The plaintiff sued his insurance company to enforce his contractual rights to their insurance coverage. After the plaintiff's liquor store burned down, the defendant, the insurance company AmGuard, refused to pay the claim. It justified that the coverage was excluded by the plaintiff's failure to maintain an automatic fire alarm.
I EW Hamilton Liquor Store, Inc. Et Al. v. Amguard Insurance Company Case No. 17-13077, United States District Court Eastern District Of Michigan Southern Division (November 10, 2020) USDC ] The complainants were victims of a fire. They admitted that at the time of the fire there was no automatic fire alarm that protected the premises. They sought compensation for the damage caused by the fire.
The plaintiffs argued that "[a] a minimum, under Michigan law, the question of [they] substantially following with [insurance] the policy conditions for maintaining an" automatic fire alarm "is an essential factual matter. . ”(Emphasis added by the Court). They argued that it had to be presented to a jury because it was an issue that needed an actual decision. The plaintiff argued that the conditions prevailing, as well as the requirement for an automatic fire alarm in their Protective Safeguard Endorsement ("PSE") policy, only need to be met by significant performance.
The Sixth Circuit, as well as several district courts therein, have recognized that the doctrine of significant performance under Michigan law does not apply to an express condition such as that at issue here. Significant performance does not meet an explicit condition.
The court found and the plaintiff admits that PSE is a condition precedent for coverage under the policy. It is in fact an explicit condition. Failure to comply with the terms will exclude coverage, as planned by Subsection B of the PSE.
As a result, the plaintiff's argument fails. The doctrine of material achievement does not apply to an explicit precedent.
The plaintiffs did not cite any authority for the assertion that a substantial compliance with a precedent condition is sufficient to satisfy the condition clerk. The doctrine of material performance applies only when the agreement does not explicitly require the obligation that has been breached. The fundamental error in the plaintiff's argument that substantial compliance with a condition precedent is not available and the insurer's proposal for a summary judgment was granted.
Precedent terms are important aspects of any insurance. A condition that is a precedent is a promise that the insured has given the insurer to maintain a PSE – to give the insurer confidence that the insured will protect his property from the risk of fire loss. Failure to fulfill the promise is a violation of a material condition and as such, the failure defeats the claims made.
© 2020 – Barry Zalma
Barry Zalma, Esq., CFE, now limits his practice of serving as an insurance consultant specializing in insurance coverage, insurance claims handling, infidelity and insurance fraud almost equally for insurance policyholders. He also acts as an arbitrator or mediator for insurance-related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims lawyer and more than 52 years in the insurance industry. He is available at http://www.zalma.com and email@example.com.
Mr. Zalma is the first recipient of the first annual Claims Magazine / ACE Legend Award.
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