Lexington Insurance Company v. the Alan Group ( 2016 )

STATE OF MICHIGAN
COURT OF APPEALS
LEXINGTON INSURANCE COMPANY, UNPUBLISHED
August 9, 2016
Plaintiff-Appellant,
v No. 326921
Wayne Circuit Court
THE ALAN GROUP and CONDOR PIPING LC No. 14-000382-CL
INCORPORATED,
Defendants-Appellees.
Before: MURPHY, P.J., and STEPHENS and BOONSTRA, JJ.
PER CURIAM.
Plaintiff appeals by right the trial court’s order granting summary disposition in favor of
defendants pursuant to MCR 2.116(C)(8) (failure to state a claim) and MCR 2.116(C)(10) (no
genuine issue of material fact). The trial court initially had also granted summary disposition in
favor of defendants in part pursuant to MCR 2.116(C)(7) (statute of limitations), but
subsequently granted plaintiff’s motion for reconsideration in that respect. It denied plaintiff’s
motion for reconsideration with respect to MCR 2.116(C)(8) and (C)(10). We affirm in part and
reverse in part.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
Plaintiff issued a property insurance policy to the owner and manager of an apartment
building (the “Midtown property”), UrbCamCom/WSU 1, LLC (UCC) and Campus Advantage,
Inc., respectively (the insureds), providing insurance for loss or damage to the building. UCC
retained defendant The Alan Group as a general contractor to work on the Midtown property; the
work was to include the installation of a sprinkler system. The Alan Group retained defendant
Condor Piping Incorporated as a subcontractor to install the sprinkler system. The contract
between UCC and The Alan Group contained the following clauses relevant to this appeal:
§ 11.3.5 If during the project construction period the Owner insures properties,
real or personal or both, or at adjacent to the site by property insurance under
policies separate from those insuring the project, or if after final payment property
insurance is to be provided on the completed Project through a policy or policies
other than those insuring the Project during the construction period, the Owner
shall waive all rights in accordance with the terms of Section 11.3.7 for damages
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caused by fire or other causes of loss covered by this separate property insurance.
All separate policies shall provide this waiver of subrogation by endorsement or
otherwise.
* * *
§ 11.3.7 WAIVERS OF SUBROGATION
The Owner and the Contractor waive all rights against (1) each other and any of
their subcontractors, sub-subcontractors, agents and employees, each of the other,
and (2) the Architects, Architects consultants, separate contractors described in
Article 6, if any, and any of their subcontractors, sub-subcontractors, agents and
employees, for damages caused by fire or other causes of loss to the extent
covered by property insurance obtained pursuant to this section 11.3 or other
property insurance applicable to the Work, except such rights as they have to
proceeds of such insurance held by the Owner as fiduciary. The Owner or
Contractor, as appropriate shall require of the Architect, Architect’s consultants,
separate contractors described in Article 6, if any, and the subcontractors, sub-
subcontractors, agents and employees of any of them, by appropriate agreements,
written where legally required for validity, similar waivers each in favor of other
parties enumerated herein. The policies shall provide such waivers of subrogation
by endorsement or otherwise. A waiver of subrogation shall be effective as to a
person or entity even though that person or entity would otherwise have a duty of
indemnification, contractual or otherwise, did not pay the insurance premium
directly or indirectly, and whether or not the person or entity had an insurable
interest in the property damaged.
In January 2012, a dry-fire suppression line for the installed dry-pipe sprinkler system
ruptured in two separate locations, flooding the Midtown property. Plaintiff reimbursed the
insureds for their losses under its insurance policy. Plaintiff then brought this subrogation action
against defendants, alleging claims of negligence, gross negligence, breach of implied/express
warranty, and breach of implied/express contract.
Defendants moved for summary disposition pursuant to MCR 2.116(C)(7), (8), and (10),
arguing that the waiver of subrogation clause in the contract barred plaintiff’s claims, that
plaintiff had failed to state a claim for gross negligence, and that plaintiff’s claims were barred
by an applicable statute of limitations or repose. The trial court held that plaintiff had failed to
state a claim for gross negligence, and further that its claim for gross negligence were barred by
the statute of limitations found in MCL 600.5839. The trial court held that plaintiff’s remaining
claims were barred by the waiver of subrogation clause. The trial court specifically declined to
decide whether the waiver of subrogation clause barred plaintiff’s claim for gross negligence.
Plaintiff moved the trial court for reconsideration, arguing that the trial court had erred in
dismissing its gross negligence claim. The trial court agreed that it had erred in dismissing
plaintiff’s gross negligence claim on limitations grounds; however, it reaffirmed its holding that
plaintiff had failed to state a claim for gross negligence. The trial court also held, for the first
time, that the waiver of subrogation clause also barred plaintiff’s claim for gross negligence and
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thus that summary disposition should also be granted in favor of defendants on plaintiff’s gross
negligence claim under MCR 2.116(C)(10). This appeal followed, limited to the trial court’s
grant of summary disposition on plaintiff’s claim for gross negligence.
II. STANDARD OF REVIEW
Plaintiff argues that the trial court erred in granting summary disposition in favor of
defendants on its gross negligence claim. “This Court reviews de novo a circuit court’s decision
whether to grant or deny summary disposition.” Johnson v Recca, 492 Mich. 169, 173; 821
NW2d 520 (2012).
A motion under MCR 2.116(C)(8) tests the legal sufficiency of the complaint based on
the pleadings alone. Maiden v Rozwood, 461 Mich. 109, 119; 597 NW2d 817 (1999). “The trial
court reviewing the motion must accept as true all factual allegations supporting the claim, and
any reasonable inferences or conclusions that might be drawn from those facts.” Gorman v Am
Honda Motor Co, 302 Mich. App. 113, 131; 839 NW2d 223 (2013). Nonetheless, “the mere
statement of a pleader’s conclusions, unsupported by allegations of fact, will not suffice to state a
cause of action.” ETT Ambulance Serv Corp v Rockford Ambulance, Inc, 204 Mich. App. 392,
395; 516 NW2d 498 (1994). Summary disposition under (C)(8) is appropriate only when the
claims are “so clearly unenforceable as a matter of law that no factual development could justify
recovery.” Wade v Dep’t of Corrections, 439 Mich. 158, 163; 483 NW2d 26 (1992).
A motion under MCR 2.116(C)(10) tests the factual sufficiency of the complaint. Joseph
v Auto Club Ins Ass’n, 491 Mich. 200, 206; 815 NW2d 412 (2012). The “circuit court must
consider the affidavits, pleadings, depositions, admissions, and other evidence submitted by the
parties in the light most favorable to the party opposing the motion.” Id. All reasonable
inferences are to be drawn in favor of the nonmovant. Dextrom v Wexford Co, 287 Mich. App.
406, 415; 789 NW2d 211 (2010).
III. WAIVER OF SUBROGATION CLAUSE
Plaintiff argues that the trial court erred by determining that the waiver of subrogation
clause barred a gross negligence claim, and therefore by holding on reconsideration that
summary disposition was proper for that reason under MCR 2.116(C)(10). We agree.
Plaintiff concedes that the waiver of subrogation clause bars its claims apart from its
claim for gross negligence. Indeed, caselaw provides that “a party may contract against liability
for harm caused by his ordinary negligence.” Lamp v Reynolds, 249 Mich. App. 591, 594; 645
NW2d 311 (2002). See also Shelby Mut Ins Co v City of Grand Rapids, 6 Mich. App. 95, 98; 148
NW2d 260 (1967). However, a party may not, by contract, protect itself from liability for gross
negligence or willful and wanton misconduct. Lamp, 249 Mich. App. at 594; Shelby Mut Ins, 6
Mich. App. at 98; Universal Gym Equipment, Inc v Vic Tanny International, Inc, 207 Mich. App.
364, 367-368; 526 NW2d 5 (1994), vacated on reh in part on other grounds, 209 Mich. App. 511
(1995).
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We therefore reverse the trial court’s holding that plaintiff’s claim for gross negligence
was barred by the waiver of subrogation clause.1
IV. FAILURE TO STATE A CLAIM
Plaintiff also argues that the trial court erred by holding that it failed to state a claim of
gross negligence. We disagree. “[C]onduct so reckless as to demonstrate a substantial lack of
concern for whether an injury results” constitutes gross negligence. Xu v Gay, 257 Mich. App.
263, 269; 668 NW2d 166 (2003). Put another way, a person acting in a grossly negligent manner
acts with an apparent “willful disregard of precautions or measures to attend to safety and a
singular disregard for substantial risks. It is as though, if an objective observer watched the
actor, he could conclude, reasonably, that the actor simply did not care about the safety or
welfare of those in his charge.” Tarlea v Crabtree, 263 Mich. App. 80, 90; 687 NW2d 333
(2004).
Plaintiff alleges that defendants’ actions constituted gross negligence in a variety of
ways. However, the nature of those allegations, both individually and cumulatively, is that
defendants failed to follow “best practices” (rather than minimally acceptable practices), and
failed to act “properly” (rather than failed to act entirely). We conclude that nothing in
plaintiff’s factual allegations shows or implies that defendants acted with willful or reckless
disregard for what damage could be caused if they failed to attend properly to the draining of the
sprinkler system. Rather, the totality of the factual allegations assert in essence simply that
defendants acted with carelessness in failing to drain the dry-pipe sprinkler system and in failing
to provide proper instruction on how to do so. Thus, at best, plaintiff’s allegations only support a
claim for ordinary negligence.
We thus conclude that the trial court did not err in holding that plaintiff failed to state a
claim in gross negligence against defendants. MCR 2.116(C)(8). We further conclude, as the
trial court did, that the amendment of plaintiff’s complaint would be futile. Id., see also Lane v
KinderCare Learning Centers, Inc, 231 Mich. App. 689, 696; 588 NW2d 715 (1998). With its
motion for reconsideration, several months after the grant of summary disposition and over a
year after the commencement of litigation, plaintiff presented the trial court with a proposed
amended complaint that merely repeated the same factual allegations found its initial complaint
and asserted again that those allegations stated a claim for gross negligence. Because those
factual allegations are insufficient to support a claim of gross negligence, we agree with the trial
court that amendment of plaintiff’s complaint would be futile.
1
We acknowledge defendants’ position that the public policy concerns underlying the cited
caselaw may be weaker or non-existent in a setting such as this, involving sophisticated
commercial entities allocating the risk of property damage. Nonetheless, the language of the
cited cases is broad, and is not limited to non-commercial settings. Moreover, given our
affirmance of the trial court’s grant of summary disposition under MCR 2.116(C)(8), it is
unnecessary for us to further consider this issue.
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We note that, at both the summary disposition hearing and the reconsideration hearing,
the trial court considered the supporting affidavit of plaintiff’s expert, Nathaniel Lee, a member
of the National Fire Protection Association (NFPA) and the Society of Fire Protection Engineers,
who opined that defendants’ “failure to properly drain the dry-pipe sprinkler system . . .
demonstrated a substantial lack of concern that the system was prepared to withstand the onset of
freezing weather and function to protect the [Midtown property] from fire.” Motions for
summary disposition under MCR 2.116(C)(8) are decided on the basis of the pleadings alone.
Mack v Detroit (On Remand), 254 Mich. App. 498, 499; 658 NW2d 492 (2002). It thus appears
that the trial court may have considered the affidavit in the context of evaluating defendant’s
motion for summary disposition under MCR 2.116(C)(10). However, the trial court’s order
granting summary disposition in that respect cited only to MCR 2.116(C)(8). And on
reconsideration, while the trial court again addressed Lee’s affidavit and concluded it did not
establish gross negligence, it again addressed that aspect of its ruling only with reference to
MCR 2.116(C)(8). A trial court speaks through its written orders. Johnson v White, 430 Mich.
47, 53; 420 NW2d 87 (1988). It therefore appears from the record before us that the trial court
did not grant summary disposition on plaintiff’s gross negligence claim pursuant to
MCR 2.116(C)(10) based on the insufficiency of the evidence supporting its gross negligence
claim. Lee’s affidavit is thus irrelevant to the issues on appeal.
Further, while Lee’s opinion was based on defendant’s alleged violation of NFPA
standards, and the “violation of a safety . . . statute creates a rebuttable presumption of
negligence,” Klinke v Mitsubishi Motors Corp, 458 Mich. 582, 592; 581 NW2d 272 (1998),
“evidence of ordinary negligence does not create a material question of fact concerning gross
negligence.” Maiden, 461 Mich. at 122-123. As the trial court properly noted, Lee’s opinion that
defendants acted with a “substantial lack of concern” is merely his conclusion about a legal
issue, which is outside the scope of Lee’s expertise and which the trial court was not bound to
accept. Even if Lee’s affidavit was relevant to the trial court’s grant of summary disposition, the
trial court would not have erred in finding it unpersuasive, nor would it have erred in finding any
other evidence of gross negligence to be lacking.
Affirmed in part and reversed in part. We do not retain jurisdiction.
/s/ William B. Murphy
/s/ Cynthia Diane Stephens
/s/ Mark T. Boonstra
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