Capital Mortg. Sols. v. The Cincinnati Ins. Co.

• Docket Number: 21-cv-10873
• Decision Date: 24 May 2023
• Parties: CAPITAL MORTGAGE SOLUTIONS, LLC, Plaintiff, v. THE CINCINNATI INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Michigan

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CAPITAL MORTGAGE SOLUTIONS, LLC, Plaintiff, v. THE CINCINNATI INSURANCE COMPANY, Defendant.

No. 21-cv-10873

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

May 24, 2023

Kimberly G. Altman, United States Magistrate Judge

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDUGMENT (ECF No. 15) AND DENYING PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT (ECF No. 17)

PAUL D. BORMAN, UNITED STATES DISTRICT JUDGE

INTRODUCTION

This case arises out of Plaintiff Capital Mortgage Solutions LLC's assertion that Defendant Cincinnati Insurance Company improperly denied coverage for water damage to Jason and Lauryn Curis' home. Now before the Court are both parties' Motions for Summary Judgment. For the reasons that follow, the Court will GRANT Defendant's Motion and DENY Plaintiff's Motion.

I. STATEMENT OF FACTS

The parties agree on the following facts.

Jason and Lauryn Curis own a home at 32451 Rockridge Lane in Farmington Hills, Michigan. (ECF No. 1, PageID 6.) The back of the home has a “paved patio” in between “a walkout basement” and an “elevated pool” and deck. (ECF No. 15 PageID 366; ECF No. 22, PageID 1330.) The back of the home also has “an extensive underground drain and pumping system to remove rainwater” from that area. (ECF No. 15, PageID 366; ECF No. 22, PageID 1330.)

Defendant Cincinnati Insurance Company “issued a homeowners insurance policy to Jason and Lauryn Curis on th[is] home” with “a policy period of March 15, 2020 to March 15, 2021.” (ECF No. 1, PageID 6; ECF No. 15, PageID 365; ECF No. 22, PageID 1329.)

The Policy came with the following exceptions (among others):

C....

4. “We” will not pay for “physical loss” resulting directly or indirectly by any of the following. Such “physical loss” is excluded regardless of any other cause or event contributing concurrently or in any sequence to the “physical loss”. These exclusions apply whether or not the “physical loss” event results in widespread damage or affects a substantial area. ...

c. Water, meaning:

(1) Flood, surface water, waves, including tidal wave and tsunami, tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind, including storm surge;

(2) Waterborne material carried or otherwise moved by any of the water referred to in C.4.c. (1); or

(3) Water or waterborne material which backs up through sewers or drains, except as provided in Section I, A.5. Additional Coverage o. Sewer or Drain Back Up.

(ECF No. 15-1, PageID 424.)

Section I, A.5.o, as modified by a Special Provisions Endorsement, provided:

“We” will pay for “physical loss” caused by water or waterborne material which backs through sewers or drains on the “residence premises”. A sewer or drain is a pipe connected to the plumbing system, a gutter or downspout, or other drainage pipe that serves to drain water or waste away from the “residence premises”. A back up does not include the inability of the sewer or drain to handle the amount of rainwater, surface water or groundwater trying to enter the sewer or drain.

(ECF No. 15-1, PageID 445.)

And the above-listed exception continued:

This Exclusion (C.4.c.) applies regardless of whether any of the above, in C.4.c. (1) through C.4.c. (3), is caused by an act of nature or is otherwise caused.

This Exclusion (C.4.c.) applies to, but is not limited to, escape, overflow, or discharge, for any reason, of water or waterborne material from a dam, levee, seawall or any other boundary or containment system.

However, direct loss by fire, explosion or theft resulting from any of the above, in C.4.c. (1) through C.4.c. (3), is covered.

(ECF No. 15-1, PageID 425.)

“On August 28, 2020, 3.7 inches of rain fell at the Curis house.” (ECF No. 15, PageID 36; ECF No. 15-4; ECF No. 22, PageID 1330.) The house's “drain and pumping system failed in whole or in part” and water “accumulated” on the patio and “eventually entered the [] basement under its [] doors and windows.” (ECF No. 15, PageID 367; ECF No. 22, PageID 1330.) Rainwater also “made its way into the basement at the front of the house.” (ECF No. 15, PageID 367; ECF No. 22, PageID 1330.)

Subsequently, the Curises filed a claim for reimbursement for water damage under their Policy with Cincinnati. (ECF No. 15, PageID 367.) On October 23, 2020, Cincinnati denied the claim, explaining:

Based upon our investigation and EFI's engineering report, the damage for which you make claim was caused by heavy rain in a short period of time which caused flooding and surface water that collected and migrated into your house and around your personal property. With regard to the water damage at the rear of your basement and basement patio, the volume of rainwater that fell during the peak flows exceeded the pumping capacity of your drainage system and your drainage system was unable to handle the volume of rainwater that collected. As outlined above, since the direct cause of the water damage for which you make claim was rain, flood and/or surface water, your Policy excluded coverage for your claimed loss or damage.

While the above-cited water exclusion contains a sewer or drain back up provision that gives back some coverage under certain circumstances, that give back does not apply here because the Policy expressly states that “A back up does not include the inability of the sewer or drain to handle the amount of rainwater, surface water or groundwater trying to enter the sewer or drain.” The drainage system was not able to handle the volume of water at the time of the loss. Your Policy makes clear that discharge or overflow of water from a sump, sump pump or related equipment is not covered either.

Moreover, the water exclusion cited above specifically provides that “physical loss” from flood and surface water is excluded “regardless of any other cause or event contributing concurrently or in any sequence to the ‘physical loss'. These exclusions apply whether or not the ‘physical loss' event results in widespread damage or affects a substantial area.” Accordingly, all damage for which you make claim is unfortunately not covered.

With regard to the water entering the basement at the front wall, that too is excluded by both the water and faulty, inadequate and/or defective workmanship and maintenance exclusions found in paragraphs (C)(1)(f) and (C)(4)(c) reproduced above. Although the faulty workmanship exclusion contains an ensuing “physical loss” give back that provides some limited coverage under certain circumstances where a Covered Cause of Loss ensues from an excluded cause of loss, in this case no Covered Cause of Loss ensued from faulty, inadequate or defective workmanship or maintenance.^[1]

(ECF No. 15-13, PagelD 693-94.)

On November 1, 2020, Jason Curis “assigned his rights to payment under the Cincinnati policy to Plaintiff Capital Mortgage Solutions.” (ECF No. 15, PageID 366; ECF No. 15-14; ECF No. 22, PageID 1330.)

II. PROCEDURAL HISTORY

On March 9, 2021, Capital filed a Complaint challenging Cincinnati's denial of coverage in the Oakland County Circuit Court. (ECF No. 1, PageID 5.) The Complaint contains three causes of action: 1) Breach of Contract; 2) Appraisal; and 3) Violations of the Michigan Uniform Trade Practices Act (MCL 500.2006). (ECF No. 1, PageID 7-9.)

On April 19, 2021, Cincinnati removed the case to this Court. (ECF No. 1.) That same day, Cincinnati answered the Complaint and asserted a counterclaim for a declaratory judgment:

A. Declaring the validity or non-validity of the assignment [from Curis to Capital];

B. [Declaring] [t]here is no coverage for Capital Mortgage Solutions, LLC's claim;

C. Declaring that appraisal and the appointment of appraisers and an umpire shall await a determination of the underlying coverage issues;

D. Declar[ing] the extent of Capital Mortgage Solutions, LLC's right to any proceeds;

E. Declar[ing] the extent of Capital Mortgage Solutions, LLC's interest in any proceeds;

F. Otherwise declaring the rights and obligations of the parties to the insurance contract;

G. Awarding [Cincinatti] its costs, attorneys' fees and litigation expenses in defending the action and prosecuting this matter; and

H. For such other and further relief as the Court shall deem just and equitable under the circumstances.

(ECF No. 2, PagelD 73-74.)

On June 21, 2021, both parties moved for Summary Judgment. (ECF Nos. 15, 17.) Between July 27 and 28, both parties responded to their counter-parties' motions. (ECF Nos. 20, 22.) And on August 10, Capital replied to Cincinnati's response. (ECF No. 23.) (Cincinnati did not file a reply.) The Court held a Hearing on the motions on May 22, 2023.

III. STANDARD OF REVIEW

Summary judgment is appropriate where the moving party demonstrates that there is no genuine dispute as to any material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); Fed.R.Civ.P. 56(a). “A fact is ‘material' for purposes of a motion for summary judgment where proof of that fact ‘would have [the] effect of establishing or refuting one of the essential elements of a cause of action or defense asserted by the parties.'” Dekarske v. Fed. Exp. Corp., 294 F.R.D. 68, 77 (E.D. Mich. 2013) (quoting Kendall v. Hoover Co., 751 F.2d 171, 174 (6th Cir. 1984)). And a dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986).

“In deciding a motion for summary judgment, the court must draw all reasonable inferences in favor of the nonmoving party.” Perry v. Jaguar of Troy, 353 F.3d 510 513 (6th Cir. 2003) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)). Still, the non-movant must produce enough evidence to allow a...