Motorists Mutual Insurance Co. v. Jacob and Lisa Zukoff and Automotive Accessories Limited, Inc. ( 2020 )

IN THE SUPREME COURT OF APPEALS OF WEST VIRGINIA
September 2020 Term
_______________ FILED
November 12, 2020
No. 19-0711 released at 3:00 p.m.
_______________ EDYTHE NASH GAISER, CLERK
SUPREME COURT OF APPEALS
OF WEST VIRGINIA
MOTORISTS MUTUAL INSURANCE CO.,
Petitioner
v.
JACOB and LISA ZUKOFF and
AUTOMOTIVE ACCESSORIES LIMITED, INC.
d/b/a ACCESSORIES LTD.,
Respondents
____________________________________________________________
Appeal from the Circuit Court of Marshall County
The Honorable David W. Hummel, Jr., Judge
Civil Action No. 18-C-27
REVERSED
____________________________________________________________
Submitted: October 13, 2020
Filed: November 12, 2020
Donald J. McCormick, Esq. Alex J. Shook, Esq.
Dell, Moser, Lane & Loughney, LLC Andrew G. Meek, Esq.
Pittsburgh, Pennsylvania HAMSTEAD, WILLIAMS & SHOOK,
Counsel for Petitioner PLLC
Morgantown, West Virginia
Counsel for Respondents
CHIEF JUSTICE ARMSTEAD delivered the Opinion of the Court.
SYLLABUS BY THE COURT
1. “Where the provisions of an insurance policy contract are clear and
unambiguous they are not subject to judicial construction or interpretation, but full effect
will be given to the plain meaning intended.” Syllabus, Keffer v. Prudential Insurance
Company, 153 W.Va. 813, 172 S.E.2d 714 (1970).”
2. “The mere fact that parties do not agree to the construction of a
contract does not render it ambiguous. The question as to whether a contract is ambiguous
is a question of law to be determined by the court.” Syllabus Point 1, Berkeley County
Public Service District v. Vitro Corporation of America, 152 W. Va. 252, 162 S.E.2d 189(1968).
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Armstead, Chief Justice:
On January 7, 2017, the building housing Jacob and Lisa Zukoffs’ business,
Accessories Ltd. (collectively, “Respondents”), was inundated with sewage and they
sought coverage for their resulting losses from Motorists Mutual Insurance Co.
(“Petitioner”) under their general commercial liability insurance policy. Pointing to an
exclusion, Petitioner denied coverage and Respondents filed a declaratory judgment action
to determine the rights and responsibilities of the parties under the insurance policy. 1 The
circuit court granted Respondents’ motion for summary judgment and denied Petitioner’s
summary judgment motion, finding that the exclusion for “water that backs up or overflows
from a sewer, drain or sump” was inapplicable so that the policy covered Respondents’
loss. We have considered the briefs, the record and the arguments of counsel, as well as
the relevant legal authorities. For the reasons set forth below, we agree with Petitioner that
the exclusion applies and there is no insurance coverage for the loss.
I. FACTUAL AND PROCEDURAL BACKGROUND
Accessories Ltd. is located at the corner of 1st Street and Washington Avenue
in Moundsville, West Virginia. On January 7, 2017, the sewer flooded the Accessories
Ltd. premises. On that day, at around noon, J.R. Logsdon (“Logsdon”), an employee of
the Moundsville Sanitary Board (“Board”), was informed that a local resident heard
gurgling sounds in her basement, which was indicative of a clog in the sewer system. He
1
Respondents also brought suit against the Moundsville Sanitary Board
which is not a party to this appeal.
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drove to a location near the corner of 2nd Street and Washington Avenue where there had
been known sewage clogs in the past to attempt to clear the sewer line. To do so, Logsdon
inserted a hose into the sewer line which injected water into the line in an attempt to clean
it out. After deploying the hose, the sewer level returned to normal and Logsdon left the
area.
Approximately ten minutes later, Logsdon was again contacted and told that
sewage was coming out of the cleanouts directly in front of Accessories Ltd. He
immediately drove by that location and observed sewage shooting “a couple of feet” into
the air from a clean out near Accessories Ltd. To attempt to clear the clog, Logsdon
returned to his prior location near the corner of 2nd Street and Washington Avenue and once
again inserted the hose and injected water into the sewer line. This time, his efforts were
futile and he was unable to open the line. Realizing this was not a simple problem, he
contacted his supervisor, Tim Minor (“Minor”), Assistant Superintendent for the Board,
and moved to a down-line location near 1st Street and Washington Avenue. When Minor
arrived, Logsdon discovered a blockage in the sewer line at a manhole. Minor then used a
hoist to lower Logsdon into the manhole where he attempted to use the hose to open the
sewer line. Logsdon was unsuccessful in this attempt. Looking into the line, Logsdon
observed crushed terracotta pipe blocking the flow. Using his hands, Logsdon reached into
the line and pulled pieces of the terracotta pipe out, which unclogged the line and caused
the trapped liquids to hit Logsdon in the stomach.
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By the time Logsdon was able to unclog the sewer line, the damage to
Accessories Ltd.’s building had been done. With nowhere to go, the blockage caused
sewage to flood into the building housing Accessories Ltd., causing damage. Respondents
were insured by Petitioner under a general commercial liability policy. This policy
provided in pertinent part as follows:
BUILDING AND PERSONAL PROPERTY COVERAGE
FORM
A. COVERAGE
We will pay for direct physical loss of or damage to Covered
Property at the premises described in the Declarations caused
by or resulting from any Covered Cause of Loss.
....
CAUSES OF LOSS – SPECIAL FORM
A. COVERED CAUSES OF LOSS
Covered Causes of Loss means RISKS OF DIRECT
PHYSICAL LOSS unless the loss is:
1. Excluded in Section B., Exclusions; or
2. Limited in Section C., Limitations;
that follow.
....
B. EXCLUSIONS
1. We will not pay for loss or damage caused
directly or indirectly by any of the following. Such loss
or damage is excluded regardless of any other cause or
event that contributes concurrently or in any sequence
to the loss.
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....
g. Water
....
(3) Water that backs up or overflows from a
sewer, drain or sump[.]
Respondent Jacob Zukoff sought coverage from Petitioner for the damage to
the Accessories Ltd. premises. Coverage for this loss was denied by Petitioner as falling
under the water exclusion. Respondents then brought a declaratory judgment action 2 in
Marshall County Circuit Court to determine the rights of the parties under the insurance
contract.
Both Petitioner and Respondents filed motions for summary judgment. On
July 19, 2019, the circuit court denied Petitioner’s motion and granted Respondents’
motion, reasoning that the insurance policy did not define the term “backup,” rendering the
policy language ambiguous. Due to this perceived ambiguity, the circuit court found that
the policy language had to be interpreted. In its interpretation, the circuit court applied the
doctrine of reasonable expectations. Citing to no authority for this application, the circuit
court determined that it would not be reasonable to expect coverage if the source of the
water and sewage was on the insured’s premises. Conversely, the circuit court found that
See The Uniform Declaratory Judgments Act, W. Va. Code §§ 55-13-1 –
2
55-13-16 (1941).
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it would be reasonable to expect coverage if the source was outside the premises and “used
the insured’s sewer connection as a conduit to enter the insured’s property.” The circuit
court concluded that the “damaging substances did not originate from inside the business
but rather it [sic] infiltrated through a conduit into the business as a result of a blockage
that was not located on the insured premises.” Accordingly, the circuit court found that
the policy exclusion was inapplicable.
It is from entry of the circuit court’s July 19, 2019, order that Petitioner
appeals.
II. STANDARD OF REVIEW
In this case, Respondents sought a declaratory judgment and the circuit
court entered summary judgment in their favor. The standard of review for entry of a
declaratory judgment is the same as that for entry of summary judgment – de novo.
Compare Syllabus Point 3, Cox v. Amick, 195 W.Va. 608, 466 S.E.2d 459 (1995), with
Syllabus Point 1, Painter v. Peavy, 192 W. Va. 189, 451 S.E.2d 755 (1994). “As we
explained in Cox, ‘because the purpose of a declaratory judgment action is to resolve legal
questions, a circuit court’s ultimate resolution in a declaratory judgment action is reviewed
de novo.’” Blankenship v. City of Charleston, 223 W. Va. 822, 824-25, 679 S.E.2d 654,
656-57 (2009) (quoting Cox, 195 W. Va. at 612, 466 S.E.2d at 463). Further, “[t]he
interpretation of an insurance contract, including the question of whether the contract is
ambiguous, is a legal determination which, like the court’s summary judgment, is
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reviewed de novo on appeal.” Payne v. Weston, 195 W. Va. 502, 506–07, 466 S.E.2d 161,
165–66 (1995).
Thus, our review of this matter is de novo. With that standard in mind, we
now address the issues raised in this appeal.
III. ANALYSIS
This is a matter of first impression which calls upon this Court to determine
if the term “backs up” contained in the commercial liability policy exclusion is ambiguous.
The circuit court found because this term was undefined in the policy that it was therefore
ambiguous. To resolve the putative ambiguity, the circuit court employed the doctrine of
reasonable expectations 3 to construe the exclusion. We disagree with the circuit court and
3
In New Hampshire Insurance Co. v. RRK, Inc., 230 W. Va. 52, 736 S.E.2d
52 (2012), we explained the doctrine of reasonable expectations:
The Court adopted the doctrine of reasonable expectations in
[Syllabus Point] 8, National Mutual Insurance Co. v.
McMahon & Sons, Inc., 177 W. Va. 734, 356 S.E.2d 488(1987), overruled on other grounds by Potesta v. United States
Fidelity & Guaranty Co., 202 W. Va. 308, 504 S.E.2d 135(1998), holding, “With respect to insurance contracts, the
doctrine of reasonable expectations is that the objectively
reasonable expectations of applicants and intended
beneficiaries regarding the terms of insurance contracts will be
honored even though painstaking study of the policy
provisions would have negated those expectations.”
(continued . . .)
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conclude the exclusion is clear and unambiguous. We also note that the circuit court did
not acknowledge that the language in the policy provided for exclusions in two separate
instances – “water that backs up or overflows from a sewer, drain or pump.” (emphasis
added). Because we must read the entire policy as a whole, the events that transpired and
caused sewage to flow into the Accessories, Ltd. premises fell squarely within the
unambiguous policy exclusion.
The initial question is whether the terms contained in the policy are clear or
are subject to interpretation.
When McMahon & Sons was decided, the doctrine of
reasonable expectations was applied only as a canon of
construction for evaluating ambiguous insurance contracts.
Since then, the doctrine of reasonable expectations has evolved
to apply to cases, such as Romano and Keller, in which a
policy provision on which denial of coverage is based differs
from the prior representations made to the insured by the
insurer. See Luikart v. Valley Brook Concrete & Supply,
Inc., 216 W. Va. 748, 755, 613 S.E.2d 896, 903 (2005); Am.
Equity Ins. Co. v. Lignetics, Inc., 284 F.Supp.2d 399, 404–06
(2003).
New Hampshire Ins. Co., 230 W. Va. at 58, 736 S.E.2d at 58. Because we find that the
policy language is unambiguous and no evidence was adduced below that the Respondents
were made prior representations of their coverage, there is no basis upon which to apply
the doctrine of reasonable expectations.
The circuit court found the policy to be ambiguous, applied this doctrine, and
made a distinction between a clog in the sewer line on the Respondents’ premises versus a
clog in the sewer line off the premises. As we find the policy to be unambiguous, we reject
the circuit court’s conclusion that the location of the clogged sewer line was a deciding
factor as to whether the coverage exclusion applies.
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In West Virginia, insurance policies are controlled by
the rules of construction that are applicable to contracts
generally. We recognize the well-settled principle of law that
this Court will apply, and not interpret, the plain and ordinary
meaning of an insurance contract in the absence of ambiguity
or some other compelling reason. Our primary concern is to
give effect to the plain meaning of the policy and, in doing so,
we construe all parts of the document together. We will not
rewrite the terms of the policy; instead, we enforce it as written.
Syllabus Point 1 of Russell v. State Automobile Mutual
Insurance Company, 188 W.Va. 81, 422 S.E.2d 803 (1992),
states: “‘Where the provisions of an insurance policy contract
are clear and unambiguous they are not subject to judicial
construction or interpretation, but full effect will be given to
the plain meaning intended.’ Syllabus, Keffer v. Prudential Ins.
Co., 153 W.Va. 813, 172 S.E.2d 714 (1970).” Thus, we are to
ascertain the meaning of the policy as manifested by its
language.
Payne, 195 W. Va. at 507, 466 S.E.2d at 166.
Conversely, “[t]he term ‘ambiguity’ is defined as language ‘reasonably
susceptible of two different meanings’ or language ‘of such doubtful meaning that
reasonable minds might be uncertain or disagree as to its meaning [.]’ [Syllabus Point] 1,
in part, Shamblin v. Nationwide Mut. Ins. Co., 175 W.Va. 337, 332 S.E.2d 639 (1985).”
Id. However, “[t]he mere fact that parties do not agree to the construction of a contract
does not render it ambiguous. The question as to whether a contract is ambiguous is a
question of law to be determined by the court.” Syllabus Point 1, Berkeley Cty. Pub. Serv.
Dist. v. Vitro Corp. of Am., 152 W. Va. 252, 162 S.E.2d 189 (1968).
[A] court should read policy provisions to avoid ambiguities
and not torture the language to create them. “‘If a court
properly determines that the contract is unambiguous on the
dispositive issue, it may then properly interpret the contract as
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a matter of law and grant summary judgment because no
interpretive facts are in genuine issue.’” Williams v. Precision
Coil, Inc., 194 W.Va. at 66 n.26, 459 S.E.2d at 343
n.26, quoting Goodman v. Resolution Trust Corp. 7 F.3d 1123,
1126 (4th Cir.1993).
Payne, 195 W. Va. at 507, 466 S.E.2d at 166.
The circuit court found, and Respondents urge, that simply because the term
“backs up” is undefined that the lack of a definition automatically renders that term
ambiguous. This contention is contrary to prior West Virginia law, which “has never
required every term in an insurance policy, nor any contract for that matter, to be defined
or else be found ambiguous.” Blake v. State Farm Mut. Auto. Ins. Co., 224 W. Va. 317,
322, 685 S.E.2d 895, 901 (2009). Just because the term “backs up” is undefined does not
automatically render that term ambiguous.
Although this Court has not examined this issue, we are aware of one West
Virginia Circuit Court that has. See Sylvania Props., LLC v. S. Putnam Pub. Serv. Dist.,
No. 05-C-1497, 2006 WL 6179293 (W. Va. Cir. Ct. Nov. 03, 2006). Sylvania arose in
Kanawha County. Id. In that matter, the circuit court determined that a policy exclusion
with language similar to the language of Respondents’ policy here, excepting coverage for
“water or sewage which backs up through sewers or drains, or which enters into and
overflows from within a sump pump, sump pump well, or any other system designed to
remove subsurface water which is drained from the foundation area[,]” was clear and
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unambiguous. Id. Thus, the circuit court applied the clear and unambiguous policy
language and found that it did “not need to construe or interpret it.” Id.Other jurisdictions have reached results similar to the circuit court’s in
Sylvania. See Jackson v. Am. Mut. Fire Ins. Co., 299 F. Supp. 151, 156 (M.D.N.C.
1968), aff’d, 410 F.2d 395 (4th Cir. 1969) (concluding that provision excepting “water
which backs up through sewers or drains,” is not ambiguous); Old Dominion Ins. Co. v.
Elysee, Inc., 601 So. 2d 1243, 1245 (Fla. Dist. Ct. App. 1992) (ruling that coverage
exception of “[w]ater that backs up from a sewer or drain,” is unambiguous); Penn-Am.
Ins. Co. v. Mike’s Tailoring, 22 Cal. Rptr. 3d 918, 922-3 (Ct. App. 2005) (finding that
exclusion for “[w]ater that backs up from a sewer or drain,” was facially unambiguous.).
However, the circuit court’s analysis should not have merely ended with a
determination of whether or not the policy term “backs up” was ambiguous. Our prior
holdings require that the circuit court examine and construe all parts of the policy together.
Upon applying the proper analysis, the policy exclusion applies not only to water that
“backs up” but also to water that “overflows.”
This position is bolstered by a case from the California Court of Appeals for
the Second District that examined essentially the same exclusionary language at issue in
this matter – “loss or damage caused directly or indirectly by . . . [w]ater that backs up or
overflows from a sewer, drain or sump.” Cardio Diagnostic Imaging, Inc. v. Farmers Ins.
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Exch., 150 Cal. Rptr. 3d 798, 799 (Ct. App. 2012). In Cardio, there was a blockage in a
sewer line “approximately 20 to 40 feet away from the toilet,” which caused the toilet to
overflow. Id. at 801. Finding the language “backs up” or “overflows” to be facially
unambiguous, the California court reasoned that “[a] layperson would understand it to
include both water that comes up out of a sewer, drain, or sump (‘backs up’) and water that
spills over from a sewer, drain, or sump (‘overflows’) due to a blockage. Id. at 803.
We are persuaded by these authorities and conclude that the policy terms
“backs up” and “overflows” are unambiguous. 4 Under normal operation of the sewer,
water did not flow out of the sewer line and into the Accessories, Ltd. premises. In fact,
under normal operation, liquids flowed away from the premises. However, in the event
giving rise to this matter, water came up out of the sewer and entered the premises exactly
how the circuit court characterized it – the water “used the insured’s sewer connection as
a conduit to enter the insured’s property.” Indeed, no matter how the entry of water into
the premises from the sewer was described, a plain reading of the policy language clearly
shows that a person would understand that coverage for this loss would be excluded where
4
Despite the clear and unambiguous language in the policy, Respondents
argue that because the Board injected water into the line there should be insurance coverage
for Respondents’ loss. However, under the terms of the policy it is of no moment as to
what caused the damages as “[s]uch loss or damage is excluded regardless of any other
cause or event that contributes concurrently or in any sequence to the loss.” Under the
policy language, even though the Board injected water into the sewer line, any back up or
overflow of water through the sewer – regardless of its cause – was excluded from
coverage.
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water “back[ed] up” and “overflow[ed]” into the Accessories, Ltd. premises. Therefore,
we find that the language of the exclusion is not ambiguous as a matter of law. Applying
that clear and unambiguous language to the undisputed facts of this case, it is clear that the
circuit court erred when it found the exclusion to be inapplicable.
IV. CONCLUSION
For the foregoing reasons, we reverse the circuit court’s grant of
Respondents’ motion for summary judgment and enter judgment here in favor of Petitioner.
Reversed and judgment entered.
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