Brandee Bower | Property Insurance Coverage Law Blog | November 2, 2015
There is a new case out of Pennsylvania where the insurance company took over a year to investigate and finally denied the claim but the court found there was no bad faith. Reported cases are great to read and provide an education how courts are ruling on various subjects, but always remember that the facts of each case are different. Use the cases as a guide to avoid the pitfalls that other plaintiffs have faced and hold insurance companies responsible for wrongdoings just as prior courts have, but apply the law to your particular set of facts.
In Tran v. Seneca Insurance Company,1 the plaintiff owned a commercial property where two businesses were separated by a masonry wall and shared a roof. The property was insured by Senaca Insurance. In 2012, it was reported to the fire department that the building was at risk of collapsing due to 2,000 gallons of standing water on the building’s flat roof. The fire department used a pump to remove the water and cut relief holes in the roof. This caused over $135,000 in damages to the building. Plaintiff filed an insurance claim and the insurance company found that the damage was due to obstructed drainage and improper maintenance and denied coverage. Plaintiff filed suit for breach of contract and bad faith. Defendant filed a summary judgement which was granted in part and denied in part.
The policy had a water and maintenance exclusion, which the court found to be ambiguous and open to various interpretations. The language is was:
B. Exclusions
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 events that contributes concurrently or in any sequence to the loss.
…
g. Water
…
(3) Water that backs up or overflows from a sewer, drain or sump;
…
2. We will not pay for loss or damage caused by or resulting from any of the following:
…d. (1) Wear and tear;
(2) Rust or other corrosion, decay, deterioration, hidden or latent defect or any quality in property that causes it to damage or destroy itself;
…2. We will not pay for loss or damage caused by or resulting from any of the following…But if an excluded cause of loss that is listed…results in a Covered Cause of Loss, we will pay for the loss or damage caused by that Covered Cause of Loss.
3.
…c. Faulty, inadequate or defective:
…
(4) Maintenance
The court found there were several possible interpretations. The first interpretation is that any obstruction of any drainage system is excluded. The insurance company would prevail here because the water on the roof pooled due to blocked drainage. Second, the water source that backs up must be from a sewer, drain or sump. So if water is backed up due to a clog, it cannot enter the sewer, drain or sump and the exclusion does not apply. Third, if water ‘backs up’ it reverses its natural flow. Pooled water on a roof would not have a reversed flow so the exclusion would not apply. Finally, the exclusion would only apply to surface water that entered the dwelling from beneath the house and pooled water on a roof would not embrace the exclusion. Because the court found there were multiple interpretations, this was an issue of fact for the jury and summary judgment could not be entered.
There was also a maintenance exclusion in the policy. The insurance company argued that they denied coverage because the water on the roof pooled due to improper maintenance. The plaintiff testified that the roofs were new and required very little maintenance. He stated that he collected trash and leaves from the roof and that the drains were not clogged. The court again found this to be an issue of fact and denied summary judgment.
To prevail on bad faith in Pennsylvania, the plaintiff must show…
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