Saad, J.
In this insurance coverage dispute, plaintiff, Michigan Battery Equipment, Inc. (Michigan Battery), appeals the trial court’s order that granted summary disposition in favor of defendant, EMCASCO Insurance Company (EMC).
The trial court granted summary disposition because it held that the loss was caused by wet rot, which was a risk not covered but instead was specifically excluded from coverage under the policy. For the reasons provided below, we affirm.
I. BRIEF FACTS AND GENERAL PRINCIPLES REGARDING INSURANCE CONTRACTS
Due to prolonged water infiltration through deteriorated rubber grommets in the roof, the roof trusses of Michigan Battery’s warehouse rotted. In January 2014, snow and ice accumulated on the roof, which caused the rotted trusses to split, crack, and fall down a few feet. The question on appeal is whether EMC’s insurance policy covers the damage to Michigan Battery’s roof. To resolve this dispute, we must examine the terms of the insurance policy and determine whether the damage is excluded from coverage under any exclusion in the policy. Insurance contracts must be enforced in accordance with their terms.
Henderson v State Farm Fire & Cas Co,
460 Mich 348, 354; 596 NW2d 190 (1999). “The language of insurance contracts should be read as a whole and must be construed to give effect to every word, clause, and phrase.”
McGrath v Allstate Ins Co,
290 Mich App 434, 439; 802 NW2d 619 (2010). “[U]nless a contract provision violates law or one of the traditional defenses to the enforceability of a contract applies, a court must construe and apply unambiguous contract provisions as written.”
Rory v Continental Ins Co,
473 Mich 457, 461; 703 NW2d 23 (2005). To determine the intent of the
parties, a court must first ascertain whether the policy provides coverage to the insured.
Hunt v Drielick,
496 Mich 366, 373; 852 NW2d 562 (2014). Then, it must determine “whether that coverage is negated by an exclusion.”
Id.
“While it is the insured’s burden to establish that his claim falls within the terms of the policy, the insurer should bear the burden of proving an absence of coverage.”
Id.
(quotation marks, citations, and alterations omitted). Where a contract provision is ambiguous, the contract is construed in favor of the insured.
Henderson,
460 Mich at 354. However, “a court should not create ambiguity in an insurance policy where the terms of the contract are clear and precise.”
Id.
Instead, contract terms should be interpreted using their plain and ordinary meanings.
Id.
II. ALL-RISK POLICY AND EXCLUSION FOR WET ROT
Michigan Battery insured its warehouse and attached offices with an “all-risk” policy issued by EMC. “Notwithstanding the presence of an ‘all-risks’ provision in an insurance policy, the loss will not be covered if it comes within any specific exclusion contained in the policy.” 10A Couch, Insurance, 3d, § 148.68, p 148-164. Here, the policy provides for various exclusions, of which two were the focus of the arguments in the trial court: (1) the exclusion for damage caused by collapse and (2) the exclusion for damage caused by fungus, wet rot, dry rot, and bacteria. “Exclusionary clauses in insurance policies are strictly construed in favor of the insured.”
Auto-Owners Ins Co v Churchman,
440 Mich 560, 567; 489 NW2d 431 (1992). However, “[c]lear and specific exclusions must be given effect,” and “coverage under a policy is lost if any exclusion within the policy applies to an insured’s particular claims.”
Id.
Because the language of the policy is controlling, we turn our attention to the rot exclusion in the policy, which provides in pertinent part:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
[[Image here]]
h. “Fungus”, Wet Rot, Dry Rot And Bacteria
Presence, growth, proliferation, spread or any activity of “fungus”, wet or dry rot or bacteria.
But if “fungus”, wet or dry rot or bacteria results in a “specified cause of loss”, we will pay for the loss or damage caused by that “specified cause of loss”.
This exclusion does not apply:
1. When “fungus”, wet or dry rot or bacteria results from fire or lightning; or
2. To the extent that coverage is provided in the Additional Coverage—Limited Coverage For “Fungus”, Wet Rot, Dry Rot And Bacteria with respect to loss or damage by a cause of loss other than fire or lightning.
Exclusions B.l.a. through B.l.h. apply whether or not the loss event results in widespread damage or affects a substantial area.
As the trial court properly held, the plain language of the above-quoted insurance policy provisions excludes from coverage damage caused by fungus, wet rot, dry rot, and bacteria. However, this exclusion has exceptions: (1) when the fungus, wet rot, dry rot, or bacteria results from fire or lightning; (2) when, and to the extent that, coverage is provided in the “Additional Coverage” provision; and (3) when the fungus, rot, or
bacteria “results in a ‘specified cause of loss.’ ” As a result, because there is no question that wet rot caused the damage at issue, we must determine if any one of the exceptions to the rot exclusion applies.
The first exception does not apply because there is nothing on the record to show, and the parties do not argue, that the wet rot here was the result of fire or lightning. Indeed, the record shows that the wet rot was caused by water leakage through grommets located in the roof.
Additionally, the second exception related to the rot being covered under the “Additional Coverage” provision does not apply. Under this “Additional Coverage,” damage from fungus, rot, and bacteria is covered where the fungus, rot, or bacteria is the result of (1) “a specified cause of loss” other than fire or lightning or (2) flood. The term “specified causes of loss” is defined as meaning
fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire-extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage.
And “water damage” is further defined as
Free access — add to your briefcase to read the full text and ask questions with AI
Saad, J.
In this insurance coverage dispute, plaintiff, Michigan Battery Equipment, Inc. (Michigan Battery), appeals the trial court’s order that granted summary disposition in favor of defendant, EMCASCO Insurance Company (EMC).
The trial court granted summary disposition because it held that the loss was caused by wet rot, which was a risk not covered but instead was specifically excluded from coverage under the policy. For the reasons provided below, we affirm.
I. BRIEF FACTS AND GENERAL PRINCIPLES REGARDING INSURANCE CONTRACTS
Due to prolonged water infiltration through deteriorated rubber grommets in the roof, the roof trusses of Michigan Battery’s warehouse rotted. In January 2014, snow and ice accumulated on the roof, which caused the rotted trusses to split, crack, and fall down a few feet. The question on appeal is whether EMC’s insurance policy covers the damage to Michigan Battery’s roof. To resolve this dispute, we must examine the terms of the insurance policy and determine whether the damage is excluded from coverage under any exclusion in the policy. Insurance contracts must be enforced in accordance with their terms.
Henderson v State Farm Fire & Cas Co,
460 Mich 348, 354; 596 NW2d 190 (1999). “The language of insurance contracts should be read as a whole and must be construed to give effect to every word, clause, and phrase.”
McGrath v Allstate Ins Co,
290 Mich App 434, 439; 802 NW2d 619 (2010). “[U]nless a contract provision violates law or one of the traditional defenses to the enforceability of a contract applies, a court must construe and apply unambiguous contract provisions as written.”
Rory v Continental Ins Co,
473 Mich 457, 461; 703 NW2d 23 (2005). To determine the intent of the
parties, a court must first ascertain whether the policy provides coverage to the insured.
Hunt v Drielick,
496 Mich 366, 373; 852 NW2d 562 (2014). Then, it must determine “whether that coverage is negated by an exclusion.”
Id.
“While it is the insured’s burden to establish that his claim falls within the terms of the policy, the insurer should bear the burden of proving an absence of coverage.”
Id.
(quotation marks, citations, and alterations omitted). Where a contract provision is ambiguous, the contract is construed in favor of the insured.
Henderson,
460 Mich at 354. However, “a court should not create ambiguity in an insurance policy where the terms of the contract are clear and precise.”
Id.
Instead, contract terms should be interpreted using their plain and ordinary meanings.
Id.
II. ALL-RISK POLICY AND EXCLUSION FOR WET ROT
Michigan Battery insured its warehouse and attached offices with an “all-risk” policy issued by EMC. “Notwithstanding the presence of an ‘all-risks’ provision in an insurance policy, the loss will not be covered if it comes within any specific exclusion contained in the policy.” 10A Couch, Insurance, 3d, § 148.68, p 148-164. Here, the policy provides for various exclusions, of which two were the focus of the arguments in the trial court: (1) the exclusion for damage caused by collapse and (2) the exclusion for damage caused by fungus, wet rot, dry rot, and bacteria. “Exclusionary clauses in insurance policies are strictly construed in favor of the insured.”
Auto-Owners Ins Co v Churchman,
440 Mich 560, 567; 489 NW2d 431 (1992). However, “[c]lear and specific exclusions must be given effect,” and “coverage under a policy is lost if any exclusion within the policy applies to an insured’s particular claims.”
Id.
Because the language of the policy is controlling, we turn our attention to the rot exclusion in the policy, which provides in pertinent part:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.
[[Image here]]
h. “Fungus”, Wet Rot, Dry Rot And Bacteria
Presence, growth, proliferation, spread or any activity of “fungus”, wet or dry rot or bacteria.
But if “fungus”, wet or dry rot or bacteria results in a “specified cause of loss”, we will pay for the loss or damage caused by that “specified cause of loss”.
This exclusion does not apply:
1. When “fungus”, wet or dry rot or bacteria results from fire or lightning; or
2. To the extent that coverage is provided in the Additional Coverage—Limited Coverage For “Fungus”, Wet Rot, Dry Rot And Bacteria with respect to loss or damage by a cause of loss other than fire or lightning.
Exclusions B.l.a. through B.l.h. apply whether or not the loss event results in widespread damage or affects a substantial area.
As the trial court properly held, the plain language of the above-quoted insurance policy provisions excludes from coverage damage caused by fungus, wet rot, dry rot, and bacteria. However, this exclusion has exceptions: (1) when the fungus, wet rot, dry rot, or bacteria results from fire or lightning; (2) when, and to the extent that, coverage is provided in the “Additional Coverage” provision; and (3) when the fungus, rot, or
bacteria “results in a ‘specified cause of loss.’ ” As a result, because there is no question that wet rot caused the damage at issue, we must determine if any one of the exceptions to the rot exclusion applies.
The first exception does not apply because there is nothing on the record to show, and the parties do not argue, that the wet rot here was the result of fire or lightning. Indeed, the record shows that the wet rot was caused by water leakage through grommets located in the roof.
Additionally, the second exception related to the rot being covered under the “Additional Coverage” provision does not apply. Under this “Additional Coverage,” damage from fungus, rot, and bacteria is covered where the fungus, rot, or bacteria is the result of (1) “a specified cause of loss” other than fire or lightning or (2) flood. The term “specified causes of loss” is defined as meaning
fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire-extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage.
And “water damage” is further defined as
accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of a plumbing, heating, air conditioning or other system or appliance (other than a sump system including its related equipment and parts), that is located on the described premises and contains water or steam.
Here, there is nothing on the record to establish, and the parties do not argue, that the wet rot in the warehouse was the result of or caused by a specified cause of loss. Likewise, there is nothing in the record to
suggest that the damage was caused by flood. As already noted, the wet rot damage was caused by water intrusion through deteriorated rubber grommets in the roof. Accordingly, because the wet rot was not the result of a “specified cause of loss” and was not the result of flood, the “Additional Coverage” provision simply does not apply.
Similarly, the third exception is not implicated. The rot in the trusses caused the roof and the trusses to fall down a couple feet, which, importantly, is not one of the enumerated specified causes of loss.
Therefore, we hold that the wet rot and resulting damage is not covered under the policy because it is excluded under the general exclusion in Section B.l.h and none of the exceptions applies. In brief, the policy plainly identifies the risks that EMC was willing to and did contract to cover, and unfortunately for Michigan Battery, wet rot is not one of those risks. Indeed, this risk was specifically excluded from coverage, and had Michigan Battery desired to obtain coverage, it could have purchased a rider for this specific loss. Consequently, because EMC identified wet rot as a particular type of risk that it was unwilling to insure, Michigan Battery cannot recover under the policy. See
Auto-Owners,
440 Mich at 567 (“It is impossible to hold an insurance company liable for a risk it did not assume.”). And because this exclusion specifically precludes coverage, we need not address how any other exclusion or any other “additional coverage” in the policy applies. See
id.
(“[C]overage under a policy is lost if any exclusion within the policy applies to an insured’s particular claims.”);
Brown v Farm Bureau Gen Ins Co of Mich,
273 Mich App 658, 661; 730 NW2d 518 (2007).
Accordingly, we affirm the trial court’s grant of summary disposition in favor of EMC. EMC, as the prevailing party, may tax costs pursuant to MCR 7.219.
CAVANAGH, P.J., and FORT HOOD, J., concurred with Saad, J.