Michael F. Schmidt Obtains Summary Judgments In Homeowner Insurance Fire Claim

Nationwide Mutual Fire Insurance Company v Kasey McDermott, United States District Court for the Eastern District of Michigan, Northern Division. Claim by Nationwide insured, Kasey McDermott, for $490,000 in damages resulting from a house fire under a homeowner policy. Nationwide made some initial payments and also paid the mortgagee $131,859.29. It was then discovered from the cause and origin report that the fire was caused by a marijuana manufacturing facility in the basement of the home used to manufacture butane honey oil involving use of multiple cans of butane. We filed a declaratory action to obtain a ruling that there was no coverage. We then deposed the insured, her husband, the investigating deputy from the Bay County Sheriff’s Department and then filed a motion for summary judgment that coverage was barred because there was no accidental direct physical loss to property, coverage would be excluded by the increased hazard exclusion and the intentional acts exclusion, and that there had been a failure to advise of the change in use of the residence premises as required by a policy condition. The court issued a written opinion granting summary judgment to Nationwide that it owed no coverage. The parties then filed cross-motions for summary judgment on the issue of whether Nationwide was entitled to reimbursement from the insured for $5,000 paid to the insured per an advance payment agreement, $2,981.75 paid to the insured prior to Nationwide’s discovery of the cause of the loss, and whether Nationwide was entitled to the return of $131,859.29 paid to the mortgagee pursuant to a standard mortgage clause contained in the policy which included a subrogation provision that if the insurer paid the mortgagee for the loss and subsequently denied payment to the insured, the insurer would become subrogated to all of the rights of the mortgagee. In a written opinion, the trial court granted summary judgment to Nationwide holding that it was entitled to reimbursement of $5,000 paid pursuant to the advance payment agreement, the $2,981.75 paid by mistake before learning the cause of the fire and the $131,859.29 paid to the mortgagee.