Title: Comley v. Auto-Owners Insurance Co.

State: kentucky

Issuer: Kentucky Supreme Court

Document:

RENDERED: DECEMBER 13, 2018 TO BE PUBLISHED 2017-SC-000596-DG LEE COMLEY APPELLANT ON REVIEW FROM COURT OF APPEALS CASE NO. 2016-CA-001305-MR FAYETTE CIRCUIT COURT NO. 15-CI-03350 AUTO-OWNERS INSURANCE COMPANY APPELLEE OPINION OF THE COURT BY CHIEF JUSTICE MINTON REVERSING AND REMANDING Le e Co ml e y has ho me o w ne r ’s insur anc e t hr o ugh Aut o -Ow ne r s Insur anc e Co mpany c o ve r ing l o ss fr o m damage t o his dw e l l ing, o t he r st r uc t ur e s, and pe r so nal pr o pe r t y—as t ho se t e r ms ar e de fine d by t he po l ic y— subje c t t o c e r t ain po l ic y e xc l usio ns and r e st r ic t io ns. Aut o -Ow ne r s de nie d Co ml e y’s c l aim fo r l o ss t o his ho me and it s c o nt e nt s c ause d by w at e r t hat inundat e d t he base me nt o f his ho me fr o m a publ ic w at e r main t hat br o ke at a r ail r o ad c r o ssing ne ar his ho me . Aut o -Ow ne r s de nie d Co ml e y’s c l aim base d upo n t he appl ic at io n o f po l ic y e xc l usio ns r e l at ing t o w at e r damage . Co ml e y sue d Aut o -Ow ne r s. The t r ial c o ur t gr ant e d summar y judgme nt in favo r o f Aut o - Ow ne r s, and t he Co ur t o f Appe al s affir me d t he t r ial c o ur t ’s judgme nt . We ac c e pt e d disc r e t io nar y r e vie w t o de c ide w he t he r t he se po l ic y e xc l usio ns ne gat e c o ve r age fo r Co nl e y’s c l aime d l o sse s. We c o nc l ude t hat t he po l ic y e xc l usio ns do no t appl y t o Co ml e y’s l o ss, so w e r e ve r se t he Co ur t o f Appe al s and r e mand t his c ase t o t he t r ial c o ur t fo r pr o c e e dings c o nsist e nt w it h t his o pinio n. I. BACKGROUND. The undisput e d fac t s ar e simpl e . A w at e r main l ine , o w ne d and o pe r at e d by a publ ic ut il it y c o mpany, r unning ne ar a r ail r o ad c r o ssing o n a ne ar by st r e e t r upt ur e d, c ausing t he r e l e ase o f l ar ge amo unt s o f pr e ssur ize d w at e r t o fl o w abo ve t he gr o und. The w at e r r an o nt o Co ml e y’s r e side nt ial pr o pe r t y, fil l ing his base me nt w it h w at e r six-fe e t de e p. Co ml e y so ught payme nt fr o m Aut o -Ow ne r s fo r t he l o ss t o his pr o pe r t y c ause d by t he w at e r damage . Aut o -Ow ne r s de nie d t he c l aim, asse r t ing t hat so me o r al l t he fo l l o w ing po l ic y e xc l usio ns fr o m c o ve r age appl y: We do no t c o ve r l o ss t o c o ve r e d pr o pe r t y c ause d dir e c t l y o r indir e c t l y by any o f t he fo l l o w ing, w he t he r o r no t any o t he r c ause o r e ve nt c o nt r ibut e s c o nc ur r e nt l y o r in any se que nc e t o t he l o ss: (3) Wat e r damage me aning: (a) r e gar dl e ss o f t he c ause , fl o o d, sur fac e w at e r , w ave s, t idal w at e r , st o r m sur ge , o r o ve r fl o w o f a bo dy o f w at e r . We do no t c o ve r spr ay fr o m any o f t he se , w he t he r o r no t dr ive n by t he w ind; (d) w at e r be l o w t he sur fac e o f t he gr o und. This inc l ude s w at e r w hic h e xe r t s pr e ssur e o n o r fl o w s, se e ps o r l e aks t hr o ugh any par t o f a buil ding, side w al k, dr ive w ay, sw imming po o l o r o t he r st r uc t ur e . Bo t h par t ie s fil e d mo t io ns fo r summar y judgme nt in t he t r ial c o ur t . The t r ial c o ur t gr ant e d summar y judgme nt in favo r o f Aut o -Ow ne r s, r ul ing t hat t he damage -c ausing e ve nt w as e xc l ude d by t he po l ic y. The Co ur t o f Appe al s affir me d t he t r ial c o ur t ’s r ul ing. We gr ant e d disc r e t io nar y r e vie w t o c o nside r t his issue . II. ANALYSIS. Aut o -Ow ne r s ar gue s t hr e e w ays t hat t he highl ight e d e xc l usio ns appl y t o de ny Co ml e y’s c l aim: 1) t he damage suffe r e d by Co ml e y w as c ause d by “fl o o d” unde r Subse c t io n (3)(a); 2) t he damage suffe r e d by Co ml e y w as c ause d by “sur fac e w at e r ” unde r Subse c t io n (3)(a); and 3) t he damage suffe r e d by Co ml e y w as c ause d by “w at e r be l o w t he sur fac e o f t he gr o und” unde r Subse c t io n (3)(d). We find al l t he se ar gume nt s unc o nvinc ing. 1 To st ar t , w e r e ad Subse c t io n (3) (a) as e xc l uding fr o m c o ve r age damage c ause d e nt ir e l y by nat ur al fo r c e s. In so c o nc l uding, w e ar e c o nvinc e d by t he fo l l o w ing guidanc e fr o m a se minal t r e at ise o n insur anc e l aw : A po l ic y may c o ve r o r e xc l ude var io us nat ur al w at e r -r e l at e d fo r c e s, suc h as t idal w ave s, r ain, fl o o d, sur fac e w at e r , and subsur fac e w at e r . . . . Damage fr o m nat ur al w at e r -r e l at e d fo r c e s is dist inc t fr o m “w at e r damage .” Ge ne r al l y, “w at e r damage ” me ans w at e r damage fr o m pl umbing syst e ms. However, a policy may exclude “water damage” and define it as damage from natural water phenomena. Provisions excluding damage from natural water- 1 As a pr e l iminar y mat t e r , t he o nl y issue be fo r e t his Co ur t is t he appl ic at io n o f t he po l ic y e xc l usio ns at issue . The par t ie s have ne ve r fo c use d ar gume nt upo n, no r has t he t r ial c o ur t de c ide d, t he issue o f c o ve r age unde r Co ve r age A - Dw e l l ing, Co ve r age B - Ot he r St r uc t ur e s, and Co ve r age C - Pe r so nal Pr o pe r t y o f t he po l ic y. related perils preclude recovery for damage from natural causes, not from man-made systems. The po l ic y’s l anguage may indic at e w he t he r an e xc l usio n appl ie s t o w at e r damage fr o m nat ur al w at e r phe no me na o r man-made syst e ms.2 The l anguage o f Co ml e y’s po l ic y mir r o r s al mo st e xac t l y t he l anguage disc usse d by Co uc h, w hic h is int e r pr e t e d t o e xc l ude fr o m c o ve r age natural water phenomena. What happe ne d he r e —a publ ic w at e r main l ine bur st ing—is no t a nat ur al w at e r phe no me no n. Aut o -Ow ne r s ar gue s t hat t he phr ase “r e gar dl e ss o f t he c ause ” pr e c e ding t he e nume r at io n o f e ve nt s c o mpr ising “w at e r damage ” ne gat e s t he dist inc t io n be t w e e n nat ur al l y o c c ur r ing ve r sus ar t ific ial l y made w at e r disast e r s. But “r e gar dl e ss o f t he c ause ” do e s no t c hange t he fac t t hat t he e ve nt at issue must st il l c o nst it ut e “fl o o d, sur fac e w at e r , w ave s, t idal w at e r , st o r m sur ge , o r o ve r fl o w o f a bo dy o f w at e r ” be fo r e t he mo difie r appl ie s. If t he e ve nt at issue c anno t be c har ac t e r ize d as o ne o f t he se nat ur al l y o c c ur r ing e ve nt s, t he n t he “r e gar dl e ss o f t he c ause ” mo difie r is ine ffe c t ive . In o t he r w o r ds, t he “r e gar dl e ss o f t he c ause ” mo difie r do e s no t hing t o al t e r t he de finit io ns o f t he t e r ms “fl o o d, sur fac e w at e r , w ave s, t idal w at e r , st o r m sur ge , o r o ve r fl o w o f a bo dy o f w at e r ” and c anno t be use d, fo r e xampl e , t o c har ac t e r ize so me t hing as a “st o r m sur ge ” t hat is no t a “st o r m sur ge .” Co uc h do e s r e c o gnize t he inc o nsist e nc y t hat c an ar ise fr o m de fining flood w he n c o nside r ing a dist inc t io n be t w e e n nat ur al l y o c c ur r ing and man-made 2 St e ve n Pl it t , e t al ., Couch on Insurance, 11 Co uc h o n Ins. § 153:48 (3d e d. June 2018) (int e r nal c it at io ns o mit t e d). c ause s.3 Co uc h pr o ffe r s a r e c o nc il iat io n: “[W]he n t he inundat io n r e sul t s fr o m t he o ve r fl o w o f a bo dy o f w at e r , w he t he r nat ur al o r ar t ific ial , t he e ve nt is a fl o o d. Co nve r se l y, if t he inundat io n do e s no t ar ise fr o m t he o ve r fl o w o f a bo dy o f w at e r , as w he n a w at e r main br e ak t he e ve nt is no t a fl o o d."4 Eve n t ho ugh t he e nume r at io n o f e ve nt s e xc l ude d fr o m c o ve r age is pr e c e de d by “r e gar dl e ss o f t he c ause ,” t he e ve nt must st il l be a “fl o o d” fo r t he e xc l usio n t o appl y. Using Co uc h’s de finit io n o f flood, w hat o c c ur r e d in t his c ase —t he br e aking o f a w at e r main l ine —w o ul d no t be a flood, so , again, t he e ffe c t o f “r e gar dl e ss o f t he c ause ” is ir r e l e vant . This same l ine o f t hinking appl ie s t o pr e c l ude t he appl ic at io n o f t he e xc l usio n fo r damage c ause d by “sur fac e w at e r .” Bl ac k’s Law Dic t io nar y de fine s surface water as: “Wat e r l ying o n t he sur fac e o f t he e ar t h but no t fo r ming par t o f a w at e r c o ur se o r l ake . Sur fac e w at e r mo st c o mmo nl y de r ive s fr o m r ain, spr ings, o r me l t ing sno w .”5 In o t he r w o r ds, ac c o r ding t o Co uc h, “w he n w at e r gat he r s int o a ho l e , fl o w s int o a se w e r pipe , and fr o m t he r e e nt e r s and damage s a buil ding, t he w at e r do e s no t c o nst it ut e sur fac e w at e r . This w at e r is no t diffuse d, has fo r me d a bo dy o f w at e r , and fo l l o w e d a de fine d c hanne l and, t he r e fo r e , ge ne r al l y is no t c o nside r e d sur fac e w at e r .”6 As suc h, t he w at e r c ausing damage must c o nst it ut e “sur fac e w at e r ” be fo r e t he “r e gar dl e ss o f t he 3 Id. at § 153:54.4 Id. (c it ing Ender v. National Fire Ins. Co. of Hartford, 169 A.D.2d 420, 420-21 (N.Y. App. 1991)). 5 Bl ac k’s Law Dic t io nar y, “Sur fac e Wat e r ” (10t h e d. 2014). 6 Pl it t , supra fn 6 at § 153:57. c ause ” mo difie r is appl ie d. He r e , t he w at e r c ausing damage c ame fr o m a “w at e r c o ur se ,” i.e ., a w at e r main l ine , so t he w at e r c ausing damage he r e c anno t c o nst it ut e “sur fac e w at e r ,” making appl ic at io n o f t he “r e gar dl e ss o f t he c ause ” mo difie r ir r e l e vant . Final l y, Co ml e y did no t suffe r damage fr o m “w at e r be l o w t he sur fac e o f t he gr o und” as t hat phr ase is use d in Subse c t io n (3)(d). Co ml e y suffe r e d damage be c ause o f w at e r t hat inundat e d his ho me fr o m t he sur fac e o f t he gr o und. And Co uc h o bse r ve s t hat t he use o f suc h l anguage is just ano t he r w ay o f saying “subsur fac e w at e r .” Ac c o r ding t o Co uc h, “[t ]he r e ge ne r al l y is no t a disput e o ve r t he de finit io n o f subsur fac e w at e r . Subsur fac e w at e r is w at e r be ne at h t he gr o und o r subt e r r ane an w at e r .”7 Again, t he damage c ause d he r e w as by w at e r fl o w ing t hr o ugh a pipe t hat br o ke , c ausing t he w at e r fr o m t he pipe t o fl o w abo ve t he sur fac e o f t he gr o und, no t by “subsur fac e w at e r .” Simpl y put , w e c anno t agr e e t hat t he e ve nt c ausing damage in t his c ase w as c o nt e mpl at e d by t he po l ic y’s e xc l usio ns at issue he r e . So w e r e ve r se t he Co ur t o f Appe al s and r e mand t his c ase t o t he t r ial c o ur t fo r fur t he r pr o c e e dings c o nsist e nt w it h t his o pinio n. III. CONCLUSION. Be c ause w e c o nc l ude t hat no ne o f t he Aut o -Ow ne r s po l ic y e xc l usio ns appl y unde r t he se fac t s t o ne gat e po t e nt ial c o ve r age , summar y judgme nt w as gr ant e d impr o pe r l y by t he t r ial c o ur t . Ac c o r dingl y, w e r e ve r se t he de c isio n o f 7 Id. at § 153:58. t he Co ur t o f Appe al s and r e mand t his c ase t o t he t r ial c o ur t fo r fur t he r pr o c e e dings c o nsist e nt w it h t his o pinio n. Al l sit t ing. Mint o n, C.J., Hughe s, VanMe t e r , Ve nt e r s, and Wr ight , JJ., c o nc ur . Cunningham, J., disse nt s by se par at e o pinio n in w hic h Ke l l e r , J., jo ins. CUNNINGHAM, J., DISSENTING: I r e spe c t ful l y disse nt . The issue in t his c ase t ur ns o n t he de finit io n o f t he t e r m “fl o o d” unde r t he insur anc e po l ic y’s e xc l usio ns se c t io n. We r e vie w t he int e r pr e t at io n o f insur anc e c o nt r ac t s de no vo . Cincinnati Ins. Co. v. Motorists Mut. Ins. Co., 306 S.W.3d 59, 73 (Ky. 2010). Unde r t he r e aso nabl e e xpe c t at io ns do c t r ine , an ambiguo us insur anc e c o nt r ac t t e r m w il l be c o nst r ue d in favo r o f t he insur e d. If no ambiguit y e xist s, t he n t he t e r ms o f t he c o nt r ac t w il l be e nfo r c e d. Kentucky Ass'n ofCntys. All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005). Unde r t he insur anc e po l ic y at issue , c o ve r age e xc l ude d “w at e r damage ” c ause d by a “fl o o d,” “r e gar dl e ss o f t he c ause ” o f said fl o o d. The t e r m “fl o o d” is no t de fine d w it hin t he po l ic y. Whe r e a t e r m do e s no t have a t e c hnic al me aning w it hin t he l aw and is no t de fine d w it hin an insur anc e po l ic y, it is de fine d by it s o r dinar y me aning. Cincinnati, 306 S.W.3d at 74 (int e r nal c it at io n o mit t e d). Bl ac k’s Law Dic t io nar y de fine s a “fl o o d” as “[a]n inundat io n o f w at e r o ve r l and no t usual l y c o ve r e d by it . Wat e r w hic h inundat e s ar e a o f sur fac e o f e ar t h w he r e it o r dinar il y w o ul d no t be e xpe c t e d t o be .” Flood, Black’s Law Dictionary 640 (6t h e d. 1990). This pl ain me aning de finit io n do e s no t spe c ify w he t he r t he inundat ing w at e r must be fr o m a nat ur al so ur c e . Simil ar l y, t he Me r r iam- We bst e r Dic t io naiy de fine s t he no un “fl o o d” t o inc l ude “a r ising and o ve r fl o w ing o f a bo dy o f w at e r e spe c ial l y o nt o no r mal l y dr y l and; a c o ndit io n o f o ve r fl o w ing ... an o ve r w he l ming quant it y o r vo l ume .” Flood, Merriam- Webster Dictionary (No ve mbe r 7, 2018), ht t ps://w w w .me r r iam- w e bst e r . c o m / dic t io nar y / fl o o d. In c o nt r ast , Co ml e y ar gue s t hat “fl o o d” is an ambiguo us t e r m t hat sho ul d be int e r pr e t e d against t he dr aft e r t o o nl y e xc l ude c o ve r age fo r nat ur al fl o o ds. Ho w e ve r , t he t e r m is mo difie d by t he phr ase “r e gar dl e ss o f t he c ause ,” w hic h e nt ail s t hat t he “c ause ” do e s no t have t o be nat ur al . As suc h, t he me aning o f “fl o o d” in t his c l ause o f t he c o nt r ac t inc l ude s nat ur al and ar t ific ial o c c ur r e nc e s. The r e fo r e , t he unambiguo us l anguage o f t he po l ic y must be e nfo r c e d as w r it t e n, e xc l uding c o ve r age fo r fl o o ds fr o m nat ur al o r ar t ific ial o c c ur r e nc e s. He r e , t he “fl o o d” w as c ause d by an ar t ific ial o c c ur r e nc e : l e aking w at e r fr o m a r upt ur e d w at e r l ine . The w at e r damage t o Co ml e y’s pr o pe r t y, c ause d by a fl o o d o f w at e r fr o m an o ut side so ur c e , l ike t he r upt ur e d w at e r l ine , is e xc l ude d fr o m c o ve r age . Thus, po l ic y c o ve r age do e s no t appl y t o t he pr o pe r t y damage w hic h Co ml e y suffe r e d. Fur t he r , al t ho ugh t he po l ic y do e s e xpr e ssl y insur e against pe r so nal pr o pe r t y damage c ause d by t he “[a]c c ide nt al disc har ge o r o ve r fl o w o f w at e r o r st e am fr o m w it hin a pl umbing, he at ing, air c o ndit io ning o r aut o mat ic fir e pr o t e c t io n spr inkl e r syst e m o r do me st ic appl ianc e ,” Ho me o w ne r s Po l ic y Fo r m 3 8 at 8, it impl ie s t hat c o ve r age is fo r t he int e r nal , do me st ic pl umbing syst e m o f Co ml e y’s r e side nc e . As fur t he r pr o o f, t he po l ic y go e s o n t o e xc l ude c o ve r age fo r pe r so nal pr o pe r t y l o ss “c ause d by o r r e sul t ing fr o m w at e r fr o m outside the plumbing system t hat e nt e r s t hr o ugh se w e r s o r dr ains ” and o ve r fl o w s t he ho use ’s sump pump o r o t he r subsur fac e w at e r r e mo val syst e m. Thus, t he po l ic y e xc l ude s pe r so nal pr o pe r t y damage c ause d by t he disc har ge o f w at e r fr o m an e xt e r nal r upt ur e d w at e r main t hat is “o ut side t he pl umbing syst e m.” Fo r t he fo r e go ing r e aso ns, I disse nt fr o m t he majo r it y o pinio n. Ke l l e r , J., jo ins. COUNSEL FOR APPELLANT: St e phe n M. O’Br ie n, III Br uc e Cl ar k Bat t e n, II David Co o me r O’BRIEN BATTEN & KIRTLEY, PLLC COUNSEL FOR APPELLEE: Luke Al an Wingfie l d Jo hn Car t e r Mc BRAYER, Mc GINNIS, LESLIE 8b KIRKLAND PLLC