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Insurance Company Can’t Deny Benefits When They Take Your Money

Posted on Thursday, May 17, 2018

Michigan Court of Appeals reversed and remanded the case of Yu v Farm Bureau, Docket 331570, to the lower court to enter a judgment in favor of Plaintiff Yu on the issue of coverage and to proceed to determine damages. 

FACTS: 

The history of the Yu’s experiences with their home on West Lake in Portage is as follows:

1.         They bought the house in 2006,

2.         In 2010 Yu accepted a new job in Lansing,

3.         They moved to Lansing and used the West Lake house on weekends,

4.         In 2013, they listed the house for sale, fixing a recent water leak with funds from an insurance claim,

5.         In November 2013, they renewed and paid the premium for their homeowners’ insurance with Farm Bureau General Insurance for a year effective December 8, 2013,

6.         On December 25, 2013, Yu received a notice from neighbors that icicles were forming on the exterior of the house, Yu drove there and discovered another water leak causing $80,000 in damages;

Yu filed a claim with his insurance company. In response on December 16, 2013, the Company notified the Yu’s that their coverage was cancelled effective January 18, 2014 because the house was vacant or unoccupied for more than 60 days. In June 2014, the Yu’s received notice that their claim for the water damage on December 25, 2013 was denied because 1) the family didn’t live in the house at the time of the loss, 2) the house had been unoccupied for 60 days and 3) the home had not been occupied for more than 6 months.

The Lower Court Opinion

Plaintiffs filed suit for breach of contract. Following the filing of cross-motions for summary disposition, the trial court concluded that there was no genuine issue of material fact in that defendant could deny coverage for the reasons stated by Farm Bureau and that plaintiffs had not established their claim under equitable estoppel. Plaintiffs now appeal and we reverse.

The Court of Appeals

The COA agreed with the Plaintiff that because the insurance company defendant repeatedly accepted the plaintiff’s late payments and continued to renew the Yu’s policy, the principle of equitable estoppel bars defendant from enforcing the automatic nonrenewal provision of the insurance contract.

Going on to explain the concept the COA said that for equitable estoppel to apply, the Plaintiff must prove:

  • That the defendant’s acts or representations induced plaintiff to believe that the policy was in effect at the time of the accident,
  • That the plaintiff justifiably relied on this belief, and
  • That plaintiff was prejudiced as a result of his belief that the policy was still in effect.

The facts that support the concept are 1) the defendant knew in February 2013 that the plaintiffs were “actively moving”, 2) despite this, it renewed the policy in December 2013 and 3) despite knowing those facts, it kept a pro rata share of the premium including the time period when the loss of Dec. 25, 2013 occurred.

Because of these facts, the COA sent the case back to the trial court to enter a judgment in favor plaintiff on the issue of coverage and proceed to determine damages.

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