In Carrico v. Stillwater Ins. Co., 23-CV-349-RAJ, 2024 WL 308106 (W.D. Wash. Jan. 26, 2024), the Western District of Washington thought-about competing motions for partial abstract judgment in a property harm case involving a winter storm, the place massive quantities of rain and melted snow backed the drain up and the power of the water pushed by way of the outside door inflicting harm to the whole basement stage. At situation within the case was the applying of the coverage’s put on and tear exclusion and its exceptions. 

The insurance coverage coverage lined direct bodily loss however contained an exclusion for bodily harm attributable to put on and tear, marring or deterioration. The wear and tear and tear exclusion included sure exceptions, which, if relevant, would reinstate protection.  Particularly, the exclusion contained exceptions for: (1) discharge or overflow from storm drains, water, steam, or sewer pipes which can be off of the residence premises; and (2) discharge or overflow from plumbing, heating, air-con, or different related methods on the residence premises. The coverage expressly excluded water harm attributable to “floor water … all whether or not or not pushed by wind, together with storm surge” and water which “[b]acks up by way of sewers or drains.” The Restricted Water Again-up and Sump Discharge Or Overflow Protection endorsement added again restricted protection for water which “[b]acks up by way of sewers or drains” as much as a $5,000 sublimit.

The defendant, Stillwater Insurance coverage Firm (“Stillwater”) decided there was protection underneath the Restricted Water Again Up and Sump Discharge or Overflow Protection endorsement and issued fee of the total $5,000 sublimit of that endorsement, along with a letter to the insureds explaining its protection evaluation. The insureds employed a plumber who decided that put on and tear to a drain lure close to their basement door triggered the drain to grow to be inoperable and demanded the total coverage limits, in the end submitting go well with towards Stillwater for Breach of Contract, Insurance coverage Dangerous Religion, Violation of the Shopper Safety Act (“CPA”), and Violation of the Insurance coverage Honest Conduct Act (“IFCA”).

The Court docket was tasked with adjudicating competing motions for partial abstract judgment. The insureds filed a Movement for Partial Abstract Judgment on their declaratory judgment, breach of contract, and CPA claims and Stillwater filed a Movement for Partial Abstract Judgment as to breach of contract declare.

The insureds contended that the loss resulted from put on and tear to a plumbing system, falling underneath the exception to the damage and tear exclusion within the coverage. The insureds tried to outline “plumbing system” broadly to incorporate the drain lure, utilizing the Uniform Plumbing Code and the deposition testimony of Stillwater’s adjuster. The insureds additionally sought partial abstract judgment on their CPA claims, alleging violations of laws similar to failure to pay claims with out affordable investigation, failure to reveal coverage advantages coverages and coverage provisions, failure to supply an inexpensive rationalization for denial, and improper denial of claims underneath particular coverage provisions or exclusions.

Stillwater maintained that the exception to the damage and tear exclusion didn’t apply on this case. Counting on the strange, dictionary that means of “plumbing system” drain, Stillwater argued that the drain was designed to maintain rainwater exterior the home and didn’t concern the distribution or use of water inside the insureds’ residence.

In contemplating the respective motions for partial abstract judgment, the Court docket discovered that there was no protection underneath the exceptions to the damage and tear exclusion. The primary exception to the damage and tear exclusion wouldn’t apply as a result of the loss occurred on the residence premises. There was additionally no foundation for concluding that the water harm resulted from an overflow from a “plumbing system,” underneath the second exception.  The Court docket emphasised that undefined phrases in insurance coverage insurance policies are interpreted primarily based on their strange that means or widespread regulation definitions. Consequently, the pipe was discovered to not be part of the home’s “plumbing system” and partial abstract judgment was entered in favor of Stillwater on the insureds’ breach of contract declare.

Concerning the insureds’ CPA claims, given the proof offered, the Court docket decided that Stillwater’s actions didn’t violate related laws. Stillwater offered the insureds with a abstract of the coverages accessible within the coverage and defined that protection was being prolonged underneath the coverage’s endorsement as much as the accessible sublimit. Due to this fact, the Court docket denied the insureds’ movement for partial abstract judgment on the CPA claims.

Conclusion

This choice underscores the significance of clear coverage language. Although the end result was favorable to the insurer, the case nonetheless makes clear that insurers ought to try to outline coverage phrases, the place practicable. For instance, the inclusion of the definition of the time period “plumbing system,” might have averted conflicting coverage interpretations. Moreover, the case is an efficient instance of the significance of clear communication and transparency with policyholders relating to protection interpretations to mitigate potential disputes and guarantee compliance with regulatory requirements.

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