Opinion
Case No. 17-0966-CV-W-FJG
09-23-2019
MIDWEST FAMILY MUTUAL INSURANCE COMPANY, Plaintiff, v. HARI OM RUDRA HOTEL, LLC, d/b/a Quality Suites, Defendant.
Lloyd W. Raber, Swanson Bernard LLC, Kansas City, MO, for Plaintiff. Daniel Lucas Boyd, The Boyd Law Firm LLC, Overland Park, KS, for Defendant.
Lloyd W. Raber, Swanson Bernard LLC, Kansas City, MO, for Plaintiff.
Daniel Lucas Boyd, The Boyd Law Firm LLC, Overland Park, KS, for Defendant.
ORDER
Fernando J. Gaitan, Jr., United States District Judge
Pending before the Court are (1) Defendant's Motion for Partial Summary Judgment (Doc. No. 58) and (2) Plaintiff's Motion for Summary Judgment (Doc. No. 60). Both are considered below.
I. Background
Plaintiff Midwest Family Mutual Insurance Company ("MFM") is an insurance company which has brought a declaratory judgment action against its insured Hari Om Rudra Hotel, LLC ("Hari Om") as to whether there is any insurance coverage for its insured's alleged property damage which resulted from a water leak. In response, defendant asserted counterclaims for declaratory relief, breach of the insurance policy, and vexatious refusal to pay.
Specifically, plaintiff issued defendant a Businessowner's insurance policy ("Policy") covering the period of the claimed loss. See MFM Policy, Doc. 1-1; Doc. 5-1. According to Defendant's Answer and Counterclaim, Defendant's insurance claim includes:
a. Damage to the [ruptured water] pipe and [the] cost to replace [it];
b. loss of ... water from [the] ruptured pipe;
c. Damage to the parking lot of the Hotel;
d. Damage to the sidewalk of the Hotel;
e. Damage to the foundation and outer wall of the Hotel due to a void creation caused by water damage.
f. Water damage to several rooms in the Hotel;
g. Water damage to the contents of several rooms in the Hotel; and
h. Business loss from the time of the rupture pipe through July of 2017.
Doc. No. 5, ¶22.
On June 28, 2018, the Court entered its Order granting plaintiff's motion for judgment on the pleadings as to defendant's claim for property damage to its parking lot, and denying the motion in all other aspects. See Doc. No. 22. Defendant's counterclaims for declaratory relief as stated in Count I of the counterclaim were also dismissed. On February 6, 2019, the Court entered its Order denying defendant's motion to preclude opinion testimony of Brian Campbell, P.E., denying defendant's motion to strike certain portions of plaintiff's answer to defendant's counterclaim, denying defendant's motion for leave to file a supplemental expert designation as to William Cox, and granting in part and denying in part plaintiff's motion to strike the testimony of William Cox. See Doc. No. 72. In particular, the Court allowed Cox's testimony as a fact witness with respect to observations made while assisting defendant in the claims process, but to the extent that his testimony is based on facts not otherwise in evidence, his testimony would be precluded. Id. at 10.
Plaintiff MFM now moves for summary judgment in its favor on Counts I, II, III, IV, V, and VIII of its complaint for declaratory judgment, and against defendant Hari Om on all remaining counts of its counterclaim. Defendant Hari Om moves for partial summary judgment, requesting a ruling that the property damage at issue to its building and the resulting business income loss are covered under the insurance policy issued by plaintiff.
II. Facts
A. Insurance Policy and the Underlying Incident
MFM issued a "Businessowner's Policy" of insurance to Hari Om Rudra Hotel, LLC, policy no. CPM00560113397, with a policy period of December 15, 2016 through December 15,2017. Hari Om is the named insured under the MFM Policy, and the Declarations of the MFM Policy lists the insured location address as: 11951 Ambassador, Kansas City, Missouri 64153. (hereinafter "The Hotel"). The Description of the "Premises" in the Declaration of the MFM Policy identifies the "Occupancy" as "motels" and the "Construction" as "Frame." On June 4, 2017 the MFM Policy was in full force and effect and all premiums were fully satisfied.
On June 4, 2017, water infiltrated several rooms of the Hotel. Water was also discovered in the parking lot area of the Hotel. All claimed damage was the result of a leak from an underground waterpipe located under the parking lot located at 11951 Ambassador, Kansas City, MO 64153. Water and water damage were discovered in the interior of the Hotel, including damage to some carpet and walls in a few specific rooms of the hotel. Hari Om notified MFM of a potential claim for water damage at the hotel on June 5, 2017. An estimate of damages and a proof of loss was submitted to MFM on July 6, 2017, although MFM claims that this form did not comply with MFM's requirements. Hari Om claimed that the Hotel and its contents were damaged by the water infiltration. Hari Om ceased operations at the hotel until July 13, 2017, resulting in lost business income and profits. On August 1, 2017 MFM informed Hari Om that it was not able to conclude that Hari Om's claimed damages were covered under the MFM Policy and that it planned to confirm its conclusions of no coverage through a declaratory judgment action. The declaratory judgment action was filed on November 16, 2017 (Doc. No. 1).
Hari OM and MFM conducted separate investigations of the water leak and the water damage. Both investigations concluded that the origin of the water was from a ruptured water pipe located approximately 8-10 feet underground, beneath the Hotel's parking lot. None of the water came from a source above the ground's surface, and none of the water came from a leak inside the hotel building. MFM's investigation concluded that the water intrusion into the hotel and the "buckled" parking lot were the result of a water main break. MFM concluded that the pipe's failure was caused by corrosion, decay, deterioration, hidden or latent defect or a quality in the pipe that caused it to damage or destroy itself. The MFM investigation concluded that "Over time, the corrosion weakened the pipe's wall until the water pressure exceeded the pipe's capacity." Doc. 28-3 p. 2, ¶ 1. Hari Om's expert Carl Martin, on the other hand, concluded the corrosion in the underground waterpipe "appears to be related to an isolated backfill conditions" of the soil.
Carl Martin prepared an expert report for Hari Om. See Report, Doc. No. 59-4. Mr. Martin concluded that water from the underground waterpipe infiltrated the hotel building, and water migration from the water leak was identified to have passed under the foundation wall of the west wing of the hotel and to have impacted the north side rooms of the west wing. Carl Martin also concluded that the lateral migration of water from the water leak extended northward under the parking lot and southward along the underground conduit that existed above the water leak location, providing a pathway for water infiltration under and along the north side exterior wall of the west wing of the Quality Inn. Mr. Martin also concluded "sub-surface soil consolidations resulting in the loss of subgrade support along portions of the north wall of the west wing result[ed] in void formations" and that "[i]t cannot be ruled out that the void formations were not caused by the water leak condition that occurred." He also found that drilling of the slab on grade in these rooms along the north wall revealed a wet substrate condition existed. Carl Martin also acknowledged the presence of crack formations along the building's north wall (as well as in the sidewalk) and concluded that the morphology of the crack formations appeared consistent with uplift from hydrostatic forces below the slab. Martin also noted cracked concrete and differential settlement along the north side perimeter wall. Martin concluded that ground penetrating radar testing of the rooms revealed that the slab-on-grade in the rooms just south of the water leak had sub-surface soil consolidations resulting in the loss of sub-grade support along portions of the north wall of the west wing. Martin does not opine that the Hotel is in danger of falling down or caving in; however, Hari Om notes that his report recommends various methods of addressing lost sub-grade support, including pressure grouting to "fill the space and generally provide strength to the structure or geo-materials". Martin concluded filling the voids would "generally provide strength to the structure or geo-materials." Doc. No. 59-4, p. S-5.
MFM argues that the water that came out of the underground waterpipe was not "Business Personal Property", as defined in Paragraph A.1 of Section I of the MFM Policy. MFM further argues that the water that came out of the underground waterpipe was not a building, as defined in Paragraph A.1 of Section I of the MFM Policy. MFM further notes that no part of the building or sidewalk located at 11951 Ambassador, Kansas City, Missouri 64153 abruptly fell down or caved in on or about June 4, 2017, or as a result of the alleged water leak from the underground waterpipe. The Hotel located at 11951 Ambassador, Kansas City, Missouri, is currently in operation although no repairs have been made to the structural integrity of the Hotel.
B. Policy Coverage and Exclusions
The MFM Policy included a "Businessowners Coverage Form" (Doc. No. 1-1). The "Businessowners Coverage Form" provides the following coverage grant:
A. Coverage
We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused or resulting from any Covered Cause of Loss.
1. Covered Property:
Covered Property includes Buildings, as described under Paragraph a. below, Business Personal Property as described under Paragraph b. below, or both, depending on whether a Limit of Insurance is shown in the Declarations for that type of property. Regardless of whether
coverage is shown in the Declarations for Buildings, Business Personal Property, or both, there is no coverage for property described under Paragraph 2. Property Not Covered.
a. Buildings, meaning the buildings and structures at the premises described in the Declarations, including:
(1) Completed additions;
(2) Fixtures, including outdoor fixtures;
(3) Permanently installed:
(a) Machinery; and
(b) Equipment;
(4) Your personal property in apartments, rooms or common areas furnished by you as landlord;
(5) Personal property owned by you that is used to maintain or service the buildings or structures or the premises, including:
(a) Fire extinguishing equipment;
(b) Outdoor furniture;
(c) Floor coverings; and
(d) Appliances used for refrigerating, ventilating, cooking, dishwashing or laundering;
(6) If not covered by other insurance:
(a) Additions under construction, alterations and repairs to the buildings or structures;
(b) Materials, equipment, supplies and temporary structures, on or within 100 feet of the described premises, used for making additions, alterations or repairs to the buildings or structures."
b. Business Personal Property located in or on the buildings at the described premises or in the open (or in a vehicle) within a 100 feet of the described premises, including:
(1) Property you own that is used in your business;
(2) Property of others that is in your care, custody or control, except as otherwise provided in Loss, Payment, Property, Loss Conditions E.5.d.(3)(b);
(3) ...
2. Property Not Covered
Covered Property does not include:
d. Land (including land on which the property is located), water, growing crops or lawns;
...
e. Outdoor fences, radio or television antennas (including satellite dishes) and their lead-in wiring, masts or towers, signs (other than signs attached to buildings), trees, shrubs or plants, all except as provided in the:
(1) Outdoor Property Coverage Extension; or
(2) Outdoor Signs Optional Coverage;
(Doc. No. 1-1). The MFM Policy defines "Covered Causes of Loss " as: "Risks of direct physical loss unless the loss: a. Excluded in Paragraph B. Exclusions in Section I; or b. Limited in Paragraph 4. Limitations in Section I." Id. The MFM Policy defines "Specified Causes of Loss" in Section H as:
Fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow; ice or sleet; water damage.
a. Sinkhole collapse means the sudden sinking or collapse of land into underground empty spaces created by the action of water on limestone or dolomite. This cause of loss does not include:
(1) The cost of filling sinkholes; or
(2) Sinking or collapse of land into manmade underground cavities.
...
c. Water damage means accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of a system or appliance (other than a sump system including its related equipment and parts) containing water or steam.
Id. The BUSINESSOWNERS COVERAGE FORM grants ADDITIONAL COVERAGES, as follows:
5. Additional Coverages
d. Collapse
The coverage provided under this Additional Coverage – Collapse applies only to an abrupt collapse as described and limited in Paragraphs d.(1) though d.(7)
(1) For the purposes of this Additional Coverage – Collapse, abrupt collapse means an abrupt falling down or caving in of a building or any part of a building with the result that the building or part of the building cannot be occupied for its intended purpose.
(2) We will pay for direct physical loss or damage to Covered Property, caused by abrupt collapse of a building or any part of a building that is insured under this policy or that contains Covered Property insured under this policy, if such collapse is caused by one or more of the following:
(a) Building decay that is hidden from view, unless the presence of such decay is known to an insured prior to collapse;
(b) Insect or vermin damage that is hidden from view, unless the presence of such damage is known to an insured prior to collapse;
(c) Use of defective material or methods in construction, remodeling, or renovation if the abrupt collapse occurs during the course of the construction, remodeling or renovation.
(d) Use of defective material or methods in construction, remodeling or renovation if the abrupt collapse occurs after the construction, remodeling or renovation is complete but only if the collapse is caused in part by:
(i) A cause of loss listed in Paragraph 2(a) or 2(b);
(ii) One or more of the "specified causes of loss";
(iii) Breakage of building glass;
(iv) Weight of people or personal property; or
(v) Weight of rain that collects on a roof.
...
e. Water Damage, Other Liquids, Powder or Molten Material Damage
If loss or damage caused by or resulting from covered water or other liquid, powder or molten material occurs, we will also pay the cost to tear out and replace any part of the building or structure to repair damage to the system or appliance from which the water or other substance escapes.
...
f. Business Income
(1) Business Income
(a) we will pay for the actual loss of Business Income you sustain due to the necessary suspension of your "operations" during the "period of restoration". The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss. With respect to loss of or damage to personal property in the open or personal property in a vehicle, the described premises includes the area within 100 feet of the site at which the described premises are located.
Doc. No. 1-1.
The MFM Policy contains the following exclusions:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
...
b. Earth Movement
(1) Earthquake, including any earth sinking, rising or shifting related to such event;
(2) Landslide, including any earth sinking, rising or shifting related to such event;
(3) Mine subsidence, meaning subsidence of a man-made mine, whether or not mining activity has ceased;
(4) Earth sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface.
But if Earth Movement, as described in Paragraphs (1) through (4) above, results in fire or explosion, we will pay for the loss or damage caused by that fire or explosion.
...
e. Utility Services
The Failure of power, communication, water or other utility service supplied to the described premises, however caused, if the failure:
a. Originates away from the described premises; or
b. Originates at the described premises, but only if such failure involves equipment used to supply the utility service to the described premises from a source away from the described premises.
Failure of any utility service includes lack of sufficient capacity and reduction in supply.
Loss or damage caused by a surge of power is also excluded, if the surge would not have occurred but for an event causing a failure of power.
But if the failure or surge of power, or the failure of communication, water or other utility service, results in a Covered Cause of Loss, we will
pay for the loss or damage caused by that Covered Cause of Loss.
...
g. Water
(1) Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body water, or spray from any of these, all whether or not driven by wind (including storm surge);
(2) Mudslide or Mudflow;
(3) Water that is up or overflows or is otherwise discharged from a sewer, drain, sump pump or related equipment;
(4) Water under the ground surface pressing on, or flowing or seeping through:
(a) Foundations, walls, floors or paved surfaces;
(b) Basements, whether paved or not; or
(c) Doors, windows, or other openings; or
(5) Waterborne material carried or otherwise moved by any of the water referred to in Paragraph (1) , (3) or (4) , or material carried or otherwise moved by mudslide or mudflow.
This exclusion applies regardless of whether any of the above, in Paragraphs (1) through (5), is caused by an act of nature or is otherwise caused. An example of a situation to which this exclusion applies is the situation where a dam, levee, seawall or other boundary or containment system fails in whole or in part, for any reason, to contain the water.
...
2. We will not pay for loss or damage caused by or resulting from any of the following:
i. Collapse
(1) Collapse, including any of the following conditions of property or any part of the property:
(a) An abrupt falling down or caving in;
(b) Loss of structural integrity, including separation of parts of the property or property in danger of falling down or caving in; or
(c) Any cracking, bulging, sagging, bending, leaning, settling, shrinkage or expansion as such condition relates to Paragraph i.(1)(a) or i.(1)(b).
But if collapse results in a Covered Cause of Loss at the described premises, we will pay for the loss or damage caused by that Covered Cause of Loss.
(2) This Exclusion i., does not apply:
(a) To the extent that coverage is provided under the Additional Coverage – Collapse; or
(b) To collapse caused by one or more of the following:
(i) The "specified cause of loss"; ...
...
l. Other Types of Loss
...
(2) Rust or corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself....
But if an excluded cause of loss that is listed in Paragraphs (1) through (7) above results in a "specified cause of loss" or building glass breakage, we will pay for the loss or damage caused by that "specified
cause of loss" or building glass breakage.
Doc. No. 1-1.
III. Standard
Summary judgment is appropriate if the movant demonstrates that there is no genuine issue of material fact and that the movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 327, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The facts and inferences are viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586–90, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party must carry the burden of establishing both the absence of a genuine issue of material fact and that such party is entitled to judgment as a matter of law. Matsushita, 475 U.S. at 586–90, 106 S.Ct. 1348.
A nonmoving party must establish more than "the mere existence of a scintilla of evidence" in support of its position. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986).
The nonmovant must do more than simply show that there is some metaphysical doubt as to the material facts, and must come forward with specific facts showing that there is a genuine issue for trial. Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no genuine issue for trial.
Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011) (en banc) (citations and quotations omitted).
IV. Analysis
A. Plaintiff's Motion for Summary Judgment (Doc. No. 60)
Midwest Family Mutual Insurance Company ("MFM"), moves for Summary Judgment for MFM and against Hari Om Rudra Hotel, LLC. ("Hari Om") on Counts I, II, II, IV, V, and VIII of MFM's Complaint for Declaratory Judgment and against Hari Om on all remaining Counts of Hari Om's Counterclaim. MFM argues that it is entitled to this result because (1) as to Count I of the Complaint, the lost water is not "covered property" under the MFM Policy"; (2) as to Count II of the Complaint, the land under or around the Hotel is not "covered property"; (3) as to Count III of the Complaint, the sidewalk is not "covered property" for the same reason the Court has already ruled that the Parking Lot is not "covered property" under the MFM Policy; (4) as to Count IV, the ruptured pipe is not "covered property" under the MFM Policy, and the alleged damage was not the result of a covered cause of loss and resulted from a loss excluded by the MFM Policy; (5) as to Count V, any damage to the Hotel or its Contents was not the result of a covered cause of loss or resulted from a loss excluded by the MFM Policy, under the underground water exclusion and/or the earth movement exclusion; (6) as to Count VIII, the Court should find that all business loss was loss from an excluded cause of loss; (7) as to Count II of Hari Om's Counterclaim, there can be no breach of contract because the MFM Policy does not provide any coverage for the alleged loss; and (8) as to Count III of Hari Om's Counterclaim, there can be no vexatious refusal to pay because there was no coverage, and in the alternative, MFM had a valid coverage dispute that it had the right to raise in this declaratory judgment action. The Court will consider Count V first and will then move on to consider the remaining arguments raised by MFM.
1. Standards for interpretation of insurance contracts
Under Missouri law, insurance contracts typically include (1) an insuring agreement that grants insurance coverage when certain conditions are met, (2) definitions limiting the words used in the policy, and (3) exclusions, conditions and endorsements that limit the coverage granted. Swadley v. Shelter Mut. Ins. Co., 513 S.W.3d 355, 357-58 (Mo.banc. 2017). If these provisions in an insurance policy are "clear and unambiguous within the context of the policy as a whole, they are enforceable." Id. at 358. The interpretation of an insurance policy is a question of law. Seeck v. Geico Gen. Ins. Co., 212 S.W.3d 129, 132 (Mo. 2007). "Absent an ambiguity, an insurance policy must be enforced according to its terms." Id. If ambiguities exist, those are resolved against the insurer. Hampton Foods, Inc. v. Aetna Cas. and Sur. Co., 787 F.2d 349, 351–52 (8th Cir.1986) ; Bellamy v. Pacific Mutual Life Ins. Co., 651 S.W.2d 490, 495–96 (Mo. 1983). Ambiguity in an insurance contract exists when there is duplicity, indistinctness or uncertainty of the meaning of the language used in the policy. St. Paul Fire and Marine Ins. Co. v. Missouri United School Ins. Council, 98 F.3d 343, 345 (8th Cir. 1996). The language "will be interpreted in the manner that would ordinarily be understood by the lay person who bought and paid for the policy." Id. An allegedly ambiguous phrase is not read in isolation; instead, the policy is read as a whole. Citizens Ins. Co. of Am. v. Leiendecker, 962 S.W.2d 446, 451 (Mo. Ct. App. 1998).
The insured bears the burden of proving there is coverage under the policy. Shelter Mut. Ins. Co. v. Ballew, 203 S.W.3d 789, 792 (Mo. Ct. App. 2006). MFM notes that, in the context of this action and policy, Hari Om must prove: (1) There was direct physical loss or damage to property at the premises described in the Declarations of the MFM Policy; (2) The allegedly damaged property was "Covered Property" under the MFM Policy; and (3) The damage resulted from a "Covered Cause of Loss." If Hari Om meets its burden as to each of these, MFM then has the burden of showing that an exclusion to coverage applies. Ballew, 203 S.W.3d at 792.
2. Count V – was the damage the result of a covered cause of loss?
MFM argues that, under the Policy, a "covered cause of loss" is limited to causes of loss that are not excluded within the Policy. See supra, p. 858. MFM then argues that the claimed damages to the Hotel and its contents are barred under the contract's exclusions for water under the ground surface pressing on or entering the Hotel. See supra, p. 861, at B.1.g.(4). MFM argues that any remaining structural damage due to underground voids in the parking lot and sidewalk area is barred by the "earth movement" exclusion. See supra, p. 860, at B.1.b.(4).
a. Water Exclusion
With respect to the water exclusion, MFM notes that the Policy does not cover any damages resulting from any excluded cause of loss. See supra, p. 858. Thus, if any exclusions apply, Hari Om would not be entitled to coverage. Here, MFM argues that all the damages to the Hotel building and its contents were the result of water under the ground surface that pressed on or flowed or seeped through foundations, walls, floors, paved surfaces, basements, door, windows, or other openings of the hotel building. Exclusion B.1.g. provides that damages related to underground water reaching covered property through these means is excluded from coverage "regardless of any other cause or event that contributes concurrently or in any sequence to the loss." Furthermore, the exclusion applies whether the water damage is caused by an act of nature or is otherwise caused. MFM argues that this paragraph does not apply to all water damage caused by water under the ground surface; instead, it only applies (as here) when the damage meets all the requirements of B.1.g.(4). MFM states it is undisputed that all the damages were the result of water that leaked out of the underground waterpipe, located outside the Hotel. At the time this Court denied the motion for judgment on the pleadings (see Doc. No. 22), Hari Om claimed that expert testimony was needed to demonstrate the cause of the damages and the flow and origin of the water. However, on summary judgment, Hari Om has no expert testimony that controverts that of MFM with respect to the source of the water damage. Thus, given that the deadline for disclosing experts has long-expired, MFM argues that the facts demonstrate that the water damage in this matter all relates to an excluded cause.
MFM further notes that the Court previously expressed concern in its Order on the motion for judgment on the pleadings that it could be "inconsistent for the interpretation of one section of the policy to completely deny coverage for underground water events but in another section of the policy state that there could be coverage for collapse events," See Doc. No. 22, p. 8. MFM argues, however, there is no conflict or inconsistency because the collapse exclusion only applies to an abrupt falling down or caving in, the loss of structural integrity (including separation of parts of the property or property in danger of falling down or caving in), or other cracking, bulging, sagging, bending, leaning, or settling that relates to an abrupt falling down or caving in or loss of structural integrity. See supra p. 861, B.2.i.1. An exception to this collapse exclusion is to a collapse caused by a specified cause of loss, one of which is the "accidental discharge or leakage of water or steam as the direct result of the breaking apart or cracking of any part of the system or appliance (other than sump system ...) containing water or steam." See supra pp. 858 and 861. Thus, the underground water exclusion in B.1.g(4), which only excludes loss or damage related to water pressing on or flowing or seeping through the covered property, is not inconsistent with the "specified cause or loss" exception to the Collapse Exclusion. MFM notes that the collapse exclusion does not apply here, as there has been no abrupt falling down or caving in, or loss of structural integrity to the covered property. MFM concludes that the Policy obviously and unambiguously intended to exclude water damages in certain circumstances "regardless of any other cause or event that contributes concurrently or in any sequence to the loss," and thus it would be inconsistent to void the underground water exclusion because the collapse exclusion might not apply in some circumstances where the underground water exclusion applies.
Hari Om responds that the underground water exclusion is ambiguous, and the policy would virtually never provide coverage for plumbing systems, as nearly all plumbing is underground. The Court notes that Hari Om's proposition that nearly all plumbing is underground is dubious at best, as many plumbing systems are contained within buildings themselves and connect to fixtures which are above ground. Instead, it appears that for the reasons stated by MFM, the Policy would potentially cover leaks caused by above-ground plumbing systems contained within the Hotel, and the Policy language providing coverage for certain water events at paragraph A.5.e. is not inconsistent or ambiguous in this regard. Hari Om also argues that the loss in this case meets an exception to the following exclusions: (1) Rust or other corrosion; and (2) Collapse. However, as discussed by MFM, an exception to an exclusion does not create coverage, particularly where, as here, the contract includes language that unambiguously intends to exclude damages where there are multiple causes of the loss ("regardless of any other cause or event that contributes concurrently or in any sequence to the loss"). See West v. Jacobs, 790 S.W.2d 475, 478 (Mo.App.W.D. 1990).
The Court finds that, for the reasons stated by MFM in its briefs and as set forth above, the water exclusion found at B.1.g.(4) of the Policy precludes coverage for damages caused by the water that leaked from the underground pipe.
b. Earth Movement Exclusion
To the extent that Hari Om claims damages due to underground structural damage that does not result from water seeping or moving through foundations/walls/floors/paved surfaces/doors/windows or other openings, MFM argues that such claims are excluded by the Earth Movement Exclusion, found at B.1.b.(4) of the Policy. That section of the Policy provides that MFM will not pay for loss or damage, directly or indirectly caused, by earth "sinking (other than sinkhole collapse), rising or shifting including soil conditions which cause settling, cracking or other disarrangement of foundations or other parts of realty. Soil conditions include contraction, expansion, freezing, thawing, erosion, improperly compacted soil and the action of water under the ground surface." (Doc. No. 1-1, MFM Policy, p. 29). Hari Om claims that there were voids under or around the Hotel as the result of the action of water under the ground surface; thus, MFM argues that all of Hari Om's remaining claims are precluded by the earth movement exclusion.
Hari Om argues that the Policy is ambiguous as to the earth movement exclusion, as it does not specify whether it applies to only naturally occurring conditions or to man-made conditions as well; however, as noted by MFM, with respect to the earth movement exception, the Policy lists as non-exclusive examples both man-made and natural conditions. Hari Om argues that the Policy ought to have been explicit if it wished to exclude damage sustained as a result of soil movement from a burst pipe; however, MFM replies that the inclusion of language specifying the "action of water under the ground surface" suffices. Hari Om also argues that the Collapse Exclusion's exception for specified causes of loss for water damage applies to impose liability on MFM. However, the Collapse Exclusion does not apply under the facts of this case, as there was no abrupt falling down or caving in, nor was there a loss of structural integrity in the Hotel itself. Moreover, contrary to arguments raised by Hari Om, the utility services exclusion and frozen plumbing exclusion do not create coverage.
See also the cases cited in MFM's reply finding similar earth movement exclusions to apply to leaking underground waterpipes: Bilotto v. Allied Prop. & Cas. Ins. Co., 79 F.Supp.3d 660, 668, 673 (W.D.Tex. 2015) ; Ark. Valley Drilling, Inc. v. Cont'l W. Ins. Co., 703 F.Supp.2d 1232, 1241-42 (D.Col. 2010) ; Audubon Hill S. Condo. Ass'n v. Cmty. Ass'n Underwriters of Am., 82 Mass.App.Ct. 461, 975 N.E.2d 458, 468-469 (2012) ; E. Iowa Plastics, Inc. v. Hartford Cas. Ins. Co., No. 17-1324, 2018 WL 3471176, *4 (Iowa App. July 18, 2018).
The Court previously found that the parking lot is not Covered Property within the meaning of the Policy. See Order, Doc. No. 22, at pp. 9-11. For the same reasons, the Court extends that holding and finds that the sidewalks are not Covered Property within the meaning of the Policy.
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Therefore, the Court finds that all claimed damages of Hari Om in this action are excluded under the Policy's Underground Water Exclusion and/or the Earth Movement Exclusion. Judgment is granted in MFM's favor on Count V of its declaratory judgment action.
3. Remainder of MFM's Motion for Summary Judgment on its Declaratory Judgment Complaint
Given that the Court has found in favor of MFM on Count V of its declaratory judgment complaint, the Court finds that: (1) the motion for summary judgment as to Count I (lost water as "covered property") is MOOT ; (2) the motion for summary judgment as to Count II and the land under and around the Hotel is GRANTED , given that Hari Om conceded in response to the motion that it is not making claims related to such property and that such land is not Covered Property under the Policy; (3) the motion for summary judgment as to Count III related to the sidewalk and parking lot is GRANTED for the same reasons as the Court stated in its Order on the motion for judgment on the pleadings, Doc. No. 22, pp. 9-11; (4) the motion for summary judgment as to Count IV (whether the ruptured pipe is "covered property") is MOOT given the finding on Count V; and (5) the motion for summary judgment on Count VIII (business loss) is MOOT given the finding on Count V. Furthermore, the Court finds that any other remaining counts or arguments from in the Complaint (Doc. No. 1) not specifically ruled in this Order should be found to be MOOT , given the Court's finding on Count V of the Complaint.
4. MFM's Motion for Summary Judgment as to Remaining Counterclaims
Given that the Court has found in favor of MFM on Count V of its declaratory judgment complaint, the Court finds that summary judgment must be granted in favor of MFM as to Count II of Hari Om's counterclaim for breach of contract, as the damages here were not the result of a covered cause of loss. For the same reason, summary judgment must be granted in favor of MFM as to Count III of Hari Om's counterclaim for vexatious refusal to pay.
B. Defendant's Motion for Partial Summary Judgment (Doc. No. 58)
Hari Om seeks partial summary judgment on Count II of its counterclaim, related to breach of contract. For the reasons stated above, Hari Om is not entitled to summary judgment on Count II of its counterclaim, as the damages in this case were not the result of a covered cause of loss under the Policy. Therefore, Hari Om's motion for summary judgment (Doc. No. 58) is DENIED.
V. Conclusion
For the foregoing reasons, (1) Defendant's Motion for Partial Summary Judgment (Doc. No. 58) is DENIED ; and (2) Plaintiff's Motion for Summary Judgment (Doc. No. 60) is GRANTED IN PART and found MOOT IN PART as discussed above. Judgment is entered in favor of MFM and against Hari Om.
IT IS SO ORDERED .