Westfield Insurance Company v. Jenkins Construction Inc ( 2018 )

STATE OF MICHIGAN
COURT OF APPEALS
WESTFIELD INSURANCE COMPANY, for UNPUBLISHED
itself and as subrogee of DOUBLEJACK September 6, 2018
ELECTRIC COMPANY, INC.,
Plaintiff/Counterdefendant-
Appellee,
v No. 337968
Wayne Circuit Court
JENKINS CONSTRUCTION, INC., LC No. 15-012569-CB
Defendant/Cross-Plaintiff/Cross-
Defendant-Appellant,
and
DOUBLEJACK ELECTRIC COMPANY, INC.,
Defendant/Counterplaintiff/Cross-
Plaintiff/Cross-Defendant-Appellee,
and
WADE TRIM ASSOCIATES, INC.,
Defendant,
and
ECORSE CREEK POLLUTION ABATEMENT
DRAIN NO. 1 DRAINAGE DISTRICT,
Defendant/Counterplaintiff/Cross-
Plaintiff,
and
COMMERCE CONTROLS, INC.,
Defendant/Cross-Defendant.
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Before: SWARTZLE, P.J., and JANSEN and O’BRIEN, JJ.
PER CURIAM.
In this declaratory judgment action, Jenkins Construction, Inc. (Jenkins) appeals as of
right the trial court’s order granting summary disposition in favor of Doublejack Electric
Company (Doublejack), the insured of Westfield Insurance Company (Westfield), and also
appeals the trial court’s earlier order granting summary disposition in favor of Westfield. We
affirm.
I. FACTS
The substantive facts of this case are not in dispute. The Ecorse Creek Pollution
Abatement Drain No. 1 Drainage District (ECPAD) decided to upgrade the Taylor (Pelham)
Basin located in Taylor, Michigan. ECPAD hired Wade Trim Associates, Inc. (Wade Trim), an
engineering firm, to conduct pre-construction engineering studies for purposes of assessing the
viability of the basin and identifying necessary improvements. ECPAD subsequently hired
Wade Trim to provide engineering and construction services for the design, bidding process, and
construction management of the project. ECPAD hired Jenkins to serve as the general contractor
for the basin improvements designed by Wade Trim. Jenkins contracted with Doublejack to
perform the electrical work on the project. Doublejack, in turn, contracted with Commerce
Controls, Inc. (Commerce Controls) to design, install, and test the instrumentation and controls.
A few weeks after completion of the basin improvements, but before Jenkins received
final payment from ECPAD, a heavy rainstorm caused the basin to overflow when the
computerized controls failed to function, which resulted in catastrophic structural damage to the
basin and released sewage onto nearby property. Apparently, Commerce Controls worked with
Wade Trim on the design and installation of the computerized controls that were intended—but
failed—to prevent this type of catastrophic event. Jenkins initially filed a lawsuit against
ECPAD in 2014, seeking final payment. Numerous parties subsequently entered the suit, filing
various counterclaims and crossclaims. Most of those claims were settled or otherwise resolved
after case evaluation.
While this was ongoing, Westfield brought a separate lawsuit on behalf of itself and
Doublejack for declaratory and other relief, seeking a ruling on the extent of their obligations.
Westfield’s suit was eventually combined with Jenkins’s initial suit, and this is the case now
before this Court. Similar to the suit filed by Jenkins, various parties filed a slew of crossclaims
and counterclaims as part of Westfield’s suit, most of which eventually settled or were otherwise
resolved. The trial court issued rulings on only a few claims, and only two of those rulings are
now on appeal: (1) the trial court’s ruling that Westfield was not obligated to indemnify Jenkins
for certain damages or for Jenkins’s liability on a professional-services claim; and (2) the trial
court’s ruling that Doublejack was not obligated to indemnify Jenkins under their separate
indemnity agreement for claims not covered by Westfield.
II. STANDARD OF REVIEW
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“This Court reviews de novo a trial court’s decision on a motion for summary disposition
in an action for a declaratory judgment.” Lansing Sch Ed Ass’n v Lansing Bd of Ed (On
Remand), 293 Mich. App. 506, 512-513; 810 NW2d 95 (2011). The trial court granted summary
disposition under MCR 2.116(C)(7) and (10).
“In a summary disposition motion brought pursuant to MCR 2.116(C)(7), the court must
consider the affidavits, pleadings, depositions, admissions, and any other documentary evidence
submitted by the parties to determine whether a genuine issue of material fact exists. Nuculovic
v Hill, 287 Mich. App. 58, 61; 783 N.W. 124 (2010). If no material facts are in dispute, and if
reasonable minds could not differ regarding the legal effect of the facts, whether a claim is
barred is a legal issue for the court. Dextrom v Wexford Co, 287 Mich. App. 406, 431; 789 NW2d
211 (2010).
A motion brought under MCR 2.116(C)(10) tests the factual support for a party’s claim.
Maiden v Rozwood, 461 Mich. 109, 120; 597 NW2d 817 (1999). When reviewing a motion for
summary disposition brought under subrule (C)(10), the court must examine all documentary
evidence presented to it, and drawing all reasonable inferences in favor of the nonmoving party,
determine whether a genuine issue of material fact exists. Dextrom, 287 Mich. App. at 430. A
trial court properly grants the motion when the evidence fails to establish any genuine issue of
material fact, and the moving party is entitled to judgment as a matter of law. West v Gen
Motors Corp, 469 Mich. 177, 183; 665 NW2d 468 (2003). “A genuine issue of material fact
exists when the record, giving the benefit of reasonable doubt to the opposing party, leaves open
an issue upon which reasonable minds might differ.” Id.
Questions concerning the proper interpretation and application of an insurance contract
are questions of law that this Court reviews de novo. TBCI, PC v State Farm Mut Auto Ins Co,
289 Mich. App. 39, 42; 795 NW2d 229 (2010).
III. JENKINS’S APPEAL AGAINST WESTFIELD
The trial court granted Westfield’s motion for summary disposition pursuant to MCR
2.116(C)(10). Jenkins argues that the trial court erred when it held that Jenkins was not entitled
to indemnification under Westfield’s Commercial General Liability (CGL) policy for certain
damages and expenses Jenkins incurred by litigating the claims in this case.
The duty to indemnify “arises only with respect to insurance afforded by the policy.”
American Bumper & Mfg Co v Hartford Fire Ins Co, 452 Mich. 440, 450; 550 NW2d 475 (1996).
In determining whether an insurer has a duty to indemnify its insured, the Court looks to the
policy language to discern whether the duty arises. Oakland Co Bd of Co Rd Comm’rs v
Michigan Prop & Cas Guaranty Ass’n, 456 Mich. 590, 601 n 6; 575 NW2d 751 (1998). When
reviewing the language of an insurance policy, we “interpret the terms therein in accordance with
Michigan’s well-established principles of contract construction.” Henderson v State Farm Fire
& Cas Co, 460 Mich. 348, 353; 596 NW2d 190 (1999). Consequently, the terms of an insurance
policy are enforced as written, unless an ambiguity exists. Id.
The first section of the CGL policy is entitled, “Section I—Coverages” and continues
“Coverage A: Bodily Injury and Property Damage Liability.” It reads in relevant part:
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1. Insuring Agreement
a. We will pay those sums that the insured becomes legally obligated to
pay as damages because of “bodily injury” or “property damage” to which this
insurance applies. . . .
* * *
b. This insurance applies to “bodily injury” and “property damage” only
if:
(1) The “bodily injury” or “property damage” is caused by an
“occurrence” that takes place in the “coverage territory.”
Thus, pursuant to “Coverage A,” Westfield’s CGL policy covers an insured’s liability for
“property damage” caused by an “occurrence.” In pertinent part, the term “property damage” is
defined in the policy under “Section V—Definitions” at “17” as
[p]hysical injury to tangible property, including all resulting loss of use of that
property. All such loss of use shall be deemed to occur at the time of the physical
injury that caused it . . . .
Here, it is not disputed that ECPAD suffered damage caused by an occurrence—the
accidental overflowing and collapse of the basin—so ECPAD’s claims to recover property
damage resulting from the occurrence fell under Westfield’s CGL policy. Westfield, as part of
the various settlements, covered ECPAD’s claims of property damage, including that damage as
attributable to Jenkins. Westfield not only covered ECPAD’s claims of property damage against
Jenkins, but it also assumed Jenkins’s defense of those claims because Doublejack’s policy with
Westfield covered Jenkins as an additional insured. As a result of Westfield’s involvement,
ECPAD’s claims for property damage were resolved through case evaluation.
Jenkins was also involved in case evaluation as a separate party, and, for its part, Jenkins
agreed to pay ECPAD $100,000 in liquidated damages. On appeal, despite that Westfield
already covered the property-damage claims, Jenkins argues that Westfield was also required to
indemnify Jenkins’s liability to ECPAD for the agreed-upon liquidated damages, as well as other
expenses incurred by Jenkins, including a “$140,000 Bond expense,” “$160,268.32 in legal fees
and expenses,” and “the potential claims of other sub-contractors for legal expenses in the
amount of $194,598.25.” Jenkins reasons that Westfield was responsible for these damages and
expenses under the CGL policy because, although not labeled property damages, the damages
were nonetheless property damage involving both physical and intangible consequential damages
resulting from the occurrence.
To determine whether an insurer has a duty to indemnify, “a court must focus on the
cause of the injury to ascertain whether coverage exists,” and “[i]t is the substance rather than the
form of the allegations in the complaint which must be scrutinized. US Fidelity & Guarantee Co
v Citizens Ins Co of America, 201 Mich. App. 491, 494; 506 NW2d 527 (1993). Here, focusing
on the cause of the injury and not the terminology used in Jenkins’s pleadings, we find Jenkins’s
argument unconvincing. Jenkins’s claimed damages are simply not covered by the terms of the
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CGL policy because Jenkins has not shown, and we can find no basis to conclude, that the
$100,000 in “liquidated damages”—or the other expenses Jenkins incurred or might incur—
represent “property damage” sustained as a result of the loss of use of the basin. Thus, Jenkins
has failed to establish that, pursuant to the terms of the CGL policy, Westfield was required to
indemnify Jenkins for any of the requested damages or expenses.
Next, Jenkins asserts that the trial court erred when it ruled that Westfield was not
required to indemnify Jenkins for any liability Jenkins had to Wade Trim for ECPAD’s
professional-negligence claim against the engineering firm.1 In the underlying case, ECPAD
brought suit against Wade Trim for professional negligence. After case evaluation, both ECPAD
and Wade Trim accepted the sum of $600,000 for ECPAD’s claim. Westfield did not cover
Jenkins’s indemnity liability to Wade Trim because, according to Westfield, the CGL policy did
not cover anyone in connection with Wade Trim’s professional services. The trial court agreed
with Westfield’s interpretation of the CGL policy.
The CGL policy includes a section called, “Amendment of Insured Contract Definition.”
This section states, “This endorsement modifies insurance provided under the following:
Commercial General Liability Coverage Part.” The endorsement applies to the “Additional
Insured” section of the CGL policy, and states in pertinent part:
This insurance does not apply to:
1. “Bodily injury”, “property damage” or “personal and advertising
injury” caused in whole or in party by the rendering of, or the failure to render,
any professional architectural, engineering, or surveying services, including:
* * *
b. Supervisory, inspection, architectural, or engineering activities.
Jenkins does not dispute that ECPAD sued Wade Trim for property damages caused by
engineering errors and omissions in the performance of two different engineering contracts, and
also for failure to supervise the contractors to ensure compliance with its engineering designs.
Under these facts, Westfield had no duty to indemnify Jenkins for Wade Trim’s professional
negligence based on the professional-services exclusion in the CGL policy’s endorsement, which
unambiguously denied coverage to additional insureds for property damage caused by
“[s]upervisory, inspection, architectural, or engineering activities.” Thus, to the extent that
Wade Trim had any claim to recover part of its $600,000 settlement with ECPAD from Jenkins,
Jenkins had no basis to seek indemnity from Westfield under the CGL policy.
IV. JENKINS’S APPEAL AGAINST DOUBLEJACK
1
It is unclear what amount, if any, Jenkins owed Wade Trim pursuant to their indemnification
agreement.
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The trial court granted summary disposition in favor of Doublejack pursuant to MCR
2.116(C)(7) and (C)(10). Jenkins argues that the trial court erred when it dismissed all of
Jenkins’s remaining claims against Doublejack because, under either a theory of express
contractual indemnity or implied contractual indemnity, Doublejack was required to cover all of
Jenkins’s damages and expenses that the trial court found Westfield not responsible for.
Article XXII in the contract between Jenkins and Doublejack is an indemnification
provision, and it states in pertinent part:
The Subcontractor hereby assumes entire responsibility and liability for any act
and all damages or injury of any kind or nature, (including death resulting there
from) to any persons, whether employees or any tier of the Subcontractor, or
otherwise, and to all property caused by, resulting from, arising out of, or
occurring in connection with the execution of the Work, or in preparation for the
Work, or any extension, modification or amendment to the Work by change order
or otherwise.
“[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).
Here, Jenkins is not entitled to express contractual indemnification because its claims do
not come within the scope of Article XXII. Under Article XXII, Doublejack’s “responsibility
and liability” to Jenkins is for “any act and all damages or injury of any kind or nature” “to any
persons . . . and to all property.” Article XXII is unambiguous, so it must be enforced as written.
The damages Jenkins sought are not tort-based and simply do not fall into the category of
personal injury or property damage covered under Article XXII. Thus, Article XXII clearly does
not require Doublejack to indemnify Jenkins for the damages Jenkins seeks.
Likewise, Jenkins is not entitled to implied contractual indemnification against
Doublejack. “In order to establish an implied contract to indemnify, there must be a special
relationship between the parties or a course of conduct whereby one party undertakes to perform
certain services and impliedly assures indemnification.” Palomba v East Detroit, 112 Mich. App.
209, 217; 315 NW2d 898 (1982). On appeal, Jenkins does not explain how it meets the legal
requirements for entitlement under an implied-contractual-indemnification theory. As observed
by our Supreme Court:
It is not enough for an appellant in his brief simply to announce a position or
assert an error and then leave it up to this Court to discover and rationalize the
basis for his claims, or unravel and elaborate for him his arguments, and then
search for authority either to sustain or reject his position. The appellant himself
must first adequately prime the pump; only then does the appellate well begin to
flow. Failure to brief a question on appeal is tantamount to abandoning it.
[Mitcham v Detroit, 355 Mich. 182, 203; 94 NW2d 388 (1959) (citations
omitted).]
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Based on Jenkins failure to present any argument regarding implied contractual indemnification,
we conclude that Jenkins abandoned this claim.2
Affirmed.
/s/ Brock A. Swartzle
/s/ Kathleen Jansen
/s/ Colleen A. O'Brien
2
Because Jenkins has not prevailed on either issue, the trial court did not err in declining to grant
summary disposition pursuant to MCR 2.116(I)(2) in favor of Jenkins.
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