Speckin Forensics LLC v. Auto-Owners Insurance Company

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
revision until final publication in the Michigan Appeals Reports.
STATE OF MICHIGAN
COURT OF APPEALS
SPECKIN FORENSICS, LLC, also known as UNPUBLISHED
SPECKIN FORENSIC LABORATORIES, August 13, 2019
Plaintiff-Appellant,
v No. 344012
Ingham Circuit Court
AUTO-OWNERS INSURANCE COMPANY and LC No. 17-000362-CB
SOUTHERN-OWNERS INSURANCE
COMPANY,
Defendants-Appellees.
Before: CAVANAGH, P.J., and STEPHENS and O’BRIEN, JJ.
PER CURIAM.
Plaintiff, Speckin Forensics, LLC, appeals by right the trial court’s order granting
summary disposition to defendants, Auto-Owners Insurance Company and Southern-Owners
Insurance Company, under MCR 2.116(I)(2) (opposing party entitled to summary disposition) on
the basis that plaintiff was not a named insured under the insurance policies issued by
defendants. We affirm.
I. FACTUAL BACKGROUND
Speckin Forensic Laboratories, Inc. (the corporation), was incorporated in 1996 and was
automatically dissolved in 2014. Plaintiff was organized as an LLC under the laws of Florida in
January 2010. On February 18, 2010, “Speckin Forensic Laboratories” applied for insurance,
checking the box labeled “CORPORATION” in the section regarding the business type. The
applicant indicated that it began doing business in 1996. On the commercial general liability and
businessowners policies that defendants issued, the named insured was stated to be “Speckin
Forensic Laboratories” and was described as “ENTITY: Corporation.” On the umbrella policy,
the insured was “Speckin Forensic Laboratories.” The umbrella policy referred to the
businessowners policy as the scheduled underlying insurance.
In July 2016, plaintiff became involved in a lawsuit in Florida whereby it was alleged that
plaintiff had been part of a conspiracy to collect and disseminate DNA. In September 2016,
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defendants denied plaintiff’s demand to be defended in the lawsuit because plaintiff’s claims
were excluded by the policies’ professional services and criminal acts exclusions. In April 2017,
another lawsuit was filed against plaintiff in Florida, alleging similar conduct. In August 2017,
defendants denied plaintiff’s demand to insure plaintiff in that action for the same reasons, as
well as because the policies had been issued to a corporation but plaintiff was an LLC.
In May 2017, plaintiff filed a declaratory judgment action to determine whether it was
insured under defendants’ policies. Plaintiff moved for partial summary disposition under MCR
2.116(C)(9) and (10), alleging that there was no genuine issue of material fact regarding whether
plaintiff was the named insured. Plaintiff also asserted that defendants should be estopped from
denying coverage. The trial court granted summary disposition to defendants under MCR
2.116(I)(2), ruling that plaintiff was not the named insured and that estoppel was not warranted.
II. STANDARDS OF REVIEW
“This Court reviews de novo a trial court’s decision on a motion for summary
disposition.” Bazzi v Sentinel Ins Co, 502 Mich. 390, 398; 919 NW2d 20 (2018). MCR
2.116(I)(2) provides, “If it appears to the court that the opposing party, rather than the moving
party, is entitled to judgment, the court may render judgment in favor of the opposing party.”
This Court reviews de novo the proper interpretation of an unambiguous contract, as well as
whether a contract’s language is ambiguous. Klapp v United Ins Group Agency, Inc, 468 Mich.
459, 463; 663 NW2d 447 (2003). This Court reviews de novo the legal effect of contractual
provisions. DeFrain v State Farm Mut Auto Ins Co, 491 Mich. 359, 366-367; 817 NW2d 504
(2012). We also review de novo the trial court’s equitable decisions and will only reverse if we
are convinced that we would have reached a different result than the trial court. Casey v Auto
Owners Ins Co, 273 Mich. App. 388, 394; 729 NW2d 277 (2006).
III. NAMED INSURED
Plaintiff argues that the insurance policies named plaintiff as an insured rather than its
predecessor corporation. We disagree. The policies unambiguously indicate that the insured is a
corporation that was founded in 1996, and this information applies only to the corporation, not to
plaintiff.
An insurance policy is a contract subject to the principles of contractual interpretation.
DeFrain, 491 Mich. at 367. The goal of contractual interpretation is to honor the parties’ intent
and to enforce the contract’s plain terms. Davis v LaFontaine Motors, Inc, 271 Mich. App. 68,
73; 719 NW2d 890 (2006). If no reasonable person could dispute the meaning of the contract’s
plain language, this Court must enforce that language as written. Rory v Continental Ins Co, 473
Mich. 457, 468; 703 NW2d 23 (2005). If the contract’s language is unambiguous, this Court
interprets the contract as a matter of law. Klapp, 468 Mich. at 469 (citation omitted).
A contract is ambiguous if its terms are “equally susceptible to more than a single
meaning.” Barton-Spencer v Farm Bureau Life Ins Co of Mich, 500 Mich. 32, 40; 892 NW2d
794 (2017). A contract is also ambiguous if its provisions irreconcilably conflict with each
other. Klapp, 468 Mich. at 467. This Court will only hold that a contract is ambiguous as a
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matter of last resort. Kendzierski v Macomb Co, ___ Mich ___, ___; ___ NW2d ___ (2019)
(Docket No. 156086); slip op at 11 (citation omitted).
When construing the contract, it is not equally likely that the policies refer to plaintiff—
an LLC—as it is that they refer to the corporation.
“The policy application, declarations page of policy, and the policy itself construed
together constitute the contract.” Royal Prop Group, LLC v Prime Ins Syndicate, Inc, 267 Mich
App 708, 715; 706 NW2d 426 (2005). In this case, the application was for a corporation that
began doing business in 1996. Speckin Forensic Laboratories, Inc., was a corporation that began
doing business in 1996. In contrast, Speckin Forensics, LLC, was an LLC that began doing
business in 2010. The policies were issued to “Speckin Forensic Laboratories,” which was
described as a corporate entity. Accordingly, the policies are unambiguous that the corporation
was the named insured, not plaintiff.
Plaintiff argues that the information in the policies concerning the type of research,
testing, payroll amounts, exclusions, and limitations referred to plaintiff, not its predecessor.
Plaintiff additionally argues that defendants would not be prejudiced by substituting plaintiff as
the named insured on the policy.
This Court may only consider extrinsic evidence to determine the intent of the parties if
the contract is ambiguous. Kendzierski, ___ Mich at ___; slip op at 10. “[A] lack of prejudice is
not among the traditional defenses to the enforcement of a contract provision.” DeFrain, 491
Mich. at 373. It is irrelevant whether prejudice results from requiring parties to comply with
contractual provisions. Id. at 376.
Even presuming that plaintiff has provided factual support for its argument that the
information refers to plaintiff rather than the corporation, we will not consider extrinsic evidence
where the contract unambiguously names the corporation as the insured. Additionally, whether
defendants would be prejudiced by insuring plaintiff instead of the corporation cannot affect the
enforcement of the policies’ provisions, including the provision that the policies only cover the
named insured.
We conclude that the trial court properly granted summary disposition on the basis that
plaintiff was not the named insured under the policies.
IV. ESTOPPEL
First, plaintiff argues that defendants should be estopped from denying coverage because
defendants knew or should have known that plaintiff, not the corporation, was the entity that
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plaintiff wished to insure.1 We reject plaintiff’s argument because binding Michigan precedent
holds that the parties’ expectations are irrelevant to an unambiguous contract.
“The rule of reasonable expectations clearly has no application to unambiguous
contracts.” Wilkie v Auto-Owners Ins Co, 469 Mich. 41, 60; 664 NW2d 776 (2003). Because the
policies are unambiguous, under Michigan law, plaintiff’s expectations are irrelevant.
Second, plaintiff argues that trial court should have estopped defendants from raising
their named-insured defense because they did not raise this defense in their September 16, 2016
denial letter, despite knowing that plaintiff had become an LLC. We disagree. No exception
applies under which estoppel could be used to broaden the terms of defendants’ policies.
With two exceptions, estoppel may not be applied where doing so would require the
insurance company to cover a loss that would not be covered by the terms of the policy. Smit v
State Farm Mut Auto Ins Co, 207 Mich. App. 674, 680; 525 NW2d 528 (1994). One exception
applies “where the inequity of forcing the insurer to pay on a risk for which it never collected
premiums is outweighed by the inequity suffered by the insured because of the insurance
company’s actions.” Id. at 681 (quotation marks and citation omitted).2 This Court has
previously held that there was no unreasonable delay in asserting an additional reason to avoid
coverage in an action for a declaratory judgment in which about a year had passed. See Allstate
Ins Co v Keillor, 203 Mich. App. 36, 38-39; 511 NW2d 702 (1993), aff’d 450 Mich. 412 (1995).
In this case, defendants’ delay does not tip the balance of equities in plaintiff’s favor.
The first Florida lawsuit was filed against plaintiff in July 2016. Defendants denied plaintiff’s
demand that defendants defend it in September 2016 on the basis of contractual exclusions. In
April 2017, a second lawsuit was filed against plaintiff. Plaintiff filed this declaratory judgment
action in May 2017. Defendants denied plaintiff’s request for coverage in the second lawsuit on
the basis that the policies covered a corporation but plaintiff was an LLC. We conclude that
defendants’ delay does not render it more equitable for defendants to provide coverage for risks
that defendants did not assume.
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We reject defendants’ argument that plaintiff has waived its argument by failing to address the
basis of the trial court’s decision. We have reviewed the trial court’s decision and conclude that
plaintiff adequately addresses it.
2
The other exception applies when the insurance company refused to defend an insured in
underlying litigation, and it precludes the insurance company from raising issues in a case
between the insurer and the insured that could have been raised in the underlying litigation.
Smit, 207 Mich. App. at 680-681. This exception does not apply in this case because defendants
do not seek to avoid coverage on the basis of a defense in the underlying Florida lawsuits.
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Accordingly, the trial court did not err by declining to estop defendants from asserting
that plaintiff was not the named insured under the policies. 3
V. MUTUAL MISTAKE
Finally, plaintiff argues that the trial court should have reformed the contract to reflect
that plaintiff was the named insured on the basis of a mutual mistake. We conclude that plaintiff
has not shown a mutual mistake of fact.
A court sitting in equity may reform a contract to conform to the agreement the parties
actually made. Casey, 273 Mich. App. at 398 (citation omitted). “To obtain reformation, a
plaintiff must prove a mutual mistake of fact, or mistake on one side and fraud on the other, by
clear and convincing evidence.” Id. Neither a unilateral mistake of fact nor a mistake about the
legal effect of an agreement warrants reformation. Id.
In this case, there is no evidence that either plaintiff or defendants were mistaken about
whom the policies were issued to. The applicant specifically sought insurance for a corporation
founded in 1996, and the policies were issued to “Speckin Forensic Laboratories,” which was a
“Corporation.” Even if defendants were aware of plaintiff’s existence, there is no evidence that
defendants mistakenly issued the policies to the corporation rather than to plaintiff. The
applicant specifically sought coverage for the corporation. Plaintiff has at best shown that it was
mistaken in believing that the policies would cover plaintiff after the corporation stopped doing
business, but a mistake about the legal effect of an agreement is not sufficient to warrant
reforming a contract.
Affirmed. As the prevailing parties, defendants are entitled to costs under MCR
7.219(A).
/s/ Mark J. Cavanagh
/s/ Cynthia Diane Stephens
/s/ Colleen A. O’Brien
3
We decline to consider plaintiff’s argument that defendants should be estopped from denying
coverage because they did not act to cancel the policies insuring the corporation. Even had
defendants acted to cancel the policies, this would not warrant reversing the trial court’s decision
because a cancellation of the corporation’s policies would not have provided coverage to
plaintiff. See Titan Ins Co v Hyten, 491 Mich. 547, 567; 817 NW2d 562 (2012) (stating that
cancellation only terminates a policy as of the date of cancellation). Therefore, refusing to set
aside the trial court’s order on this basis would not be inconsistent with substantial justice. See
MCR 2.613(A).
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