Wells Fargo Bank, NA v. Null
304 Mich. App. 508
Mich. Ct. App.2014Background
- Fire destroyed residence at 17285 Williamsville St. (April 11, 2009). Lonnie Null was the named insured on an Auto-Owners homeowner policy; Wells Fargo held the mortgage; Elizabeth Null (occupant) claimed loss.
- Policy required the dwelling be used principally as the insured’s private residence; “insured” and “residence premises” definitions required the insured to reside there.
- Auto-Owners denied Elizabeth’s claim because Lonnie did not reside at the property at the time of the fire; a companion case adjudicated (and this Court affirmed) that the home was not covered for Elizabeth under the policy.
- Wells Fargo sued Auto-Owners and Elizabeth asserting mortgagee rights under the policy’s mortgage clause and seeking insurance proceeds; Auto-Owners moved for summary disposition arguing no coverage in the first instance and that the companion case barred Wells Fargo’s claims.
- Trial court granted summary disposition for defendants; the Court of Appeals reversed as to Auto-Owners and remanded for determination whether Wells Fargo satisfied mortgage-clause conditions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the residence is covered under the Auto-Owners policy (relitigation) | Wells Fargo argued coverage applied (or at least question open) | Auto-Owners argued prior companion-case judgment precluded coverage | Court: Collateral estoppel bars relitigation — prior final judgment held the dwelling was not covered for the insured |
| Whether the mortgage clause creates separate coverage for mortgagee | Wells Fargo: Mortgage clause is a standard clause — a separate contract that protects mortgagee even if insured lacks coverage | Auto-Owners: Clause applies only where policy affords coverage to insured (i.e., not when there was no coverage in the first instance) | Court: Mortgage clause is a standard clause creating a separate contract; it affords coverage to Wells Fargo despite lack of insured coverage |
| Whether the companion case judgment or doctrines (judicial estoppel / laches) bar Wells Fargo’s suit | Wells Fargo: Companion case did not bar its claim; it lacked timely notice of denial and did not take inconsistent positions | Auto-Owners: Wells Fargo had opportunity to litigate in companion case and is barred | Court: Judicial estoppel and laches do not bar Wells Fargo; Wells Fargo’s position was not inconsistent and no prejudice shown from separate suits |
| Whether Wells Fargo complied with mortgage-clause conditions (proof-of-loss, notice) | Wells Fargo: Factual dispute exists about whether it received notice triggering the 60‑day proof-of-loss duty; Auto-Owners’ letters created ambiguity | Auto-Owners: Wells Fargo failed to submit sworn proof of loss within 60 days after notice; noncompliance defeats mortgagee claim | Court: Issue not decided by trial court; remanded for factfinding whether genuine dispute exists about Wells Fargo’s compliance |
Key Cases Cited
- Heniser v. Frankenmuth Mut. Ins. Co., 449 Mich 155 (Michigan Supreme Court) (policy requiring insured to "reside" at premises precludes coverage when insured does not live there)
- Foremost Ins. Co. v. Allstate Ins. Co., 439 Mich 378 (Michigan Supreme Court) (distinguishes ordinary vs. standard mortgage clauses; standard clause creates separate contract protecting mortgagee)
- Monat v. State Farm Ins. Co., 469 Mich 679 (Michigan Supreme Court) (elements and mutuality considerations for collateral estoppel)
- Citizens State Bank of Clare v. State Mut. Rodded Fire Ins. Co. of Mich., 276 Mich 62 (Michigan Supreme Court) (standard mortgage clause protects mortgagee even where insurer alleges lack of insurable interest or fraud by insured)
- Ingersoll-Rand Fin. Corp. v. Employers Ins. of Wausau, 771 F.2d 910 (5th Cir.) (mortgagee recovery under standard mortgage clause may succeed even when the insured cannot recover under policy)
- McGrath v. Allstate Ins. Co., 290 Mich App 434 (Michigan Court of Appeals) (applies Heniser: residence-premises requirement precludes coverage unless insured lives there)