| Platek v Town of Hamburg |
| 2012 NY Slip Op 05459 [97 AD3d 1118] |
| July 6, 2012 |
| Appellate Division, Fourth Department |
| Frederick J. Platek et al., Respondents, v Town ofHamburg et al., Defendants, and Allstate Indemnity Company,Appellant. |
—[*1] Lipsitz Green Scime Cambria LLP, Buffalo (Patrick J. Mackey of counsel), forplaintiffs-respondents.
Appeal from an order of the Supreme Court, Erie County (Ralph A. Boniello, III, J.), enteredMay 12, 2011 in a breach of contract action. The order granted the motion of plaintiffs forsummary judgment, declared that plaintiffs' loss is covered by the subject insurance policy,directed defendant Allstate Indemnity Company to pay plaintiffs' claim and denied the crossmotion of defendant Allstate Indemnity Company for summary judgment.
It is hereby ordered that the order so appealed from is modified on the law by vacating thedeclaration and as modified the order is affirmed without costs.
Memorandum: Plaintiffs commenced this action for, inter alia, breach of contract, allegingthat defendant Allstate Indemnity Company (Allstate) breached its insurance contract withplaintiffs by failing to provide coverage for water damage to the basement of their home after anabutting water main ruptured and water flooded their property. Allstate disclaimed coveragepursuant to an exclusion in the insurance policy, denominated "item 4," which states that Allstatedoes not cover losses caused by "[w]ater . . . on or below the surface of the ground,regardless of its source . . . [,] includ[ing] water . . . which exertspressure on, or flows, seeps or leaks through any part of the residence premises." Plaintiffsmoved for summary judgment, seeking a declaration that the insurance policy covered theirclaimed loss and directing Allstate to pay their claim. Plaintiffs relied upon a provision in theinsurance policy setting forth an exception to the exclusion relied upon by Allstate, whichprovides that Allstate covers "sudden and accidental direct physical loss caused by fire, explosionor theft resulting from item[ ] . . . 4." Plaintiffs averred that the exception appliesbecause their claimed loss was caused by an "explosion" of the water main. Allstate cross-movedfor summary judgment dismissing the complaint against it on the ground that the insurancepolicy does not cover plaintiffs' loss.
Supreme Court granted the motion and denied the cross motion, declaring that plaintiffs' lossis covered under the insurance policy and directing Allstate to pay plaintiffs' claim in accordancewith the policy provisions. Although we conclude that the court properly granted [*2]summary judgment to plaintiffs on the issue of liability, we furtherconclude that the court erred in "declaring" that plaintiffs' claimed loss is covered under thepolicy, inasmuch as the action against Allstate is for breach of contract and not a declaratoryjudgment (see Gravino v Allstate Ins.Co., 73 AD3d 1447, 1448 [2010], lv denied 15 NY3d 705 [2010]). We thereforemodify the order by vacating the declaration.
The parties disagree with respect to whether the exception to item 4 under the policyexclusions applies, and they offer conflicting interpretations of that exception. Allstatecharacterizes the exception as an "ensuing loss" provision, and it thus interprets the exception toprovide 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 thepolicy but that, in the event that there is an "explosion . . . resulting from" thatinitial loss, any secondary or ensuing loss caused by the explosion is covered. Plaintiffs disagreethat there must be a secondary or ensuing loss, and they assert that the exception applies becausethere was an "explosion [of the water main] resulting from" the conditions set forth in item 4,i.e., "[w]ater . . . below the surface of the ground," and causing "sudden andaccidental direct physical loss" to their property.
In our view, both interpretations are "reasonable" (Pioneer Tower Owners Assn. v State Farm Fire & Cas. Co., 12 NY3d302, 308 [2009]), and we therefore conclude that the exception "is ambiguous and thusshould be construed in favor of plaintiffs, the insureds" (Trupo v Preferred Mut. Ins. Co., 59 AD3d 1044, 1045 [2009]; see generally White v Continental Cas.Co., 9 NY3d 264, 267 [2007]; Belt Painting Corp. v TIG Ins. Co., 100 NY2d377, 383 [2003]). Contrary to Allstate's contention, the relevant language of the insurance policydoes not specify that the exception applies only to a secondary or ensuing loss or that theexplosion must result from a loss to the insured's property caused by the conditions setforth in item 4. Rather, the policy states that the exception applies where the loss to the insured'sproperty was "caused by [an] explosion . . . resulting from item[ ] . . .4."
We further conclude that plaintiffs established their entitlement to summary judgment bydemonstrating that the exception at issue applies to their claimed loss (see generally Topor v Erie Ins. Co., 28AD3d 1199, 1200 [2006]). The term "explosion" is not defined in the insurance policy, andwe thus "afford that term its 'plain and ordinary meaning' " (Gallo v Travelers Prop. Cas., 21 AD3d 1379, 1380 [2005]).Webster's Third New International Dictionary defines "explosion" as "an act of exploding"(Webster's Third New International Dictionary 802 [2002]), and to "explode" is "to burstviolently as a result of pressure from within" (id. at 801). Here, plaintiffs submittedevidence, i.e., the affidavits of plaintiff Frederick J. Platek and an expert engineer, sufficient toestablish as a matter of law that there was an "explosion" of the water main abutting theirproperty caused by the build up of pressure therein; that the pressure in the water main "result[ed]from" the conditions set forth in item 4, i.e., "[w]ater . . . below the surface of theground"; and that the explosion of the water main caused "sudden and accidental direct physicalloss" to plaintiffs' property. Plaintiffs thus met their initial burden on the motion, and Allstatefailed to raise a triable issue of fact in opposition inasmuch as it did not oppose plaintiffs' factualshowing (see generally Zuckerman v City of New York, 49 NY2d 557, 562 [1980]).
All concur except Peradotto and Martoche, JJ., who dissent and vote to reverse in accordancewith the following memorandum.
Peradotto and Martoche, JJ. (dissenting). We respectfully dissent because, in our view, thehomeowners insurance policy at issue specifically excludes plaintiffs' loss and the exception tothe exclusion relied upon by plaintiffs does not apply. We would therefore reverse the order,deny plaintiffs' motion for summary judgment, and grant the cross motion of defendant AllstateIndemnity Company (Allstate) for summary judgment dismissing the complaint against it. Wenote at the outset that we agree with the majority that Supreme Court erred in "declaring" that the[*3]claimed loss is covered under the policy because this is abreach of contract action and not a declaratory judgment action (see Gravino v Allstate Ins. Co., 73AD3d 1447, 1448 [2010], lv denied 15 NY3d 705 [2010]). We therefore also wouldvacate the declaration.
Plaintiffs are the owners of certain residential real property in defendant Town of Hamburg,which property was insured under a policy of insurance issued by Allstate (policy). The policyprovides, in relevant part, that Allstate does not cover "loss to the property . . .consisting of or caused by: 1. Flood, including, but not limited to, surface water . . .[;] 2. Water . . . that backs up through sewers or drains[;] 3. Water . . .that overflows from a sump pump, sump pump well or other system designed for the removal ofsubsurface water . . . [; or] 4. Water . . . on or below the surface of theground, regardless of its source . . . [,] includ[ing] water . . . whichexerts pressure on, or flows, seeps or leaks through any part of the residence premises" (waterloss exclusion). In September 2010, plaintiffs' property was damaged when an abutting watermain ruptured and water flooded their property, causing water damage to the basement of theirhome. Allstate disclaimed coverage under "item 4" of the water loss exclusion.
Plaintiffs commenced this action alleging that Allstate breached its insurance contract withplaintiffs by failing to provide coverage for the water damage to their home. Plaintiffs reliedupon an exception to the water loss exclusion (exception), which provides that Allstate covers"sudden and accidental direct physical loss caused by fire, explosion or theft resulting from items1 through 4," i.e., the four categories of water incursion set forth in the water loss exclusion.Specifically, plaintiffs averred that the exception applies because their claimed loss was causedby an "explosion" of the water main. As noted by the majority, plaintiffs moved for summaryjudgment seeking a declaration that their loss is covered by the policy and directing Allstate topay their claim. Allstate cross-moved for summary judgment dismissing the complaint against iton the ground that the policy does not cover plaintiffs' loss. The court granted the motion, deniedthe cross motion, declared that plaintiffs' loss is covered under the policy and directed Allstate topay plaintiffs' claim in accordance with the policy provisions. We would reverse, deny plaintiffs'motion, thus vacating the improper declaration, and grant the cross motion of Allstate forsummary judgment dismissing the complaint against it.
It is undisputed that the loss occurred when a water main ruptured outside plaintiffs'residence, causing water to enter the basement of their home. It is therefore further undisputedthat the loss falls within item 4 of the water loss exclusion precluding coverage for "loss to theproperty . . . consisting of or caused by . . . [w]ater . . .on or below the surface of the ground, regardless of its source . . . [,] includ[ing]water . . . which exerts pressure on, or flows, seeps or leaks through any part of theresidence premises." "[B]ecause the existence of coverage depends entirely on the applicabilityof [an] exception to the [water loss] exclusion," plaintiffs bear the burden of demonstrating theapplicability of the exception (Borg-Warner Corp. v Insurance Co. of N. Am., 174 AD2d24, 31 [1992], lv denied 80 NY2d 753 [1992]; see Hritz v Saco, 18 AD3d 377, 378 [2005]; Redding-Hunter,Inc. v Aetna Cas. & Sur. Co., 206 AD2d 805, 807 [1994], lv denied 86 NY2d 709[1995]).
In construing an insurance contract, the "parties' intent is to be ascertained by examining thepolicy as a whole, and by giving effect and meaning to every term of the policy" (Oot v HomeIns. Co. of Ind., 244 AD2d 62, 66 [1998] [internal quotation marks omitted]; seeConsolidated Edison Co. of N.Y. v Allstate Ins. Co., 98 NY2d 208, 221-222 [2002] ["Weconstrue the policy in a way that affords a fair meaning to all of the language employed by theparties in the contract and leaves no provision without force and effect" (internal quotation marksomitted)]). "[W]ords and phrases are to be understood in their plain, ordinary, and popularlyunderstood sense, rather than in a forced or technical sense" (Oot, 244 AD2d at 66)."Where the provisions of the policy are clear and unambiguous, they must be given their plainand ordinary meaning, and courts should refrain from rewriting the agreement" (United StatesFid. & Guar. Co. v Annunziata, 67 NY2d 229, 232 [1986] [internal quotation marksomitted]).
Unlike the majority, we conclude that, when viewing the policy as a whole, the claimed lossis not covered under the clear and unambiguous language of the policy. Plaintiffs did notpurchase, and Allstate did not provide, what may generally be characterized as flood insurance.The water loss exclusion broadly exempts from coverage losses consisting of or caused by theentry of water into the insured premises "regardless of its source." The exception to thatexclusion covers "sudden and accidental direct physical loss caused by fire, explosion or theftresulting from items 1 through 4 listed above" (emphasis added), i.e., the four types ofexcluded water events. In our view, the exception should not be construed as intending to createcoverage for water intrusion inasmuch as such a reading of the exception would supplant thewater loss exclusion (see generally Narob Dev. Corp. v Insurance Co. of N. Am., 219AD2d 454 [1995], lv denied 87 NY2d 804 [1995]). Rather, we agree with Allstate thatthe exception is properly characterized as an "ensuing loss provision," excluding from coverageany initial loss to the insured's property caused by "[w]ater . . . on or below thesurface of the ground," but covering secondary or ensuing loss caused by fire, explosion or theftthat occurs as the result of an excluded water event (see id. ["Where a property insurancepolicy contains an exclusion with an exception for ensuing loss, courts have sought to assure thatthe exception does not supersede the exclusion by disallowing coverage for ensuing loss directlyrelated to the original excluded risk"]).
As noted above, the exception provides that Allstate covers "sudden and accidental directphysical loss caused by fire, explosion or theft resulting from" the entry of water into theresidence as described in items 1 through 4 of the water loss exclusion. The phrase "resultingfrom" in the exception does not mean "caused by," nor should it be interpreted in that manner.Indeed, interpreting the exception to cover a loss where an explosion is caused by water outsidethe residence, as plaintiffs urge, contravenes the purpose of the water loss exclusion, which is topreclude coverage for losses caused by water entry into the residence (see ITT Indus. vFactory Mut. Ins. Co., 303 AD2d 177, 177 [2003] [rejecting plaintiff's "untenableinterpretation that the policy provided coverage for a resulting loss of an excluded risk"]). Rather,the language "resulting from" is properly interpreted as referring to an "ensuing loss," i.e., a lossthat follows or takes place after an excluded event (Goldner v Otsego Mut. Fire Ins. Co.,39 AD2d 440, 442 [1972]; see Narob Dev. Corp., 219 AD2d at 454). In other words, theexception refers to a separate occurrence—fire, explosion or theft—that results fromthe water damage to the residence, and does not refer to the water damage itself. For example, afire or explosion triggered by water damage to a circuit breaker or appliance, or a theft thatoccurs in an empty house rendered uninhabitable by water damage would constitute an ensuingloss. Our interpretation of the phrase "resulting from" is consistent with the dictionary definitionof "resulting" ("[t]o come about as a consequence," "synonym[ ]" to follow), or "resultant"("[i]ssuing or following as a consequence or result") (American Heritage Dictionary 1487 [4th ed2000]). Thus, in our view, the only reasonable interpretation of the exception is that it coverslosses caused by fire, explosion or theft that follows one of the excluded water events setforth in items 1 through 4 of the water loss exclusion.
Given the nature of the water loss exclusion, we discern no other plausible way to read theexception. The water loss exclusion is for loss "consisting of or caused by" water intrusion; thecoverage in the exception is for loss "direct[ly] . . . caused by" fire, explosion, ortheft that "result[s] from" water intrusion. In order to adopt plaintiffs' interpretation, we wouldhave to read the exception to cover a loss caused by an explosion that in turn is caused by water.The difficulty with that interpretation is exposed when the same interpretation is applied to a lossfrom "theft," also a part of the exception. Under plaintiffs' interpretation, the exception covers aloss caused by a theft that is caused by water—an illogical, if not absurd, reading. Theweakness of plaintiffs' proposed interpretation is further exposed in reviewing the exception thatcovers[*4]"sudden and accidental direct physical loss caused by. . . theft . . . resulting from earth movement." Theft cannot be"caused" by earth movement, although theft might logically follow an earthquake if, for example,the door to the residence is damaged, the windows are shattered, or the house is rendereduninhabitable by the earthquake.
Because, in our view, plaintiffs' interpretation of the exception is unreasonable, we wouldreverse the order, deny plaintiffs' motion for summary judgment, thus vacating the improperdeclaration, and grant Allstate's cross motion for summary judgment dismissing the complaintagainst it. Present—Smith, J.P., Fahey, Peradotto, Sconiers and Martoche, JJ.