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### STATE OF MICHIGAN

COURT OF APPEALS

CRAFT RECREATION COMPANY, LLC, d/b/a LAKEWOOD LANES,

Plaintiff-Appellee, UNPUBLISHED September 15, 2015

v No. 321435 Oakland Circuit Court HOME-OWNERS INSURANCE COMPANY, LC No. 2013-136669-CB

Defendant-Appellant.

Before: M URRAY , P.J., and M ETER and O WENS , JJ.

P ER C URIAM

. In this insurance coverage dispute, defendant appeals as of ri ght a judgment for plaintiff and challenges an opinion and order granting summary dispositio n to plaintiff. Resolution turns on whether defendant’s insurance policy was authorized under MC L 500.2826 or MCL 500.2827, provisions of the Michigan Insurance Code, MCL 500.10 0 et seq. We hold that the trial court correctly determined that plaintiff’s policy falls under § 2827 and thus, defendant was required to remit the policy limits to plaintiff without regard to whether the structure was actually repaired or replaced because the damage exceeded the p olicy limits.

Plaintiff is a limited liability company which operated a bowl ing alley under the name Lakewood Lanes. The business premises were insured by defendan t. In August 2012, a fire destroyed the business, resulting in a total loss. The parties do not dispute that the damages were in excess of the policy limit . The policy between the parties provided:

d. [Defendant] will not pay on a replacement cost basis for any loss or damage:

(1) Until the lost or damaged property is actually repaired or replaced; and

(2) Unless the repairs or replacement are made as soon as reas onably possible after the loss or damage.

e. [Defendant] will not pay more for loss or damage on a replac ement cost basis than the least of:-2- (1) The Limit of Insurance app licable to the lost or damaged p roperty;

(2) The cost to replace, on the same premises, the lost or dam aged property with other property:

(a) Of comparable material and quality; and

(b) Used for the same purpose[.]

Defendant refused to remit the full policy limit and argued tha t plaintiff was re quired to rebuild the structure before it would become liable. Plaintiff filed s uit; both parties moved for summary disposition. Relying on Cortez v Fire Ins Exch , 196 Mich App 666; 493 NW2d 505 (1992), and distinguishing Smith v Mich Basic Prop Ins Ass’n , 441 Mich 181; 490 NW2d 864 (1992), the trial court held that the policy language fell under § 2827, an d that plaintiff was therefore entitled to recover up to the policy limit.

The construction and interpreta tion of an insurance contract i s a question of law subject to de novo review. Henderson v State Farm Fire & Cas Co , 460 Mich 348, 353; 596 NW2d 190 (1999). The interpretation of a statute is reviewed de novo, McAuley v Gen Motors Corp , 457 Mich 513, 518; 578 NW2d 282 (1998), overruled in part on other grounds by Rafferty v Markovitz
, 461 Mich 265, 273 n 6; 602 NW2d 367 (1999), as is a decision on a motion for summary disposition, Rory v Continental Ins Co , 473 Mich 457, 464; 703 NW2d 23 (2005).

Interpretation of insurance policy terms follows Michigan’s es tablished principles of contract construction. Henderson , 460 Mich at 353.

First, an insurance contract must be enforced in accordance wit h its terms. A court must not hold an insurance company liable for a risk that it did not assume. Second, a court should not create ambiguity in an insurance pol icy where the terms of the contract are clear and precise. Thus, the terms o f a contract must be enforced as written where there is no ambiguity. [ Id . at 354 (citations omitted).]

However, if there is ambiguity in the contract, the ambiguity w ill be “liberally construed in favor of the insured and against the insurer, who drafted the contract.” Morinelli v Provident Life & Acc Ins Co , 242 Mich App 255, 262; 617 NW2d 777 (2000).

The foremost rule of statutory construction or interpretation is to discern and give effect to the intent of the Legislature. Sun Valley Foods Co v Ward , 460 Mich 230, 236; 596 NW2d 119 (1999). Each word or phrase of a statute is given its commonly accepted meaning, unless a word or phrase is expressly defined, and then courts must apply it in a ccordance with that definition. McAuley , 457 Mich at 518. “To discern the true intent of the Legislat ure, the statutes must be read together, and no one section should be taken in isolation.” Apsey v Memorial Hospital , 477 Mich 120, 132 n 8; 730 NW2d 695 (2007).

MCL 500.2806 provides that a “po licy or contract of fire insur ance shall not be made, issued, or delivered . . . unless it conforms to the provisions of this chapter.” Two separate provisions may authorize the policy at issue. Section 2826 pro vides:-3- An insurer may issue a fire insurance policy, insuring propert y, by which the insurer agrees to reimburse and indemnify the insured for t he difference between the actual value of the i nsured property at the time an y loss or damages occurs, and the amount actually e xpended to repai r, rebuild, or replace with new materials of like size, kind, and quality, but not to exceed th e amount of liability covered by the fire policy. A fire policy issued pursuant to t his section may provide that there shall be no li ability by the insurer to pay the amount specified in the policy unless the propert y damaged is actually repaired, rebuilt, or replaced at the same or another site.

In contrast, § 2827 provides:

(1) An insurer may issue a fire policy, insuring property, by which the insurer agrees to reimburse and i ndemnify the insured for the d ifference between the actual cash value of the lost or damaged insured property a t the time of the loss or damage, and the amount act ually necessary to repair, re build, or replace the lost or damaged insured property to a condition and appeara nce similar to that which existed at the time of the loss or damage based on the us e of conventional materials and construction methods which are currently availabl e without extraordinary expense. The insur er’s liability shall not exceed the amount of liability covered by the c ontract of insurance.

* * *

(3) The contract of insurance es tablished pursuant to subsect ion (1) may provide that there shall be no liability on the part of the ins urer to pay an amount in excess of the actual cash value of the lost or damaged insur ed property at the time of the loss or damage, unless the lost or damaged property is actually repaired, rebuilt, or replaced at the same or another contiguou s site. However, this subsection shall not apply if the amount of loss or damage to the insured property under the standards of subsection (1) exceeds the amou nt of liability covered by the contracts.

The policy at issue states that the insurer will cover the cost to replace or repair the property with other property of “comparable material and quality.” The polic y in Smith referred to “like construction and use,” Smith , 441 Mich at 185 n 3, while in Cortez the policy required “equivalent construction,” Cortez , 196 Mich App at 669. Section 2826 covers the use of “new materials of like size, kind, and quality,” while § 2827 covers the use of “conventional materials and construction methods.” The language from neither case nor statute exactly matches that of the policy at issue.-4- The word “like” means, in part, “of the same form, appearance, kind, character, amount[.]” Random House Webster’s College Dictionary (1997). 1 The word “conventional” means, in part, “conforming or adhering to accepted standards” and “ordinary rather than different or original.” Id . Turning to the words in the p olicies, “equivalent” means, in part, “equal in value, measure, force, effect, or significance,” whil e the term “comparable” means, in part, “capable of being compared; permitting comparison,” and “ compare” means, in part, “to examine . . . in order to note si milarities and differences” a nd “to consider or describe as similar; liken[.]” Id

.
These definitions show that the term “like” includes an elemen t of being “the same,” while “comparable” includes the examination of similarities and differences. A different material could be used in repairing a home under § 2827 as long as the differences did not outweigh the similarities. In addition, § 2826 refers to “new materials . . . .” This Court has determined that “equivalent const ruction” clauses are authorize d under § 2827, which allows “conventional materials and construction methods.” Cortez , 196 Mich App at 668-669. The Cortez Court stated:

Defendant contends contract provisions limiting an insurer’s l iability to pay replacement cost only in the event the damaged property is actually repaired or rebuilt are expressly authorized by statute. We agree. Sec tion 2826 of the Insurance Code . . . provides for this type of insurance contra ct. However, § 2826 . . . addresses replacement-cost insurance provisions that requ ire the insurer to provide replacement with “new materials of like size, kind and quality.” The contract of insurance at issue in this case provides for replac ement cost for “equivalent construction.” Thus, this policy is subject to § 2 827 of the code, . . . which addresses replacement-cost policies that require the insu rer to rebuild or replace the lost or damaged property “to a condition and appear ance similar to that which existed at the time of loss based on the use of conventional materials and construction methods.” [ Cortez ,196 Mich App at 668-669 (emphasis in original).]

The “comparable material” phrasing under the policy here is mos t closely authorized under the “conventional materials” phrasing of § 2827 and is similar to t he phrase “equivalent construction” construed in Cortez . Contrary to defendant’s argument, Smith does not control because it did not address the distinctions between the section s. See Smith , 441 Mich at 187 n 6. Finally, any ambiguity must go against the defendant, who draft ed the policy. Morinelli , 242 Mich App at 262. Therefore, the trial court did not err in applying § 2827(1) and (3) and in granting summary dispos ition to plaintiff.

1 The terms are not defined in the statute and thus this Court m ay look to the dictionary for the ordinary meaning of the words. Stanton v Battle Creek , 466 Mich 611, 617; 647 NW2d 508 (2002).-5- Affirmed.

/s/ Christopher M. Murray /s/ Patrick M. Meter /s/ Donald S. Owens