INTRODUCTION
Plaintiff Shaunda Lear requests the court to hold that a water leak which erupted under her home and is the proximate cause of the sustained damage, is a covered occurrence under the homeowner’s insurance policy between Ms. Lear and defendant (Inure-all).
As such, the defendant must reimburse Ms. Lear for all expenses related to the remediation and damage repair. Generally, under the insurance policy, "occurrence" is defined as: “An accident, including continuous repeated exposure to conditions, which results in bodily injury or property damage, which is neither expected or intended from the standpoint of insured.”[1]
QUESTION PRESENTED
- Whether the water leak is an occurrence which is covered under the insurance policy?
- Whether the water leak is excluded under the exclusionary clause which states: Construction over top of fill dirt is excluded from coverage?
STATEMENT OF THE CASE
Ms. Lear has owned her ranch style home in Little Rock Arkansas for five years.
About six months ago, she noticed that the master bedroom floor was spongy and sinking.
Ms. Lear asked a flooring expert to evaluate the condition of the floor.
The expert determined that the floor was not defective.
Rather, a plumbing leak under the floor might be the cause of the sponginess and sinking.
After consulting with a plumber, it was determined that there was indeed a plumbing leak under the floor.
After obtaining this determination, Ms. Lear filed a claim against Insure-all.
She asked Insure-all to reimburse her for all expenses related to remediation and repair of the floor.
Insure-all denied Ms. Lear’s claim, citing that an engineering report for Ms. Lear’s subdivision indicated that her home was built on fill dirt. Insure-all stated that construction over top of fill dirt is a named exclusion in its policy with Ms. Lear.
SUMMARY OF ARGUMENT
A water leak which causes damage to the housing structure is an accidental unexpected occurrence. Until a water leak is discovered and remediated, it is reasonable to expect that the water leak would cause parts of the home to be repeatedly and continuously subject to conditions which may cause property damage. On its face, the water leak fits the definition of an occurrence. Because of these facts, the court must find in favor of the plaintiff.
ARGUMENT
ISSUE
- Whether the water leak is an occurrence which is covered under the policy?
- Whether the water leak is excluded under the exclusionary clause which states: Construction over top of fill dirt is excluded from coverage?
RULE
- Generally, under the insurance policy, "occurrence" is defined as an accident, including continuous repeated exposure to conditions, which results in bodily injury or property damage, neither expected nor intended from the standpoint of insured.[2]
- Exclusionary endorsements must adhere to the general requirements that the insurance terms must be expressed in clear and unambiguous language.[3]
ANALYSIS
(1) Courts have allowed broad latitude when considering what constitutes an occurrence.[4] In Geurin, where an exclusionary clause was invoked to deny coverage to the insured who suffered loss of income when Geurin closed a portion of a State Highway for repaving, the court held that the conditions surrounding the closure of the highway and subsequent loss of income was indeed an occurrence which the insurer was obligated under the policy to cover.
The court cited that the key consideration in determining whether an event is a covered occurrence under the policy was whether the event was anticipated or intended by the insured.[5] In applying the Geurin standard to this case, it is not reasonable to expect that Ms. Lear either anticipated or intended that a water leak would occur. Thus, the leak must be considered an occurrence which unless barred by a valid and enforceable exclusionary clause, must be a covered and reimbursable event.
(2) For the exclusionary clause to be enforceable, the clause must be expressed in clear, unambiguous language.[6] Where technical terms, or terms of art are used, it is reasonable to expect persons who are familiar in those relevant fields to understand the assigned meaning of those terms. It is also reasonable for persons familiar with the terminology to know when the words used have a specialized meaning which falls beyond what the plain meaning of the words manifest.[7]
However, for the lay person who is not privy to these different meanings, it is only reasonable to expect one to rely on the plain meaning of these terms. When Insure-all stated that construction over top of fill dirt is a named exclusion to its policy with Ms. Lear, Insure-all relied on language which is ambiguous in that they used either technical language, or terms of art that Ms. Lear cannot be expected to understand. Or, Insured-all simply relied on language whose plain meaning is that any portion of the structure whose physical elevation is above the top layer of fill dirt is excluded.
The statement also infers that portions of the structure equal to or below the physical elevation of the fill dirt are covered. Because of the ambiguity, coupled with the broad differences in the meaning each party has assigned to the clause, a question of law exists which renders any exclusion to be unenforceable. Ms. Lear’s request for relief is based on this ambiguity as courts have consistently held that ambiguous language in contracts is held “liberally” in favor of the insured.[8] Because Insure-all drafted the policy, the court must interpret the meaning of the language in light most favorable to Ms. Lear and grant all relief requested by Ms. Lear.
CONCLUSION
Looking at the totality of the events and circumstances in this case, it is reasonable for the court to hold that the water leak which caused the damage to Ms. Lear’s floor was unexpected and not intended by Ms. Leak. Because of this, the water leak meets the definition of an occurrence and must be covered under the policy. Because coverage does exist, then only an enforceable exclusion can bar coverage.
Because courts hold that exclusionary clauses must be clearly stated and unambiguous, when such as in this case, the language is ambiguous; the language cannot be defined as that of an enforceable exclusionary clause. These facts manifest an obligation under the policy where Insure-all must reimburse Ms. Lear for all costs associated with the damage caused by the water leak.
[1] Geurin Contractors, Inc. v. Bituminous Cas. Corp., 636 S.W.2d 639, 5 Ark. App. 229 (Ct. App. 1982).
[2] Geurin, supra, note 1.
[3] Norris v. State Farm Fire & Cas. Co., 16 S.W.3d 242, 341 Ark. 360 (2000).
[4] Geurin, supra note 1, at 640.
[5] Id.
[6] Norris, supra note 3, at 244.
[7] Restatement (Second) of Contracts §202 (1981).
[8] Baskette v. Union Life Ins. Co., 652 S.W.2d 635, 9 Ark. App. 34 (Ct. App. 1983).