Cincinnati Insurance Company v. Thomas Kaeding II
332559
| Mich. Ct. App. | Jul 20, 2017Background
- Homeowner Thomas Kaeding owned an Ann Arbor house while living in Ohio; an upstairs bathroom water line separated, releasing water into the house for 27 days.
- Cincinnati Insurance Company denied coverage under a policy exclusion for “constant or repeated seepage or leakage of water or the presence or condensation of humidity, moisture or vapor, over a period of weeks, months or years” unless hidden and unknown.
- Plaintiff moved for summary disposition under MCR 2.116(C)(10), arguing the exclusion precluded coverage.
- Defendant cross-moved, arguing the terms “leakage” and “seepage” contemplate slow, low-volume events and do not cover the rapid, large-volume loss here.
- The trial court agreed with defendant, finding the exclusion targeted gradual damage from neglect or failure to maintain/occupy, not the flooding-like separation here, and granted summary disposition for defendant.
- The Court of Appeals affirmed, holding the exclusion did not apply because the event was a rapid, high-volume release rather than gradual leakage/seepage over weeks, months, or years.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy exclusion for "constant or repeated seepage or leakage... over a period of weeks, months or years" bars coverage for the 27-day water loss | Exclusion applies because loss is caused by water "leakage/seepage," so policy excludes coverage | "Leakage/seepage" implies gradual, low-volume events over long periods; this was a flooding-level, rapid release not contemplated by exclusion | Exclusion does not apply; the loss was a rapid, high-volume event, not gradual leakage/seepage over weeks/months/years |
| Proper construction of undefined policy term "leakage" | (Implicit) term should be read broadly to include this water loss | Term should be given its common meaning—gradual or low-volume leak—so exclusion inapplicable | Court adopts common meaning: "leak" = gradual or low-volume event; exclusion construed to target neglect/long-term discharge |
| Whether summary disposition was appropriate on these contract interpretation grounds | Policy language unambiguous and exclusion applies; summary disposition for plaintiff warranted | Ambiguity and factual context favor defendant; exclusion does not cover the event; summary disposition for defendant warranted | Affirmed trial court: summary disposition for defendant appropriate because exclusion did not apply |
| Whether exclusion, read as whole, targets homeowner neglect/failure to maintain/occupy | Exclusion intended to bar coverage of long-term seepage/leakage losses | Exclusion should not be used to deny coverage for sudden, substantial releases | Court agrees exclusion is aimed at long-term neglect-type losses, not the sudden flood here |
Key Cases Cited
- Schmalfeldt v. North Pointe Ins. Co., 469 Mich 422 (addresses de novo review of contract interpretation and summary disposition)
- Baker v. Arbor Drugs, Inc., 215 Mich App 198 (procedure for considering record on MCR 2.116(C)(10))
- Terrien v. Zwit, 467 Mich 56 (undefined contract terms read by their common meaning)
- McGrath v. Allstate Ins. Co., 290 Mich App 434 (insurance contract construed to give effect to all terms)
- Mich Battery Equip., Inc. v. Emcasco Ins. Co., 317 Mich App 282 (enforce contract and exclusions according to their terms)
- Century Sur. Co. v. Charron, 230 Mich App 79 (clear, specific exclusions given effect but construed in favor of insured)
- Skinner v. Square D Co., 445 Mich 153 (limits on factfinding/credibility at summary disposition)
- Shallal v. Catholic Social Servs. of Wayne Co., 455 Mich 604 (definition of genuine issue of material fact)