In this insurance dispute, plaintiff Wells Fargo Bank, N.A., appeals by right the September 4, 2012 order of the trial court granting summary disposition in favor of defendants Elizabeth A. Null and Auto-Owners Insurance Company under MCR 2.116(C)(10).
I. PERTINENT FACTS AND PROCEDURAL HISTORY
The underlying insurance dispute in this case arose from an April 11, 2009 fire that destroyed a residence located at 17285 Williamsville Street, Cassopolis, Michigan. In 1994, Lonnie purchased the residence and obtained from Auto-Owners a homeowners insurance policy covering the residence (hereinafter “the policy”). Wells Fargo held the note on the residence. Accordingly, Lonnie was the mortgagor of record and Wells Fargo the mortgagee. In 1997, Lonnie executed a “Residential Real Estate Contract” with Elizabeth; however, the mortgage was never assigned to Elizabeth and the Auto-Owners policy remained in Lonnie’s name. Lonnie stayed in the residence with Elizabeth sporadically for a few days or weeks at a time, through approximately 2004. However, when the fire occurred in April 2009, Lonnie had not lived in the residence for several years. In fact, evidence of record indicates that Lonnie was incarcerated in 2008 and had not resided or stayed in the home since that time.
After the fire, Elizabeth filed a claim for insurance benefits from Auto-Owners under the policy that was then in effect for the policy term of December 22, 2008 to December 22, 2009. In a letter dated April 21, 2009, Auto-Owners advised Wells Fargo, as the mortgagee, that fire had damaged the residence and that a claim had been filed. As Lonnie remained the named insured under the policy, the letter indicated that Lonnie, not Elizabeth, was the individual who suffered damages resulting from the fire. The letter also informed Wells Fargo that, as the mortgagee, its name would be included on any insurance checks, in accordance with Auto-Owners’s policy.
In late 2009, Auto-Owners denied Elizabeth’s insurance claim for damage to the residence and her personal property on the ground that Lonnie, who was the named insured, did not reside there, which
a. Coverage A — Dwelling
(1) Covered Property
We cover:
(a) your dwelling located at the residence premises including structures attached to that dwelling. Thisdwelling [sic] must be used principally as your private residence.
c. Coverage C — Personal Property
(1) Covered Property
We cover:
(a) personal property owned or used by any insured anywhere in the world including property not permanently attached to or otherwise forming a part of realty.
(b) at your option, personal property owned by others while it is in that part of the residence premises occupied by any insured.
Additionally, the policy defined “insured” as:
a. you;
b. your relatives; and
c. any other person under the age of 21 residing with you who is in your care or the care of a relative.
“Relative” was defined as “а person who resides with you and who is related to you by blood, marriage or adoption. Relative includes a ward or foster child who resides with you.” “You” or “your” was defined as the “first named insured,” which was Lonnie. Finally, “residence premises” was defined as “the one or two family dwelling where you reside . . ..”
A. THE COMPANION CASE
Elizabeth sued Auto-Owners for breach of contract in March 2010, naming both Auto-Owners and Wells Fargo as defendants in the case. That case was captioned in the trial court as Null v Auto-Owners Ins Co, LC No. 10-228-NI. Wells Fargo and Auto-Owners continued to correspond during the pendency of that companion case.
On December 2, 2010, the trial court entered an order granting summary disposition in favor of defendant Wells Fargo. The order stated, “This is a final Judgment as to [Wells Fargo] only and does not resolve all pending matters in this case.” Although it had been dismissed from the litigation, Wells Fargo moved to intervene as a counterplaintiff sometime in May 2011. The motion stated that Wells Fargo was not asserting a new claim against Auto-Owners, that its claim was derivative of the policy held by Lonnie, and that, if intervention was granted, Wells Fargo intended to file a countеrclaim against Elizabeth only. The trial court denied this motion on May 9, 2011.
After a bench trial, the trial court reversed its earlier initial grant of summary disposition in favor of Elizabeth and granted summary disposition in favor of Auto-Owners, denying coverage in an opinion dated October 5, 2011, and an order entered on October 21, 2011.
Elizabeth appealed, and this Court issued an opinion affirming the trial court’s order on October 22, 2013. See Null v Auto-Owners Ins Co, unpublished opinion per curiam of the Court of Appeals, issued October 22, 2013 (Docket No. 308473) at 1, 3. Relevant to this appeal, this Court stated that the residence did not fall within the policy’s definition of covered property because
[t]he controlling Michigan case law establishes that defendant properly denied coverage on the basis of the policy’s residence requirements. In Heniser [v Frankenmuth Mut Ins Co,449 Mich , 161;155 534 NW2d 502 (1995)], our Supreme Court explained that when a property insurance policy includes a “residence premises” definition, there is no coverage if the insured does not reside at the property. The property at issue in Heniser was a vacation home that the insured had sold on a land сontract, and the insured did not live in the home. Id. at 157. The Court held, “[w]e agree with those courts that have found the exact language of this policy to unambiguously require the insured to reside at the insured premises at the time of the loss.” Id. at 168.
This Court applied Heniser to confirm a denial of insurance coverage in McGrath v Allstate Ins Co,290 Mich App 434 ;802 NW2d 619 (2010). The McGrath Court determined that the residence premises requirement preeluded coverage unless the insured lived in the premises at the time of the loss. Id. at 441. The Court rejected the argument that the insured could be deemed to reside in the premises if the insured intended to return at some time in the future. Id. at 442. The Court determined that the term “reside” had no technical meaning in the policy, and that the policy plainly required the insured to live in the premises in order to obtain coverage. Id. at 442-443.
Heniser and McGrath control the coverage question in this case. There is no ambiguity in the policy language at issue; the policy limits coverage to the dwelling in which the insured resides and which is used as the insured’s primary residence. The record confirms that Lonnie did not reside in the home at the time of the fire. Plaintiff testified in deposition that Lonnie lived at the Cassopolis house with plaintiff and her husband for approximately one month after being released from jail in 1997. After that, Lonnie “bounced around a lot,” meaning he stayed sporadically at the Cassopolis house for a few days at a time, and stayed there for two weeks in approximately 2005. Nothing in the record indicates that Lonnie resided in the home after 2005. Accordingly, the home did not fall within the policy definition of covered property, and defendant properly denied coverage. [Null, unpub op at 1-3.]
B. THE INSTANT CASE
While the companion case was proceeding, Wells Fargo filed a complaint against Auto-Owners and Elizabeth on June 13, 2011, asserting that it was entitled to any insurance proceeds recovered by Elizabeth. The complaint also alleged unjust enrichment and requested injunctive relief. Wells Fargo later amended the complaint and added a breach of contract claim against Auto-Owners.
On February 28, 2012, Auto-Owners moved for summary disposition pursuant to MCR 2.116(C)(8) and (10). Auto-Owners acknowledged that the policy at issue contained a mortgage clause that gave rise to a separate contract with the mortgagee, and that the clause would afford сoverage to the mortgagee, even if coverage would not be afforded to the insured, in cases of fraud or arson. However, Auto-Owners asserted that the first step in interpreting an insurance policy is to determine whether coverage is afforded to any named insured by virtue of the satisfaction of all conditions precedent to coverage. Then, and only then, if coverage is afforded, the policy is reviewed to determine whether any exclusions apply.
Auto-Owners argued, on the basis of the trial court’s ruling in the companion case,
Wells Fargo filed a response on July 12, 2012. Wells Fargo asserted that it was entitled to coverage under the policy’s mortgage clause. Specifically, Wells Fargo argued that the mortgage clause was a separate contract that was distinct from any contract Auto-Owners may have had with Lonnie, the insured. Therefore, the fact that the insured was precluded from coverage under the policy did not negate the separate сontract between Auto-Owners and Wells Fargo, and Wells Fargo remained covered under the policy. Wells Fargo also argued that, as of December 8, 2010, Auto-Owners had not informed Wells Fargo of the status of its claim, as evidenced by a letter sent from Wells Fargo to Auto-Owners requesting information about the status of the claim on December 8, 2010. Auto-Owners did not advise Wells Fargo that its claim was denied until October 11, 2011. Therefore, Wells Fargo argued that the companion case did not bar the present case because it would have been “absurd” to require Wells Fargo to bring this action before it knew the status of its claim with Auto-Owners.
The trial court held a hearing on Auto-Owners’ motion on July 16, 2012. After taking the matter under advisement, the trial court entered an order on July 19, 2012, stating that “the insurance policy at issue does not provide coverage to plaintiff Wells Fargo Bank for damages to the structure arising from the fire of April 11, 2009,” and further stating that “the Order of December 2, 2010 . . . does constitute a dismissal of all claims Wells Fargo Bank may have had arising from the fire of April 11, 2009.” The court therefore granted summary disposition to Auto-Owners under MCR 2.116(C)(10).
II. STANDARD OF REVIEW
We review de novo the trial court’s grant of summary disposition. Dancey v Travelers Prop Cas Co of America,
With regard to whether this case is barred by the order in the companion case, the trial court granted summary disposition to defendants under MCR 2.116(0(10); however, the correct subrule for summary disposition based upon a prior order is (C)(7). See Bd of Co Rd Comm’rs for Eaton Co v Schultz,
The issue whether the policy covered the residence was not raised or decided in this case; it is therefore unpreserved. Fast Air, Inc v Knight,
The “proper interpretation and application of an insurance policy is a question of lаw that we review de novo.” Grosse Pointe Park v Mich Muni Liability & Prop Pool,
First, an insurance contract must be enforced in accordance with its terms. A court must not hold an insurance company liable for a risk that it did not assume. Second, a court should not create ambiguity in an insurance policy where the terms of the contract areclear and precise. Thus, the terms of a contract must be enforced as written where there is no ambiguity. [Id. (citation and quotation marks omitted).]
“An insurer is free to define or limit the scope of coverage as long as the policy language fairly leads to only one reasonable interpretation and is not in contravention of public policy.” Heniser,
III. ANALYSIS
A. THE ISSUE WHETHER THE RESIDENCE WAS COVERED UNDER THE POLICY IS BARRED FROM RELITIGATION BY THE DOCTRINE OF COLLATERAL ESTOPPEL
Wells Fargo argues that the residence was covered under the policy, and that the trial court erred by holding to the contrary. We note that, as stated earlier, this Court could decline to address this issue as unpreserved. Booth Newspapers,
Generally, application of collateral estoppel requires that (1) the issue was actually litigated and determined by a valid and final judgment, (2) the same parties had a full and fair opportunity to litigate the issue, and (3) there is mutuality of estoppel. Monat v State Farm Ins Co,
[Mutuality of estoppel requires that in order for a party to estop an adversary from relitigating an issue[,] that party must have been a party, or in privy to a party, in the previous action. In other words, [t]he estoppel is mutual if the one taking advantage of the earlier adjudication would have been bound by it, had it gone against him. [Monat,469 Mich at 684-685 (citations and quotation marks omitted).]
“By preventing relitigation, this doctrine attempts ‘to relieve parties of multiple litigation, conserve judicial, resources, and, by preventing inconsistent decisions, encourage reliance on adjudication.’ ” Bithell,
In the instant case, whether the residence was covered under the policy is an issue that has already been actually litigated and determined by a valid and final judgment. See Monat,
Next, the same parties or privies had a full and fair opportunity to litigate the issue.
A party is one who is directly interested in the subject matter and has a right to defend or to control the proceedings and to appeal from the judgment. A person is in privy to a party if, after the judgment, the person has an interest in the matter affected by the judgment through one of the parties, such as by inheritance, succession, or purchase. [Husted v Auto-Owners Ins Co,213 Mich App 547 , 556;540 NW2d 743 (1995), aff'd459 Mich 500 (1999)].
In Null v Auto-Owners Ins Co, LC Nо. 10-228-NI, Elizabeth was the plaintiff and Auto-Owners and Wells Fargo were defendants. In this case, Wells Fargo is the plaintiff and Elizabeth and Auto-Owners are defendants. Thus, the cases involved the exact same parties. Wells Fargo had a full and fair opportunity in the companion case to litigate whether the residence was covered under the Auto-Owners policy. Although there is no evidence of record indicating that Wells Fargo actually filed any briefing or motions in support of coverage under the Auto-Owners policy, it had the opportunity to do so as a party to the action. Moreover, Wells Fargo was dismissed from the case on its own motion. The general rule permits relitigation only if “[t]he party against whom preclusion is sought could not, as a matter of law, have obtained review of the judgment in the initial action[.]” Monat,
Finally, the mutuality prong is satisfied if the party “taking advantage of the earlier adjudication would have been bound by it, had it gone against him.” Monat,
Because we conclude that all three prongs of the collateral estoppel doctrine have been satisfied, we hold that the doctrine bars the relitigation of whether the residence was covered under the Auto-Owners policy.
B. WELLS FARGO WAS COVERED UNDER THE STANDARD MORTGAGE CLAUSE OF THE POLICY
“In general, there are two types of loss payable clauses, otherwise known as mortgage clauses, contained in insurance policies which protect lienholders.” Foremost Ins Co v Allstate Ins Co,
a lienholder is not subject to the exclusions available to the insurer against the insured because an independent or separate contract of insurance exists between the lien-holder and the insurer. In other words, there are two contracts of insurance within the policy — one with the lienholder and the insurer and the other with the insured and the insurer. [Id. at 384.]
See also Singer v American States Ins,
The two types of clauses are generally identifiable within an insurance policy on the basis of their language. An ordinary loss payable clause simply provides that the mortgagee will be paid as its “interest may appear,” meaning that the mortgagee will only receive insurance proceeds to the extent of its interest in the insured property
In the instant case, the Auto-Owners policy includes the following mortgage clause:
k. MORTGAGE CLAUSE
This provision applies to only the mortgagee named in the Declarations. It does not affect your [the insured’s] rights or duties under this policy.
The word mortgagee includes a trustee under a deed of trust and a contract seller under a land contract.
Loss covered by the policy, if any, shall be payable to the mortgagee, as their interest may appear, under all present or future mortgages upon the property described in the Declarations of this policy in which the mortgagee may have an interest. If more than one mortgagee is named in the Declarations, payment shall be made in order of precedence of the mortgages.
If we [Auto-Owners] deny your [the insured’s] claim, such denial will not apply to a valid claim of the mortgagee, provided the mortgagee:
(1) notifies us [Auto-Owners] of any change of ownership or occupancy or substantial change in exposure which has come to the knowledge of the mortgagee;
(2) pays any premium due under this policy that you [the insured] or the mortgagor has neglected to pay; and
(3) submits to us [Auto-Owners], within 60 days after receiving notice from us [Auto-Owners] of your [the insured’s] failure to do so, a proof of loss signed and sworn by the mortgagee.
Whenever we [Auto-Owners] pay the mortgagee any sum for loss under this policy and deny payment to you [the insured] for such loss:
(1) to the extent of such payment, we [Auto-Owners] are legally subrogated to all rights of the mortgagee under the terms of the mortgage on the covered property; or
(2) at our [Auto-Owners’] option, we [Auto-Owners] may pay to the mortgagee the whole principal due, with interest accrued, and shall then receive full assignment and transfer of the mortgage and of all collateral.
Subrogation shall not impair the right of the mоrtgagee to recover the full amount of the mortgagee’s claim.
We [Auto-Owners] may cancel or nonrenew [sic] this policy at any time as provided by its terms. We will notify the mortgagee at least 10 days prior to the effective date of the cancellation or nonrenewal. We may also cancel this agreement by providing 10 days notice to the mortgagee.
All policy terms and conditions apply to the mortgagee.
Wells Fargo maintains that this mortgage clause constitutes a standard mortgage clause that acts as a separate contract between it and Auto-Owners, and
We agree with the parties, and conclude that the policy in this case contains a standard mortgage clause. The clause provides that the mortgagee will be paid “as their interest may appear,” like an ordinary loss payable clause, see Foremost,
Wells Fargo argues that this clause provides coverage for it, as mortgagee, even though it was determined in the companion case that Elizabeth was barred from recovery. That determination was based on Lonnie’s failure to reside in the premises, as a result of which the property did not meet the policy’s definition of “residence premises.” According to Wells Fargo, Lonnie’s act or neglect did not operate to avoid coverage for Wells Fargo under the separate contract of the standard mortgage clause. Auto-Owners responds that the standard mortgage сlause is not applicable in situations where the policy does not provide coverage for an insured in the first instance, rather than where coverage is afforded but then negated by an exclusion.
The trial court did not provide any rationale for its conclusion that Wells Fargo was not covered under the policy. The trial court’s order only provided that it granted summary disposition under MCR 2.116(0(10) because “the insurance policy at issue does not provide coverage to plaintiff Wells Fargo Bank for damages to the structure arising from the fire of April 11, 2009.”
Our review de novo of the language of the policy leads us to conclude that the trial court erred by granting summary disposition to Auto-Owners. We thus agree with Wells Fargo, and hold that the standard mortgage clause in this case is a separate contract between Wells Fargo and Auto-Owners that, by its plain language, affords coverage to the mortgagee under the circumstances presented.
As noted, “it is well settled that a policy’s standard mortgage clause constitutes a separate and distinct contract between a mortgagee and an insurance company for payment on the mortgage.” Singer,
Generally, the circumstances under which Michigan courts have had occasion to consider coverage under a standard mortgage clause have been in the context of policy exclusions such as those noted on
As we have previously noted, there are two contracts of insurance involved in this case. One covers risk and outlines exclusions for the insured and the insurer. The other operates as an independent contract for the limited purpose of preventing the loss of coverage by any act or neglect between the insurer and the insured. The prevention of recovery under the contract between the insured and the insurer does not prohibit the recovery by the lienholder under its separate contract of insurance with the insurer .... [Id. at 388-389.]
Thus, the Court indicated that the standard mortgage clause was an independent contract of insurance meant to prevent loss of coverage for the mortgagee for any act or neglect between the insured and the insurer. While the case may have involved denial of coverage to the insured pursuant to an exclusion, rather than a finding that no coverage existed, the Court did not make a distinction between acts that precluded coverage and acts that excluded coverage when setting forth the rule of law.
We also reject that distinction in the circumstances presented in this case. Our decision in that regard is supported not only by Foremost, but also by our Supreme Court’s earlier decision in Citizens State Bank of Clare v State Mut Rodded Fire Ins Co of Mich,
The effect of this clause has been the subject of much litigation, and the conclusion derived is well stated in 5 Couch, Cyclopedia Insurance Law, p 4435, § 1215b:
The so-called “standard” or “union” mortgage clause, making the mortgagee payee, and stipulating that the insurance shall not be invalidated by the mortgagor’s acts or neglect, constitutes an independent contract between said mortgagee and insurer, and in such case the subject-matter of the insurance is the mortgagee’s insurable interest, and not the real estate, and the risk will not be avoided by any acts, representations, or omissions of the mortgagor or owner, whether done or permitted prior or subsequently to, or at the time of, the issuance of the policy.
Since the case of Hastings [v Westchester Fire Ins Co,73 NY 141 (1878)], the courts have declared this to be aseparate contract between insurer and mortgagee and not subject to most of the defenses which the insurer might have against the mortgagor. Consequently, since the clause operates as a separate and distinct contract of insurance upon the mortgagee’s interest, it gives the mortgagee such an independent status as might authorize a recоvery on the policy by him even though the mortgagor were precluded. [Citizens State Bank, 276 Mich at 67-69 (emphasis added; citations omitted).]
Thus, standard mortgage clauses operate to afford coverage to mortgagees even when coverage is denied to an insured in a context other than the application of a policy exclusion, and even when the act or neglect of the insured occurs before the issuance of the policy.
This reading is consistent with the very purpose of standard mortgage clauses. A mortgagee is in a real sense a bystander to the negotiation of an insurance policy between an insured and an insurer, and to the resulting relationship between them. Although a mortgagee facilitates an insured’s property ownership and is thus essential both to the insured’s ownership of property and to the insured’s ability then to insure that property, the mortgagee’s role in the process of obtaining insurance is essentially nonexistent. That process occurs solely between the insured and the insurer; the mortgagee is merely along for the ride. The insured makes an application to the insurer; the insurer bears the responsibility for and assumes the risks associated with evaluating the insured’s application and related representations, and the facts and circumstances attendant thereto; and it proceeds accordingly. Similarly, the mortgagee is not a party to the resulting relationship between the insured and the insurer, and possesses neither the rights nor the responsibilities that are attendant to that relationship. Unlike the insurer, the mortgagee plays no role in the application evaluation process or in any resulting relationship with the insured; consequently, in the standard mortgage clause context, the mortgagee is entitled under the law to rely on the insurer’s assumption of responsibility to engage in that evaluation to its satisfaction, and to assume the risks of the resulting relationship.
The consequence of this is that the mortgagee is protected in the event that any act or neglect by the insured, either before, during, or after the application process, causes the insured to be denied coverage under the policy. It matters not whether that act or neglect by the insured falls within а policy exclusion or causes there to be no coverage under the policy in the first instance. In either event, the standard mortgage clause affords protection to the mortgagee.
In this case, it was the insured’s act of ceasing to reside in the residence that negated the insured’s coverage. We hold that, under the rule of law announced in Foremost and Citizens State Bank, that circumstance does not negate coverage for Wells Fargo, as mortgagee, under the standard mortgage clause of the Auto-Owners policy.
Our conclusion is further supported on these facts by the language of the Auto-Owners policy itself. Specifically, the standard mortgage clause of the policy provides that a denial of the insured’s claim “will not apply to a valid claim of the mortgagee,” provided the mortgagee complies with certain conditions. One of those conditions is that the mortgagee “notifies [Auto-Owners] of any change of ownership or occupancy or substantial change in exposure which has come to the knowledge of the mortgagee[.]” The inclusion of this
For the same reason, the use of the adjective “valid” within the phrase “valid claim of the mortgagee” is inconsequential to our analysis. The standard mortgage clause is clear that, notwithstanding the above circumstance, a mortgagee still may have a “valid claim.” To read the term more broadly, so to exclude as “invalid” any claim arising in the context of a change in ownership or occupancy, would give rise to an internal inconsistency in the policy language, and effectively would undermine the policy’s own standard mortgage clause. We decline to so interpret the policy language. See Ingersoll-Rand Fin Corp v Employers Ins of Wausau, 771 F2d 910, 914 (CA 5, 1985), quoting Couch, Insurance, 2d (rev ed), § 42:720 (1982) (“ ‘[I]nsofar as the provisions of the policy are inconsistent with or antagonistic to the clause protecting the interest of the mortgagee, they must be regarded as inapplicable in determining his rights.’ ”) (citation and quotation marks omitted).
Our conclusion draws further support from decisions in other jurisdictions. There are no Michigan cases that squarely consider whether a mortgagee continues to have a “valid claim” under a standard mortgage clause even when the property is not covered because it was not a “residence premises” at the time of the loss. However, other jurisdictions have considered the application of standard mortgage clauses in similar contexts. Caselaw from other states is not binding on this court, but may be “instructive” and used as a guide. A&E Parking v Detroit Metro Wayne Co Airport Auth,
In Ingersoll-Rand, 771 F2d at 911-914, the United States Court of Appeals for the Fifth Circuit addressed a standard mortgagе clause that provided no coverage for the insured. The case involved an insurance policy covering a ship that was stolen because of the insured’s negligence; however, theft of the ship was not covered under the policy. Id. at 911. As the Fifth Circuit explained, “[b]oth parties agree that loss by theft of the vessel was not among the named perils covered by the policy; so that the insured mortgagor-owner . . . could not itself recover on the policy for the present loss if occasioned by a theft of the vessel.” Id. at 912. Nevertheless, the Fifth Circuit held that the mortgagee could recover under the policy’s standard mortgage clause, stating:
Where the issue has been squarely presented, the modern decisions are unanimous, and the earlier decisions virtually so, in holding that a mortgagee under a standard mortgage clause may (where not guilty himself of any breaches of policy conditions) recover from the insurer for a loss sustained by the mortgaged property, even though the risk be excluded from the policy coverage ....
. .. The intent of the standard mortgage clause is that the mortgagee’s right to recover will not be invalidated by the act or negligence of the mortgagor and that no act or default of any person other than the mortgagee .. . shall affect the rights of the mortgagee to recover in case of loss. “[IJnsofar as the provisions of the policy are inconsistent with or antagonistic to the clause protecting the interest of the mortgagee, they must be regarded as inapplicable in determining his rights.” [Id. at 913-914, quoting Couch, § 42:720 (citations and quotation marks omitted).]
Additionally, under facts closely resembling the facts of the instant case, the California Court of Appeals has held that a mortgagee was covered under a policy’s standard mortgage clause. In Home Savings of America, FSB v Cont’l Ins Co, 87 Cal App 4th 835; 104 Cal Rptr 2d 790, 792 (Cal App, 2001), the insured homeowners vacated their residence and demolished the property with the intent to rebuild; however, they did not notify the insurer or the mortgagee of their actions. Id. After the loan went into default, the mortgagee learned of the vacancy and demolition and sought to recover under the policy’s standard mortgage clause. Similar to the terms of the policy in this case, the policy contained a “residence premises” definition and a standard mortgage clause providing that a denial of the insured’s claim would not apply to a “valid claim of the mortgagee, if the mortgagee . . . notifies [the insurer] of any change in ownership, occupancy or substantial change in risk of which the mortgagee is aware[.]” Id. at 792, 796. The California court cited with approval Foremost,
In Waterstone Bank, SSB v American Family Mut Ins Co, 2013 Wis App 60,
We find Ingersoll-Rand and Home Savings to be persuasive and to support our
For all these reasons, we conclude that the trial court erred by granting summary disposition to Auto-Owners with respect to Wells Fargo’s coverage under the standard mortgage clause of the policy. Further, for the reasons indicated, we hold that the standard mortgage clause of the policy unambiguously provides coverage for Wells Fargo in the circumstances presented. For the reasons discussed later in this opinion, however, we conclude, on the basis of the record that is now before us, that it would be premature to direct the entry of summary disposition in favor of Wells Fargo.
C. THE ORDER GRANTING SUMMARY DISPOSITION TO WELLS FARGO IN THE COMPANION CASE DOES NOT BAR ■WELLS FARGO’S CLAIM IN THIS CASE
Finally, Wells Fargo argues that the trial court’s order granting summary disposition to Wells Fargo in the companion case does nоt bar its claim in this case. Auto-Owners responds that the doctrines of judicial estoppel and estoppel by laches apply to bar Wells Fargo’s claim because Wells Fargo was aware of the claim and had an opportunity to bring the claim during the companion case. The trial court did not provide any rationale or reasoning for its conclusion that the companion case barred Wells Fargo’s claim in this case. The trial court only stated that its previous order “does constitute a dismissal of all claims Wells Fargo Bank may have had arising from the fire of April 11, 2009.” We agree with Wells Fargo that the companion case does not bar its claim in the instant case.
“Judicial estoppel precludes a party from adopting a legal position in conflict with a position taken earlier in the same or related litigation. The doctrine protects the integrity of the judicial and administrative processes.” Ford Motor Co v Pub Serv Comm,
“Estoppel by laches is the failure to do something which should be done under the circumstances or the failure to
We conclude that neither of these doctrines is applicable to the circumstances of the instant case. With regard to judicial estoppel, there is no record evidence that Wells Fargo “unequivocally and successfully set forth a position in a prior proceeding” and is now attempting to present “an inconsistent position” in this proceeding. Detroit Int’l Bridge Co,
Further, even though it may have been more efficient for Wells Fargo to have asserted its claim against Auto-Owners in the companion cаse, “[t]o successfully assert laches as an affirmative defense, a defendant must demonstrate prejudice occasioned by the delay.” Schmude Oil,
IV REMAND IS NECESSARY FOR DETERMINATION OF WHETHER WELLS FARGO COMPLIED WITH THE REQUIREMENTS OF THE POLICY
In its motion for summary disposition before the trial court, Auto-Owners alternatively argued that, even if coverage was afforded to Wells Fargo under the mortgage clause, Wells Fargo had failed to comply with the requirement that it “submitf] to us [Auto-Owners], within 60 days after receiving notice from us [Auto-Owners] of your [the insured’s] failure to do so, a proof of loss signed and sworn by the mortgagee.” Auto-Owners alleged that it informed Wells Fargo in correspondence dated August 17, 2009, that it was required to submit a sworn proof of loss within 60 days, and that Wells Fargo failed to do so.
Wells Fargo responded that a genuine issue of material fact existed regarding whether it had “received” the requisite notice from Auto-Owners, so as to trigger its obligation to provide a sworn proof of loss within 60 days. Wells Fargo further argued that deposition testimony from an Auto-Owners claims representative supported the notion that it had made a valid claim under the policy, and that in any event correspondence from Auto-Owners on April 21, 2009, contained the representation that Auto-Owners had received a claim from the insured and that Wells Fargo needed to take no further action to secure its rights under the policy.
The parties addressed this issue at a hearing before the trial court and presented arguments consistent with the positions taken in their respective briefs. However, the trial court mаde no specific ruling on this issue in its order granting summary disposition to Auto-Owners. Because the trial court concluded that the policy did not provide coverage to Wells Fargo, and further that its order in the companion case barred Wells Fargo’s claim, it apparently saw no need to address the issue of Wells Fargo’s compliance with policy provisions.
Because we conclude that the trial court erred by ruling that the policy did not provide coverage to Wells Fargo and that the companion case barred Wells Fargo’s claim, we conclude that the proper course of action is to remand to allow the trial court to decide whether a genuine issue of material fact exists concerning Wells Fargo’s compliance with the requirements of the policy. This comports with the principle that “[ajppellate review is generally limited to issues decided by the trial court.” Candelaria v B C Gen Contractors, Inc,
V CONCLUSION
We conclude that the doctrine of collateral estoppel bars relitigation of whether the residence was covered under the policy. We further conclude that the trial court erred by granting summary disposition to Auto-Owners on the issue of Wells Fargo’s coverage under the policy. We hold as a matter of law that the policy’s standard mortgage clause afforded coverage to Wells Fargo, the mortgagee, despite the lack of coverage for the insured. Additionally, we conclude that the doctrines of judicial estoppel and estoppel by laches do not bar Wells Fargo’s claim in the instant case. We further conclude, however, that it would be inappropriate at this juncture to determine as a matter of law whether Wells Fargo complied with the requirements of the policy, without consideration of that issue by the trial court.
We therefore reverse the trial court’s grant of summary disposition in favor of Auto-Owners and remand this case for further proceedings consistent with this opinion. On remand, the trial court should determine whether, in light of our decision that the policy provides for coverage for Wells Fargo and Wells Fargo’s claims are not barred by the companion case, a genuine
Reversed and remanded. We do not retain jurisdiction.
Notes
The trial court’s grant of summary disposition in favor of Elizabeth is not at issue on appeal, and we do not disturb that ruling.
The July 19, 2012 order made no mention of Elizabeth, who was also a defendant in the action. The tried court entered another order on September 4, 2012, providing that all claims, against both Auto-Owners and Elizabeth, were dismissed with prejudice for the reasons provided in the previous order.
We note that our Supreme Court has held that “where collateral еstoppel is being asserted defensively against a party who has already had a full and fair opportunity to litigate the issue, mutuality is not required.” Monat,
We disagree with Wells Fargo’s contention that denial of coverage to Elizabeth under the policy renders the policy illusory or in violation of Michigan law. Had Lonnie resided in the home as required by the policy, the home would have been covered under the policy. The policy was thus not “so insubstantial as to impose no obligation,” Black’s Law Dictionary (9th ed), p 1332 (defining “illusory promise”), nor did it violate any statutory provisions governing the issuance of fire insurance policies, see MCL 500.2833 and Heniser,
For the same reason, we decline to read the language “[a]ll policy terms and conditions apply to the mortgagee” as meaning that the mortgagee is subject to all defenses to which the insured may be subject. Such a reading would be contrary to specific language of the policy, would serve to undermine the law’s recognition of the purpose and effect of the standard mortgage clause, and would be inconsistent with and antagonistic to the clause that protects the interest of the mortgagee. Ingersoll-Rand, 771 F2d at 913.