Universal Image Productions, Inc. v. Federal Insurance Co.

Summary

The Sixth Circuit affirmed summary judgment for Federal Insurance Company in a coverage dispute involving mold and bacterial contamination at Universal Image Productions’ leased premises. Applying Michigan law, the court held that Universal had not shown a direct physical loss or damage because no insured property sustained tangible damage and the premises were not rendered uninhabitable or substantially unusable.

Holdings

1. Universal did not suffer direct physical loss or damage because it presented no evidence of tangible physical damage to insured property. Cleaning and moving expenses, lost undamaged improvements, and lost business income were economic losses rather than tangible physical losses.
2. Universal did not establish that the Evergreen building was uninhabitable or substantially unusable during remediation, and therefore could not establish direct physical loss under that alternative theory.
3. Universal did not establish that odor caused direct physical loss because the odor was localized, did not persist, and did not damage or require replacement of insured property.

Questions Presented

1. Whether mold, bacterial contamination, odor, and related operational disruption constituted direct physical loss or damage to insured property under the property insurance policy.
2. Whether the Evergreen building was rendered uninhabitable or substantially unusable so as to constitute direct physical loss despite the absence of tangible structural damage.
3. Whether Universal presented a genuine issue of material fact sufficient to preclude summary judgment.

Disposition

affirmed