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Court reverses summary disposition improperly granted to Auto Owners Insurance Company in coverage dispute arising out of ambiguous language

This week the Court of Appeals reversed a trial judge's decision to grant AutoOwners summary disposition in a dispute over fire damage.   KEN Holdings, LLC was forced to sue AutoOwners after a fire badly damaged the building it was buying from the titled owner Ed Wenzel.  AutoOwners contended that the fire was set by Wenzel and that any defenses it had to a claim by Wenzel would also apply to all other insureds, including KEN Holdings.

The appeals court reviewed the relevant language in the loss payable provisions of the policy (where KEN Holdings was identified as an insured/loss payee).   It determined that "the relationship between the loss payable provisions and the commercial property coverage declaration is unclear."  Since the policy language written by AutoOwners was ambiguous, it must be interpreted to afford coverage if the unclear language reasonably created an expectation of coverage in the insured.  The case was sent back to the trial judge to sort out.

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