                          STATE OF MICHIGAN

                           COURT OF APPEALS


SONG YU and SANG CHUNG,                                            UNPUBLISHED
                                                                   April 11, 2017
               Plaintiffs-Appellants,

v                                                                  No. 331570
                                                                   Ingham Circuit Court
FARM BUREAU GENERAL INSURANCE                                      LC No. 14-001421-CK
COMPANY OF MICHIGAN,

               Defendant-Appellee.


Before: CAVANAGH, P.J., and SAWYER and SERVITTO, JJ.

PER CURIAM.

       Plaintiffs appeal following the trial court’s grant of summary disposition in favor of
defendant on plaintiffs’ breach of contract claim. We reverse and remand.

        According to the affidavit filed by plaintiff Song Yu in the trial court, he and his wife,
plaintiff Sang Chung, purchased a home on West Lake in Portage in 2006, where they lived until
Yu accepted a new job in Lansing in 2010. According to Yu, plaintiffs moved to an apartment in
Okemos at that time, retaining the West Lake house as a second home, where they spent leisure
time.

       In 2013, plaintiffs decided to sell the West Lake house and to purchase a home in East
Lansing, which they did in March 2013. In February 2013, they met with a realtor at the West
Lake house to discuss listing it for sale. At that time, they discovered some water damage in the
home due to a water supply line leak in the bathroom. They filed a claim with defendant and
were paid approximately $5,000. In November 2013, they received notice from defendant that
the homeowner’s policy would renew on December 8 for a one-year period. Plaintiffs paid the
premium and the policy renewed.

       On Christmas Day 2013, plaintiffs received a call from their neighbors and were
informed that icicles were forming on the exterior of the West Lake home. Yu drove to the




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home and discovered another water leak, this time resulting in much more extensive damage.1
Shortly after reporting the claim to defendant, plaintiffs received a letter from defendant dated
December 16 notifying them that the homeowners’ coverage was being terminated effective
January 18, 2014, because “the dwelling has been unoccupied for more than 60 days or is
vacant.” In January, plaintiffs received a check from defendants refunding a portion of the
premium, presumably representing the period from the effective date of cancellation until the end
of the policy term.

        In June 2014, plaintiffs were notified by defendant that it was denying the December
2013 claim. The stated reasons were: (1) that plaintiffs did not reside in the premises at the time
of loss and it was not a “residence premises” as required by the policy, (2) that the house had
been vacant for more than 60 consecutive days, and (3) that the home had been unoccupied for
more than 6 consecutive months.

        Plaintiffs filed suit for breach of contract. Following the filing of cross-motions for
summary disposition, the trial court concluded that there was no genuine issue of material fact
that defendant could deny coverage for the above-stated reasons and that plaintiffs had not
established their claim under equitable estoppel. Plaintiffs now appeal and we reverse.

       On appeal, plaintiffs argue in the alternative that either the above-stated reasons do not
apply in this case or that defendant is equitably estopped from denying coverage. Because we
agree with plaintiffs’ estoppel argument, we need not address the applicability of the stated
reasons for denial of coverage. We do note that, in the absence of a valid estoppel argument, our
decision in Vushaj v Farm Bureau General Ins Co of Michigan, 284 Mich App 513; 773 NW2d
758 (2009), is somewhat persuasive in favor of defendant. But, by the same token, our decision
in McNeel v Farm Bureau Gen Ins Co of Michigan, 289 Mich App 76; 795 NW2d 205 (2010),
would seem to favor plaintiffs, at least on the issue of “vacant” and “unoccupied.”

       In any event, as stated above, we agree that, under the facts of this case, defendant is
estopped from denying coverage. Our Supreme Court discussed equitable estoppel in the context
of insurance coverage in Morales v Auto-Owners Ins Co, 458 Mich 288, 296-297; 582 NW2d
776 (1998):

                 However, we find the reasoning of the Court of Appeals unpersuasive
          under the facts of this case. Defendant repeatedly accepted plaintiff’s late
          payments and continually renewed the plaintiff’s policy. As a result, we agree
          with plaintiff that the principle of equitable estoppel bars defendant from
          enforcing the automatic nonrenewal provision of the insurance contract.

                 The principle of estoppel is an equitable defense that prevents one party to
          a contract from enforcing a specific provision contained in the contract. With
          regard to payment provisions of an insurance policy, it is generally recognized
          that “because provisions for forfeiture, lapse, or suspension for nonpayment of


1
    Plaintiffs claimed over $80,000 in damage due to this second loss.


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       premiums, assessments, or dues are for the benefit of the insurer, the insurer may
       waive, or may be estopped to assert, such a provision through its conduct or
       words.” 5 Couch, Insurance, 3d, § 78:1, p 78-5. Moreover, “under certain
       circumstances the insurer may be estopped from asserting that the policy had
       expired and that it had not been renewed.” 2 Couch, Insurance, 3d, § 29:45, p 29-
       54.

                                               ***

               Therefore for equitable estoppel to apply, plaintiff must establish (1) that
       the defendant’s acts or representations induced plaintiff to believe that the policy
       was in effect at the time of the accident, (2) that the plaintiff justifiably relied on
       this belief, and (3) that plaintiff was prejudiced as a result of his belief that the
       policy was still in effect. Fleckenstein v Citizens’ Mut Automobile Ins Co, 326
       Mich 591, 599; 40 NW2d 733 (1950); see also Unruh v Prudential Property &
       Casualty Ins Co, 3 F. Supp. 2d 1204, 1207-1208 (D Kan, 1998).

        We are not necessarily persuaded by plaintiffs’ argument that they justifiably relied on
the belief that coverage was in effect in December 2013 because their living circumstances were
the same in February 2013, when the first claim was paid, as it had been for some time before.
But, we are persuaded that defendant is estopped from denying coverage based upon (1) its
knowledge in February 2013, (2) that, despite this knowledge, it renewed the policy in December
2013, and (3) after cancelling the policy and refunding plaintiffs a pro rata share of the premium,
defendant retained the premium for the time period in which the loss occurred.

        With respect to defendant’s knowledge as of February 2013, defendant itself quotes in its
brief from the deposition testimony of its adjuster who handled the February 2013 claim.
Defendant quotes the following part of the adjuster’s testimony:

              Q. Are you sure that he [Song Yu] told you that he was moving to
       Lansing?

              A. Based on the notes that I inputted in the file and my history of working
       claims and putting notes—making notes and referencing, yes.

              Q. Would it surprise you to know that he had lived in Lansing since July
       of 2010?

               A. Yes.

              Q. Did you ask Song Yu whether he was living in the home at 1724
       Forest when you talked to him on February 8th of 2013?

               A. I don’t—I didn’t note that—

                                               ***

               THE WITNESS: I didn’t note that I asked him that, no.

                                                -3-
       BY MR. NOUD:

               Q. Well, why didn’t you ask him?

               A. It didn’t seem to be important at that point in time.

              Q. Well, if he wasn’t living in the home at that time wouldn’t that be
       important?

               A. Again, when he told me he was moving and then when I did make the
       inspection it was evidence that that was the case, there were boxes of goods boxed
       up and that I thought it was in the process of moving. There were doors laying on
       the living room floor, kitchen cabinets being painted, and he said that he had been
       doing some repairs to get ready to put it on the market. That seemed logical to
       me.

                                                ***

               A. That he didn’t—he made me believe that they were going back and
       forth, that they were actively moving, not that it had been sitting there for three
       years empty.

              Q. And what did he say exact—what were his exact words that led you to
       believe that he was actively going back and forth?

                A. He told me that they had been going back and forth and were preparing
       it for sale.

Defendant relies upon this testimony to support its argument that it had no reason to believe that
“Plaintiffs were not living at the home until just prior to this loss, when the home was discovered
to be vacant and the cancellation process began.” We do not agree with defendant’s
interpretation of this testimony.

        We would concede that this might suggest that defendant had no reason to believe that
plaintiffs’ status in the house had been that way for two or three years prior to February 2013.
That is, if the only basis to find that equitable estoppel applies is that (1) the status of the house
in December 2013 was the same as it was in February 2013, and that (2) defendant knew that,
then we might agree that the testimony does not establish the second point. But, as we stated, we
do not believe that the applicability of equitable estoppel is dependent upon a showing that
defendant knew in February 2013 when it paid the first claim that the status of the house was the
same as it was in December 2013.

        Rather, what we find important is that defendant was aware, as the adjuster testified, in
February 2013 that plaintiffs were “actively moving.” It would therefore be logical to conclude
that defendant understood that plaintiffs were no longer residing in the house and that it was
unoccupied and vacant within defendant’s proposed interpretation of those terms in the insurance
policy. And certainly defendant should have understood that 10 months later when defendant
renewed the policy and accepted plaintiffs’ premium payment.

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        We also find it important that, in cancelling the policy and refunding a pro rata share of
the premium, defendant retained the portion of the premium up to the stated effective date of the
cancellation in January 2014. Defendant argues that an “insurance company should not be
required to pay for a loss for which it failed to charge a premium.” But, at the same time, an
insured should not be required to pay a premium for coverage that the insurance company
refuses to provide.

        In sum, defendant knew, by its own admission, as early as February 2013 that the stated
reasons for denying the subsequent claim already existed, or the existence of one or more of
those reasons would soon exist. Yet, not only did defendant fail to inform plaintiffs that they
would need to obtain different coverage, it renewed the policy several months later, charging and
retaining a premium for the time period during which the loss occurred. Accordingly, we
conclude that defendant’s actions and inaction reasonably led plaintiffs to believe that they were
covered by the insurance policy issued by defendant and paid for by plaintiffs.

        For these reasons, we conclude that the trial court erred in granting summary disposition
in favor of defendant and against plaintiffs. On remand, the trial court shall enter judgment in
favor plaintiff on the issue of coverage and proceed to determine damages.

        Reversed and remanded for further proceedings consistent with this opinion. We do not
retain jurisdiction. Plaintiffs may tax costs.



                                                            /s/ Mark J. Cavanagh
                                                            /s/ David H. Sawyer




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