Chabad of Key Biscayne, Inc. v. Scottsdale Ins. Co., No. 22-13603 (11th Cir. 2023)

Chabad filed a claim for water damage after a drain or sewer pipe broke. The insurer denied the claim under the general water damage exclusion but offered $5,000 under the “Water Backup or Overflow of Sewers and Drains” extension of the policy.

The court granted the insured’s motion for summary judgment. The 11th Circuit Court of Appeals ultimately affirmed the District Court’s ruling, which found that the policy’s water exclusion barred the damage at issue and the water damage exception did not apply.

The District Court found that the latter applied only to surface water or to water under the surface of the ground, while Chabad’s damage fell under damage from sewer or drain backup or overflow. Chabad appealed the ruling, arguing the water damage exception operates as an exception, so there should be coverage.

The Court of Appeals disagreed. It reasoned that the water damage exception applies to the wear and tear exclusion, and as such, its language must be interpreted through the lens of the provisions of the wear and tear exclusion, including its exceptions. The exception explicitly states that it exempts from the water exclusion damage from surface water or water under the surface of the ground. As such, the Court of Appeals concluded that, because the exception to the exclusion at issue does not apply, there is no coverage.