Ken Holdings LLC v. Auto-Owners Insurance Company, 325427

Background

KEN Holdings sold commercial property to HCSL under a contract for deed requiring HCSL to obtain commercial property insurance protecting both parties.
HCSL obtained a policy from Auto‑Owners; the application and declarations identified KEN Holdings as a “loss payee”/“land contract holder” and the policy included a "Loss Payable Provisions" endorsement.
In 2009 the building was damaged by fire; Auto‑Owners denied HCSL’s claim for misconduct (arson) and also denied KEN Holdings’ claim, asserting the endorsement barred KEN’s recovery when the insured’s claim was denied for misconduct.
KEN sued; the trial court granted summary disposition to Auto‑Owners, this court reversed for ambiguity about whether the declarations’ “loss payable” notation selected which clause applied, and remanded.
On remand the trial court heard expert testimony and again granted summary disposition to Auto‑Owners; on further appeal this Court concluded the endorsement must be read as a single unit containing three provisions (Clauses B, C, D) and that KEN met Clause C.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Which clause of the Loss Payable Provisions controls KEN’s coverage (B, C, or D)?	KEN: Clause C (Lender’s Loss Payable) applies because KEN is a contract‑for‑deed creditor/land contract holder, so KEN is entitled to payment despite HCSL’s misconduct.	Auto‑Owners: The declaration’s notation “Interest: Loss Payable” places KEN under Clause B (Loss Payable), which permits denial when the insured’s claim is denied for misconduct.	Held: Clause C applies to KEN; the endorsement is a single unit containing all three provisions and KEN meets Clause C criteria, so KEN is entitled to coverage despite HCSL’s misconduct.
Whether the declarations notation alone selects which clause applies (resolving ambiguity)?	KEN: The notation is ambiguous and cannot alone determine which clause applies; the policy text governs.	Auto‑Owners: The declarations notation governs and places KEN under Clause B.	Held: The declaration notation cannot override the endorsement’s textual scheme; clauses describe which loss payee each covers and the notation does not pre‑select a clause.
Whether expert testimony on ambiguity could resolve the contract issue at summary disposition	KEN: Ambiguity existed previously; factual development was permissible but linguistic ambiguity cannot be resolved by choosing one expert’s view at summary disposition.	Auto‑Owners: Trial court relied on expert testimony to conclude ambiguity was resolved.	Held: The Court rejected the notion that competing expert testimony resolved the linguistic ambiguity; resolution here was based on plain contract language, not expert selection.

Key Cases Cited

Rory v. Continental Ins. Co., 473 Mich. 457 (discussing that insurance policies are contracts and must be interpreted under contract principles)
In re Smith Trust, 480 Mich. 19 (if contractual language is unambiguous, courts enforce it as written)
Meagher v. Wayne State Univ., 222 Mich. App. 700 (if a contract admits two reasonable interpretations, summary disposition is inappropriate)
Klapp v. United Ins. Group Agency, Inc., 468 Mich. 459 (courts must avoid interpretations that render contract language surplusage)