Auto-Owners Ins. Co. v. United Way of E. Cent. Ala.

497 F.Supp.3d 1115

AUTO-OWNERS INSURANCE COMPANY, Plaintiff,

v.UNITED WAY OF EAST CENTRAL ALABAMA, Defendant.

Case No. 1:20-CV-00454-CLM

United States District Court, N.D. Alabama, Eastern Division.

Signed October 20, 2020

Filed October 23, 2020

Brandon J. Clapp, Brian C. Richardson, Swift Currie McGhee & Hiers LLP, Birmingham, AL, for Plaintiff.

James B. Brannan, III, Gaines Gault Hendrix PC, Birmingham, AL, for Defendant.

MEMORANDUM OPINION

COREY L. MAZE, UNITED STATES DISTRICT JUDGE

An Anniston public water main ruptured, releasing water that damaged the property of Defendant United Way of East Central Alabama ("United Way"). Plaintiff Auto-Owners Insurance Company ("Auto-Owners") insured United Way's damaged property at the time.

Auto-Owners sued United Way, seeking a declaration that United Way's policy did not cover the damage (doc. 1). United Way cross-sued Auto-Owners, seeking a declaration that its policy covered the damage (doc. 6). The parties have filed cross motions for judgment on the pleadings (docs. 13, 16). For the reasons detailed within, the court finds that United Way's policy covered the damage, so United Way's motion is due to be GRANTED and Auto-Owners’ motion is due to be DENIED .

FACTS AND PROCEDURAL HISTORY

An Anniston water main burst on February 21, 2020. Doc. 14 at 4. Water released from the ruptured main flowed across a parking lot and into United Way's building through the back walkway door and garage door. Water damage ensued.

Auto Owners provided United Way businessowner's insurance at the time. United Way filed a claim, which Auto-Owners denied because, in Auto-Owners’ opinion, "the property damage is excluded by the Policy's water damage exclusion." This lawsuit followed. See Doc. 1 (Auto-Owner's complaint); Doc. 6 (United Way's Answer and Countercomplaint).

STANDARD OF REVIEW

Rule 12(c) allows a party to move for judgment after the pleadings are closed but early enough not to delay trial. "Judgment on the pleadings is appropriate where there are no material facts in dispute and the moving party is entitled to judgment as a matter of law." Cannon v. City of W. Palm Beach, 250 F.3d 1299, 1301 (11th Cir. 2001) ; see Bank of New York Mellon v. Estrada, 2013 WL 3811999, 2013 U.S. Dist. LEXIS 102069 (N.D. Ill. July 22, 2013) ("A Rule 12(c) motion for judgment on the pleadings is ‘designed to provide a means of disposing of cases when the material facts are not in dispute and a judgment on the merits can be achieved by focusing on the content of the pleadings and any facts of which the court will take judicial notice’ ").

The court analyzes Rule 12(c) motions for judgment on the pleadings like Rule 12(b)(6) motions to dismiss. Griffin v. SunTrust Bank, Inc., 157 F. Supp. 3d 1294, 1295 (N.D. Ga. 2015). So to survive a motion for judgment on the pleadings, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). In general, a district court should not look outside the complaint in a motion to dismiss or for judgment on the pleadings, but it may consider documents attached to a defendant's motion if those documents are "relationship-forming contracts [that] are central to a plaintiff's claim." SFM Holdings, Ltd. v. Banc of Am. Sec., LLC, 600 F.3d 1334, 1337 (11th Cir. 2010) ; Harris v. Ivax Corp., 182 F.3d 799, 802 n.2 (11th Cir. 1999) ("[A] document central to the complaint that the defense appends to its motion to dismiss is also properly considered, provided that its contents are not in dispute.").

STATEMENT OF LAW: INSURANCE CONTRACTS

This diversity jurisdiction case was filed under state law, so the court applies Alabama state law as it interprets United Way's insurance policy.

In Alabama, "[i]nsurance contracts are subject to the same general rules applicable to other written contracts ..." Am. & Foreign Ins. Co. v. Tee Jays Mfg. Co. , 699 So.2d 1226, 1228 (Ala. 1997). A court does not consider the language of the policy in isolation; it must consider "the policy as a whole." Porterfield v. Audubon Indem. Co. , 856 So. 2d 789, 799 (Ala. 2002). An insurance policy should be read how an ordinary person would interpret it, not how a lawyer would read it. St. Paul Fire & Marine Ins. Co. v. Edge Memorial Hosp. , 584 So.2d 1316, 1322 (Ala. 1991). This means that the court does not look for what the insurer intended but to what a reasonably prudent person applying for insurance would assume. See W. World Ins. Co. v. City of Tuscumbia , 612 So.2d 1159, 1161 (Ala. 1992). "Further, this Court has ruled that exceptions to coverage must be interpreted as narrowly as possible to provide the maximum coverage available." Sullivan v. State Farm Mut. Auto. Ins. , 513 So.2d 992, 994 (Ala. 1987). When exclusions are ambiguous, they "are to be construed most strongly against the insurance company that drafted and issued the policy." Cincinnati Ins. Co. v. Lee Anesthesia, P.C. , 641 So. 2d 247, 249 (Ala. 1994).

ANALYSIS

The parties agree that United Way's policy covers the damage to its building and business personal property unless the ruptured water main incident fits within Section B.1(g) of the policy, which excludes certain "water" damage. At the time of the incident, Section B.1(g) read:

1. We will not pay for loss of 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 currently or in any sequence to the loss.

g. Water

(1) Regardless of the cause, flood , surface water , waves, tides, tidal waves, storm surge, overflow of any body of water, or their spray, all whether driven by wind or not;

(2) Mudslide or mudflow;

(3) Water that backs up from a sewer or drain; or

(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 .

But if loss or damage by fire, explosion or sprinkler leakage results, we will pay for that resulting loss or damage.

Doc. 1-1 at 31 at 49-50 (original § B.1); 31 (changes to § B.1(g)) (emphasis added). Auto-Owners contends that the emphasized provisions describe the cause of United Way's damage and thus exclude coverage. The court analyzes each below.

A. Paragraph B.1(g)(1): Flood or surface water, regardless of cause

Auto-Owners’ primary argument is that the water that damaged United Way's property was "flood" or "surface water." The policy defines neither term, so the court must read the policy as a whole to determine how a reasonable person applying for insurance would understand those terms—not how Auto-Owners intended them to be understood. See W. World Ins. Co. , 612 So.2d at 1161 ; St. Paul Fire & Marine Ins. Co. , 584 So.2d at 1322.

The parties’ positions, generally: United Way contends that a reasonable person understands terms like "flood, surface water, waves, [and] tides" to have natural origins that don't include man-made causes like ruptured pipes. As United Way puts it, "when the Anniston Star tweets that there is a ‘flash flood’ warning for Calhoun County, citizens are concerned with high rainfall and accumulation, not the threat of spontaneously bursting pipes or rupturing public water mains." Doc. 14 at 8. United Way cites dictionary definitions, insurance treatises, and caselaw from other States to back its position.

Auto-Owners counters that, even if United Way is correct that a reasonable person generally understands terms like "flood, surface water, waves, [and] tides" to have natural origins, adding the introductory clause "[r]egardless of the cause" expanded the scope of those terms. Put simply, the ruptured water main caused the "flood" or "surface water" that, in turn, caused the damage, so there is no coverage.

To be sure, the introductory clause means what it says; a "flood" is a "flood," no matter what caused it. But that still requires a reasonable person to consider the water as "flood" or "surface water." If water that escapes from a ruptured water main never becomes "flood" or "surface water" before damaging property, then the cause of the water's escape is irrelevant. And, as explained below, the court agrees with United Way that the water that escaped Anniston's water main was neither "flood" nor "surface water" when it flowed through United Way's doors.

Associated terms: Before the court defines "flood" and "surface water" individually, the court notes that the collective list of terms in Paragraph B.1(g)(1) suggests a definition about natural water phenomena, not man-made systems. Each term that follows flood and surface water—i.e. , "waves, tides, tidal waves, storm surge, overflow of any body of water"—has a natural connotation. So the Associated Words canon of construction (or noscitur a sociis ) dictates that the terms "flood" and "surface water" also be given a natural connotation. See Antonin Scalia & Bryan A. Garner, Reading Law: The Interpretation of Legal Texts 195 (2012).

A leading insurance treatise agrees that grouping terms like flood, surface water, and tides in a policy connotes a natural versus man-made distinction:

A policy may cover or exclude various natural water-related forces, such as tidal waves, rain, flood, surface water, and subsurface water. Because exclusions are read narrowly, a policy excluding damage from some natural water-related perils may cover damage from other natural water phenomena. Therefore, the definition and scope of the various terms is often disputed.

Damage from natural water-related forces is distinct from ‘water damage’. Generally, ‘water damage’ means water damage from plumbing systems. However, a policy may exclude ‘water damage’ and define it as damage from natural water phenomena. Provisions excluding damage from natural water-related perils preclude recovery for damage from natural causes, not from man-made

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