In Cameron v. Scottsdale Insurance Company, No. 17-11907, 2018 WL 1791889, at *1 (11th Cir. Apr. 16, 2018), the Eleventh Circuit vacated the lower court’s grant of summary judgment in favor of the insurer and relied on Cheetham v. Southern Oak Insurance Company, 114 So. 3d 257, 258 (Fla. Dist. Ct. App. 2013), to support its holding that the water exclusion at issue did not apply because the claimed loss was not caused by water that originated somewhere other than the subject property’s plumbing system.
Plaintiffs owned a residential rental dwelling and experienced a water loss as a result of an age-related “acute pipe failure” that caused the collapse of one of the dwelling’s sanitary lines that carried wastewater out of the dwelling. Plaintiffs filed a claim with the defendant insurer, who ultimately denied the claim, and then filed suit against the defendant insurer to challenge its denial of coverage.
Plaintiffs’ policy provides coverage for some, but not all, water damage, which rendered coverage for Plaintiffs’ claim contingent on whether the claimed loss was the type of water damage covered by the policy. Specifically, the policy at issue ordinarily excludes damages arising from “[w]ear and tear” or “rust or other corrosion, decay [or] deterioration[,]” unless those damages are resultant of “[w]ater damage” that is not otherwise excluded under the terms of the Water Exclusion. Cameron, 2018 WL 1791889, at *2 (11th Cir. Apr. 16, 2018). “[W]ater damage” is defined as the “[a]ccidental discharge or leakage of water . . . as the direct result of the breaking apart of or cracking of a . . . plumbing system . . . that is located on the described premises and contains water.” Id. (ellipses supplied in original).
The Water Exclusion specifically excludes coverage for damages resulting from the following:
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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);
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Mudslide or mudflow;
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Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment;
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Water under the ground surface pressing on, or flowing or seeping through: a. Foundations, walls, floors, or paved surface; b. Basements, whether paved or not; or c. Doors, windows or other openings; or
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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.
The defendant insurer argued at summary judgment that the claimed loss was excluded pursuant to the above-quoted paragraph 3. of the Water Exclusion. The lower court agreed with the insurer and granted it summary judgment, finding that the plain terms of the Water Exclusion applied because the loss was caused by a backup and overflow from a drain. The Eleventh Circuit vacated and remanded the lower court’s decision as contrary to the controlling Florida precedent in Cheetham.
The Eleventh Circuit reasoned that, in light of all of the policy provisions taken together, it is clear that the Water Exclusion does not apply. The Eleventh Circuit explained, like the water damage exclusion in Cheetham, the Water Exclusion contemplates and applies to damage caused by water that does not originate from the subject property’s plumbing system — even if water that damages the property eventually backs up through a pipe and/or drain within the property’s plumbing system. The Eleventh Circuit further bolstered its conclusion by providing policy’s definition of “water damage,” which contains guidance that there no coverage when “discharge or leakage results from the breaking apart or cracking of a pipe which was caused by or related to weather-induced flooding . . .” or for “loss or damage caused by or related to weather-induced flooding which follows or is exacerbated by pipe breakage cracking attributable to wear and tear.”
Accordingly, the Eleventh Circuit has strengthened the Cheetham decision, and this decision further emphasizes the often-cited rule that all provisions of a policy must be read together.
[1] Cheetham is a decision rendered by Florida’s Third District Court of Appeal, wherein the policy at issue provided (1) coverage for the accidental discharge of water from a plumbing system if it was caused by deterioration and is not otherwise excluded, and (2) a water exclusion that is substantially similar to the one in Cameron. The Cheetham court held that the water exclusion for “water back up” was not applicable when a pipe within the plumbing system of a residence broke due to age and deterioration and caused a blockage that resulted in water overflow and subsequent damage, because the water damage exclusion at issue, in that case, reflected that the exclusion pertains to water damage that was caused by outside forces that are unrelated to the residence plumbing system. See Cheetham, 114 So. 3d at 258-64; see alsoCameron, 2018 WL 1791889, at *2-*3 (explaining the facts, holding, and rationale of Cheetham).
