878 F.3d 530
6th Cir.2017Background
- Scottsdale issued a commercial fire policy to Palmer covering a Detroit property for 11/8/2011–11/8/2012; the property was burglarized/vandalized in Feb. 2012.
- Palmer submitted a Proof of Loss on 11/27/2013; Scottsdale acknowledged coverage but investigated and paid $150,000 on ~6/16/2014, well after Michigan’s 30‑day payment rule for fire claims.
- Palmer sought appraisal; appraisers fixed actual cash value at $1,642,796.76 and Scottsdale paid up to the $1,000,000 policy limit in subsequent checks.
- Palmer demanded statutory penalty interest under Mich. Comp. Laws § 500.2006(4) (12% simple interest from 60 days after satisfactory proof of loss for untimely payments); Scottsdale refused.
- Palmer sued (state court → removed to federal court). District court granted summary judgment for Scottsdale, holding the policy’s 2‑year contractual limitations (actions "under the Policy") barred the claim and that a tolling statute did not apply to surplus‑lines insurers.
- Sixth Circuit reversed and remanded, holding Palmer’s penalty‑interest claim is independent of the policy and is governed by Michigan’s six‑year catch‑all limitations period (Mich. Comp. Laws § 600.5813).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether penalty‑interest claim "arises under" the policy so the policy’s 2‑year limitations applies | Palmer: claim is statutory, based on §500.2006(4), independent of contract | Scottsdale: claim is derivative of policy payment obligation and thus "on the policy" | Held: Claim arises from statutory duty, not from policy; not barred by the 2‑year policy limitation |
| Whether §500.2006(4) creates an independent private cause of action / must be pleaded | Palmer: §500.2006(4) provides independent remedy for dilatory payments and may be pleaded or recovered | Scottsdale: penalty interest need not be pleaded and is not an independent cause of action | Held: Michigan authority supports an independent right to recover penalty interest under §500.2006(4) |
| Applicable statute of limitations for §500.2006(4) penalty interest | Palmer: no specific limitations; apply Michigan’s six‑year catch‑all, §600.5813 | Scottsdale: not a "personal action"; district court applied policy limitation instead | Held: Six‑year residual period of §600.5813 applies; claim was timely |
| Whether tolling provision for insurance claims applies to surplus‑lines insurers | Palmer (alternative): even if policy 2‑year applied, tolling statute §500.2833(1)(q) tolled period | District court: surplus‑lines insurers are not subject to that provision | Held: Court did not decide because six‑year statute resolves appeal; remanded without reaching surplus‑lines tolling issue |
Key Cases Cited
- Hearn v. Rickenbacker, 400 N.W.2d 90 (Mich. 1987) (distinguishes claims "on the policy" from independent statutory or tort duties; focus is on nature of right sued upon)
- Yaldo v. North Pointe Ins. Co., 578 N.W.2d 274 (Mich. 1998) (recognizes §500.2006(4) as an alternative source for 12% interest for dilatory insurer payments)
- DiPonio Constr. Co. v. Rosati Masonry Co., 631 N.W.2d 59 (Mich. Ct. App. 2001) (applies §600.5813 six‑year residual limitations to statutory causes of action)
- Florsheim v. Travelers Indem. Co. of Ill., 393 N.E.2d 1223 (Ill. App. Ct. 1979) (explains that collateral statutory or punitive claims fail when there is no entitlement to policy recovery)
- Williams v. AT&T Mobility Servs. LLC, 847 F.3d 384 (6th Cir. 2017) (summary judgment standard; cited for standard of review)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986) (standard for genuine dispute of material fact at summary judgment)
- Berrington v. Wal‑Mart Stores, Inc., 696 F.3d 604 (6th Cir. 2012) (federal court predicts how state supreme court would decide state‑law question)