Crisco v. Foremost Insurance Company Grand Rapids, Michigan

Background

The case concerned insurance coverage after the October 2017 Tubbs Fire. Ten plaintiffs owned and lived in mobile homes at Journey’s End Mobile Home Park in Santa Rosa. Foremost Insurance Company Grand Rapids, Michigan and Foremost Property and Casualty Insurance Company insured the homes under policies with the same relevant terms.

The policies covered direct, sudden, and accidental physical loss to insured property, including the dwelling. For a total loss—defined as damage beyond reasonable repair—the policy provided the amount listed on the declarations page. The policies also separately provided additional living-expense coverage when an insured loss made the premises unfit to live in.

The fire destroyed 117 of the park’s 160 mobile homes, according to one stipulated account, and destroyed the park’s electric, gas, sewer, potable-water, and related infrastructure. The parties agreed that, as a direct result of the fire, the plaintiffs’ homes lost access to running water, sewage, electricity, gas, and heat. The infrastructure was owned and controlled by the park owners, and the parties disputed whether the mobile homes also suffered direct damage from the fire.

Government officials prohibited occupancy. Later inspections found that the remaining homes were uninhabitable because the park’s infrastructure had been destroyed. The park owner eventually obtained approval to close the park, concluding that reopening was not economically feasible. The plaintiffs’ homes were among those remaining, and counsel stated at oral argument that they had since been removed and destroyed.

The plaintiffs made claims under their policies. Foremost paid each plaintiff the policy limit for additional living expenses but declined to pay total-loss benefits under the dwelling coverage. Foremost said there had been no direct, sudden, and accidental physical loss to the insured property beyond what it had already paid. Foremost initially relied on a government-action exclusion but abandoned that argument in its briefing.

Issue and parties’ arguments

The cross-motions for partial summary judgment addressed whether the plaintiffs were entitled to total-loss benefits under Coverage A. Foremost argued that coverage required physical damage to the insured mobile homes themselves. The plaintiffs argued that a physical loss could also exist when a structure became uninhabitable or substantially unusable because of the fire’s destruction of essential connected infrastructure.

Court’s analysis

Applying California law, the court treated interpretation of the insurance contract as a question of law. It relied on California authority describing direct physical loss as an actual change in insured property caused directly by a fortuitous event, resulting in a distinct, demonstrable physical alteration.

The court concluded that the fire caused such an alteration. Although the destroyed infrastructure belonged to the park owner, it was physically interconnected with and serviced the mobile homes. After the fire, sewage, electricity, water, and gas no longer physically ran into the units as they had before. The court reasoned that the policies were issued for mobile-home dwellings and that the policy documents considered factors such as the home’s age, whether it was in an approved park, and whether it was tied down. The policy also valued the structure based on the estimated cost of purchasing a comparable replacement mobile home.

Reading the direct-physical-loss language in the context of the policies as a whole, the court held that the fire directly, suddenly, and accidentally destroyed the plaintiffs’ homes by destroying the essential infrastructure serving the entire park. This triggered Coverage A.

The court rejected Foremost’s reliance on MRI Healthcare Center of Glendale, Inc. v. State Farm General Insurance Co. It distinguished that case because the event there did not directly damage the insured MRI machine, whereas the fire here destroyed infrastructure physically interconnected with the mobile homes. The court also relied on the reasoning of Hughes v. Potomac Insurance Co. of District of Columbia, which treated a dwelling as damaged when a landslide destroyed essential support and made the building unfit for occupancy, even though the building’s physical components remained largely intact.

The court further rejected Foremost’s argument that payment of additional living expenses resolved the plaintiffs’ claims. The policy described that coverage as payment for increased living expenses when an insured loss made the premises unfit to live in. It did not state that additional-living-expense payments substituted for coverage of the insured physical loss itself.

Disposition

The court granted the plaintiffs’ motion for partial summary judgment to the extent stated in the order and denied Foremost’s motion. It stated that judgment would be entered separately in accordance with the parties’ stipulation.