CC 145 Main v. Union Mut. Fire Ins. Co.

306 A.3d 1252

CC 145 MAIN, LLC

v.UNION MUTUAL FIRE INSURANCE COMPANY

No. 2021-0376

Supreme Court of New Hampshire.

Argued: June 14, 2022

Opinion Issued: July 20, 2023

Rockingham

Stebbins, Lazos Vanderbeken PLLC, of Manchester (Henry B. Stebbins on the brief and orally), for the plaintiff.

Primmer Piper Eggleston & Cramer PC, of Manchester (Gary M. Burt and Bailey M. Robbins on the brief, and Gary M. Burt orally), for the defendant.

HICKS, J.

The defendant, Union Mutual Fire Insurance Company, appeals an order of the Superior Court (Honigberg, J.) granting summary judgment to the plaintiff, CC 145 Main, LLC, in a declaratory judgment action regarding the interpretation of an insurance policy exclusion. The defendant challenges the trial court’s ruling that the policy’s water damage exclusion was ambiguous and its decision to construe the policy, therefore, in favor of CC 145 Main. We affirm.

The following facts are supported by the record or are not in dispute. CC 145 Main owns an apartment building in Newmarket. To protect this operation, it purchased from Union Mutual a "Businessowners Coverage" insurance policy that includes "all risk" property insurance, which provides that Union Mutual will "pay for direct physical loss of or damage to" the covered property, unless coverage is specifically limited or excluded by the policy. See Caryn L. Daum, A Primer on New Hampshire First-Party Property Insurance, 52 N.H.B.J. 20, 21 (Autumn 2011) ("An ‘all risk’ policy typically covers any risk of direct physical loss or damage that is not specifically excluded or limited by the terms of the policy.")) see also Russell v. NGM Ins. Co., 170 N.H. 424, 429-30,176 A.3d 196 (2017) (describing an "all risk" property insurance policy).

CC 145 Main contends, and Union Mutual does not dispute, that the insured property sustained damage when a tenant poured cat litter down a toilet, clogging an interior pipe and causing water to overflow from a shower and toilet. The property required significant cleaning and repair, and tenants were required to temporarily relocate. CC 145 Main filed a claim with Union Mutual for water damage, which Union Mutual denied pursuant to a provision in the insurance policy excluding coverage for damage caused by "[w]ater that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment."

CC 145 Main filed a complaint seeking a declaration that the water exclusion does not apply to its claim. Union Mutual filed a motion for summary judgment, arguing that the damage at issue was caused by water that overflowed from "drains" within the meaning of the exclusion. CC 145 Main objected and filed a cross-motion for summary judgment. The trial court granted CC 145 Main’s motion and denied Union Mutual’s motion, concluding that it is unclear whether the word "drain" in the water exclusion applies to shower and toilet drains and, therefore, the water exclusion is ambiguous and must be construed in favor of CC 145 Main. It reasoned, inter alia, that "[i]nterpreting drain to mean literally any drain," such as a shower drain, "would set this term apart from the others in the provision" — such as "sewer" and "sump pump" — which "are typically external features that are intended to carry water away from a property." This appeal followed.

On appeal, Union Mutual argues that the trial court erred by finding the water exclusion ambiguous because the only reasonable interpretation of the exclusion is that it applies to water that overflows from toilet and shower drains. CC 145 Main counters that the trial court reached the correct result because the relevant portion of the water exclusion is ambiguous when read in context.

[1–3] In reviewing rulings on cross-motions for summary judgment, "we consider the evidence in the light most favorable to each party in its capacity as the nonmoving party and, if no genuine issue of material fact exists, we determine whether the moving party is entitled to judgment as a matter of Jaw." Ro v.-Factory Mut. Ins. Co., 174 N.H. 112, 116, 260 A.3d 811 (2021) (quotation omitted). "If our review of that evidence discloses no genuine issue of material fact and if the moving party is entitled to judgment as a matter of law, then we will affirm the grant of summary judgment." Id. (quotation omitted). We review the trial court’s application of the law to the facts de novo. Id.

[4, 5] This appeal requires that we interpret the language of the insurance policy. "The interpretation of insurance policy language, like any contract language, is ultimately an issue of law for this court to decide." Mellin v. N. Sec. Ins. Co., 167 N.H. 544, 547, 115 A.3d 799 (2015). In a declaratory judgment action to determine the coverage of an insurance policy, the burden of proof is always on the insurer, regardless of which party brings the petition. Id.; RSA 491:22-a (2010).

[6–12] "The fundamental goal of interpreting an insurance policy, as in all contracts, is to carry out the intent of the contracting parties." Bartlett v. Commerce Ins. Co., 167 N.H. 521, 530, 114 A.3d 724 (2015) (quotation omitted). To discern the parties’ intent, we first examine the language of the policy itself and look to the plain and ordinary meaning of the policy’s words in context. Id. We construe the terms of the policy as would a reasonable person in the position of the insured based upon more than a casual reading of the policy as a whole. Id. at 530-31, 114 A.3d 724. Policy terms are construed objectively, and where the terms of a policy are clear and unambiguous, we accord the language its natural and ordinary meaning. Id. at 581, 114 A.3d 724. We need not examine the parties’ reasonable expectations of coverage when a policy is clear and unambiguous; absent ambiguity, our search for the parties’ intent is limited to the words of the policy. Id. The fact that parties may disagree on the interpretation of policy language does not necessarily create an ambiguity. Id. For an ambiguity to exist, the disagreement must be reasonable. Id.

[13–15] In determining whether an ambiguity exists, we consider the disputed policy language in its appropriate context, and construe the words used according to their plain, ordinary, and popular definitions. Id. If one of the reasonable meanings of the language favors the policyholder, the ambiguity will be construed against the insurer in order to honor the insured’s reasonable, expectations. Id. However, when "the policy language is clear, this court will not perform amazing feats of linguistic gymnastics to find a purported ambiguity simply to construe the policy against the insurer and create coverage where it is clear that none was intended." Id. (quotation omitted).

[16] The language at issue in this case is contained within the following exclusion:

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.

….

g. Water

(1) Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind (including storm surge);

(2) Mudslide or mudflow;

(3) Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, 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.

(Bolding omitted; emphasis added.) We begin by analyzing Union Mutual’s argument. Union Mutual focuses its argument on the term "drain," arguing that this term unambiguously encompasses water overflowing from showers and toilets. "Drain" is defined as "[a] channel by which liquid is drained or gradually carried off; esp. an artificial conduit or channel for carrying off water, sewage, etc.," Oxford English Dictionary, https://www.oed.com/view/Entry/57459?rskey=TcQDG6 & result=l & is Advanced=false#eid (last visited July 11, 2023), or "an artificial channel by means of which liquid or other matter is drained or carried off," Merriam-Webster Unabridged, https ://unabridged.merriam-webster.com/unabridged/drain (last visited July 11, 2023). Shower drains meet these definitions. As for the toilet overflow, a toilet is a receptacle "connected by plumbing to a system for flushing away the waste into the sewer." Oxford English Dictionary, https://www.oed.com/view/Entry/202921?rskey=nH4oj4&result=1&is Advanced=false#eid (last visited July 11, 2023). Consulting these definitions, we find reasonable Union Mutual’s argument that "[t]he toilet that backed up and overflowed was connected to a drain" — the drain is part of the "system" that the toilet relies upon to flush away the waste — and, therefore, that a toilet is "related equipment" to a drain. Union Mutual also correctly observes that there is no language within the exclusion that explicitly limits the application of this term to certain types of drains or causes of overflow. See Keene Auto Body, Inc. v. State Farm Mut. Auto. Ins. Co., 175 N.H. 503, 507-08, 293 A.3d 1146 (2022) (concluding insurer’s reading of policy provision was reasonable in light of broad language and absence of qualifying language). Accordingly, we are satisfied that Union Mutual’s reading of the water exclusion is reasonable. See id.

However, CC 145 Main presents a reasonable, alternative interpretation of the exclusion. It argues that context contained within the insurance policy limits the water exclusion’s...