American & Foreign Ins. Co. v. Allied Plumbing & Heating Co., Docket No. 9925

• Decision Date: 26 October 1971
• Docket Number: No. 3,Docket No. 9925,3
• Citation: 36 Mich.App. 561,194 N.W.2d 158
• Parties: AMERICAN AND FOREIGN INSURANCE CO., a corporation authorized to do business in the State of Michigan, Subrogee of Indian Hills Apartments, Inc., a Michigan corporation, Plaintiff-Cross-Appellee, v. ALLIED PLUMBING & HEATING COMPANY, a Michigan corporation, and Badger Construction Company, a Michigan corporation, Defendants, Third-Party Plaintiffs-Appellees, and Cross-Appellants, v. LONDON & LANCASHIRE INSURANCE COMPANY, Limited, Third-Party Defendant- Appellant
• Court: Court of Appeal of Michigan — District of US

Page 158

194 N.W.2d 158

36 Mich.App. 561

AMERICAN AND FOREIGN INSURANCE CO., a corporation authorized

to do business in the State of Michigan, Subrogee

of Indian Hills Apartments, Inc., a Michigan corporation, Plaintiff-Cross-Appellee, v. ALLIED PLUMBING & HEATING COMPANY, a Michigan corporation, and Badger Construction Company, a Michigan

corporation, Defendants, Third-Party Plaintiffs-Appellees, and Cross-Appellants, v. LONDON & LANCASHIRE INSURANCE COMPANY, Limited, Third-Party

Defendant- Appellant.

Docket No. 9925.

Court of Appeals of Michigan, Division No. 3.

Oct. 26, 1971.

Rehearing Denied Dec. 15, 1971.

Released for Publication Feb. 10, 1972.

Leave to Appeal Denied Feb. 29, 1972.

Allaben, Massie, Vander Weyden & Timmer, Sam F. Massie, Jr., Grand Rapids, for London & Lancashire.

Cholette, Perkins & Buchanan, Grant J. Gruel, Grand Rapids, for Allied Plumbing & Heating.

Smith, Haughey & Rice, David O, Haughey, Grand Rapids, for Badger Constr. Co.

Schmidt, Smith & Howlett, Richard L. Spindle, Grand Rapids, for American & Foreign Ins. Co.

Before FITZGERALD, P.J., and BRONSON and T. M. BURNS, JJ.

FITZGERALD, Presiding Judge.

This cause arose from a fire in apartment building B of the Indian Hills Apartments in Grand Rapids on January 20, 1969. At the time of the fire, the building was still under construction.

On or about January 15, 1969, Mr. Jacobson, representing Indian Hills Apartments, told Mr. Dobie, his independent insurance broker, that building B was nearing completion and that it should be added to the 'permanent' policy issued by American and Foreign Insurance Company. It had been insured under a builder's risk policy issued by London and Lancashire Insurance Company during construction.

After the fire, American settled the claim with Indian Hills, became its subrogee, and commenced action against Badger and Allied. Badger was the general building contractor for building B and Allied was its subcontractor. American alleged negligence on the part of Allied in starting the fire and negligence on the part of Badger in selecting its subcontractor.

Badger and Allied brought a third-party action against London alleging that if they were liable, any judgment should be paid by London under the builder's risk policy.

London denied coverage, and by stipulation, the third-party action was heard by the court, sitting without a jury. The trial court found that the builder's risk policy issued by London was in full force and effect as to the burned building. From that finding, London filed a claim of appeal on July 23, 1970. Badger and Allied filed claims of cross-appeal on August 6, 1970.

Although not noted in the briefs, the record indicates that the original suit has since gone to trial; and a jury returned a verdict on February 3, 1971, in favor of American Insurance in the amount of $210,814.67 against Badger, and a verdict of no cause of action against Allied. Badger thereupon, on February 19, 1971, moved for a directed verdict or, in the alternative, a judgment notwithstanding the verdict; moved for a mistrial, moved for a new trial, and moved that judgment be entered against London and Lancashire Insurance Company. At the time of filing in this Court, the motions have not yet been heard by the trial court.

Despite the multitude of issues raised at trial and in this appeal, the crux of the question resolves itself to whether the London policy was in force as to building B at the time of the fire.

Appellant London's arguments with respect to the question of the completion of the building, the lack of an insurable interest on the part of Badger and Allied, and the 'other insurance' provisions are without merit. The question of whether building B was completed within the meaning of the policy issued by London is an odd mixture of questions of law and fact. There is ample evidence in the record to support the finding that there was still a great deal of work to be done in building B before the building would be totally completed. While there was evidence that a few of the apartments in building B were already occupied, the fact that there is occupancy is merely supportive of a finding of, but does not conclusively compel a finding of, completion. See Hendrix v. New Amsterdam Casualty Company (CA 10, 1968), 390 F.2d 299. Ordinarily a building is not 'completed' until it is ready for the use or occupancy for which it was intended, and is not 'occupied' until it is put to a practical and substantial use for which it was designed. See 94 A.L.R.2d 221, § 10, pp. 240--247.

In the instant case, there would not appear to be such substantial occupancy as to amount to 'completion' as a matter of law. It would not appear that it can be said that the trial court's determination that the building was not 'complete' within the meaning of the policy was clearly erroneous. Had London wished their coverage to terminate because of Any occupany, they should have used restrictive language to that effect rather than 'while in the course of construction'.

Appellant's contention that Badger and Allied lacked an insurable interest in building B at the time of the fire is equally without merit. A contractor of a building under construction has an insurable interest in the building. See 3 Couch on Insurance (2d ed), § 24.29, p. 112; 94 A.L.R.2d 221, § 6, pp. 234--237; see, also, Atlantic Insurance Company v. Massey (CA 10, 1967), 381 F.2d 520. It would not appear that the trial court was clearly erroneous in determining that Badger and Allied had an insurable interest in building B at the time of the fire, even though Badger and Allied did not suffer any immediate out-of-pocket expenses.

By the same token, the 'other insurance' provision of the London policy is not applicable to the instant case, in that the American policy did not cover Badger's and Allied's interest and the American policy was not payable to Badger and Allied, who were named insureds under the London policy. Since the American policy did not cover the same insurable interests as the London policy, the 'excess coverage' provisions do not apply. See Lubetsky v. Standard Fire Insurance Company (1922), 217 Mich. 654, 187 N.W. 260; McCoy v. Continental Insurance Company (1949), 326 Mich. 261, 40 N.W.2d 146; Atlantic Insurance Company...