Walters Beach Condominium Assoc v. Home-Owners Insurance Company
335172
| Mich. Ct. App. | Nov 16, 2017Background
- A rainstorm on Aug 30, 2013 caused wind-driven rain to enter four condo units, producing interior water damage around walkout basement doors and ceilings.
- Walters Beach Condominium Association (plaintiff) submitted a claim under its Businessowners policy issued by Home-Owners Insurance (defendant).
- Defendant retained a forensic engineer (Ternullo) who concluded the intrusions occurred because of inadequate exterior construction (missing flashing/weep holes, improperly pitched limestone sills).
- Parties stipulated to the Ternullo findings: construction defects allowed wind-driven rain to penetrate and cause interior damage, and wind-driven rain is a covered cause of loss under the policy.
- Defendant denied coverage invoking several policy exclusions (defective construction, wear and tear, hidden/latent defects). The trial court granted summary disposition for defendant; the Court of Appeals reversed and remanded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the construction-defect exclusion bars coverage for interior water damage caused by wind-driven rain entering through defective exterior work | Coverage applies because wind-driven rain is a covered cause and the policy’s resulting-loss (ensuing-loss) language requires payment for ensuing damage | Exclusion for defective construction bars the claim because construction defects caused the loss | Held for plaintiff: the construction-defect exclusion bars repair of the defect itself but not resulting damage from a covered cause (wind-driven rain) under the policy’s resulting-loss clause |
| Whether the wear-and-tear exclusion precludes coverage | Damage resulted from wind-driven rain, not ordinary wear and tear | Damage was due to normal wear/tear of the property | Held for plaintiff: no evidence of ordinary wear and tear; exclusion not shown by defendant |
| Whether the hidden or latent defect exclusion precludes coverage | Some defects were open and observable; question of fact whether any hidden/latent defects caused the loss | Defects were hidden/latent so exclusion applies to bar coverage | Held: genuine factual dispute exists about which defects were hidden/latent; summary disposition improper |
| Whether the policy’s clause excluding “any quality in property that causes it to damage or destroy itself” applies | Defective construction merely permitted external wind-driven rain to enter; defect did not cause the property to self-destruct | Defect constituted an inherent quality causing damage | Held for plaintiff: exclusion inapplicable because an external covered cause (wind-driven rain) caused the interior damage, not an inherent self-destructive quality |
Key Cases Cited
- Mouzon v. Achievable Visions, 308 Mich. App. 415 (preservation rule for appellate review)
- Dell v. Citizens Ins. Co. of Am., 312 Mich. App. 734 (appellate review of legal questions when facts are developed)
- Spiek v. Dep’t of Transp., 456 Mich. 331 (standard of review for summary disposition)
- West v. Gen. Motors Corp., 469 Mich. 177 (summary disposition MCR 2.116(C)(10) standard)
- Corwin v. DaimlerChrysler Ins. Co., 473 Mich. 457 (insurance-contract interpretation reviewed de novo)
- Michigan Battery Equip., Inc. v. Emcasco Ins. Co., 317 Mich. App. 282 (if any policy exclusion applies, coverage is lost)