Opinion
Civ. No. A2-98-01.
Filed June 30, 1999.
Summary: Plaintiffs brought a claim for breach of contract seeking insurance coverage under their homeowners policy. Plaintiff's Grand Forks home received water damage when the power to their home was shut off during the Flood of 1997, which did not allow their sump pump to work. The court granted defendant's motion for summary judgment, holding that the policy's flood exclusion contained "concurrent causation" language, which excluded coverage for damage caused directly or indirectly, or in any sequence, by flood. Thus, plaintiff's homeowners policy did not provide coverage and the court dismissed plaintiff's claim.
REPORT AND RECOMMENDATION
Before the court is defendant's motion to dismiss plaintiffs' punitive damage claim and motion for partial summary judgment. (Doc. #23.) Plaintiffs oppose the motion for summary judgment, but not the motion to dismiss the claim for punitive damages. (Doc. #28.) Because plaintiffs do not oppose defendant's motion to dismiss the punitive damage claim, the undersigned recommends that defendant's motion be granted. Furthermore, as more fully explained below, it is recommended that defendant's motion for partial summary judgment be granted.
I. Background
Briefly stated, this case arises out of the historic flood which devastated the Grand Forks, North Dakota area in the spring of 1997. Plaintiffs Jim and Alyce Strausbaugh purchased a homeowner's insurance policy from defendant Heritage Mutual Insurance Group to cover their residence in Grand Forks. This policy was in effect from August 5, 1996, to August 5, 1997.
On April 19, 1997, emergency management personnel told plaintiffs to leave their home because of flooding in Grand Forks. Sometime after they left, the power company turned off the electricity to their premises. Without electricity, plaintiffs' sump pump could not function. When plaintiffs returned to their home on May 18, 1998, they discovered their basement filled with water. Since plaintiffs did not see any water marks on the home to indicate overland flooding, and because they had plugged their sewer drains, they surmised that the water in the basement was the result of seepage, which their sump pump could not remove. (Doc. #25, p. 68.) A picture taken by a neighbor on April 20, 1997 shows that overland flood waters did not reach plaintiff's home, which also led plaintiffs to believe that the water in their basement was not a result of overland flood water. (Doc. #28, Ex. A.)
On May 29, 1997, plaintiffs filed a claim of loss with defendant. Defendant denied plaintiffs' claim based on an exclusion in plaintiffs' policy that excludes from coverage any loss to the home caused directly or indirectly by flooding. Following the denial of coverage by defendant, plaintiffs filed this action, asserting claims for breach of contract and bad faith. (Doc. #1.) Defendant answered and counterclaimed, seeking a declaratory judgment that plaintiffs' claimed loss is not covered under the terms of their homeowners policy. (Doc. #2.) Defendant now moves for partial summary judgment, maintaining that since plaintiffs' damages were caused directly or indirectly by flood water, the policy clearly and unambiguously excludes coverage for these damages. (Doc. #26.)
Defendant's motion is entitled "Motion for Partial Summary Judgment," presumedly because of the accompanying motion to dismiss. Defendant obviously intended its motion to dismiss to completely dispose of plaintiffs' bad faith claim, which is plaintiffs' only basis for punitive damages. Although granting defendants' motion to dismiss does not necessarily completely dispose of plaintiffs' bad faith claim, it appears the parties viewed the motion as doing just that. Thus, the undersigned will consider defendant's motion for summary judgment as a motion for a "full" summary judgment.
II. Discussion
Summary judgment is appropriate only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). A fact is "material" if it might affect the outcome of a case, and a factual dispute is "genuine" if the evidence is such that a reasonable jury could return a verdict for the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Churchill Bus. Credit, Inc. v. Pacific Mut. Door Co., 49 F.3d 1334, 1336 (8th Cir. 1995). Under North Dakota law, the interpretation of an insurance policy is a question of law. Dundee Mut. Ins. Co. v. Marifjeren, 587 N.W.2d 191, 193 (N.D. 1998). Consequently, such cases are particularly amenable to summary judgment. See John Deere Ins. Co. v. Shamrock Indus., Inc., 929 F.2d 413, 415 (8th Cir. 1991).
When construing an insurance policy, North Dakota courts seek to give effect to the mutual intent of the parties as it existed at the time the contract was formed. See Landis v. CNA Ins., 589 N.W.2d 590, 591-92 (N.D. 1999). To accomplish this aim, the court must look first to the policy language itself. Id. at 592;Marifjeren, 587 N.W.2d at 193. Where a policy term is self explanatory and subject to only one meaning, the inquiry ends.Landis, 589 N.W.2d at 592; Marifjeren, 587 N.W.2d at 193. An ambiguity exists in an insurance policy only when reasonable arguments can be made for two contrary positions regarding the meaning of a term. Marifjeren, 587 N.W.2d at 194. Where an ambiguity is found, the court will construe the term in favor of the insured. Id. However, the court will not strain the definition of a term to create an ambiguity. Close, 583 N.W.2d at 796.
Defendant denied coverage for plaintiffs' claim pursuant to what this court terms the "concurrent causation" language contained in the policy at issue:
1. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.
* * *
c. Water Damage, meaning:
(1) flood, surface water, waves, tidal water, overflow of a body of water, or spray from any of these, whether or not driven by wind;
(2) water which backs up through sewers or drains; or
(3) water below the surface of the ground, including water which exerts pressure on or seeps or leaks through a building, sidewalk, driveway, foundation, swimming pool or other structure.
(Doc. #26, Ex. A (emphasis original)). Defendant maintains that this language clearly and unambiguously excludes coverage for plaintiffs' claimed damages, since they were caused "directly or indirectly by flood, surface water, waves, tidal water, or overflow of a body of water."
Plaintiffs argue that the flood exclusion language is ambiguous, and thus must be interpreted in their favor. Since no overland flood waters reached their house, plaintiffs assert that the flood water exclusion is inapplicable in this case. Plaintiffs argue their loss is covered under the policy provision which covers any damage caused by an accidental discharge or overflow in the plumbing system. The specific policy language upon which plaintiffs rely states:
COVERAGE C — PERSONAL PROPERTY
We insure for direct physical loss to the property described in Coverage C caused by a peril listed below unless the loss is excluded in Section I — Exclusions.
12. Accidental discharge or overflow of water or steam from within a plumbing . . . system.
(Doc. #23, Ex. A). Plaintiffs assert that their sump pump is part of the plumbing system, and therefore, since their damage was caused by its failure, their loss is covered under this section of their policy.
Courts have universally held that the concurrent causation clause contained in plaintiffs' policy clearly and unambiguously excludes coverage where damage is caused directly or indirectly by an excluded peril, even where damage is also partially caused by a covered peril. See Ramirez v. American Family Mut. Ins. Co., 652 N.E.2d 511, 516 (Ind.Ct.App. 1995); Front Row Theatre, Inc. v. American Mfr. Mut. Ins. Co., 18 F.3d 1343, 1347 (6th Cir. 1994);TNT Speed Sport Center v. American States Ins. Co., 114 F.3d 731 (8th Cir. 1997); Dupps v. Travelers Ins. Co., 80 F.3d 312 (8th Cir. 1996); Pavuk v. State Automobile Ins. Co. of Columbus, 1997 WL 431014 (E.D.Pa. 1997); Prytania Park Hotel v. General Star Indemnity Co., 896 F. Supp. 618 (E.D.La. 1995); Schroeder v. State Farm Fire and Cas. Co., 770 F. Supp. 558 (D.Nev. 1991); Pakmark Corp. v Liberty Mutual Ins. Co., 943 S.W.2d 256 (Mo.App. 1997);Sunshine Motors, Inc. v New Hampshire Ins. Co., 530 N.W.2d 120 (Mich.App. 1995); Kula v. State Farm Fire and Cas. Co., 628 N.Y.S.2d 988 (Sup.Ct. 1995); Alton v. Manufacturers Merchants Mut. Ins. Co., 624 N.E.2d 545 (Mass. 1993); Alf v. State Farm Fire and Cas. Co., 850 P.2d 1272 (Utah 1993). The undersigned agrees that although the concurrent causation language in plaintiffs' policy is very broad, it is nonetheless clear and unambiguous.
In the present case, it is clear that the 1997 Grand Forks flood was the first step in the chain of events which directly led to plaintiffs' loss. The electrical power to plaintiffs' home was turned off as a direct result of the flood, which in turn prevented plaintiffs' sump pump from working. Additionally, the flood was also the likely source of the water that seeped into plaintiffs' basement and actually caused the damage. Based on the undisputed facts, a reasonable jury would be forced to conclude that plaintiffs' damages were directly, or at least indirectly, caused by the flood, and thus are clearly and unambiguously excluded from coverage. See Ramirez, 652 N.E.2d at 513 (holding that nearly identical concurrent causation language excluded coverage where an ice storm, a covered peril, caused a power outage, which caused the plaintiffs' sump pump to fail, an excluded peril).
In the alternative, plaintiffs argue that even if the flood exclusion is unambiguous, it is still unenforceable. Plaintiffs correctly assert that when there is a conflict between an endorsement and the policy, the language of the endorsement controls. See Marifjeren, 587 N.W.2d at 194. Plaintiffs go on to contend that since the language on which they rely is contained in an endorsement, and the exclusion relied on by defendant is contained in the actual policy, the coverage language on which plaintiffs rely must control. Based on a review of the policy and its endorsements, the undersigned finds this line of reasoning to be completely misplaced. The language on which plaintiffs rely is not contained within an endorsement, but rather on page six of the policy itself; the exclusions relied on by defendant are stated on page seven of the policy. (Doc. #23, Ex. A); see Johnson v. Center Mutual Ins. Co., 529 N.W.2d 568, 571 (N.D. 1995) (an endorsement is an amendment to the policy which can limit or add coverage). Thus, plaintiffs' alternative argument is without merit.
Additionally, even assuming the flood exclusion is not applicable in this case, and assuming that plaintiffs' sump pump was part of their plumbing system, the undersigned finds that the policy language relied on by plaintiffs does not provide coverage for their damages in any event. As admitted by plaintiffs, the water in their basement was a result of seepage (Doc. #25, p. 68-69), not an "accidental discharge or overflow of water . . . from within a plumbing . . . system." See Goodman v. Broome County Co-Operative Fire Ins. Co., 521 N.Y.S.2d 898, 899 (N.Y.App.Div. 198 7) (holding that identical coverage language did not provide coverage for water damage caused by seepage after plaintiffs' sump pump malfunctioned since "the water did not emanate from an `accidental discharge or overflow'"). Furthermore, plaintiffs' policy specifically and unambiguously excludes coverage for loss resulting "directly or indirectly" from seepage. Thus, even assuming plaintiffs' loss was an "accidental discharge or overflow," this loss is specifically excluded from coverage.
In sum, plaintiffs' policy clearly and unambiguously excludes coverage for losses resulting directly or indirectly from flood and/or seepage. Thus, based on the undisputed facts, the undersigned finds that defendant properly denied coverage for plaintiffs' claimed damages. It is therefore recommended that defendant's motion for summary judgment be granted.
IT IS RECOMMENDED:
1. Defendant's motion to dismiss and motion for partial summary judgment be granted. (Doc. #23.) Judgment should be entered dismissing plaintiffs' complaint and cause of action.
2. Defendant's counterclaim for a declaratory judgment be dismissed as moot. (Doc. #2.)
Pursuant to Local Rule 72.1(G)(5), any party may object to this recommendation within ten (10) days after being served with a copy thereof.