The insured homeowners were successful in establishing coverage for water damage after demonstrating an exception to the exclusion relied upon by the insurer was ambiguous. Plantek v. Town of Hamburg, 948 N.Y.S. 2d 797 (N.Y. App. Div. 2012).
The insureds' basement was flooded after an abutting water main ruptured. Allstate denied coverage under exclusion "4," which stated Allstate did not cover losses caused by "[w]ater . . . on or below the surface of the ground, regardless of its source . . . including water . . . which exerts pressure on, or flows, seeps or leaks through any part of the residence premises."
The insureds sued and moved for summary judgment. They argued there was an exception to the exclusion because damage caused by a sudden and accidental explosion "resulting from . . . Exclusion . . . 4" was covered. The claimed loss was caused by an explosion of the water main. The lower court granted the insureds' motion.
On appeal, Allstate argued exception was an "ensuing loss" provision. Therefore, any initial loss to the insured's property caused by "water. . . on or below the surface of the ground" was not covered, but if there was an "explosion . . . resulting from" the initial loss, any secondary or ensuing loss caused by the explosion was covered. The homeowners contended the exception applied because there was an "explosion [of the water main] resulting from" the conditions set forth in exclusion 4, i.e., "[w]ater . . . below the surface of the ground" and causing "sudden accidental direct physical loss" to their property.
The appellate court found both interpretations reasonable. Therefore, the exception to the exclusion was ambiguous and was to be construed in favor of the insureds. Coverage was established as the insurer failed to raise a fact issue in opposition.
