In Platek v Town of Hamberg (N.Y. Ct. Apps., Feb. 19, 2015), New York’s highest court reversed the decision of the Fourth Department appeals court siding with the carrier’s interpretation of the water exclusion contained within a homeowner’s all risk policy. The relevant policy language provided as follows:
“ [The policy] does not cover loss to the property . . . consisting of or caused by:
. . .
- Water . . . on or below the surface of the ground, regardless of its source [, including] water . . . which exerts pressure on, or flows, seeps or leaks through any part of the residence premises.
We do cover sudden and accidental direct physical loss caused by fire, explosion or theft resulting from items 1 through 4 listed above.”
In this case, the insureds argued that because they had sustained a water intrusion loss caused by an explosion of the water main, their claim fell within the exception to the water loss exclusion. Allstate characterized the exception to the exclusion as an ensuing loss provision, and interpreted the provision to provide that any initial loss to the insured’s property caused by the conditions set forth in item 4, i.e., “[w]ater . . . on or below the surface of the ground,’ is not covered under the policy but that, in the event that there is an ‘explosion . . . resulting from’ that initial loss, any secondary or ensuing loss caused by the explosion is covered.” The insureds disagreed that there must be a secondary or ensuing loss, and asserted that the exception applies here solely because there was an explosion of the water main which resulted from the conditions set forth in item 4, i.e., “[w]ater . . . below the surface of the ground,” which caused a sudden and accidental direct physical loss to their property.
The court held that the loss clearly falls within item 4 of the water loss exclusion, which bars coverage for “loss to the property. . . consisting of or caused by . . . 4. Water . . . on or below the surface of the ground, regardless of its source . . . including water . . . which exerts pressure on, or flows, seeps or leaks through any part of the residence premises.” Turning next to the sudden and accidental exception, the court held that this clause is properly characterized as an ensuing loss provision, which provides coverage when, as a result of an excluded peril, a covered peril arises and causes damage, but cautioned that “an ensuing loss at least requires a new loss to property that is of a kind not excluded by the policy; it does not resurrect coverage for an excluded peril.”
Plaintiffs also argued that even if the policy’s use of the phrase “resulting from” does have the temporal meaning of “follows,” it is not “irrational” for it also to mean “caused by.” The court disagreed noting that the sudden and accidental exception to the water loss exclusion, uses the phrase “caused by” earlier when referring to “loss caused by . . . explosion” and then uses a different phrase, i.e., “resulting from items 1 through 4” in the exception. “The use of different terms in the same agreement (here, in the same sentence) implies that they are to be afforded different meanings.”
Accordingly, the court granted the insurer’s motion for summary judgment, stating that interpreting the insurance policy as the insureds propose would contravene the purpose of the policy’s water loss exclusion, as expressed in unambiguous language, which is to preclude coverage for damages caused by the entry of water onto an insured’s property.
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