PLYMOUTH UNITED CHURCH OF CHRIST CONGREGATIONAL v. PHILADELPHIA INDEMNITY INSURANCE COMPANY (2024)

OPINION AND ORDER DENYING CROSS-MOTIONS FOR SUMMARY JUDGMENT (ECF NO. 13, 14)

Before the Court are the cross-motions for summary judgment of Plaintiff Plymouth United Church of Christ (Congregational) a/k/a Plymouth Congregational United Church of Christ (“Plymouth”) and Defendant Philadelphia Indemnity Insurance Company (“PIIC”). ECF No. 13, 14. This action involves a dispute over insurance benefits to cover damage sustained at Plymouth's property. Both motions have been fully briefed and the Court held oral argument on June 7, 2024. The Court finds that a genuine issue of material fact remains, precluding summary judgment. Therefore, both Motions for Summary Judgment (ECF No. 13, 14) are DENIED.

I.

Plymouth owns and operates a church located in Detroit, Michigan. The property is insured under the terms of insurance policy no. PHPK228945 (“the Policy”) issued by PIIC. ECF No. 13-1, 14-1. The Policy covers both the building and Plymouth's personal property located within the church. ECF No. 14-2, PageID.864. On June 25 and 26, 2001, a historic rainstorm occurred in the metro Detroit area resulting in 6-8 inches of rain falling in a 24-hour period. ECF No. 13 at PageID.448-9; ECF No. 14 at PageID.837, ¶4. As a result, water from the sewer system backed up, inundating the church's basement, and overflowing its drains. ECF No. 13 at PageID.449; ECF No. 14 at PageID.837, ¶5. An unquantifiable amount of water also entered the building through doors, concrete walls, and joints between the wall and slab of the building. ECF No. 13 at PageID.837, ¶6. The church suffered extensive damage to the interior of the building and the personal property within the church, resulting in Plymouth submitting a claim for the damage to PIIC. Id. at PageID.837, ¶7.

PIIC paid $50,000 under the Policy's Elite Property Enhancement coverage and denied any further liability. ECF No. 13 at PageID.451; ECF No. 14 at PageID.838, ¶¶ 8, 11. The Elite Property Enhancement states, in part:

v. Water

Water is included as a covered cause of loss. We will not pay more than $50,000 in any one occurrence.

1. Water means:

a. Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;

b. Mudslide or mudflow;

c. Water under the ground surface pressing on, or flowing or seeping through:

(1) Foundations, walls, floors or paved surfaces;

(2) Basements, whether paved or not; or

(3) Doors, windows or other openings.

ECF No. 4-1, PageID.299.¹ The Elite Property Enhancement section also purports to amend the Causes of Loss section in that it says, “In the Causes of Loss Form, Section B. Exclusions, 1.g. Flood is deleted in its entirety.” Id.

The “Flood Exclusion” states, in relevant part:

B. Exclusions

1. We will not pay for “loss” caused directly or indirectly by any of the following. Such “loss” is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the “loss”.

* * *

g. “Flood”

Id. at PageID.258-59. In a later section of the Causes of Loss Form, “flood” is defined as:

3. “Flood” means

a. Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not; or

b. Mudslide or mudflow.

Id. at PageID.266-67.

The Policy also includes an endorsement titled “Limitations on Fungus, Wet Rot, Dry Rot, and Bacteria.” In this endorsement, the Causes of Loss Form, Section E. Additional Coverage Extension is amended to include the following:

A. Coverage

* * *

2. a. We will also pay for loss or damage by “fungus,” wet or dry rot or bacteria that is the result of one or more of the following causes that occurs during the policy period. Coverage applies only if all reasonable means were used to save and preserve the property from damage at the time of and after that occurrence.

(1) A “specified cause of loss” other than fire or lightning;

(2) Water that backs up or overflows from a sewer, drain or sump; or

(3) Water under the ground surface pressing on, or flowing or seeping through:

(a) Foundations, walls, floors or paved surfaces

(b) Basements, whether paved or not;

(c) Doors, windows or other openings; or

(4) “Flood,” if the Flood Endorsement applies to the affected premises.

Id. at PageID.289 (italics and underlining added).

After being denied coverage beyond the $50,000 under the Elite Property Enhancement endorsement, Plymouth instituted an action in state court alleging breach of the parties’ insurance contract. See generally ECF No. 1-2. Plymouth sought compensation for the actual loss, an order to have its actual cash value set by appraisal, incidental and consequential damages incurred, and 12% interest. Id. PIIC removed this matter to federal court and filed its Answer. ECF No. 1; ECF No. 4. Subsequently, PIIC moved for summary judgment on the ground that the policy language does not allow for additional coverage above the $50,000 under the Elite Property Enhancement endorsement. ECF No. 13. Plymouth also moved for summary judgment on the grounds that it was entitled to coverage for the actual loss, because none of the policy exclusions exclude damage caused by water that backs up from the sewer or overflows sewers or drains. ECF No. 14.

II.

A motion for summary judgment under Federal Rule of Civil Procedure 56 shall be granted “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A genuine dispute of material fact exists when there are “disputes over facts that might affect the outcome of the suit under the governing law.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). “[F]acts must be viewed in the light most favorable to the nonmoving party only if there is a ‘genuine’ dispute as to those facts.” Scott v. Harris, 550 U.S. 372, 380, 127 S.Ct. 1769, 167 L.Ed.2d 686 (2007). “Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986).

Once the movant satisfies its initial burden of demonstrating the absence of any genuine issue of material fact, the burden shifts to the nonmoving party to set forth specific facts showing a triable issue of material fact. Scott, 550 U.S. at 380, 127 S.Ct. 1769; Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The nonmoving party “must do more than simply show that there is some metaphysical doubt as to the material facts,” Scott, 550 U.S. at 380, 127 S.Ct. 1769 (quoting Matsushita, 475 U.S. at 586, 106 S.Ct. 1348), as the “mere existence of some alleged factual dispute between the parties will not defeat an otherwise properly supported motion for summary judgment.” Scott, 550 U.S. at 380, 127 S.Ct. 1769 (quoting Anderson, 477 U.S. at 247–248, 106 S.Ct. 2505); see also Babcock & Wilcox Co. v. Cormetech, Inc., 848 F.3d 754, 758 (6th Cir. 2017) (“A mere scintilla of evidence or some metaphysical doubt as to a material fact is insufficient to forestall summary judgment.”); Midtown Inv. Grp. v. Massachusetts Bay Ins. Co., No. CV 20-10239, 2021 WL 3164274, at *2 (E.D. Mich. July 27, 2021).

When evaluating cross-motions for summary judgment, the Court must “evaluate each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration.” Taft Broad. Co. v. United States, 929 F.2d 240, 248 (6th Cir. 1991). “The fact that both parties have moved for summary judgment does not mean that the court must grant judgment as a matter of law for one side or the other; summary judgment in favor of either party is not proper if disputes remain as to material facts.” Id. (citations omitted).

III.

The Parties’ dispute in this case revolves around each of their interpretations of the insurance contract. Each has filed a motion for summary judgment arguing that their understanding of the Policy entitles them to judgment as a matter of law. The main question at issue in each motion for summary judgment is what coverage Plymouth is entitled to for damage sustained when water seeped through doors/walls and sewer water backed up through drains and pipes, following a severe rain event.

PIIC's Motion for Summary Judgment (ECF No. 13) argues that Plymouth is not entitled to any additional coverage beyond the $50,000 allowed under the Elite Property Enhancement. ECF No. 13 at PageID.445. They argue that the words of the contract mean what they say, and “water” is only covered up to $50,000. Id. Plymouth's Motion for Summary Judgment (ECF No. 14), however, argues that the Policy's language is ambiguous and should be construed in favor of the insured – stating that the Elite Property Endorsement's definition of “water” does not include “water that backs up or overflows from a sewer, drain or pump” as the Policy identifies that as a separate and distinct peril, covered under the Policy's blanket Building and Business Personal Property coverage limits. ECF No. 16 at PageID.1041, 1046.

Michigan law clearly denotes that insurance contracts are interpreted in accordance with Michigan's well-established principles of construction. Frankenmuth Mut. Ins. Co. v. Masters, 460 Mich. 105, 111, 595 N.W.2d 832, 837 (1999). Insurance contracts are to be read as a whole, and the Court is to give meaning to each of the terms therein. Singer v. Am. States Ins., 245 Mich. App. 370, 374, 631 N.W.2d 34, 37 (2001). The goal of contract interpretation is to honor the intent of the parties. Auto-Owners Ins. Co. v. Churchman, 440 Mich. 560, 566, 489 N.W.2d 431 (1992). Courts are to enforce contracts as written, so long as they are not ambiguous. Allstate Ins. Co. v. Fick, 226 Mich. App. 197, 201-02, 572 N.W.2d 265 (1997). A contract is ambiguous when “a fair reading of the entire contract of insurance leads one to understand that there is coverage under particular circumstances and another fair reading of it leads one to understand there is no coverage under the same circumstances ․” Raska v. Farm Bureau Ins. Co., 412 Mich. 355, 362, 314 N.W.2d 440, 441 (1982). “Accordingly, if two provisions of the same contract irreconcilably conflict with each other, the language of the contract is ambiguous.” Klapp v. United Ins. Grp. Agency, Inc., 468 Mich. 459, 467, 663 N.W.2d 447, 453 (2003).

“It is well settled that the meaning of an ambiguous contract is a question of fact for the jury.” Id. at 469, 663 N.W.2d 447 (citing Hewett Grocery Co. v. Biddle Purchasing Co., 289 Mich. 225, 236, 286 N.W. 221 (1939)). Where the meaning of a contract is obscure and its construction cannot be determined by the terms alone, the question of interpretation should be submitted to the jury with proper instruction. Id. Juries are entitled to consider relevant extrinsic evidence to determine the parties’ intent in interpreting a policy's meaning. Id.

Evaluating each motion for summary judgment and viewing the facts in the light most favorable to the non-moving party, the Court finds that the Policy is ambiguous and capable of conflicting interpretations. On the one hand, consistent with PIIC's motion for summary judgment, it can be interpreted that the Elite Policy Enhancement limits coverage. By amending the Cause of Loss Form to delete the Flood Exclusion, the Elite Policy Enhancement was simply an addition of coverage for any damage resulting from “water” up to $50,000. The fact that the definitions of “flood” and “water” are the same supports this notion. Compare ECF 4-1 at PageID.266-67 with ECF No. 4-1 at PageID.289. The Court further finds support in the argument that there can be no doubt that the rain event caused a flood that backed up the sewer system. ECF No. 13 at PageID.449; ECF No. 14 at PageID.837, ¶5. Consequently, any damage done to the property caused by the flood is limited. The Policy's intent was not to distinguish between damage caused by sewage backup or damage caused by water seepage or surface water – when the flood caused both. Flood is flood – no matter how it enters the property – therefore, coverage is limited to $50,000.

On the other hand, consistent with Plymouth's motion, the Elite Policy Enhancement's lack of inclusion of sewage backup or “water that backs up or overflows from a sewer, drain or sump” in the definition of “water.” See ECF No. 4-1 at PageID.299. This exclusion leads the Court to conclude that sewage backup is not limited, and therefore it is covered under the blanket Building and Business Personal Property coverage limits (which are much greater than $50,000). Id. at PageID.234-235. This conclusion is supported by the argument that the Policy considers “water that backs up or overflows from a sewer, drain or sump,” distinctly different from “flood” in the section relating to coverage for fungus, wet/dry rot, and bacteria. Id. at PageID.289. Reading the Policy as a whole, Flood and sewage backup are separate and distinct perils, extending coverage to them independently. Singer, 245 Mich. App. at 374, 631 N.W.2d 34; see also Front Row Theatre, Inc. v. Am. Mfr's Mut. Ins. Companies, 18 F.3d 1343, 1347-1348 (6th Cir. 1994) (treating sewer backup/overflow distinct from surface water caused by flood). This interpretation also finds support in the argument that the Policy would not otherwise exclude sewage backup outside of the confines of this dispute. See ECF No. 14-6, PageID.993 (Deposition of S. Sabouni stating (1) that the Policy does not contain an exclusion for water that backs up or overflows from a sewer, drain or pump; and (2) “If the flood had not occurred that started this whole process, yes, I would agree with you that the sewer backup would be covered.”). If sewage backup is not expressly excluded, then it should not now be excluded by the operation of the Elite Property Enhancement which does not explicitly define water as sewage backup. Under these terms, the Policy would not limit coverage for the damage to $50,000, and the Policy would pay for damage subject to the general Building and Personal Property Coverage.

Given these conflicting interpretations and ambiguities, the parties’ intent must be determined to resolve this matter. The record, currently before the Court, is inadequate to do so. The Court is therefore left with a material dispute as to the key issue in this case – coverage under the policy. Consequently, in resolving such a question of fact, a jury should decide the issue and is entitled to consider relevant extrinsic evidence to determine the meaning of the Policy and the intent of the parties. Klapp, 468 Mich. at 469, 663 N.W.2d 447.

The parties also raise arguments in support of their motions that the Court cannot resolve until the threshold question of coverage is determined. For example, Plymouth argues that absent anti-concurrent causation language, loss caused by a combination of surface water and sewage backup requires coverage. See ECF No. 16 at PageID.1041-44. This necessarily requires determining whether sewage backup is different from surface water under the Policy. Plymouth also argues that when two coverages with different limits contribute to a loss, the coverage with the greater limit applies. See id. at PageID.1044-52. Again, resolving this question requires knowing how sewage backup is covered, if at all.

PIIC argues that other policy exclusions (the “Acts and Decisions,” the “Faulty, Inadequate or Defective,” “Utility Services,” and the “Weather Conditions” Exclusions) further bar coverage for the damages. See ECF No. 17, PageID.1092-94. As argued by Plymouth, these exclusions are subject to an ensuing/resulting loss clause, which first requires determining whether the loss is a covered cause of loss – which remains a disputed question of fact. Because the Court finds a material dispute in the issue of coverage for sewage backup after a significant rain event to be materially in dispute, it cannot grant judgment in favor of either party on these ancillary arguments.

IV.

The Court finds the language of the Policy is ambiguous, which creates a genuine dispute of material fact that should be left to the jury to decide. Klapp, 468 Mich. at 459, 663 N.W.2d 447. Additionally, even considering the facts in the light most favorable to PIIC, the Court finds that until the ambiguity of coverage relating to the sewage backup is resolved, the other policy exclusions relatedly create issues of material fact. Consequently, the cross-motions for summary judgment are denied on the meaning of the contract and whether coverage extends to an amount above the $50,000 already provided under the Elite Property Enhancement.

Accordingly, Defendant's Motion for Summary Judgment (ECF No. 13) is DENIED and Plaintiff's Motion for Summary Judgement (ECF No. 14) is also DENIED.

IT IS SO ORDERED.

FOOTNOTES

1.   Despite attaching the insurance policy or excerpts therefrom to their briefs, both parties cite to ECF 4-1 to reference the relevant sections of the Policy. The Court will, therefore, use this citation format.

BRANDY R. MCMILLION, United States District Judge