Water Damage Specifically and Clearly Excluded

After five thousand gallons of water running continuously at a rate of nine to ten gallons per hour for a 25-day period seriously caused damage to a residence including mold growth and infestation. The insured sought reversal of Allstate’s denial of coverage based on a clear exclusion as continuous or repeated seepage or leakage over a period of weeks, months, or years, of water.

In Kimberly Landrum f/k/a Kimberly Shepard v. Allstate Insurance Company, Civil Action No. 5:18-cv-00458-TES, United States District Court for the Middle District of Georgia Macon Division (October 9, 2019) Kimberly Landrum sued to recover indemnity for damage to her vacation home in Milledgeville, Georgia that was damaged by water.

FACTUAL BACKGROUND

Landrum purchased a homeowners insurance policy from Allstate in 2017 that covers “sudden and accidental direct physical loss” to her Milledgeville, Georgia property.
The Policy explicitly excludes coverage for “[s]eepage, meaning continuous or repeated seepage or leakage over a period of weeks, months, or years, … or b) from within or around any plumbing fixtures … or other fixtures designed for the use of water or steam.”

On April 4, Landrum received a call from a neighbor informing her that the Milledgeville Water Department had left a note on her door. Landrum arrived at the property later that day and discovered water “spewing out from under the sink in the kitchen.” There was approximately a half inch of water covering the main floor of the house, and some had seeped into the basement. Landrum turned off the water supply to the house and later determined that the water came from a supply line running from the kitchen sink to the refrigerator ice maker.

Allstate adjuster Thomas Specht inspected the property on April 16, 2018 and determined from examining mold growth that water had been coming out of the supply line for enough time to deny Landrum’s claim. Allstate sent Landrum a formal denial letter the following day.

In her complaint, Landrum claims that the water damage to her property is covered under the Policy and that Allstate’s denial of coverage constituted a bad-faith breach of the Policy.

DISCUSSION

Policy Language

The parties primarily dispute whether the Policy’s exclusion of “seepage, meaning continuous or repeated seepage or leakage,” is ambiguous. Landrum argues that this circular definition renders “seepage” per se ambiguous.  An ambiguity only exists where the words used in the contract leave the intent of the parties in question — i.e., that intent is uncertain, unclear, or is open to various interpretations. Conversely, no ambiguity exists where, examining the contract as a whole and affording the words used therein their plain and ordinary meaning, the contract is capable of only one reasonable interpretation.

The definition of seepage in this case is not open to various interpretations, as the Policy clearly limits it to its plain meaning and the plain meaning of “leakage.”

Although Landrum seeks to limit the ordinary meanings to water that is “moving slowly” through an opening the Policy’s exclusion of both seepage, which in some definitions includes a speed component, and leakage, which does not include a speed component, clearly indicates the intention to exclude any escape of water, including that which is slow-moving and that which is not. Thus, it cannot reasonably be disputed that the loss to Landrum’s property arose from seepage as it is defined in the Policy and as that definition is informed through ordinary meaning.

Bifurcation of Damages

Landrum next argues that Allstate is liable for the damages that occurred during the first 13 days of the leak, despite the application of the Policy seepage exclusion. The Court, in other cases, has already determined that at least 14 days of seepage or leakage is required to trigger an exclusion, like the one here, for seepage or leakage “over a period of weeks, months, or years.”

Landrum claims that Allstate is required to bifurcate the damages to the property and provide coverage for the portion of the damages that arose from the first 13 days of the 25-day period of seepage, since a 13-day leak would, as a matter of law, occur over a period of days and not weeks. None of the evidence in this record establishes that the damages were caused by less than 25 days of leakage.

In the absence of evidence to create a genuine issue of fact as to whether the damages occurred from the first 13 days of the 25-day leak, Landrum cannot meet her burden on summary judgment as to this issue, and there is no dispute that the Policy excludes coverage.

Coverage for Mold Damage

Finally, Landrum argues that Allstate is liable for mold remediation arising from the water damage. However, the Policy clearly states that Allstate is only required to pay for mold remediation arising from a covered water loss. Because the Court has already determined that the water loss Landrum suffered is not covered by the Policy, mold resulting from that loss is also not covered.

The Policy unambiguously excluded coverage for the damages arising from the 25-day leak on Landrum’s property and she recovered nothing.

ZALMA OPINION

Sometimes interpreting an insurance policy is easy. A 25-day leak that destroyed much of the property and resulted in obvious mold growth was clearly and unambiguously excluded by the Allstate policy. The USDC read the policy, checked the dictionary, and ruled in favor of the insurer.

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Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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