Whitehouse Condo. Grp., LLC v. Cincinnati Ins. Co.

959 F.Supp.2d 1024

WHITEHOUSE CONDOMINIUM GROUP, LLC, Plaintiff,

v.The CINCINNATI INSURANCE COMPANY, Defendant.

Case No. 12–14924.

United States District Court,

E.D. Michigan,

Southern Division.

July 29, 2013.

Order Denying Reconsideration Sept. 9, 2013.

Edward B. Davison, Gault Davison, Grand Blanc, MI, for Plaintiff.

Alan G. Gregory, Gregory and Meyer, Troy, MI, for Defendant.

ORDER GRANTING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT [# 10] AND DENYING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT [# 8] AND CANCELLING JULY 29, 2013 HEARING

GERSHWIN A. DRAIN, District Judge.

I. INTRODUCTION

Presently before the Court are Cross–Motions for Summary Judgment, filed on April 1, 2013 and April 29, 2013. Defendant objects to Plaintiff's Motion on the basis of it being untimely, but in the interests of justice, the Court will proceed to the merits of the Motions. The parties agree that the sole issue to be decided by this Court is the meaning of the term “obsolescence” as used in the definition of actual cash value in Plaintiff's insurance policy. Upon review the Court concludes that oral argument will not aid in the resolution of this matter, so the pending Motions are resolved on the briefs and the hearing scheduled for July 29, 2013 is cancelled. See E.D. Mich. L.R. 7.1(f)(2). For the reasons listed below, Plaintiff's Motion is GRANTED and Defendant's Motion is DENIED.

II. PROCEDURAL AND FACTUAL HISTORY

The parties are in agreement about the facts of this case, which are as follows. On November 4 and 5, 2010, a fire damaged a condominium building owned by Plaintiff that was located at G3247 Beecher Road, Flint, Michigan. The property was insured by Defendant under Policy No. EPP0023125. At issue is the actual cash value (“ACV”) of the building at the time of the fire. ACV is defined as, “replacement cost less a deduction that reflects depreciation, age, condition and obsolescence.” Def.'s Mot. for Summ. J. Ex. 1, at 47. Plaintiff claims that the building was worth $2,767,730.00. Defendant determined the value of the building was $1,187,660.38 and has already paid Plaintiff that amount. The discrepancy in value comes from contrary understandings of the term “obsolescence” as used in the definition of ACV. Defendant claims that “obsolescence” refers to both functional and economic obsolescence. Plaintiff, on the other hand, argues that only functional obsolescence was meant to be deducted in the calculation of actual cash value.

The dispute over the meaning of obsolescence led Plaintiff to demand appraisal. Both parties have selected appraisers, but Plaintiff has requested this Court to provide a construction of the term obsolescence before the appraisal may take place. Defendant counters that a construction is not necessary since a plain reading of the term includes both functional and economic obsolescence. Plaintiff filed suit on October9, 2012 seeking a declaration of the rights of the parties. Defendant filed the present Motion for Summary Judgment on April 1, 2013. Plaintiff responded with its own Motion for Summary Judgment on April 29, 2013. Defendant filed a Reply on May 13, 2013.

III. LAW AND ANALYSIS1. Standard of Review

Federal Rule of Civil Procedure 56(c) empowers the court to render summary judgment “forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.” See Redding v. St. Eward, 241 F.3d 530, 532 (6th Cir.2001). The Supreme Court has affirmed the court's use of summary judgment as an integral part of the fair and efficient administration of justice. The procedure is not a disfavored procedural shortcut. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Cox v. Kentucky Dept. of Transp., 53 F.3d 146, 149 (6th Cir.1995).

The standard for determining whether summary judgment is appropriate is “ ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’ ” Amway Distributors Benefits Ass'n v. Northfield Ins. Co., 323 F.3d 386, 390 (6th Cir.2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251–52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)). The evidence and all reasonable inferences must be construed in the light most favorable to the non-moving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Redding, 241 F.3d at 532 (6th Cir.2001). “[T]he mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment; the requirement is that there be no genuine issue of material fact.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247–48, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) (emphasis in original); see also National Satellite Sports, Inc. v. Eliadis, Inc., 253 F.3d 900, 907 (6th Cir.2001).

If the movant establishes by use of the material specified in Rule 56(c) that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law, the opposing party must come forward with “specific facts showing that there is a genuine issue for trial.” First Nat'l Bank v. Cities Serv. Co., 391 U.S. 253, 270, 88 S.Ct. 1575, 20 L.Ed.2d 569 (1968); see also McLean v. 988011 Ontario, Ltd., 224 F.3d 797, 800 (6th Cir.2000). Mere allegations or denials in the nonmovant's pleadings will not meet this burden, nor will a mere scintilla of evidence supporting the non-moving party. Anderson, 477 U.S. at 248, 252, 106 S.Ct. 2505. Rather, there must be evidence on which a jury could reasonably find for the non-movant. McLean, 224 F.3d at 800 (citing Anderson, 477 U.S. at 252, 106 S.Ct. 2505).

2. Interpretation

Before interpreting the Contract, the Court must first determine that it is unambiguous. Whether contract language is clear or ambiguous is a question of law. Collins v. National General Ins. Co., 834 F.Supp.2d 632 (E.D.Mich.2011). If the Court decides that the contract is ambiguous, then the meaning of the contract becomes a question of fact. See 51382 Gratiot Ave. Holdings, LLC v. Chesterfield Development Co., LLC, 835 F.Supp.2d 384, 391 (E.D.Mich.2011). However, if the language is clear, then the meaning of the contract is a question of law that may be properly decided at the summary judgmentstage. See Aqua Group LLC v. Federal Ins. Co., 620 F.Supp.2d 816 (E.D.Mich.2009). Neither party claims that the insurance policy is ambiguous, nor does this Court find reason to think it is. Accordingly, the Court may interpret the contract at this summary judgment stage.

The relevant language of the insurance policy is as follows:

SECTION D. LOSS CONDITIONS

* * *

7. Valuation

We will determine the value of Covered Property in the event of “loss” as follows:

a. At “Actual Cash Value” as of the time of “loss” ...

* * *

SECTION G. DEFINITIONS

1. “Actual Cash Value” means replacement cost less a deduction that reflects depreciation, age, condition and obsolescence.

Def.'s Mot. for Summ. J. 5.

The parties rely on different sources for the definition of obsolescence. Defendant cites to Black's Law Dictionary (9th ed.2009), which states:

OBSOLESCENCE

obsolescence ... 1. The process or state of falling into disuse or becoming obsolete. 2. A diminution in the value or usefulness of property, esp. as a result of technological advances. For tax purposes, obsolescence is usu. distinguished from physical deterioration. Cf. depreciation.

economic obsolescence. Obsolescence that results from external economic factors, such as decreased demand or changed governmental regulations.—Also termed external obsolescence. Cf. functional obsolescence.

external obsolescence. See economic obsolescence.

functional obsolescence. Obsolescence that results either from inherent deficiencies in the property, such as inadequate equipment or design, or from technological improvements available after the use began. Cf. economic obsolescence.

Def.'s Mot. for Summ. J. 10. Based on this definition, Defendant concludes that the common and ordinary meaning of “obsolescence” is clear and includes both functional and economic obsolescence. Plaintiff disputes that Black's Law Dictionary is the appropriate source for the “standard dictionary definition” of the term. Instead, Plaintiff cites to Random House Webster's College Dictionary, which states:

Obsolescent 1. Becoming obsolete; passing out of use as a word. 2. Intending to become out of date, as machinery, etc.

Obsolete 1. Fallen into disuse, or no longer in use: an obsolete word. 2. Of a discarded type; out of an obsolete battleship. 3. Effaced by wearing down or away.”

Pl.'s Mot. for Summ. J. 9. Based on this definition, Plaintiff argues that there is no agreement on whether both functional and economic obsolescence were intended to be included in the insurance policy.

The Court agrees with Plaintiff. Neither definition provides an explanation for whether functional and economic obsolescence are included in the term “obsolescence”. As to the definition provided in Black's Law Dictionary, it is not at all clear that the use of the term “obsolescence” necessarily includes the three types of “obsolescence” listed underneath the definition. Admittedly, the three types of obsolescence are related, but they are different terms. Nor is Plaintiff's “standard dictionary definition” of any help to this inquiry. Simply put, dictionary definitions do not determine the outcome of the case. Instead, the Court will examine relevant case law for guidance on the issue.

3. Relevant Case Law

In their briefings, the parties acknowledged that the question presented is of first impression in this Court. Further, no Michigan court has dealt squarely with this issue either. The lack of precedent means this Court must...