Kalamazoo Acquisitions v. Westfield Ins. Co.

266 F.Supp.2d 675

KALAMAZOO ACQUISITIONS, L.L.C., Plaintiff, v. WESTFIELD INSURANCE COMPANY, INC., Defendant.

No. 1:02-CV-564.

United States District Court, W.D. Michigan, Southern Division.

June 10, 2003.

COPYRIGHT MATERIAL OMITTED

Mark E. Kreter, Kreis, Enderle, Callander & Hudgins, Battle Creek, MI, for Plaintiff.

Mark G. Cooper, Cardelli, Hebert & Lanfear, PC, R. Carl Lanfear, Jr., Royal Oak, MI, for Defendant.

OPINION

ENSLEN, District Judge.

This matter is before the Court on the motion of Plaintiff Kalamazoo Acquisitions, L.L.C. ("Kalamazoo"), and on the motion of Defendant Westfield Insurance Company, Inc. ("Westfield"), for summary judgment. The motions have now been fully briefed and oral argument is unnecessary in light of the extensive briefing and the questions presented. For the reasons which follow, Plaintiffs motion will be granted and Defendant's motion will be denied pursuant to Federal Rule of Civil Procedure 56.

FACTS

Plaintiff owned and managed a multitenant commercial building, known as the Kalamazoo City Centre Building, which was in the process of renovation. The purpose of this project was to renovate a number of connected buildings. As part of the project, the ceiling of the top floor had to be raised. Continental Construction Company ("Continental") was the contractor hired by Plaintiff to raise the ceiling. To accomplish this, the existing roof was left in place while the new roof was constructed. To support the new roof, holes were cut in the existing roof, through which 12 steel support columns were lowered into place.

On or about February 25, 2001, a heavy rainstorm caused water to enter the building through the holes. Although the contractors attempted to cover the holes with plastic visqueen, the material failed to divert the water towards the drainage system as intended, causing substantial damage to the interior of the building.

Plaintiff filed an insurance claim with Westfield pursuant to the Commercial Property Insurance contract between the parties, policy number CSP3506130 ("policy"). Plaintiff also made an insurance claim against Continental for damages and ultimately settled its claim with Continental pre-suit for $208,188.00.

Westfield denied Plaintiffs insurance claim and is seeking summary judgment on the grounds that the policy excluded coverage from the damage that occurred and that Kalamazoo breached the contract by reaching a settlement with Continental and releasing Continental from further claims without notifying Westfield. Kalamazoo is seeking summary judgment on the ground that the terms of the Additional Coverage-Collapse section of the policy expressly covers the damage in question and thus, there is no genuine issue of material fact as the policy should be enforced as written. It is apparent from the briefing that neither party is disputing facts pertaining to the loss, but both are disputing coverage under the pertinent policy language.

STANDARD FOR SUMMARY JUDGMENT

Review of a motion for summary judgment requires the Court to determine if there is no genuine issue as to any material fact such that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c). The Court must consider the record as a whole by reviewing all pleadings, depositions, affidavits, and admissions on file. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The facts are to be considered in a light most favorable to the non-moving party, and "... all justifiable inferences are to be drawn in his favor." Schaffer v. A.O. Smith Harvestore Prod., Inc., 74 F.3d 722, 727 (6th Cir.1996) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)) (other citations omitted).

Once the movant satisfies his/her burden of demonstrating the absence of a genuine issue of material fact, the non-moving party must come forward with specific facts showing that there is a genuine issue for trial. Kramer v. Bachan Aerospace Corp., 912 F.2d 151, 153-54 (6th Cir.1990). The non-moving party may not rest on its pleadings but must present "specific facts showing that there is a genuine issue for trial." Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (quoting Fed.R.Civ.P. 56(e)). It is the function of the Court to decide "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505. The question is "whether a fairminded jury could return a verdict for the [non-moving party] on the evidence presented." Id. at 252, 106 S.Ct. 2505.

LEGAL ANALYSIS

Defendant requeste summary judgment on the following grounds: (1) the policy excludes coverage for damage caused by rain unless the building or structure first sustains damage by a covered loss through which the rain enters; and (2) Kalamazoo waived Westfield's subrogation rights. However, the second ground upon which the Defendant seeks summary judgment has been conceded by the defense as stated in Plaintiffs Brief in Support of Motion for Summary Judgment and does not need to be considered.¹ Conversely, Plaintiff requests summary judgment on the ground that the terms of the Additional Coverage-Collapse portion of the policy expressly covers the damage occurring on or about February 25, 2001.

INTERPRETING THE POLICY

Federal trial courts sitting in diversity apply the forum state's choice of law. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941). When interpreting the terms of the policy, the Court must therefore apply principles developed by the courts of the state of Michigan. Vandenbark v. Owens-Illinois Glass Co., 311 U.S. 538, 543, 61 S.Ct. 347, 85 L.Ed. 327 (1941).

Insurance policies are held to be the same as any other contract, "[i]t is an agreement between the parties in which a court will determine what the agreement was and effectuate the intent of the parties." Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 489 N.W.2d 431, 433-434 (1992). When interpreting an insurance contract, a court must construe clear and unambiguous provisions according to the plain and ordinary meaning of the terms used in the policy. Trierweiler v. Frankenmuth Mut. Ins. Co., 216 Mich. App. 653, 550 N.W.2d 577, 579 (1996). Any clause in an insurance policy is valid as long as it is clear, unambiguous and does not contravene public policy. Raska v. Farm Bureau Mut. Ins. Co., 412 Mich. 355, 314 N.W.2d 440, 441 (1982). Where a policy is clear, "courts are bound by the specific language set forth in the agreement." Heniser v. Frankenmuth Mut. Ins. Co., 449 Mich. 155, 534 N.W.2d 502, 504 (1995). If an insurance contract sets forth definitions, the policy language must be interpreted according to those definitions. Cavalier Mfg. Co. v. Employers Ins. of Wausau (On Remand), 222 Mich. App. 89, 564 N.W.2d 68, 70-71 (1997). Finally, the burden of proof lies with the insured to show that the damage suffered was covered by the terms of the insurance policy. Williams v. Detroit Fire & Marine Ins. Co., 280 Mich. 215, 273 N.W. 452, 453 (1937); Fire Ins. Exch. v. Diehl, 450 Mich. 678, 545 N.W.2d 602, 609 (1996).

GENERAL COVERAGE

The relevant portion of the policy reads:

We will not pay for loss or damage to property, as described and limited in this section. In addition, we will not pay for any loss that is a consequence of loss or damage as described in this section ... we will not pay for loss or damage to the interior of any building or structure, or to property in the building or structure, caused by or resulting from rain, snow, sleet, ice, sand, or dust, whether driven by wind or not, unless the building or structure first sustains damage by a covered cause of loss to its roof or walls through which the rain, snow, sleet, ice, sand, or dust enters.

(Def.'s Brief for Summ. J., Ex. A, "LIMITATIONS" section of policy). The relevant question is whether the term "roof covers the existing roof in its condition on or about February 25, 2001. Plaintiff contends that the existing roof and the plastic tents incorporate the "roof as defined in the policy, while Defendant contends that the incomplete structure does not fall within the definition of a "roof as stated in the policy. Because the term is susceptible to two or more reasonable interpretations, the language is ambiguous and therefore it is necessary to look elsewhere for interpretive guidance. D'Avanzo v. Wise & Marsac, 223 Mich.App. 314, 565 N.W.2d 915, 918 (1997). There is a lack of binding case law regarding this particular issue. Nonetheless, there is some case law that provides useful guidance.

Plaintiff relies on the holding in Victory Peach Group, Inc. v. Greater New York Mut. Ins. Co., 310 NJ.Super. 82, 707 A.2d 1383, 1386-1387 (1998). In that case, the New Jersey Superior Court's Appellate Division reasoned that a roof which was under repair by building troughs on it to divert water was nonetheless a roof for purposes of a similar policy provision. The parties do not raise, and therefore this Court will not address, the issue of whether this is an "all-risk" or "named peril" policy as distinguished in Victory Peach Group, 707 A.2d at 1384-1385.

Victory Peach Group, supra, is distinguishable from this case in that the roof there was not in the process of replacement but only in the process of repair through the addition of troughs. It was thus a completed roof with some improvements in progress. Holesapple v. Aetna Cos. & Sur. Co., 2002 WL 749198, *7 (Cal. Ct.App. Apr. 29, 2002). However, the instant case is dealing with an uncompleted roof in the process of being replaced, not a permanent roof in the process of improvements. Id. at *7. Therefore, this was a risk outside the scope of the policy, as the policy clearly meant that the damage had to result from the...