Title: King v. Travelers Insurance Company

State: new-mexico

Issuer: New Mexico Supreme Court

Document:

505 P.2d 1226 (1973) 84 N.M. 550 Elmer G. KING and Ruth M. King, Husband and wife, Plaintiffs-Appellants, v. The TRAVELERS INSURANCE COMPANY, Defendant-Appellee. No. 9437. Supreme Court of New Mexico. February 2, 1973. *1228 Edward E. Triviz, Las Cruces, for plaintiffs-appellants. Bivins & Weinbrenner, Las Cruces, for defendant-appellee. MONTOYA, Justice. This is an appeal by plaintiffs, hereinafter called "Appellants," from a summary judgment rendered in a suit which was brought to recover damages under a homeowners' insurance policy issued by the defendant insurance company, hereinafter called "Appellee." The parties stipulated that a galvanized iron water line underneath the concrete floor slab, somewhere between the hot water heater and the kitchen in Appellants' home, broke or ruptured, allowing the escape and discharge of water which eroded the soil and proximately caused abnormal settling damage from the pressure of the said water underneath the slab; caused the concrete floor slab to buckle in the living room and the outside walls to crack, resulting in damages to the insured premises in the sum of $2,255.41. It was further stipulated that the leak from the galvanized iron water line occurred from within the plumbing system and was caused by a deterioration in the water line from a chemical reaction known as "electrolysis." Appellee denied coverage and both parties moved for summary judgment. The trial court granted summary judgment to Appellee and this appeal ensued. Both parties agree in their briefs that the basis for the trial court's ruling was that the claimed loss by Appellants was not covered under the terms of the policy in question. The essential facts necessary for a determination of the issues between the parties are stipulated to and the basic issue to be determined is whether or not the loss was covered under the policy. The first question to be considered is whether the loss was or was not a named peril under Section I of the policy. Under the "perils insured against," only paragraph 17 is applicable, and it reads, insofar as material herein, as follows: Appellee argues that this damage is not covered by the policy because it was not the result of an "accidental discharge," rather that the damage was due to the process known as electrolysis, a result caused initially by defective installation. The cases do not support the claim that the loss was not occasioned by an accident; indeed, a wealth of authority sustains the conclusion that an accident occurred. St Paul Fire and Marine Insurance Co. v. Northern Grain Co., 365 F.2d 361 (8th Cir.1966). The court in St. Paul, supra, quotes from 7A Appleman, Insurance Law and Practice, § 4492, as follows: The court went on to say: Kraftsow v. Brown, 172 Pa.Super. 581, 94 A.2d 183 (1953), dealt with a "water damage" policy. In holding the policy to be applicable in a situation where plaintiff's employee negligently used a plunger on the drain on the roof and a cap covering the opening in a wall pipe came off and flooded the basement, the court quoted the following from Hamilton v. American Indemnity Co., 82 Pa.Super. 191 (1923): Furthermore, in Cross Properties, Inc. v. Home Indemnity Company, 41 Misc.2d 822, 246 N.Y.S.2d 683 (1964), the court states: In Rex Roofing Co. v. Lumber Mut. Cas. Ins. Co. of New York, 280 App.Div. 665, 116 N.Y.S.2d 876 (1952), the defendant disclaimed liability upon the ground that the occurrence was due to faulty workmanship on the part of the plaintiff and was not caused by accident, and that the damaged property was under the care, custody and control of the plaintiff. In holding the loss was caused by accident and affirming coverage, the court stated: The authorities cited above indicate that an insurance policy designed to compensate for damages suffered by "accidental means" is no less effective when the damages result from negligence. That there was a discharge of water from within the plumbing system is undisputed. The fact that the discharge resulted from and was caused by a deterioration in the water line from a chemical reaction known as electrolysis, as stipulated by the parties, does not make it any less an "accident" as that word is understood to mean in its ordinary and common usage. If the water line was negligently installed this does not preclude the "accident" from coverage under paragraph 17 of the policy. As the Supreme Court of Minnesota said in Hauenstein v. Saint Paul-Mercury Indem. Co., 242 Minn. 354, 65 N.W.2d 122 (1954): In view of the foregoing, it is clear to us from the stipulated facts that the loss suffered by Appellants was loss caused by accidental discharge and leakage of water from within a plumbing system, and that no ruling to the contrary should be allowed to stand. The next issues before this court are whether the loss was otherwise excluded under the policy, and whether the policy clauses with which we are concerned contain an ambiguity. Under the "losses excluded" the insurer shall not be liable under Section I for: Appellee contends that the loss was, therefore, excluded under the policy, while Appellants contend otherwise. Appellants also argue that, if the loss is not covered under Section I, the pertinent provisions of the policy are ambiguous and any construction of the provisions should be resolved in Appellants' favor. A case very analogous to the factual situation we have confronting us here, is World Fire & Marine Ins. Co. v. Carolina Mills Distributing Co., 169 F.2d 826 (8th Cir.1948). There the facts show that a water damage policy was involved which insured all direct loss and damage caused solely by accidental discharge, leakage or overflow of water or steam from enumerated sources, including plumbing systems, and also providing in the exception clause that the insurer should not be liable for damage caused directly or indirectly by floods, inundation, backing up of sewers or drains. The damages in that case resulted when the city's main sewer became overloaded as a result of an unusually heavy rain and the resulting pressure in the sewer caused water to flow back through a soil pipe into insured's building, causing a metal cap covering an opening in the plumbing system to be broken and forced off, resulting in a flooding of the basement. There it was argued that the loss was not caused by an accidental discharge of water from the insured's plumbing system, but was indirectly caused by the backup water from the sewer system, and hence fell within the exception hereinbefore mentioned. The court disposed of those arguments by saying: In considering the effect of the excepting clause in the World Fire case, supra, the court said it presented two possible alternatives, each of which would lead to the same result. Its reasoning was that the excepting clause was either in irreconcilable conflict with and repugnant to the insurance clause, or that it must be so construed that its meaning will be harmonized with the insuring clause. The court went on to state: Appellee argues that Section I(b)(3), supra, in particular excludes coverage of damage due to "water below the surface of the ground." We concur with the statement in the World Fire case, supra, which we believe answers that contention: As held there, the contract must be construed, whenever possible, to give effect to both provisions of the policy, that is, the insuring clause and the excepting clause. It is not unreasonable to assume that the loss or damage intended to be excepted by the words "water below the surface of the ground" was like the other losses as would result from causes having no connection with the "plumbing system." If the excepting clause be construed as applying to the state of facts in this case, as Appellee contends, an irreconcilable conflict exists between its meaning and the insuring clause, with the result that the contract must be found to be ambiguous. In that event, the contract will be construed favorable to the insured who did not prepare it. Jacobs v. Camden Fire Insurance Association, 135 F. Supp. 837 (D.C.W.D.Pa. 1955), even though denying coverage, states what we believe to be the appropriate rule of construction, citing cases in support thereof as follows: Any "abnormal settling" or "buckling" of the concrete floor slab in the instant case, which was not a result of the "accidental discharge, leakage or overflow of water" from the enumerated fixtures, would not have been covered by the applicable provisions of the policy, but where there was an accidental discharge of water from within the plumbing system, there *1232 would be liability. As the court points out in World Fire & Marine Ins. Co. v. Carolina Mills Distributing Co., supra: This, of course, is counter to Appellee's argument that "in order for there to be coverage, the damage would have had to result from water that was not below the surface." However, Appellee ignores the fact that a great part of many plumbing systems, by necessity, are installed below the ground. Presumably, if an insurer desired to exclude from coverage that part of the plumbing system which is below the surface of the ground after specifically insuring the overall plumbing system, it could have done so. We agree that the language used in Roach v. Churchman, 431 F.2d 849 (8th Cir.1970), correctly states the general rule as follows: The strict construction of exclusionary clauses in insurance policies was followed in Chicago, Rock Island and Pacific Railroad Company v. Aetna Insurance Company, 180 Kan. 730, 308 P.2d 119 (1957), where the court said: Thus, the fact that there was water damage due to a break in the plumbing system, which is specifically covered, is no less worthy of coverage simply because a part of that plumbing system was beneath the ground. The terms of the policy should be construed in their plain, ordinary and usual sense. In Fowler v. First National Life Insurance Co. of America, 71 N.M. 364, 378 P.2d 605 (1963), we approved this well-settled rule of construction when we said: Finally, in addition to a question of ambiguity resulting from a mere reading of the policy, Appellants point out, and the record supports, the logical inference that the insurer's agents were also in doubt as to the applicability of the pertinent provisions of the policy in question. Although Appellants do not argue that theories of waiver and estoppel are applicable here, Appellants' argument is persuasive evidence of the policy's ambiguity. Harr v. Allstate Insurance Company, 54 N.J. 287, 255 A.2d 208 (1969), as quoted in our recent decision in Pribble v. Aetna Life Insurance Company, 84 N.M. 211, 501 P.2d 255 (1972), is in point: In Harr v. Allstate Insurance Company, supra, as in the instant case, the insurance agent told the insured (Appellants herein) that they were covered for the loss involved, although liability for the loss was later denied by the home office of the Appellee. In the instant case, Appellant Mr. King, a man who had a third grade education and who worked as a laborer all his life, purchased insurance from insurer's agent Mr. Campbell, a man trained in the specialties of his profession. Mr. King testified that he had bought a previous policy from Mr. Campbell on his former home and when he moved into a new home Campbell convinced him to add "water damage" coverage, which he did. Mr. King's wife testified that Mr. Campbell had called and said: "* * * `Your don't have enough insurance on your house.' * * *." After checking with her husband, Mrs. King called Mr. Campbell back and said: When Mr. Campbell was reminded of this conversation by Appellants, Campbell advised them that they were covered. Appellants further testified that they never really understood the policy, even after coverage was denied and the applicable provisions pointed out to them. Appellee, in its brief, cites Park v. Hanover Insurance Company, 443 S.W.2d 940 (Tex.Civ.App. 1969), as authority in support of their denial of coverage. That case involved an all risk policy and is distinguishable on the facts. There the water line break occurred at a point where it entered the house beneath the foundation and excessive rust was found at the point of the break. The escaping water came in contact with the foundation only and the softened subsoil resulted in a shifting of the foundation, causing cracks in the wall and other damages. That policy excluded from coverage any loss caused or resulting from "water below the surface of the ground." In that case, one of the named perils insured against was accidental discharge of water used within a plumbing system. The Park case, supra, reached a contrary result from that arrived at in World Fire & Marine Ins. Co. v. Carolina Mills Distributing Co., supra, stating it was distinguishable on the facts as well as the stated exceptions. It is interesting to note that the policy in the Park case, supra, contained an additional exclusion which provided that there would be no recovery for loss caused by "inherent vise, wear and tear, deterioration and rust * * *." The Park case, supra, adopts a line of reasoning contrary to the World Fire case, supra, which we have hereinbefore quoted with approval and which we now adopt as our view of the applicable law in this case. Other cases cited by Appellee are distinguishable on the facts, or on the exceptions stated in the policies involved. This leaves for consideration the ultimate disposition to be made herein. We agree that, in view of the stipulation of the parties, there is no material fact in dispute, but we believe that the legal effect of the *1234 facts, as stipulated, has been erroneously construed by the trial court in granting summary judgment in favor of Appellee. We disagree with the conclusion arrived at by the trial court, that the policy did not cover the loss suffered by Appellants. In view of the foregoing, we now hold that Appellants are entitled to judgment as a matter of law. Accordingly, the judgment of the trial court is reversed and this cause is remanded to the trial court with instructions to vacate its judgment heretofore entered and to enter a judgment in favor of Appellants for the stipulated amount with costs. It is so ordered. McMANUS, C. J., and STEPHENSON, J., concur.