By Barry Zalma, Attorney and Consultant
The U.S. District Court for the Eastern District of Michigan was asked to grant Defendant Netherlands Insurance Company's Motion for Summary Judgment. Plaintiffs filed suit for declaratory relief and sought coverage under a cemetery's insurance policy for an allegedly misplaced body in Steven Reed, et al v. Netherlands Insurance Company, No. Case No: 10-13247, 2012 U.S. Dist. LEXIS 19487 (E.D.Mich. 02/16/2012).
The Netherlands policy was effective December 22, 2006 until November 25, 2007. Plaintiffs did not discover the alleged mistake until March 11, 2009. The cemetery claimed the body was never lost. Rather, paperwork was misplaced, and the burial took place on August 10, 2007 as scheduled, in the lot the Plaintiffs purchased.
Plaintiffs' underlying state court complaint ("Verified Complaint") alleged breach of contract, negligence, intentional infliction of emotional distress, violation of the Michigan Consumer Protection Act, and fraud. As a result, Plaintiffs alleged they suffered mental anguish, loss of use of attendant property, and interference with the right of burial of human remains.
Netherlands denied coverage. It averred that Plaintiffs' claims - if they existed - occurred outside of the policy period and even if they are timely, policy exclusions bar coverage.
Steven Reed, Kresha Rhan, Ezra Bolden, Cholon Bolden, and Phaedra Bolden ("Plaintiffs'") were the children of the deceased, Katherine Bolden. Plaintiffs alleged the United Memorial Gardens Cemetery ("Cemetery"), a cemetery corporation, misplaced their mother's remains. Plaintiffs filed suit in Wayne Circuit Court on February 12, 2010 against the Cemetery. Plaintiffs had entered into a burial contract with the Cemetery on August 7, 2007, to bury their mother. The Plaintiffs alleged that they were not allowed to see their mother interred, but do not explain why. The Plaintiffs did not attend the funeral and had no contact with the Cemetery until a year and a half later.
Around March 11, 2009, Plaintiffs contacted the Cemetery to make arrangements to bury their sister next to her mother. Plaintiffs alleged they were told their mother was not buried there, but if she was, she was in a different plot. Plaintiffs also said that an agent of the Cemetery informed them that a former employee had taken client money and disposed of bodies in unknown locations. But the Cemetery asserted that in a letter dated May 14, 2009, that it had told Plaintiffs that its records indicated Katherine Bolden was buried in the space Plaintiffs reserved, on the day she was to be buried. Although Bolden's file could not be located, the Cemetery said that the burial was recorded in two other places. But the Cemetery lot book showed that Bolden's space had already been sold to someone else at the time Plaintiffs purportedly purchased it; that was why the family was told the decedent was buried in someone else's space.
GENERAL DESCRIPTION OF POLICY
In determining Coverage it was necessary to review the insuring agreement, conditions and definitions sections of the policy ("Coverage"). Under Coverage, the insurer agreed to pay damages resulting from "bodily injury," "property damage" or "personal and advertising injury" caused by an "occurrence" during the policy period.
Despite the language in the Coverage section, the policy contained a Funeral Services Exclusion ("Exclusion"). This stated that the insurance did not apply to "bodily injury," "property damage" or "personal and advertising injury" arising out of errors or omissions in the handling, embalming, disposal, burial, cremation, or disinterment of dead bodies.
Finally, the insurance policy contained a Funeral Homes or Cemeteries Endorsement ("Endorsement"); this Endorsement modified the coverage to extend coverage for "bodily injury," including mental anguish claims, and "property damage" arising from the rendering or failure to render professional services by a funeral home or a cemetery. The Endorsement also modified coverage to allow recovery for "personal injury" arising out of the interference with the right of burial of human remains.
Determining coverage here was complicated by several facts. The policy was in effect December 22, 2006 until November 25, 2007. While Plaintiffs' decedent was buried during the period of coverage - on August 10, 2007 - Plaintiffs did not find out that she was not in the plot they purchased until March 11, 2009 - outside of the policy period. Their so-called mental anguish arose from being given the information that their mother was not in the purchased plot.
Michigan law governed; a federal court sitting in diversity applies the substantive law of the state in which it sits. To determine whether an insured is entitled to insurance benefits, a court must first determine whether the policy provides coverage. If it does, the court must then determine whether that coverage is negated by an exclusion.
Plaintiffs' theory of recovery was that under the Endorsement, there was coverage for "bodily injury" including mental anguish, arising from the Cemetery's failure to render professional services. Netherlands countered that the claims were barred because Plaintiffs did not discover an alleged error until March 11, 2009 after the expiration of the Netherlands policy.
Emotional distress claims generally do not ripen until the plaintiff suffers the emotional distress. Under the circumstances of this case, a plaintiff's claim for mental anguish would not accrue until the plaintiff was actually aware that human remains were mishandled.
The Netherlands policy provided coverage only for losses that occurred within the policy period. Under the policy, "occurrence" was defined as "an accident, including continuous or repeated exposure to substantially the same general harmful conditions." Under an occurrence policy, there can be no coverage for an event which does not occur during the policy period.
The Plaintiffs' claim of mental anguish did not accrue until August 11, 2009, the date Plaintiffs discovered that Katherine Bolden's body had allegedly been misplaced. This date was outside the effective dates of the policy, and Netherlands was not obligated to provide coverage for losses that occurred outside the policy period.
Plaintiffs contended that as a result of the breach, Netherlands was legally obligated to pay property damages for the loss of use of the burial lot, burial vault, internment rights, perpetual care of gravesite, and services that they paid for and did not receive. Netherlands countered that this property claim failed because: (1) the Exclusion barred coverage; (2) a cause of action did not accrue until the family learned of the alleged misplacement; (3) the body was never misplaced; (4) policy provisions j(6) and m(2) excluded coverage; and (5) recovery for breach of the burial contract was limited to one hundred dollars.
Even if this alleged loss accrued during the policy period, Netherlands alleged that there were exclusions in the policy that barred coverage. The exclusion stated:
Exclusions - this insurance does not apply to:
m. Damage to Impaired Property or Property Not Physically Injured
(2) A delay or failure by you (Cemetery) or anyone acting on your behalf to perform a contract or agreement in accordance with its terms.
The court found that Netherlands was correct that Provision m(2) excluded coverage.
Under m(2), there was no coverage under the policy for a delay or failure by the Cemetery to perform a contract. Therefore, Plaintiffs' property damage claims arising out of the alleged breach of the burial contract were barred because the policy did not provide coverage for instances in which the Cemetery breached a contract or agreement.
The Court declared the policy did not cover any of Plaintiffs' claims because:
1. Plaintiffs' property damage claims were barred by policy exclusions,
2. Plaintiffs' claims for bodily injury were barred because they fell outside of the policy period,
3. Plaintiffs' claim of interference with the burial of human remains was similarly barred; Plaintiffs could not have suffered damages until after the policy expired,
4. The claims for emotional distress and fraud were precluded because the policy did not provide coverage for intentional acts,
5. Plaintiffs did not allege a theory of recovery that fell within the policy,
6. Arguments regarding an extension of the policy period were unavailing, and
7. Plaintiffs' contract and negligence claims for burying the body in the wrong place were precluded by the Exclusion.
Finally, when read as a whole, the contract was unambiguous and had to be enforced as written.
As interesting as the facts of this case are - the claimed loss of the body of the plaintiffs' mother - it is a fairly direct insurance case where the parties seeking insurance coverage must prove that their damage occurred within the policy period and that the policy provided coverage for what allegedly caused damage. Plaintiffs failed and the insurer was granted summary judgment.
A Cemetery is obliged to fulfill the contract with the family of the deceased with knowledge that a failure can cause bodily injury and emotional distress. The potential for such a breach is the reason why Funeral Homes or Cemeteries Endorsement insurance is purchased.
It seems the wrong insurer was sued or that there was no insurer available at the time the Plaintiffs incurred emotional distress. Their attempts to drag Netherlands into the case to provide money for their injuries failed because the district court was willing to read the policy as written.
Reprinted with Permission from Zalma on Insurance, (c) 2011, Barry Zalma.
Barry Zalma, Esq., CFE, is a California attorney, insurance consultant and expert witness specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud. Mr. Zalma serves as a consultant and expert, almost equally, for insurers and policyholders. He founded Zalma Insurance Consultants in 2001 and serves as its senior consultant. He recently published the e-books, "Heads I Win, Tails You Lose - 2011," "Zalma on Rescission in California," "Zalma on Diminution in Value Damages," "Arson for Profit" and "Zalma on California Claims Regulations," "Murder and Insurance Fraud Don't Mix" and others that are available at Zalma Books.
Mr. Zalma can be contacted at Barry Zalma or email@example.com, and you can access his free "Zalma on Insurance Fraud" newsletter at Zalma's Insurance Fraud Letter.
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