An insurer has a dispute with a policyholder about whether water leaking from a cracked or broken drain line in the subfloor/crawlspace under the insured restaurant constitutes an "interior sewer or drain" for which coverage is provided under a "Water Back-Up and Sump Overflow" endorsement. The Endorsement is a modified ISO form, with the word "interior" being the crucial difference. The policy is a BOP and does not provide building coverage. The Insuring Agreement for the Endorsement states, "We will pay for direct physical loss or damage to Covered Property...caused by or resulting from: 1) water or waterborne material which backs up through or overflows or is otherwise discharged from an interior sewer or drain." The water that exited the cracked or broken drain line accumulated below the restaurant on a dirt floor below the first floor of the restaurant. The water never entered the restaurant through any drain, floor, or opening of any kind. Is the pipe under the restaurant an "interior sewer or drain" for purposes of this endorsement? A redacted copy of the first page of the endorsement is included.
Colorado Subscriber
When a policy term is undefined, the courts will commonly turn to a standard dictionary for its meaning. Merriam-Webster online defines 'interior' a noun, in part, as 3: the internal or inner part of a thing: INSIDE. The dictionary also provides the following synonyms:
1: lying, occurring, or functioning within the limiting boundaries:
an interior point of a triangle
2: belonging to mental or spiritual life
a simple interior piety
3: belonging to the inner constitution or concealed nature of something
interior meaning of a poem
4: lying away or remote from the border or shore
Relying on this definition, we would conclude that the interior of the restaurant would be only the inside part of the building designated as the restaurant portion, and not the area below the ground surface.
Also, there would need to be actual damage to the insured restaurant, which leaking water from a drain pipe that doesn't enter the building would not seem to indicate any covered damage.