The trial court's issuance of summary judgment to the insurer for mold and water damage was upheld on appeal. Schwartz v. Encompass Indem. Co., 2016 Mich. App. LEXIS 551 (Mich. Ct. App. March 15, 2016).
The contractor was demolishing a portion of the insured's home when he discovered water damage and what appeared to be mold. The contractor believed this damage was due to improper roof installation and leaks around the windows. Further demolition was done to water-damaged portions of the home.
The insured filed a claim with Encompass for mold and "over-demolition." When Encompass's adjuster inspected the home, none of the alleged mold-affected material was present because it had been removed from the site by the contractor. The claims were denied.
The insured filed suit and Encompass moved for summary judgment. The trial court found that both the claim for mold and over-demolition were covered losses. However, the insured could not recover on the mold because of spoilation of evidence, and was precluded from recovery on the demolition claim due to the exclusion for faulty workmanship.
The appellate court agreed. The insured sought to recover costs associated with the contractor's extensive demolition. The demolition was done either due to the contractor's error or his faulty workmanship, or due to the contractor's addressing faulty workmanship of the persons responsible for the roof and window installation. The contractor was the insured's agent. The insured presented evidence that the contractor acted in error, but even if the contractor's work was faulty, it was excluded under the homeowner's policy.
The insured also argued that the trial court erred in attributing the contractor's disposal of the evidence of mold to the insured. The insured felt the adjuster had a duty to recover the disposed evidence. But the insured had a duty under the policy to allow the insurer "to take samples of damaged and undamaged property for inspection, testing and analysis." This became impossible because the allegedly moldy material was thrown into dumpsters, mixing with other construction debris and was not protected from the weather.
While dismissal of the claim seemed harsh where the insured apparently lacked some degree of knowledge or control over the initial methods in which the materials were removed and disposed of, it was of greater prejudice to Encompass who had absolutely no control over the evidence.
