A United States Court of Appeals ruled that an insurance policy's sublimit for code-compliance costs applied since the insurer did not have the duty to advise, nor did the insured have reasonable reliance on the insurer's statements. The case is Piatt Lake Bible Conference Ass'n v. Church Mut. Ins. Co., 2026 LX 12241 (6th Cir. Jan. 2026).
Background
Piatt Lake Bible Conference Association (PLBCA) is a nonprofit religious organization that has owned and operated around 18 buildings in Michigan since the 1940s, including the Miracle Building. It was a two-story building that contained an auditorium, dining hall, kitchen, and other rooms.
Having been built in 1973, the building lacked many features that modern building codes now require, such as a fire-suppression system, an elevator, wheelchair ramps, central heating, and a pump-fed septic system.
In March 2020, the Miracle Building collapsed under the weight of accumulated snow and ice. PLBCA filed an insurance claim with Church Mutual, with whom they had a blanket commercial property insurance policy that insured all of PLBCA's buildings up to $3,571,200 per occurrence. However, the policy contained a sublimit of $100,000 for construction costs related to compliance with any ordinance, law, or code.
PLBCA contracted with Nomad Construction Company to design and rebuild the building, who estimated the cost at $3.7 million. Church Mutual calculated the replacement cost at around $2.3 million. The huge difference in estimates is attributed to the construction company including the cost of code-compliance, while the insurer limited code-compliance costs to $100,000.
Legal History
Church Mutual paid $100,000 for code-compliance costs. PLBCA sued for the remaining $1.3 million difference between the two estimates in a Michigan state court.
PLBCA alleged intentional misrepresentation and fraudulent inducement, promissory estoppel, silent fraud, negligent misrepresentation regarding complete coverage, and innocent misrepresentation.
PLBCA alleged that even if the policy limited code-compliance coverage, the actions of Church Mutual should make the company liable for costs exceeding that limit.
Church Mutual removed the case to federal court and filed for summary judgment. A district court found that PLBCA failed to show both duty and reliance—two factors required to prove the claims of fraud, misrepresentation, and promissory estoppel. PLBCA appealed to the Court of Appeals.
US Court of Appeals
PLBCA alleged that based on three prior interactions with Church Mutual in the past, there was a reasonable belief that PLBCA was fully covered for all rebuilding costs, including code-compliance upgrades, and that Church Mutual was liable in tort. Church Mutual responded that there was a lack of duty and a lack of reliance in their relationship with PLBCA.
Duty to Advise
Under Michigan law, the insurer-insured relationship is fundamentally contractual in nature. An insurance agent typically owes no common law duty to advise a policyholder about coverage gaps, so long as there is no special relationship.
A special relationship only exists between an insurer and an insured in four scenarios: "(1) the agent misrepresents the nature or extent of the coverage offered or provided, (2) an ambiguous request is made that requires a clarification, (3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate, or (4) the agent assumes an additional duty by either express agreement with or promise to the insured."
PLBCA argued that the second and third scenarios applied to all three of the prior interactions they had with Church Mutual. The first was a Church Mutual brochure that stated, "One of the first steps of our relationship is a detailed, on-site risk and insurance needs analysis. Our specialists will measure your building(s) to establish replacement values based on current construction costs. And we'll ask about your programs and activities to identify exposures. The information we gather forms the basis of your customized proposal."
However, the court found that there was no indication that the brochure was provided in response to a request or inquiry, so it did not satisfy the second or third special relationship trigger. The brochure was marketing material and not personalized advice.
The second interaction was the phone and email communications between PLBCA board member Dennis Lintemuth and Church Mutual agent Stephen Loos in 2014. Lintemuth asked whether the policy 100% covered PLBCA so that there would be no "under valued problem with any potential claim in the future." Loos responded that the policy covered replacement costs and that "the limits should protect [PLBCA] fully on each building."
Lintemuth would later testify that the questions concerned the blanket nature of the policy and whether the $3.5 million limit would cover the total value of all of PLBCA's buildings.
He also said he understood Loos's assurances to mean that PLBCA could rebuild "the same building" with the same features it already had. The court found that there was no ambiguous request made, nor did Loo give inaccurate advice, so again, none of the special relationship triggers applied.
The final interaction was a 2019 meeting with PLBCA board president Vicky Welty and Church Mutual agent Beth Kroeger. Welty asked if PLBCA was fully covered with replacement coverage for each of the buildings. She did not remember the exact response by Kroeger, but Welty testified she felt "very comfortable coming out of that meeting that [PLBCA was] well taken care of." Welty thought fully covered meant if something happened to one of the buildings, its rebuild would be fully covered.
The court found that if there's no record of an actual representation, there can be no inaccurate advice given. Once again, none of the special relationship criteria were triggered, meaning the insurer did not have a duty to advise. The insured also has an obligation to read the policy and raise questions concerning coverage.
Reasonable Reliance
For PLBCA's claims of intentional misrepresentation or fraudulent inducement, silent fraud, negligent misrepresentation, and innocent misrepresentation to succeed, they would have to prove reasonable reliance on the alleged misrepresentation.
The court found, however, that under Michigan law, "when a written contract, with an integration clause, expressly contradicts a defendant's allegedly fraudulent representations not contained in the contract, a plaintiff's reliance on such representations cannot be reasonable."
The court determined that the contract unambiguously limited code-compliance coverage to $100,000. Any representation that suggested there was no limit contradicts what is expressly stated in the policy, and reliance on that representation is unreasonable.
The court again reiterated that policyholders are obligated to have read their policies and be aware of the extent of coverage provided. PLBCA President Welty admitted she never attempted to read the policy, so she could not claim to have reasonably relied on statements that conflicted with its terms.
The court found that PLBCA did not show that Church Mutual had a duty to advise, nor did they prove that they reasonably relied on Church Mutual's representations, and affirmed the district court's grant of summary judgment.
Editor's Note
The biggest lesson from this case is that insureds should, at the very minimum, read their insurance policy and understand the coverage provided. Policies can be complicated and ambiguous at times, but in this case, the court found that the code-compliance sublimit was expressly stated in the policy. Insureds with older buildings should be particularly aware of any code-compliance sublimit—in this case, the difference between rebuilding the original building and rebuilding one that was code-compliant was $1.4 million.
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