Western Cas. and Sur. Group v. Coloma Tp.

• Court: Court of Appeal of Michigan
• Writing for the Court: PER CURIAM
• Citation: Western Cas. and Sur. Group v. Coloma Tp., 364 N.W.2d 367, 140 Mich.App. 516 (Mich. App. 1985)
• Decision Date: 01 April 1985
• Docket Number: Docket No. 71927
• Parties: WESTERN CASUALTY AND SURETY GROUP, Plaintiff-Appellee, v. COLOMA TOWNSHIP, Defendant-Appellant, and Richard Pearson, Defendant.

Page 367

364 N.W.2d 367

140 Mich.App. 516

WESTERN CASUALTY AND SURETY GROUP, Plaintiff-Appellee, v. COLOMA TOWNSHIP, Defendant-Appellant and Richard Pearson, Defendant.

Docket No. 71927.

Court of Appeals of Michigan.

Submitted Feb. 8, 1984.

Decided Feb. 5, 1985.

Released for Publication April 1, 1985.

Early, Lennon, Peters & Crocker by Ronald G. Tays, Kalamazoo, for plaintiff-appellee.

Hartwig, Crow, Jones & Postelli by F.A. Jones, St. Joseph, for Coloma Tp.

Before KELLY, P.J., and MAHER and REILLY ^*, JJ.

PER CURIAM.

John and Ellen LaRatta purchased an allegedly defective house from Melvin and Delores Mendenall in 1977. The house was constructed by the Mendenalls and was allegedly inspected and certified as being in compliance with the appropriate building codes by Coloma Township, through its former building inspector, Richard Pearson. As against the latter two parties, the LaRattas brought a complaint alleging that defendants acted fraudulently and negligently in failing to properly inspect the house during its construction and in representing the house as being in compliance with the building codes.

The township was insured under a policy issued by plaintiff herein, Western Casualty and Surety Group. Plaintiff undertook a defense to the LaRattas' suit under a reservation of rights agreement and brought this declaratory judgment action seeking a determination that the policy did not cover the claims asserted by the LaRattas and that plaintiff had no duty to defend that suit. The trial court found in favor of plaintiff, holding that the LaRattas' complaint against defendants herein did not allege an "occurrence" within the policy definition. A final order was entered June 9, 1983. Defendant township appeals as of right from that order.

The policy issued to the township provides in pertinent part:

"The company will pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of

"A. bodily injury or,

"B. property damage

"to which this insurance applies, caused by an occurrence, and the company shall have the right and duty to defend any suit against the insured seeking damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent, * * *

* * *

* * *

" 'occurrence' means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured;

* * *

* * *

" 'property damage' means (1) physical injury to or destruction of tangible property which occurs during the policy period, including the loss of use thereof at any time resulting therefrom, or (2) loss of use of tangible property which has not been physically injured or destroyed provided such loss of use is caused by an occurrence during the policy period."

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. Reurink Brothers Star Silo, Inc. v. Maryland Casualty Co., 131 Mich.App. 139, 142-143, 345 N.W.2d 659 (1983). The Court in The Detroit Edison Co. v. Michigan Mutual Ins. Co., 102 Mich.App. 136, 141-142, 301 N.W.2d 832 (1980), summarized the insurer's duty as follows:

"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.)

We must now decide whether any of the theories of recovery pled in the LaRattas' complaint are covered by the policy.

Counts I and II of the complaint allege fraud and intentional misrepresentation. These counts allege that defendants made false representations with knowledge of their falsity, or with reckless disregard of their truth or falsity, and with the intent that the LaRattas would rely on and be deceived thereby. This Court agrees with the trial court that Counts I and II allege intentional acts on the part of the insured which cannot be considered accidents within the policy definition of occurrence. Guerdon Industries, Inc. v. Fidelity & Casualty Co. of New York, 371 Mich. 12, 18-19, 123 N.W.2d 143 (1963); Frankenmuth Mutual Ins. Co. v. Kompus, 135 Mich.App. 667, 678-679, 354 N.W.2d 303 (1984).

Count III of the LaRattas' complaint alleges that the township and Mr. Pearson were negligent in failing to properly inspect the premises and supervise construction of the house so as to insure that it complied with the building codes. The trial court interpreted the policy definition of "occurrence" as requiring that the insured's alleged negligent acts caused the property damage. The court concluded that coverage did not exist under the policy for the claims asserted because the alleged negligent inspection was merely an indirect and remote cause of...