Batton-Jajuga v. Farm Bureau Gen. Ins. Co. of Mich.

322 Mich.App. 422

913 N.W.2d 351

Debra BATTON-JAJUGA, Plaintiff-Appellee,

v.FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN, Defendant-Appellant.

No. 334130

Court of Appeals of Michigan.

Submitted December 12, 2017, at Lansing.

December 21, 2017, 9:00 a.m.

Donald M. Fulkerson and Fabian, Sklar & King, PC (by Jason L. Liss ) for Debra Batton-Jajuga.

Law Offices of John Honeyman, PLLC (by John D. Honeyman ) and Willingham & Coté, PC (by Kimberlee A. Hillock ) for Farm Bureau General Insurance Company of Michigan.

Before: Murphy, P.J., and M. J. Kelly and Swartzle, JJ.

Swartzle, J.Defendant Farm Bureau General Insurance Company of Michigan (Farm Bureau) insured real property owned by plaintiff Debra Batton-Jajuga, and the property was destroyed in a fire. Batton-Jajuga had indemnification coverage as well as replacement-cost coverage. When she attempted to replace her destroyed property with different property purchased with a land contract, Farm Bureau refused to pay any replacement costs. Farm Bureau claimed that Batton-Jajuga's interest in the new property was less than a fee simple and therefore was not a "complete" replacement.

Farm Bureau breached the insurance agreement by refusing to pay. While a vendee to a land contract does not immediately acquire a full fee simple in the real property, the vendee does become the equitable owner of the property when the contract becomes effective, and this was sufficient under the law and the parties' agreement. Accordingly, we affirm the trial court's grant of summary disposition to plaintiff.

I. BACKGROUND

The relevant facts are not in dispute. Farm Bureau insured Batton-Jajuga's real property located in Monroe, Michigan up to $289,000. The parties' agreement included two types of property coverage: (1) indemnification up to the depreciated value of the property (i.e., the actual cash value); and (2) replacement-cost coverage (i.e., the full cost of repair or replacement above the actual cash value). With respect to replacement-cost coverage, the parties' agreement provided in pertinent part:

5. Loss Settlement. Covered property losses are settled as follows:

* * *

b. Buildings under Coverage A or Coverage B at replacement cost ... subject to the following:

(1) If, at the time of loss, the amount of insurance in this policy on the damaged building is 80% or more of the full replacement cost of the building immediately before the loss, we will pay the cost to repair or replace, after application of deductible and without deduction for depreciation, but not more than the least of the following amounts:

(a) the limit of liability under this policy that applies to the building;

(b) the replacement cost of that part of the building damaged for like construction and use on the same premises; or

(c) the necessary amount actually spent to repair or replace the damaged building.

* * *

(4) We will pay no more than the actual cash value of the damage, unless:

(a) actual repair or replacement is complete; ....

A fire destroyed Batton-Jajuga's property in October 2014. The parties agreed that the replacement-cost value of the loss was $179,811.23, and Farm Bureau promptly paid Batton-Jajuga $93,000 (the actual cash value of the destroyed property minus a $1,000 deductible). After adjusting for an additional $1,085.33 in nonrecoverable depreciation, Farm Bureau held back the remaining $83,725.90 while Batton-Jajuga attempted to identify a replacement property.

In April 2015, Batton-Jajuga located replacement property in Pinckney, Michigan. She purchased the property by land contract for $200,000, with $40,000 paid immediately as a down payment and the remaining balance to be paid with monthly installments over 15 years. While an initial version of the land contract made the sale contingent on Farm Bureau paying replacement costs to Batton-Jajuga, that provision was removed from the final version. The version executed in June 2015 made the sale unconditional and provided that, in the event of default, the vendor had the right to declare a forfeiture of the property and take immediate possession as well as seek payment of any unpaid balance due under the contract. The contract further stated, "The Land Contract can be paid off in full at anytime with no pre-payment penalty."

Several days after she purchased the Pinckney property, Batton-Jajuga submitted a claim with Farm Bureau for the remaining $83,725.90. Given the lack of any prepayment penalty, she suggested that Farm Bureau could pay the remaining amount directly to the vendor to reduce the balance owed on the land contract. Farm Bureau refused, asserting that Batton-Jajuga had "spent nothing to repair or replace the damaged building" and that "[a]cquisition of another property under a land contract does not constitute ‘replacement’ of the damaged building within the meaning" of the replacement-cost coverage provision. Farm Bureau subsequently clarified that "the documents supplied [by Batton-Jajuga] suggest an expenditure by [her] of $40,000 under the land contract," but otherwise the company maintained that its position remained unchanged.

Batton-Jajuga sued Farm Bureau for breach of contract and sought damages of $83,725.90 as well as additional consequential and incidental damages. She later moved for summary disposition under MCR 2.116(C)(10) and in its response, Farm Bureau likewise sought summary disposition under MCR 2.116(I)(2). The trial court granted Batton-Jajuga summary disposition and awarded her the replacement-cost amount as well as statutory interest and fees, but the trial court denied her any additional damages or contractual attorney fees.

Farm Bureau appealed as of right.

II. ANALYSIS

A. STANDARD OF REVIEW

On appeal, this Court reviews de novo a trial court's ruling on summary disposition. Summary disposition is appropriate under MCR 2.116(C)(10) when, except as to damages, "there is no genuine issue as to any material fact, and the moving party is entitled to judgment or partial judgment as a matter of law." We construe the pleadings, admissions, and other evidence submitted by the parties in the light most favorable to Farm Bureau as the nonmovant. Latham v. Barton Malow Co. , 480 Mich. 105, 111, 746 N.W.2d 868 (2008). This Court also reviews de novo questions of law, including the meaning of statutes and contracts. Oakland Co. Bd. of Co. Rd. Comm'rs v. Mich. Prop. & Cas. Guaranty Ass'n , 456 Mich. 590, 610, 575 N.W.2d 751 (1998) ; Reed v. Reed , 265 Mich.App. 131, 141, 693 N.W.2d 825 (2005).

Our duty in interpreting a statute or a contract is to give effect to the intent of the drafter. Van Buren Co. Ed. Ass'n v. Decatur Pub. Sch. , 309 Mich.App. 630, 643, 872 N.W.2d 710 (2015) ; In re Smith Trust , 274 Mich.App. 283, 285, 731 N.W.2d 810 (2007). In both the statutory and contractual contexts, the drafter is presumed to intend the meaning clearly expressed, and this Court gives effect to the plain, ordinary, or generally accepted meaning of the drafter's words. Terrien v. Zwit , 467 Mich. 56, 76-77, 648 N.W.2d 602 (2002) ; Lorencz v. Ford Motor Co. , 439 Mich. 370, 376, 483 N.W.2d 844 (1992). Only when ambiguity exists does the Court turn to common canons of construction for aid in construing a text's meaning. People v. Borchard-Ruhland , 460 Mich. 278, 284-285, 597 N.W.2d 1 (1999) ; People v. Stone Transp., Inc , 241 Mich.App. 49, 50-51, 613 N.W.2d 737 (2000). Finally, in the absence of a statutory or contractual definition, the Court "may turn to dictionaries in common usage for guidance." In re Detmer , 321 Mich.App. 49, 62, 910 N.W.2d 318 (2017).

B. FARM BUREAU BREACHED THE INSURANCE AGREEMENT

Farm Bureau makes two arguments on appeal. First, Farm Bureau argues that the property interest conveyed by land contract is not a complete replacement for Batton-Jajuga's fee simple in the destroyed property, and, therefore, she has failed to satisfy the precondition for any replacement-cost recovery under ¶ 5.b(4)(a) of the agreement. Second, Farm Bureau claims that, regardless of the type of property interest conveyed, Batton-Jajuga only spent $46.629.58 (the down payment and several monthly installments) when she made her claim for replacement costs, and because this amount was less than the $93,000 she had already received, she is not entitled to anything more under the replacement-cost measure of ¶ 5.b(1)(c). Both arguments fail.

1. BATTON-JAJUGA ACQUIRED A "COMPLETE" REPLACEMENT

Michigan law expressly permits an insurer to offer replacement-cost coverage for property damaged by fire. Specifically, under MCL 500.2826, an insurer may "reimburse and indemnify the insured" for the amount above the property's actual cash value that is "actually expended to repair, rebuild, or replace" the damaged property, not to exceed the coverage cap. The statute further states, "A fire policy issued pursuant to this section may provide that there shall be no liability by the insurer to pay the amount specified in the policy unless the property damaged is actually repaired, rebuilt, or replaced at the same or another site."

Pursuant to state law, Farm Bureau offered replacement-cost coverage in Michigan in a form consistent with coverage offered in other states. See, e.g., Pierce v. Farm Bureau Mut. Ins. Co. , 548 N.W.2d 551, 554 (Iowa, 1996) (construing a replacement-loss coverage provision identical in all material respects to the one in this case); Parker, Replacement Cost Coverage: A Legal Primer , 34 Wake Forest L. Rev. 295, 301-302 (1999) (analyzing a form provision of replacement-cost coverage that is identical in all material respects to the one in this case). Batton-Jajuga purchased replacement-cost coverage from Farm Bureau, and payment of replacement cost was subject to the condition that "actual repair or replacement" be "complete." Neither the statute nor the agreement defined the terms "replace," "replacement," "actual," or "complete," and a review of the statute and agreement provides little contextual insight into the meaning of the...