Reurink Bros. Star Silo, Inc. v. Maryland Cas. Co., Docket No. 64975

• Decision Date: 16 March 1984
• Docket Number: Docket No. 64975
• Citation: 345 N.W.2d 659,131 Mich.App. 139
• Parties: REURINK BROTHERS STAR SILO, INC., Plaintiff-Appellant, v. MARYLAND CASUALTY COMPANY, a Foreign Corporation, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 659

345 N.W.2d 659

131 Mich.App. 139

REURINK BROTHERS STAR SILO, INC., Plaintiff-Appellant, v. MARYLAND CASUALTY COMPANY, a Foreign Corporation, Defendant-Appellee.

Docket No. 64975.

Court of Appeals of Michigan.

Submitted Aug. 3, 1983.

Decided Dec. 19, 1983.

Rehearing Denied Feb. 9, 1984.

Released for Publication March 16, 1984.

Dilley, Dewey & Waddell, P.C. by Jonathan S. Damon, Grand Rapids, for plaintiff-appellant.

Smith, Haughey, Rice & Roegge by Constance J. Grzanka, Grand Rapids, for defendant-appellee.

Before V.J. BRENNAN, P.J., and SHEPHERD and QUINNELL, ^* JJ.

SHEPHERD, Judge.

Plaintiff sought a declaratory judgment that its potential liability to a third party was covered by an insurance policy issued to plaintiff by defendant and that defendant was contractually bound to defend the plaintiff in a suit against plaintiff filed by the third party. Plaintiff also sought reimbursement for legal defense costs already incurred. Both plaintiff and defendant moved for summary judgment on stipulated facts. In its order of May 24, 1982, the trial court granted defendant's motion and denied plaintiff's motion. Plaintiff appeals as of right.

In May, 1974, plaintiff contracted to construct a silo containing a bottom-end unloader-feeder on the farm of Clare and Berniece Feldpausch. On September 25, 1979, the Feldpausches brought suit against plaintiff, alleging damages caused by plaintiff's breach of contract and negligence. An amended complaint based on the same causes of action was filed on March 31, 1981.

Subsequent to the initiation of the suit against it by the Feldpausches, plaintiff demanded coverage and defense of that lawsuit from defendant, its insurer. Defendant refused coverage and also refused to provide a defense to the lawsuit. Plaintiff then filed this action against defendant seeking a declaratory judgment that the Feldpausches' claims against it were covered by its insurance policy with defendant and that defendant was required under the provisions of that policy to provide plaintiff a defense to the Feldpausches' suit. Plaintiff also sought reimbursement for its legal expenses incurred in the defense of the Feldpausches' suit resulting from defendant's failure to provide a defense.

On May 24, 1982, the trial court issued an order denying plaintiff's and granting defendant's motion for summary judgment. In its opinion of May 7, 1982, the trial court held that none of the claims asserted against plaintiff by the Feldpausches were covered by the insurance policy issued by the defendant.

On appeal, plaintiff contends that the trial court erred in concluding that the Feldpausches' claims were clearly excluded from coverage under the terms of the policy. We agree with plaintiff.

The duty of an insurance company to provide a defense to a lawsuit brought against its insured is separate and severable from its duty to indemnify the insured for liability imposed after trial. Dochod v. Central Mutual Ins. Co., 81 Mich.App. 63, 67, 264 N.W.2d 122 (1978). Furthermore, it is not necessary that all claims which are brought against the insured in the suit be covered by the policy. If there are any theories of recovery that fall within the policy, the insurer owes a duty to defend the suit. Dochod, supra, p. 67, 264 N.W.2d 122. As was said in Space Conditioning, Inc. v. Insurance Co. of North America, 294 F.Supp. 1290, 1293 (ED Mich, 1968):

"The insurer is under a duty to defend if the complaint alleges facts constituting a cause of action within the insurance coverage, even if other facts constituting causes of action not covered by the policy are also alleged."

The rule regarding an insurer's duty to defend was elaborated on by this Court in Detroit Edison Co. v. Michigan Mutual Ins. Co., 102 Mich.App. 136, 141-142, 301 N.W.2d 832 (1980):

"The duty of the insurer to defend the insured depends upon the allegations in the complaint of the third party in his or her action against the insured. This duty is not limited to meritorious suits and may even extend to actions which are groundless, false, or fraudulent, so long as the allegations against the insured even arguably come within the policy coverage. An insurer has a duty to defend, despite theories of liability asserted against any insured which are not covered under the policy, if there are any theories of recovery that fall within the policy. Dochod v Central Mutual Ins Co, 81 Mich App 63; 264 NW2d 122 (1978). The duty to defend cannot be limited by the precise language of the pleadings. The insurer has the duty to look behind the third party's allegations to analyze whether coverage is possible. Shepard Marine Construction Co v Maryland Casualty Co, 73 Mich App 62; 250 NW2d 541 (1976). In a case of doubt as to whether or not the complaint against the insured alleges a liability of the insurer under the policy, the doubt must be resolved in the insured's favor. 14 Couch on Insurance 2d, § 51:45, p 538." (Emphasis in original.)

In the instant case, both parties moved for summary judgment pursuant to GCR 1963, 117.2(3). Neither party now contends that a material issue of fact exists. This appeal is based solely on the question of whether the trial court erred as a matter of law in holding that none of the Feldpausches' claims against plaintiff were arguably covered by plaintiff's insurance policy issued by defendant.

Defendant does not contend that the Feldpausches' claims do not fall within the general coverage provisions of the policy. Rather, it claims that they are clearly excluded from coverage by exclusion (m) of the policy which reads as follows:

"This insurance does not apply: * * * (m) to loss of use of tangible property which has not been physically injured or destroyed resulting from

"(1) a delay in or lack of performance by or on behalf of the named insured of any contract or agreement, or

"(2) the failure of the named insured's products or work performed by or on behalf of the named insured to meet the level of performance, quality, fitness or durability warranted or represented by the named insured;

"but this exclusion does not apply to loss of use of other tangible property resulting from the sudden and accidental physical injury to or destruction of the named insured's products or work performed by or on behalf of the named insured after such products or work have been put to use by any person or organization other than an insured; * * *."

The relevant portions of the Feldpausches' amended complaint are contained in Count I, sections II, III, and IV. Sections II and III allege that plaintiff breached its contract with the Feldpausches and that plaintiff was negligent in the installation of the bottom-end unloader system. Section IV alleges, in six numbered paragraphs, the damages the Feldpausches allegedly sustained "as a result of [instant plaintiff's] negligence in this matter".

"1. Additional cost to feed his dairy herd during the time the silo was inoperable and while it was being replaced at [Feldpausches'] cost by another functional system.

"2. Approximately 1000 hours of [Feldpausch's] own labor to attempt to get the unloader system working sufficiently to take out enough...