Katz v. Safeco Insurance Company

Filing 39

OPINION AND ORDER DENYING 12 Plaintiff's Motion for Summary Judgment and GRANTING 11 Defendant's Motion for Summary Judgment. Signed by District Judge Terrence G. Berg. (AChu)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
CLARA KATZ,

Plaintiff,
Case No. 15-10405
HON. TERRENCE G. BERG

v.
SAFECO INSURANCE COMPANY OF
AMERICA,
Defendant.

/

OPINION AND ORDER DENYING PLAINTIFF’S MOTION FOR SUMMARY
JUDGMENT (DKT. 12) AND GRANTING DEFENDANT’S MOTION FOR
SUMMARY JUDGMENT (DKT. 11)
In August 2014, a record flood hit the Detroit area and damaged Plaintiff
Clara Katz’s home. During the cleanup and remediation effort, asbestos was
released, further damaging her personal property and home. Plaintiff sought and
received coverage for flood damages, but is also seeking coverage for the asbestosrelated damages under a home insurance policy she obtained from Defendant
Safeco Insurance Company of America (“Safeco”). Because Safeco disagrees that
this loss is covered under the policy, Plaintiff filed this lawsuit on December 22,
2014. (Dkt. 1, Ex. A). Presently before the Court are the parties’ cross-motions for
summary judgment. For the reasons explained below, Plaintiff’s motion for
summary judgment (Dkt. 12) is DENIED and Safeco’s motion for summary
judgment (Dkt. 11) is GRANTED.

I.

FACTUAL AND PROCEDURAL HISTORY

Plaintiff resides at 25115 Ridge Cliff Drive in Southfield, Michigan.
(Complaint, Dkt. 1, Ex. A, p. 1). On November 10, 2013, Plaintiff obtained a yearlong home insurance policy from Safeco, policy number OK6067898, that ran from
November 10, 2013 to November 10, 2014. (Dkt. 12, Ex. 1).
In August 2014, heavy rains hit the Metro Detroit area and led to a discharge
of water from a sump pump or sump well into Plaintiff’s basement. (Dkt. 12, p. 1).
Plaintiff claims that the water badly damaged her home and its contents. (Dkt. 1,
Ex. A, p. 2). On August 11, 2014, Plaintiff filed a claim with Safeco for damages
caused by the water discharge (the “water and sewer damage” claim). (Dkt. 14, p.
3). Safeco determined that Plaintiff was entitled to recover insurance proceeds
under the insurance policy’s “escape of water from a sump” coverage and paid
Plaintiff $25,000—the full policy limit under this coverage. (Dkt. 12, Ex. A). In
addition, Safeco paid Plaintiff five percent of the $25,000 limit ($1,250) according to
the policy’s additional coverage for debris removal. (Id.)
Plaintiff then hired non-party ServPro to clean up the water and to remediate
the damage to her home. (Dkt. 1, Ex. A, p. 2). During the cleanup, ServPro tore out
a tile floor that allegedly contained asbestos. (Id.) Plaintiff contends that ServPro
did not check for the presence of asbestos prior to removing the tile, and did not
have authorization to remove the tile; Plaintiff maintains that these actions
violated local, state, and federal laws. (Id.) Plaintiff claims that the removal of the
tile floor caused the asbestos to become airborne, posing a hazard to her health and
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damaging her personal property and home. (Id. at pp. 2-4) (“the claim of KATZ [sic]
for the Asbestos damages . . . is applicable relative to the structure and content.”).
Plaintiff subsequently contacted Safeco to report a new and separate claim
for asbestos damage. (Id. at p. 3). In November 2014, Safeco verbally informed
Plaintiff’s public adjuster, Howard Tkatch, that it considered Plaintiff’s asbestos
claim to be a part of her water and sewer damage claim, for which it had already
paid Plaintiff the $25,000 policy limit. (Safeco’s Notice of Declination of Coverage,
March 16, 2015, Dkt. 11, Ex. B, p. 2).
On December 22, 2014, Plaintiff filed suit against Safeco in the Oakland
County Circuit Court1 raising a single breach of contract count. Safeco timely
removed the suit to this Court on January 30, 2015 based on diversity jurisdiction.
(Dkt. 1). On May 1, 2015, the parties filed cross-motions for summary judgment.
Following full briefing, the Court held oral argument on November 10, 2015.
II. ANALYSIS
A. Standard of Review
“Summary judgment is appropriate if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with any affidavits, show that
there is no genuine issue as to any material fact such that the movant is entitled to
a judgment as a matter of law.” Villegas v. Metro. Gov't of Nashville, 709 F.3d 563,
568 (6th Cir. 2013); see also Fed. R. Civ. P. 56(a). A fact is material only if it might
affect the outcome of the case under the governing law. See Anderson v. Liberty
1

Case No. 2014-144711-CB.

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Lobby, Inc., 477 U.S. 242, 249 (1986). On a motion for summary judgment, the
Court must view the evidence, and any reasonable inferences drawn from the
evidence, in the light most favorable to the non-moving party. See Matsushita Elec.
Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citations omitted);
Redding v. St. Edward, 241 F.3d 530, 531 (6th Cir. 2001).
“As the moving parties, the defendants have the initial burden to show that
there is an absence of evidence to support [plaintiff’s] case.” Selhv v. Caruso, 734
F.3d 554 (6th Cir. 2013); see also Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986).
Once the moving party has met its burden, the non-moving party “‘may not rest
upon its mere allegations or denials of the adverse party’s pleadings, but rather
must set forth specific facts showing that there is a genuine issue for trial.’”
Ellington v. City of E. Cleveland, 689 F.3d 549, 552 (6th Cir. 2012) (citing Moldowan
v. City of Warren, 578 F.3d 351, 374 (6th Cir.2009)). In this case, both parties are
moving for summary judgment and bear the burden to show there is no genuine
issue of material fact and that they are entitled to judgment as a matter of law.
B. Discussion
“In this action arising under federal diversity jurisdiction, we apply the
substantive law of Michigan, as the forum state.” Berrington v. Wal-Mart Stores,
Inc., 696 F.3d 604, 607 (6th Cir. 2012). The first issue that Plaintiff raises is
whether Safeco has waived its defenses under the insurance policy. “In Michigan,
there is a general rule that denial of liability under an insurance policy on specified
grounds constitutes a waiver of other defenses.” Provident Life & Acc. Ins. Co. v.
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Adie, 176 F.R.D. 246, 249 (E.D. Mich. 1997). In Provident Life, the court declined to
apply the general rule where the defendant raised the defenses in its answer and, in
so doing, provided the plaintiff with notice of these defenses at an early stage of the
litigation. Id. Similarly, here there are no grounds to find that Safeco waived its
defenses under the insurance policy as it raised them in its answer to Plaintiff’s
complaint. Plaintiff was on notice of these defenses and had the opportunity to
address them in her pleadings. The Court will thus consider whether Safeco is
bound to pay for Plaintiff’s losses under the insurance policy.
Under Michigan law, insurance contracts are interpreted according to the
traditional rules of contract interpretation. McGrath v. Allstate Ins. Co., 290 Mich.
App. 434, 439 (2010). “The proper interpretation of a contract is a question of law.”
Wilkie v. Auto-Owners Ins. Co., 469 Mich. 41, 47 (2003). “[T]he primary goal of
contract interpretation is to ascertain and effectuate the intent of the contracting
parties.” City of Grosse Pointe Park v. Michigan Mun. Liab. & Prop. Pool, 473 Mich.
188, 218 (2005). Courts read insurance contracts as a whole and must “give effect to
every word, clause, and phrase.” Id.
“When interpreting insurance contracts, the Court must first determine if the
policy language is ambiguous.” Triple Inv. Grp., L.L.C. v. Hartford Steam Boiler
Inspection & Ins. Co., 71 F. Supp. 3d 733, 738 (E.D. Mich. 2014). “An insurance
contract is ambiguous if provisions are subject to more than one meaning.”
McGrath, 290 Mich. App. at 439. “Ambiguities in the policy are construed against

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the insurer, who is the drafter of the contract.” Singer v. Am. States Ins., 245 Mich.
App. 370, 374 (2001).
If a court finds the policy language clear and unambiguous, it “must enforce
the specific language of the contract.” McGrath, 290 Mich. App. at 439. “The
language of the contract is to be given its ordinary, plain meaning and technical,
constrained constructions should be avoided.” Singer, 245 Mich. App. at 374.
“A generally recognized principle of insurance law is that the burden of proof
lies with the insured to show that the policy covered the damage suffered.” Pioneer
State Mut. Ins. Co. v. Dells, 301 Mich. App. 368, 378 (2013) (quoting Solomon v.
Royal Maccabees Life Ins. Co., 243 Mich. App. 375, 379 (2000)). “While the burden
of proving coverage is on the insured, it is incumbent on the insurer to prove that an
exclusion to coverage is applicable.” Id. Although courts construe insurance
exclusion clauses strictly and narrowly, they must “enforce clear and unambiguous
exclusions in insurance policies.” Realcomp II, Ltd. v. Ace Am. Ins. Co., 46 F. Supp.
3d 736, 741 (E.D. Mich. 2014).
Plaintiff asserts that the asbestos claim is a separate and distinct claim from
her water and sewer damage claim because ServPro was not responding to the flood
damage when it tore out the tile floor, exposing the harmful asbestos. Her principal
argument is that the insurance policy’s Building Ordinance or Law Coverage—an
additional policy coverage under the policy—encompasses her asbestos claim. This
coverage states in full:

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7. Building Ordinance or Law Coverage. We will pay for
damage to Building Property We Cover resulting from a
covered cause of loss in compliance with any ordinance or law
that regulates the construction, repair or demolition of the
property.
This coverage does not apply unless you choose to repair or
rebuild your property at its present location.
We do not cover:
a. the loss in value to any covered building or other
structure due to the requirements of any ordinance or law;
or
b. the costs to comply with any ordinance which requires any
insured or others to test for, monitor, clean up, remove,
contain, treat, detoxify or neutralize, or in any way
respond to, or assess the effects of, pollutants or
contaminants. However, for purposes of Building
Ordinance or Law Coverage, pollutants or
contaminants shall not include asbestos or materials
containing asbestos or lead.
You may use all or part of this ordinance or law coverage to pay
for the increased costs you incur to remove debris resulting from
the construction, demolition, remodeling, renovation, repair or
replacement of property as stated above.
The limit of liability shown in your Policy Declarations is the
most we will pay for the total of all loss or costs for Building
Property We Cover, regardless of the number of locations or
number of claims made.
This is an additional amount of insurance.
(Additional Property Coverages, Dkt. 17, Ex. A, p. 8; Michigan Special Provisions,
Dkt. 17, Ex. A, p. 1) (emphasis in original). Plaintiff seeks coverage for damages to
her personal property and home. The Court will address each type of damage in
turn.
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1. Plaintiff’s personal property losses
As a threshold matter, the Building Ordinance or Law Coverage does not
cover Plaintiff’s damaged personal property because it only extends to “building
property we cover.” The policy defines “building property we cover” to include the
Plaintiff’s dwelling and attached structures. (Property Coverages, Dkt. 17, Ex. A, p.
1). Personal property is not included in “building property we cover,” and is
therefore not covered under the Building Ordinance or Law Coverage.
Plaintiff also argues that her personal property losses should be covered
under Coverage C, which does govern personal property. However, Coverage C does
not cover personal property losses that are “caused directly or indirectly by any of
the Building Property Losses We Do Not Cover.” (Coverage C, Dkt. 17, Ex. A, p. 4).
Section I of the policy states that it covers building property losses caused by
“accidental direct physical loss to property . . . except as limited or excluded.” The
policy excludes building property losses due to pollution or contamination. It states,
in relevant part:
7. Pollution or Contamination, meaning the existence of or the actual,
alleged, or threatened discharge, dispersal, seepage, migration, release,
escape, emission, transmission, or absorption of pollutants or
contaminants at any time except as provided by Additional Property
Coverages—Household Products Coverage under Section I—
Property Coverages.
(Id. at p. 2) (emphasis in original). In its definitions section, the policy defines
“pollutants or contaminants” to include “asbestos or any materials containing
asbestos[.]” (Definition 3(k)(3), Dkt. 17, Ex. A, p. 23). Because the policy explicitly
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declines to provide coverage for building property losses due the asbestos, Plaintiff
cannot recover for any asbestos-related damage to her personal property under
Coverage C.
2. Plaintiff’s building property losses
The Court next turns to whether Plaintiff is entitled to coverage for building
property losses under the Building Ordinance or Law Coverage. The Building
Ordinance or Law Coverage provides coverage for (1) “damage to Building Property
We Cover,” (2) “resulting from a covered cause of loss,” (3) “in compliance with any
ordinance or law that regulates the construction, repair or demolition of the
property.”2 (Additional Property Coverages, Dkt. 17, Ex. A, p. 8). Plaintiff meets
the first element insofar as she is claiming damage to her personal residence.
The next requirement for this coverage is that the damage to Plaintiff’s
residence must be “resulting from a covered cause of loss.” Only certain losses are
“covered” under the policy, however. For example, the policy expressly excludes
building property losses caused directly or indirectly by pollutants or contaminants.
The policy defines the term pollutant or contaminant to include asbestos—meaning
that damage to building property caused directly by asbestos contamination is not a

In general, building law and ordinance provisions provide coverage for “government-mandated
requirements. In most cases, these will be statutes or regulations enacted by a state or the federal
government or ordinances adopted at the city or local level.” Scott G. Johnson, Insurance Coverage
for Building Code Upgrades, 44 Tort Trial & Ins. Prac. L.J. 1031, 1036 (2009). Following the Court’s
request for supplemental briefing, Plaintiff provided evidence of at least two laws regulating the
repair and construction of structures that contain asbestos, including a regulation from the
Occupational Safety and Health Administration (“OSHA”) under 29 C.F.R. § 1926.1101(a)(3), and
the Michigan Asbestos Abatement Contractors Licensing Act under Mich. Comp. Laws § 338.3101 et.
seq.
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covered cause of loss. (See Exclusion Number 7 under “Building Property Losses
We Do Not Cover,” Dkt. 17, Ex. A, at p. 2).
Plaintiff relies on language in the Building Ordinance or Law Coverage
contained in the “Additional Property Coverages” section of the policy to argue that
asbestos contamination is in fact a covered cause of loss, but this reliance is
misplaced. The portion of the Building Ordinance or Law Coverage that Plaintiff
point to provides as follows:
We do not cover:
b. the costs to comply with any ordinance which requires
any insured or others to test for, monitor, clean up,
remove, contain, treat, detoxify or neutralize, or in any
way respond to, or assess the effects of, pollutants or
contaminants. However, for purposes of Building
Ordinance or Law Coverage, pollutants or
contaminants shall not include asbestos or materials
containing asbestos.
(Michigan Special Provisions, Dkt. 17, Ex. A, p. 1) (emphasis in original). This
provision removes asbestos and lead from the definition of pollutants or
contaminants “for purposes of Building Ordinance or Law Coverage[.]” The purpose
of the Building Ordinance or Law Coverage is to cover costs incurred in complying
with laws or ordinances that regulate “the repair or construction of a building.”
Johnson, Insurance Coverage for Building Code Upgrades, 44 Tort Trial & Ins. Prac.
L.J. at 1036. The key phrase in the Building Ordinance or Law Coverage that
defeats Plaintiff’s claim that it provides coverage for her asbestos clean-up efforts is
the limiting language “resulting from a covered cause of loss.”
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The Building Ordinance or Law Coverage only applies to asbestos clean-up
required by law if the damage at issue results from a covered cause of loss. The
release of asbestos contaminants, of itself, is expressly excluded—that is, it is
specifically defined as not a covered cause of loss—under the “Building Property
Losses We Do Not Cover” Section. (Exclusion 7, Dkt. 17, Ex. A, p. 2). Here, the
damage was caused by ServPro removing asbestos tile, it was not caused by the
sump pump overflow, which was a covered loss. While Plaintiff may argue that the
tile removal was made necessary by the discharge from the sump pump, the policy
excludes losses caused by pollutants or contaminants “regardless of any other cause
or event contributing concurrently or in any sequence to the loss.” (Personal
Property Losses We Do Not Cover, Dkt. 17, Ex. A, p. 7).
Plaintiff’s interpretation is also in conflict with other provisions of the policy.
Courts read insurance contracts as a whole and must “give effect to every word,
clause, and phrase.” City of Grosse Pointe Park, 473 Mich. at 218. As an additional
property coverage, the Building Ordinance or Law Coverage is “subject to all the
terms, provisions, exclusions, and conditions of this policy.” This includes the
policy’s express exclusion of asbestos damages.
As stated, under “Building Property Losses We Do Not Cover,” the policy
specifically excludes losses caused directly or indirectly by the “discharge, dispersal,
seepage, migration, release, escape, emission, transmission, absorption of pollutants
or contaminants” which the policy defines to include asbestos. (Exclusion 7, Dkt.
17, Ex. A, p. 2; Definition 3(k)(3), Dkt. 17, Ex. A, p. 23). Plaintiff insists that this
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claim is a separate and distinct claim from her sump pump discharge claim, and
seeks to recover damages to her home caused by the dispersal of asbestos following
ServPro’s removal of the tile flooring. These are precisely the type of losses that the
policy intends to exclude.
The Court is also mindful that it must not hold Safeco liable for “a risk that it
did not assume.” Henderson v. State Farm Fire & Cas. Co., 460 Mich. 348, 354
(1999). Here, the policy clearly states that asbestos contamination damages are not
a covered cause of loss. The terms of the Building Ordinance or Law Coverage do
not eliminate this exclusion; it merely states that it will extend coverage for costs
incurred in complying with asbestos-related ordinances where Plaintiff’s building
property suffers asbestos contamination damage that results from a covered cause
of loss.
At oral argument and in its pleadings, Plaintiff clarified that her asbestos
claim is independent from its water and sewer damage claim because ServPro was
not responding to the flood damage when it tore out her tile floor. (See CrossMotions for Summary Judgment Hearing Transcript, Dkt. 23, 20:2-24:25) (stating
that removal of floor was a separate and distinct act from repair of water damage).
Given Plaintiff’s position, the Court holds that she is not entitled to recover
damages under the Building Ordinance or Law Coverage. In summary, because the
Building Ordinance or Law Coverage requires that damages result from a covered
cause of loss, and Plaintiff’s asbestos claim is not a covered cause of loss, Plaintiff is
not entitled to recover damages under this provision.
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3. Plaintiff’s entitlement to coverage under other provisions
In addition to the Building Ordinance or Law Coverage, Plaintiff claims that
she is entitled to recover damages under Coverage D and the additional Household
Products Coverage. Coverage D provides coverage for additional living expenses
and loss of rent. It states:
1. If a loss covered under this Section makes that part of the
residence premises where you reside uninhabitable we cover
Additional Living Expense, meaning the necessary increase in
living expenses you incur so that your household can maintain its
normal standard of living.
(Coverage D, Dkt. 17, Ex. A, p. 9) (emphasis in original). This provision is
unavailing because it conditions coverage on a “loss covered under this Section.” As
explained above, the policy explicitly excludes coverage for asbestos contamination
damages. Therefore, Plaintiff is not entitled to recover under Coverage D.
Nor can Plaintiff recover under the additional Household Products Coverage,
which provides:
We cover direct physical loss to the property described in
Coverages A and B arising out of a discharge, dispersal, spill,
leak, release, escape, emission, transmission or absorption of
household products . . . For purposes of this coverage, household
products do not include materials containing asbestos,
lead or formaldehyde.
(Additional Property Coverages, Dkt. 17, Ex. A, p. 9) (emphasis added). Because
the plain language of this provision excludes materials containing asbestos,
Plaintiff is also not entitled to coverage under this provision.

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In sum, Plaintiff has not shown that her asbestos claim is entitled to coverage
under any provision of the insurance policy, while Defendant has shown that it is
not. The record contains no genuine issue of material fact because the parties do
not contest the underlying facts. The Court finds that the terms of the policy do not
cover the type of claim Plaintiff is making. Consequently, Defendant is entitled to
summary judgment, while Plaintiff’s motion for summary judgment must be denied.
III. CONCLUSION
For the reasons explained above, Defendant’s motion for summary judgment
is GRANTED and Plaintiff’s motion for summary judgment is DENIED.
Let judgment be entered accordingly.
SO ORDERED.
Dated: March 23, 2016

s/Terrence G. Berg
TERRENCE G. BERG
UNITED STATES DISTRICT JUDGE
Certificate of Service

I hereby certify that this Order was electronically submitted on March 23,
2016, using the CM/ECF system, which will send notification to all parties.
s/A. Chubb
Case Manager

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