(c) The fair rental for that portion occupied by the Insured.

5. Period of Recovery: the length of time for which a loss may be claimed under this provisions shall be in accordance with the loss provisions applicable under the Period of Recovery clause [sic]

Id. at PageID.55-56.

         The Policy limited Altman's Period of Recovery for a claim, providing as follows:

16. Loss Provisions Applicable to Business Interruption - Gross Earnings, Extra Expense, Rental Value)

A. Period of Recovery

The length of time for which a loss be claimed is referred to as the period of recovery and:

1. shall commence with the date of such loss or damage and shall not be limited by the date of expiration of this policy;

2. shall not exceed such length of time as would be required with the exercise of due diligence and dispatch to rebuild, repair, or replace the property that has been destroyed or damaged;

and

3. such additional length of time to restore the Insured's business to the condition that would have existed had no loss occurred, commencing with ...