Jessica M. Karmasek Oct. 2, 2013, 6:30pm

LANSING, Mich. (Legal Newsline) -- The Michigan Court of Appeals this week ruled that an insurer did not breach its contract with a cheese producer when it failed to pay the company for losses associated with a recall.

The plaintiff, Torres Hillsdale Country Cheese LLC, appealed a trial court's order denying its motion for partial summary disposition and granting summary disposition in favor of defendant Auto-Owners Insurance Company.

In an unpublished opinion filed Tuesday, a three-judge panel of the appeals court said summary disposition was not "premature."

"There was no genuine question that the losses were the result of the government's actions," the court wrote in its eight-page opinion. "Because the exclusions in Form 54082 applied, the trial court properly granted defendant's motion for summary disposition."

In February 2009, random testing of the company's cheese product by the Michigan Department of Agriculture revealed the presence of Listeria, a harmful bacteria.

Torres Hillsdale was notified that it was to not ship any product until testing came back negative for the bacteria. However, the company proceeded to ship out product.

As a result, a recall was issued in March 2009. The recall was later expanded in April 2009 and June 2009 to cover additional types of cheeses.

The cheese producer later sought payment under its insurance policy for non-contaminated cheese that was seized and could not be brought back to market.

Its insurer, Auto-Owners, denied the claim based on exclusions present in the policy.

Specifically, Auto-Owners relied on the exclusions that it will not pay for any loss due to "delay, loss of use or loss of market" and will not pay for any loss due to "[a]cts or decisions, including failure to act or decide, of any person, group, organization or governmental body."

Torres Hillsdale filed suit against the insurer, alleging breach of contract and violation of the Michigan Uniform Trade Practices Act. The company alleged that the exclusions relied on by insurer did not apply to the losses that it suffered.

However, the appeals court noted that the provision the cheese producer relied on "merely states that the acts of others beyond the insured's control will 'not affect' insurance."

"It does not say that the acts of others beyond the insured's control automatically results in a covered loss," the panel wrote. "Thus in general, an act of another person outside the control of the insured is not a ground to grant coverage and it also is not a reason to deny coverage.

"As a result, one must look to the terms of the actual policy in order to determine if any particular loss is covered. And here, the exclusions, as part of the policy, clearly deny recovery for any loss caused by the government's seizure as well as any loss caused by a decision of a governmental body."

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