J & J Castor Grp. v. Home-Owners Ins. Co.

J & J CASTOR GROUP, INC., Plaintiff-Appellant, v. HOME-OWNERS INSURANCE COMPANY, Defendant-Appellee.

No. 354832

Court of Appeals of Michigan

August 19, 2021

UNPUBLISHED

Kent Circuit Court LC No. 18-002888-CB.

Before: Jonathan Tukel, P.J., and Kirsten Frank Kelly and Michael F. Gadola, JJ.

PER CURIAM.

Plaintiff J & J Castor Group, Inc., appeals as of right the order of the trial court granting defendant, Home-Owners Insurance Company, summary disposition under MCR 2.116(C)(10). We affirm.

I. FACTS

This case involves a dispute over insurance coverage for a commercial building. In 2010, plaintiff purchased a commercial building in Walker, Michigan. Plaintiff insured the building by purchasing from defendant a Tailored Protection Policy. In the event of damage to the building the policy provided coverage for the building as well as the business personal property located in the building, and permitted the insured to make a claim on an actual cash value basis. Thereafter, if the insured provided notice of the intent to rebuild to defendant within 180 days, the policy permitted a further claim for replacement cost value. The policy provided, however, that defendant was not obligated to make payment on a replacement cost basis for any loss or damage (1) until the lost or damaged property was actually repaired or replaced, and (2) unless the repairs or replacement were made as soon as reasonably possible after the loss or damage. Specifically, the policy provided in part:

G. OPTIONAL COVERAGES

* * *

3. Replacement Cost

* * *

c. You may make a claim for loss or damage covered by this insurance on an actual cash value basis instead of on a replacement cost basis. In the event you elect to have loss or damage settled on an actual cash value basis, you may still make a claim for the additional coverage this Optional Coverage provides if you notify us of your intent to do so within 180 days after the loss or damage.

d. We will not pay on a replacement cost basis for any loss or damage:

(1) Until the lost or damaged property is actually repaired or replaced; and

(2) Unless the repairs or replacement are made as soon as reasonably possible after the loss or damage.

On February 21, 2014, a portion of the roof of the building collapsed under the weight of snow and ice. Defendant paid plaintiff for the loss under the policy in the amount of $87, 965.61, which represented the actual cash value of the structure minus the deductible. Defendant also paid plaintiff $51, 784.07 representing the actual cash value of the business personal property, $12, 805 for demolition, $10, 695.76 for replacement of computers, $1, 674.80 for storage, and $725 for an engineering assessment.

With regard to the replacement cost value of the building, defendant determined that the portion of the building where the roof collapsed was an addition to the building which could be restored without impacting the rest of the structure. Defendant offered to pay plaintiff up to an additional $65, 266.34 in replacement costs, for a total of $153, 231.95 for repair and loss related to the structure (up to $65, 266.34 replacement cost value of the structure plus the $87, 965.61 in actual cost value of the structure already paid to plaintiff), but only if plaintiff actually repaired the building and incurred that amount or more to restore the building to its former condition.

According to defendant, plaintiff initially informed defendant of its intent to secure financing and to repair the damaged portion of the building. Defendant asserts that from 2014 through 2016, it repeatedly advised plaintiff of the contractual terms under which it would pay replacement cost value, but plaintiff did not undertake the repair of the building. At some point during this process, plaintiff informed defendant that instead of replacing the damaged section of the building, plaintiff planned to demolish the entire building and build a new, much larger structure. Defendant also asserts that plaintiff informed defendant that the new building plan had raised code enforcement issues with the City of Walker, which was causing additional expense and delay. By contrast, plaintiff asserts that the code enforcement issues were raised by the City of Walker after the partial collapse of the building roof and were unrelated to the expanded nature of the proposed project.^[1]

The policy also provided coverage for Business Income/Extra Expense, and included an endorsement for Ordinance or Law Coverage related to the increased cost of replacement or repair because of ordinance or law. According to defendant, in the fall of 2015, plaintiff informed defendant that in addition to seeking the replacement cost value of the building, it planned to present a claim to defendant for Business Income/Extra Expense, but did not do so. By letter dated June 17, 2016, defendant advised plaintiff that it would honor the replacement cost estimate of $153, 231.96 until March 30, 2017. When plaintiff had not undertaken the replacement of the damaged portion of the building by that date, defendant denied the claim for replacement cost value.

Plaintiff filed its complaint in this action on March 29, 2018, alleging that defendant breached the contract of insurance between the parties by failing to pay for plaintiff's loss in accordance with the policy terms. Defendant moved for summary disposition under MCR 2.116(C)(10), contending that under the policy it was not obligated to pay replacement cost value until and unless the property was actually repaired or replaced, and only if the repair or replacement was made as soon as reasonably possible after the loss or damage. Defendant also contended that plaintiff never provided documentation to support its claim of Business Income/Extra Expense, entitling defendant to summary disposition of that claim under MCR 2.116(C)(10). After a hearing, the trial court granted defendant's motion for summary disposition of plaintiff's claim for Business Income/Extra Expense, but denied defendant summary disposition of plaintiff's claim for the replacement cost value of the structure.

Defendant moved for reconsideration of the trial court's ruling on the issue of replacement cost value. Upon reconsideration, the trial court agreed that it had misapplied the precedent of Smith v Mich. Basic Prop Ins, 441 Mich. 181; 490 N.W.2d 864 (1992) to the issue of replacement cost value and granted defendant summary disposition of plaintiff's remaining claim. The trial court further held that plaintiff was not entitled to amend its complaint because to do so would be futile.

Plaintiff moved for reconsideration and sought leave to amend its complaint to seek declaratory relief. The trial court denied plaintiff's motion and again denied plaintiff leave to amend its complaint. Plaintiff now appeals.

II. DISCUSSION

A. SUMMARY DISPOSITION

Plaintiff contends that the trial court erred by granting defendant summary disposition under MCR 2.116(C)(10). Plaintiff argues that it should not be required to repair or replace the damaged building in this case as a condition precedent to obtaining replacement value from defendant because plaintiff was precluded from repairing and replacing the building by municipal regulations and by defendant's own refusal to pay replacement cost value. We disagree.

We review de novo a trial court's decision to grant or deny a motion for summary disposition. El-Khalil v Oakwood Healthcare, Inc, 504 Mich. 152, 159; 934 N.W.2d 665 (2019). This Court also reviews de novo questions regarding the proper interpretation and construction of an insurance policy. Gurski v Motorists Mut Ins Co, 321 Mich.App. 657, 665; 910 N.W.2d 385 (2017). A motion for summary disposition under MCR 2.116(C)(10) tests the factual sufficiency of a claim. El-Khalil, 504 Mich. at 160. Summary disposition under MCR 2.116(C)(10) is warranted when there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law. Id. When reviewing a motion for summary disposition granted under MCR 2.116(C)(10), this Court considers the documentary evidence submitted by the parties in the light most favorable to the nonmoving party, id., and will find that a genuine issue of material fact exists if "the record leaves open an issue upon which reasonable minds might differ." Johnson v Vanderkooi, 502 Mich. 751, 761; 918 N.W.2d 785 (2018) (quotation marks and citations omitted). The moving party has the initial burden to support its motion with documentary evidence, but once met, the burden shifts to the nonmoving party to establish that a genuine issue of material fact exists. AFSCME v Detroit, 267 Mich.App. 255, 261; 704 N.W.2d 712 (2005).

An insurance policy is a contractual agreement between the insurer and the insured, Farm Bureau Ins Co v TNT Equip, Inc, 328 Mich.App. 667, 672; 939 N.W.2d 738 (2019), and is subject to the same principles of construction as other contracts. Rory v Continental Ins Co, 473 Mich. 457, 461; 703 N.W.2d 23 (2005). When interpreting an insurance policy, the primary goal is to honor the intent of the parties to the policy. TNT Equip, Inc, 328 Mich.App. at 682. To ascertain the meaning of a contract, this Court gives the words used in the contract their plain and ordinary meaning. Rory, 473 Mich. at 464. If there is ambiguity in the contract, the ambiguity will be liberally construed against the insurer as the drafter of the contract. Morinelli v Provident Life & Accident Ins Co, 242 Mich.App. 255, 261-262; 617 N.W.2d 777 (2000). However, it is not possible for an insurer to be liable for a risk that it did not assume. Hunt v Drielick, 496 Mich. 366, 373; 852 N.W.2d 562 (2014).

Michigan law specifically recognizes an insurer's right to require...