LEGAL SERVICES PLAN OF EASTERN MI V CITIZENS INS CO
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STATE OF MICHIGAN
COURT OF APPEALS
LEGAL SERVICES PLAN OF EASTERN
MICHIGAN,
UNPUBLISHED
April 30, 2009
Plaintiff-Appellant,
v
No. 278110
Genesee Circuit Court
LC No. 06-083314-CK
CITIZENS INSURANCE COMPANY OF
AMERICA,
Defendant/Cross-Plaintiff-Appellee,
and
ABBOTT CONSTRUCTION, INC.,
Defendant/Cross-Defendant,
and
WADE-TRIM MANAGEMENT, INC.,
Defendant/Cross-Defendant,
and
WADE-TRIM, INC.,
Defendant/Third-Party
Plaintiff/Cross-Plaintiff,
and
INDIANA INSURANCE COMPANY,
Third-Party Defendant.
Before: Wilder, P.J., and Markey and Talbot, JJ.
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PER CURIAM.
Plaintiff appeals as of right the order of the trial court granting summary disposition in
favor of defendant/cross-plaintiff-appellee, Citizens Insurance Company of America
(“Citizens”). On appeal, plaintiff argues that the trial court erred in granting summary
disposition in favor of Citizens because, under an insurance contract between plaintiff and
Citizens, Citizens was required to cover the cost of damage to plaintiff’s building caused by
construction in front of the building, and water damage to the building’s interior. We affirm.
The dispute in this case arises from an insurance policy issued to plaintiff by Citizens,
providing coverage of plaintiff’s business premises from September 6, 2002, to September 6,
2003. In late June 2003, the city of Flint began a construction project that involved replacing the
sidewalk and planting trees near plaintiff’s building. Abbott Construction, Inc. (“Abbott”),
performed the construction work, and Wade-Trim, Inc., oversaw the project. Plaintiff’s
basement, the east end of which ran under the sidewalk, was occupied by commercial tenants.
During the process of removing layers of concrete from the sidewalk, workers from Abbott and
Wade-Trim came into the basement several times, with plaintiff’s permission, to make sure that
nothing came through into plaintiff’s basement.
Although the concrete covering plaintiff’s basement was old and in bad shape, Abbott
employees apparently did not put down any type of waterproofing material to cover the opened
sidewalk before leaving for the holiday weekend of July 4, 2003. It rained very hard over the
weekend, and, on July 7, 2003, a large amount of water, about 20 inches deep, was discovered in
plaintiff’s basement. An engineer with Wade-Trim testified that a major storm had deposited a
large amount of rain in a short period of time, and, because the curb had been removed, “water
rushing off of the road and down the hill was able to spill off into this open area where there was
no curb and no sidewalk.” The water flowed downhill and through a hole in the wall of
plaintiff’s basement. The hole was apparently an old coal chute that had become unsealed during
the construction, possibly by a bulldozer.
Although multiple parties, including Abbott and Wade-Trim, participated in the lower
court proceedings, Citizens and plaintiff are the only parties to this appeal. Plaintiff argues that
the court erred in finding that exclusions in Citizens’ policy precluded coverage of the damage to
plaintiff’s building caused by water and “construction activity.” We disagree.
We review a trial court’s decision on a motion for summary disposition de novo. Rose v
Nat’l Auction Group, 466 Mich 453, 461; 646 NW2d 455 (2002). When reviewing a decision on
a motion for summary disposition pursuant to MCR 2.116(C)(10), we consider “the affidavits,
pleadings, depositions, admissions, and other documentary evidence submitted by the parties in
the light most favorable to the party opposing the motion.” Id. Summary disposition is
appropriate “if there is no genuine issue of regarding any material fact and the moving party is
entitled to judgment as a matter of law.” Id.
“Clear and specific exclusionary clauses must be given effect because an insurance
company cannot be liable for risks it did not assume,” and “[c]overage under a policy is lost if
any exclusion in the policy applies to an insured’s particular claims.” Hayley v Allstate Ins Co,
262 Mich App 571, 574; 686 NW2d 273 (2004), quoting Century Surety Co v Charron, 230
Mich App 79, 83; 583 NW2d 486 (1998). “When reviewing an exclusionary clause, we read the
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contract as a whole to effectuate the overall intent of the parties.” Hayley, supra at 575. “Where
the language is clear and unambiguous, the insurance policy must be enforced as written.” Id.
The relevant provisions of the insurance contract at issue are set forth in Citizens’
Insurance Policy, form CP 10 30 10 00, “CAUSES OF LOSS-SPECIAL FORM”:
A.
Covered Causes of Loss
When Special is shown in the Declarations, Covered Causes of Loss
means Risks of Direct Physical Loss unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C., Limitations;
that follow.
B.
Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any
of the following. Such loss or damage is excluded regardless of any other cause
or event that contributes concurrently or in any sequence to the loss.
***
g. Water
(1) Flood, surface water, waves, tides, tidal waves, overflow of any
body of water, or their spray, all whether driven by wind or not . . .
***
3. We will not pay for loss or damage caused by or resulting from any of
the following, 3.a. through 3.c. But if an excluded cause of loss that is listed in
3.a. through 3.c. results in a Covered Cause of Loss, we will pay for the loss or
damage caused by the Covered Cause of Loss.
a. Weather conditions. But this exclusion only applies if weather
conditions contribute in any way with a cause or event excluded in Paragraph 1.
above to produce the loss or damage.
b. Acts or decisions, including the failure to act or decide, of any
person, group, organization, or governmental body.
c. Faulty, inadequate or defective:
(1) Planning, zoning, development, surveying, siting:
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(2) Design, specifications, workmanship,
construction, renovation, remodeling, grading, compaction;
repair,
(3) Materials used in repair, construction, renovation or
remodeling; or
(4) Maintenance;
of part or all of any property on or off the described
premises.
***
C.
Limitations
The following limitations apply to all policy forms and endorsements,
unless otherwise stated.
1. We will not pay for loss of 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 and limited in this section.
***
c. The interior of any building or structure, or to personal property
in the building or structure, caused by or resulting from rain, snow, sleet, sand or
dust, whether driven by wind or not, unless:
(1) 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; or . . .
The trial court did not err in holding that there was no genuine issue of material fact with
respect to whether Citizens was required to pay for the water damage to plaintiff’s basement
because the policy’s “surface water” exclusion applies. Although “surface water” is not defined
in the policy, under Michigan case law, “‘[s]urface waters’ are defined as ‘waters on the surface
of the ground, usually created by rain or snow, which are of a casual or vagrant character,
following no definite course and having no substantial or permanent existence.’” Kernen v
Homestead Dev Co, 232 Mich App 503, 511 n 7; 591 NW2d 369 (1998), quoting Fenmode, Inc v
Aetna Casualty & Surety Co, 303 Mich 188, 192; 6 NW2d 479 (1942).
Here, the evidence establishes that rain collected on the ground surface and flowed into
plaintiff’s basement through an opening in the wall. When the rainwater fell on the street and
began to pool and flow, it became “surface water,” and did not cease to be surface water when it
flowed into plaintiff’s basement. Under Michigan case law, water ceases to be “surface water”
only “by percolation, evaporation, or by reaching some definite watercourse or substantial body
of water into which [it] flow[s].” Fenmode, supra. The trial court did not err in granting
summary disposition for Citizens because the policy specifically and unambiguously excludes
damage caused directly or indirectly by surface water.
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Plaintiff argues that the “water” exclusion does not preclude coverage in this case by
attempting to distinguish Vanguard Ins Co v Clarke, 438 Mich 463; 475 NW2d 48 (1991),
overruled in part on other grounds Wilkie v Auto-Owners Ins Co, 469 Mich 41, 58; 664 NW2d
776 (2003). In Vanguard, the Michigan Supreme Court considered a case in which this Court
applied the rule of “concurrent causation” to reverse summary disposition for the insurer. The
Supreme Court noted that a minority of courts in other jurisdictions had applied the theory “to
impose insurance liability notwithstanding an explicit policy exclusion” in cases involving “the
convergence of two or more causes of an indivisible injury to the insured,” and where “one of the
causes falls within the coverage of the insurance policy.” Id. at 466. The Supreme Court
reversed, finding that this Court had “erred in subordinating the explicit auto-related exclusion of
the insurance policy to the doctrine of concurrent causation.” Id. at 471. Plaintiff argues that
here, in contrast to Vanguard, the construction activity, which is a covered cause of loss, was the
single proximate cause of the damage to plaintiff’s building. However, as plaintiff
acknowledges, Vanguard simply held that, where an unambiguous exclusion applies, coverage is
precluded. In this case, coverage is precluded because the “surface water” exclusion applies.
Nor did the trial court err in granting summary disposition with respect to any damage to
plaintiff’s building caused by “construction activity.” This is an excluded cause of loss because
it is encompassed by the “acts or decisions” exclusion set forth in Special Form B.3.b. Under
that provision, Citizens is not required to pay for damage caused by “[a]cts or decisions,
including the failure to act or decide, of any person, group, organization, or governmental body.”
Because the construction activity constitutes “acts,” any damage caused by that activity is not
covered. If the construction activity had resulted in a covered cause of loss, Citizens would be
required to pay for the damage caused by the covered cause of loss; however, as already
discussed, surface water is not a covered cause of loss.
Finally, we agree with plaintiff that the exclusion for “weather conditions” does not
preclude coverage of the loss from water damage in this case, because that exclusion only applies
if weather conditions contributed with a cause or event excluded in Paragraph 1 of the Special
Form to produce the loss or damage, and none of the causes in Paragraph 1 are relevant here.
Similarly, the exclusion for faulty, inadequate or defective construction or renovation, B.3.c., is
not a basis for granting summary disposition for Citizens with respect to any damage caused by
the construction because whether the construction activity at issue in this case was “faulty,
inadequate or defective,” is a question of fact. However, “[c]overage under a policy is lost if any
exclusion in the policy applies to an insured’s particular claims.” Hayley, supra at 574.
Affirmed. Defendant, being the prevailing party, may tax costs pursuant to MCR 7.219.
/s/ Kurtis T. Wilder
/s/ Jane E. Markey
/s/ Michael J. Talbot
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