The Court of Appeals of New York ruled the water exclusion in a policy precluded coverage after water flowed into the plaintiffs' home from a ruptured water main. The case is Platek v. Town of Hamburg, 26 N.E.3d 1167 (N.Y. 2015).
The Plateks suffered a water loss when an underground water pipe burst and flooded their finished basement. They submitted a claim for damages under the homeowners policy they had purchased from Allstate Indemnity Company. Their claim was denied on the basis of the policy exclusion for losses caused by water under the surface of the ground.
The Plateks sued Allstate and requested a declaration of coverage, alleging they had suffered more than $100,000 after Allstate wrongfully denied their claim. They did not argue that their claim was not excluded, but they said the damages were the result of an "explosion" of the water main due to subsurface water and were therefore covered under the exception to the water exclusion. Allstate maintained the water exclusion precluded coverage for a loss due to "[w]ater . . . on or below the surface of the ground, regardless of its source" (emphasis added), so the Plateks claim was not covered. Both parties filed for summary judgment in their favor. The trial court granted summary judgment to the Plateks, declaring their loss was covered and Allstate was obligated to pay their claim.
In the appellate court, the judges voided the trial court's declaration of coverage and the order of payment but did not otherwise alter the trial court's decision. Allstate argued that what the Plateks called an "explosion" of the water main still had to occur as a result of the water loss for coverage to apply. The Plateks argued the "explosion" was itself an ensuing loss caused by "[w]ater . . . below the surface of the ground." Both interpretations were reasonable, according to the trial court, meaning the water exclusion was ambiguous by definition. The judges ruled in favor of the Plateks, and Allstate appealed to the Court of Appeals of New York.
There was no argument that the water exclusion was inapplicable to the Plateks' claim. The Plateks asserted the explosion itself was an ensuing loss "caused by an explosion resulting from internally pressurized water suddenly and accidentally bursting from the underground pipe," so their claim should be covered. However, Allstate argued the exception claimed by the Plateks did not apply because, even though the engineer said the water main had exploded, it was the water, and not the actual explosion, that caused property damage.
The Plateks pointed to a supporting affidavit from an engineer that stated the Plateks had suffered home and property damage when the water main had "suddenly exploded from the internal water pressure being exerted on the pipe walls." (emphasis added). The Plateks argued they were entitled to coverage because the damages were "caused by an explosion resulting from internally pressurized water suddenly and accidentally bursting from the underground pipe." (emphasis added).
The justices were not convinced. The "sudden and accidental" part of the water loss exception indicated that the provision did refer to an ensuing loss. An ensuing loss, the court said, "requires a new loss to property that is of a kind not excluded by the policy." (emphasis added).
The Plateks were resolute and continued to assert that the explosion itself was the ensuing loss. The pressurized water below the ground had exerted sufficient force on the water main to cause an explosion. The pressurized water, and not the water overflowing the water main, was the culprit.
The court was skeptical. The Plateks, the court said, had paid no attention to the language preceding the water exclusion, which stated there was no coverage available for a "loss to the property . . . consisting of or caused by" floods, surface water, water backups, or subsurface water. The explosion exception would only apply in cases where water caused an explosion, and that explosion in turn caused property damage.
The verdicts from the trial and appellate courts were reversed, including the grant of summary judgment in favor of the Plateks, and summary judgment should be awarded in favor of Allstate.
Editor's Note: Ensuing losses can be tricky. In this case, the justices explained that an ensuing loss occurs "when, as a result of an excluded peril, a covered peril arises and causes damage." The Plateks said the water main had exploded due to subsurface pressurized water; the policy stated Allstate would cover damages resulting from an explosion caused by underground pressurized water, so their claim should be covered.
Unfortunately, the Plateks missed the mark. The water main did explode as a result of highly pressurized subsurface water, but it was not the explosion that had caused damage to the Plateks' home. The pressurized water flowing out of the ruptured water main had intruded into the Plateks' residence and flooded the basement. Since the damage had been caused by water, the loss was excluded.
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