Sosa v. Mass. Bay Ins. Co.

458 N.J.Super. 639

206 A.3d 1011

Adrian SOSA, Plaintiff-Appellant,

v.MASSACHUSETTS BAY INSURANCE COMPANY, Defendant-Respondent.

DOCKET NO. A-5349-16T3

Superior Court of New Jersey, Appellate Division.

Submitted December 19, 2018

Decided April 24, 2019

Jeffrey A. Bronster, Livingston, attorney for appellant.

Kennedys CMK LLP, attorneys for respondent (Matthew J. Lodge, Basking Ridge, of counsel and on the brief).

Before Judges Ostrer, Currier and Mayer.

The opinion of the court was delivered by

OSTRER, J.A.D.

This insurance coverage dispute concerns the meaning of a homeowner's insurance policy's water damage exclusion. Plaintiff, Adrian Sosa, appeals from summary judgment dismissing his breach-of-contract complaint against his homeowner's insurer, defendant Massachusetts Bay Insurance Company. Plaintiff unsuccessfully sought coverage for real and personal property damages after a municipal water main broke under a public street and inundated his home. Upon cross-motions for summary judgment, the court dismissed the complaint, finding that the policy's plain language excluded his claim. As we find that the water damage exclusion does not clearly bar plaintiff's claim, we reverse the grant of summary judgment to Massachusetts Bay. However, we also affirm the order denying summary judgment to plaintiff, as plaintiff has not established that his personal damage claim satisfies a named peril, and the balance of plaintiff's damages are not clearly documented.

I.

The following facts are undisputed.¹ On September 30, 2015, a municipal water-main pipe broke under Knox Avenue in Cliffside Park. The pavement buckled on the side of the street opposite plaintiff's home and water gushed about a foot into the air. The water flowed from the street into plaintiff's driveway and then into the garage and basement apartment of his home. About a foot of water filled the downstairs floor. Plaintiff identified invoices exceeding $ 75,000 for work to remediate the damage to his real and personal property.² Plaintiff was unaware whether any other homes were affected. After he submitted a claim to Massachusetts Bay, an adjuster inspected the property and concluded that the damage resulted from "surface and ground water intrusion." On that basis, the company disclaimed coverage.

The Massachusetts Bay policy provided "all risk" coverage for damage to the dwelling and other structures, and "named peril" coverage for damage to personal property. See Victory Peach Grp., Inc. v. Greater New York Mut. Ins. Co., 310 N.J. Super. 82, 87, 707 A.2d 1383 (App. Div. 1998) (explaining that an "all risk" policy generally covers all damages unless specifically excluded, and a "named peril" policy only covers perils specifically identified). Both forms of coverage were subject to the policy's water damage exclusion. Thus, plaintiff's real property damages were covered unless subject to the exclusion. The personal property damages were covered only if they also satisfied a named peril. We consider the water damage exclusion first.

The underlying policy form excluded losses caused by "water damage." An endorsement, entitled "Water Back-Up and Sump Discharge or Overflow" ("Sump Endorsement"), replaced "water damage" with "water." It also modified the exclusion's reach. Consistent with its title, the endorsement expanded coverage to include damages caused by water from sewers, drains, sumps, sump pumps or related equipment, except if caused by flood. However, the endorsement also revised the water damage exclusion in other respects having nothing to do with the subject of its title. Notably, it explained that the exclusion "applie[d] regardless of whether" the water was "caused by an act of nature or [was] otherwise caused."

As revised by the endorsement – we note the endorsement's additions in bold and deletions in brackets – the policy states that water means:

(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 ("Exclusion 1");

(2) Water which:

a. Backs up through sewers or drains; or [which]

b. overflows or is otherwise discharged from a sump, sump pump or related equipment; as a direct or indirect result of flood ("Exclusion 2");

(3) Water below the surface of the ground, including water which exerts pressure on, or seeps, leaks or flows through a building, sidewalk, driveway, patio foundation, swimming pool or other structure ("Exclusion 3"); or

(4) Waterborne material carried or otherwise moved by any of the water referred to in D.1 through D.3 of this Exclusion ("Exclusion 4").

This exclusion applies regardless of whether any of the above, in D.1 through D.4 is caused by an act of nature or is otherwise caused.

This exclusion applies to, but is not limited to, escape, overflow or discharge, for any reason, of waterborne material from a dam, levee, seawall or any other boundary or containment system.

However , direct loss by fire, explosion or theft resulting from [water damage] any of the above, in D.1 through D.4, is covered. All other provisions of this policy apply .

[Policy, Section I Exclusions, ¶ 1(c), as amended by section D of Sump Endorsement.]

The policy does not define "surface water" as used in the exclusion, but the policy does elsewhere define "flood" in a "Notice Regarding Flood Damage Coverage" ("Flood Notice"). It states:

2. Flood means a general and temporary condition of partial or complete inundation of normally dry land area from:

i. The overflow of inland or tidal waters;

ii. The unusual and rapid accumulation or runoff of surface waters from any source;

iii. Mudslides (that is, mudflows) that are proximately caused by flooding and are akin to a river of liquid and flowing mud on the surfaces of normally dry land areas, including your premises, as when earth is carried by a current of water and deposited along the path of the current;

3. Flood also includes the collapse or subsidence of land along the shore of a lake or other body of water as a result of erosion or undermining caused by waves or currents of water exceeding cyclical levels, which results in the partial or complete inundation of normally dry land area;

As noted, coverage for plaintiff's personal property damage claim depends upon showing the damage also satisfied a named peril. The only named peril arguably pertinent covers damages caused by:

Accidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system or from within a household appliance.

The peril does not include loss:

....

c. On the "residence premises" caused by accidental discharge or overflow which occurs off the "residence premises."

In this peril, a plumbing system does not include a sump, sump pump or related equipment.

[Policy, Section I – Perils Insured Against, Coverage C – Personal Property.]

Following discovery, the parties cross-moved for summary judgment. They only disputed the meaning of the water damage exclusion.

In granting Massachusetts Bay's motion, and denying plaintiff's cross-motion, the trial judge found no ambiguity in the policy's language. In an oral opinion, she concluded that Exclusion 1 precluded recovery; and suggested Exclusion 3 would also apply if the first did not.

Plaintiff appeals from the grant of summary judgment to Massachusetts Bay and the denial of summary judgment to him.

II.

This court reviews a grant of summary judgment de novo, employing the same standard as the trial court. Henry v. N.J. Dep't of Human Servs., 204 N.J. 320, 330, 9 A.3d 882 (2010). The interpretation of an insurance policy, like any contract, is a question of law, which we review de novo. Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med., 210 N.J. 597, 605, 46 A.3d 1272 (2012).

In performing that interpretative task, we look first to the plain language, and if it is unambiguous, we will not strain to provide a better policy than the one obtained. Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh, 224 N.J. 189, 200, 129 A.3d 1069 (2016). We are guided by general principles: "coverage provisions are to be read broadly, exclusions are to be read narrowly, potential ambiguities must be resolved in favor of the insured, and the policy is to be read in a manner that fulfills the insured's reasonable expectations." Selective Ins. Co., 210 N.J. at 605, 46 A.3d 1272. The insurer bears the burden to establish that an exclusion applies. Flomerfelt v. Cardiello, 202 N.J. 432, 442, 997 A.2d 991 (2010).

In determining whether there is ambiguity, we consider whether an average policyholder could reasonably understand the scope of coverage, and whether better drafting could put the issue beyond debate. Templo Fuente De Vida, 224 N.J. at 200, 129 A.3d 1069. We will not strain to find ambiguity based on "far-fetched" interpretations, but "if there is more than one possible interpretation of the language, courts apply the meaning that supports coverage rather than the one that limits it." Flomerfelt, 202 N.J. at 442, 997 A.2d 991.

III.

Massachusetts Bay contends that Exclusion 1 applies, because the water that caused the damage was "a flood or surface water." Also, Exclusion 3 applies, because below-ground water "exert[ed] pressure on, ... seep[ed], leak[ed], or flow[ed] through a building, sidewalk ... driveway ... or other structure." Massachusetts Bay highlights the provision that the "[e]xclusion applies regardless of whether any of the above ... is caused by an act of nature or is otherwise caused." We are unconvinced.

Before turning to the specific exclusions we note that the policy does not exclude all losses resulting from "water," that is, the colorless liquid formed by atoms of hydrogen and oxygen. Had the insurer intended so broad an exclusion, it could have said so. See Hatley v. Truck Ins. Exch., 261 Or. 606, 495 P.2d 1196, 1198 (1972) (rejecting insurer's argument that ...