Amish Connection, Inc. v. State Farm Fire and Casualty Company

IN THE SUPREME COURT OF IOWA
No. 13–0124
Filed March 20, 2015
AMISH CONNECTION, INC.,
Appellant,
vs.
STATE FARM FIRE AND CASUALTY COMPANY,
Appellee.
On review from the Iowa Court of Appeals.
Appeal from the Iowa District Court for Black Hawk County,
Kellyann M. Lekar, Judge.
Property insurer seeks further review of court of appeals decision
reversing summary judgment upholding denial of coverage for damage
from rainwater spilling from corroded drainpipe that failed during storm.
DECISION OF COURT OF APPEALS VACATED; DISTRICT COURT
SUMMARY JUDGMENT AFFIRMED.
Samuel C. Anderson and Joseph G. Martin of Swisher & Cohrt,
P.L.C., Waterloo, for appellant.
Mark W. Thomas of Grefe & Sidney, P.L.C., Des Moines, for
appellee.
2
WATERMAN, Justice.
In this appeal, we must decide whether a business insurance
policy covers water damage inside a building resulting when a corroded
interior drainpipe bursts during a summer rainstorm. The pipe carried
rainwater from the roof to a storm sewer. The policy only insures
damage “caused by rain” if an insured event first ruptures the roof or
exterior walls to allow the rain to enter or if the damage results from
melting ice or snow. The district court granted summary judgment for
the insurer, concluding the water damage was caused by rain. The court
of appeals reversed, concluding that damage from “rainwater” flowing
from the broken interior drainpipe is not damage “caused by rain.” We
granted the insurer’s application for further review.
This case presents our first opportunity to adjudicate coverage
claims under a rain limitation in an insurance policy. For the reasons
explained below, we conclude the unambiguous language of the rain
limitation precludes coverage for the damage caused by the rainwater
escaping the ruptured interior drainpipe. We, like the district court, also
reject the insured’s alternative argument that coverage is available
because the damage resulted from the “breaking or cracking of any part
of a system containing water or steam.” That argument fails because the
policy does not provide coverage for damage “caused by rain,” even if a
system containing water was involved. We therefore vacate the decision
of the court of appeals and affirm the district court’s summary judgment
in favor of the insurer.
I. Background Facts and Proceedings.
Amish Connection, Inc. leased space in Crossroads Shopping Mall
in Waterloo, where it operated the Amish Connection Store. In 2008,
Amish Connection moved into Suite 102. This litigation arises from the
3
failure of a leaky four-inch cast-iron drainpipe that ran above the ceiling
tiles and along the interior back wall. This pipe connected to the rooftop
drains and carried rainwater down and through the interior of the
building to a storm sewer. During heavy rains, leaking rainwater
routinely ran down the back wall of the suite. To address the leakage,
mall management installed a makeshift wooden trough to catch the
rainwater from the back wall and direct it toward a drain. The drainage
tile and pipe system in Suite 102 showed “trails of rust left by years of
water leak issues.” The drainpipe was hidden from the tenant’s view by
ceiling tiles and wallboard, and Amish Connection was unaware that it
leaked. The drainpipe itself was “extremely rusty” before it failed.
Subsequent photos show extensive corrosion on the pipe, especially
where it joined the wall.
In May 2010, the owner of Amish Connection approached the mall
manager about closing the store until November “because business was
bad.” New lease contracts were prepared to allow Amish Connection to
close its business to the public through October and reopen November 1.
During that period, Amish Connection would continue paying rent for
Suite 102 and store property there. On June 14, the new lease
agreements were executed. It rained heavily that night. The rainstorm
caused no damage to the roof, windows, or exterior walls of the building.
The next morning, however, the mall maintenance staff discovered the
interior drainpipe had failed, flooding the back room of Suite 102 with up
to several inches of rainwater and soaking the carpet in much of the
front showroom. The rainwater caused substantial damage to Amish
Connection’s office, bathroom, and property stored there, including its
samples, inventory, office supplies, and business records.
4
Amish Connection promptly submitted a claim under its business
insurance policy with State Farm Fire and Casualty Company (State
Farm). Section I of the policy, entitled “LOSSES INSURED AND LOSSES
NOT INSURED,” provides:
We insure for accidental direct physical loss to property
covered under this policy unless the loss is:
1. limited in the PROPERTY SUBJECT TO
LIMITATIONS section; or
2. excluded in the LOSSES NOT INSURED section
that follows.
The relevant provisions of those two sections state:
PROPERTY SUBJECT
TO LIMITATIONS
We will not pay for loss:
....
6. to the interior of any building or structure, or
the property inside any building or structure,
caused by rain, snow, sleet, ice, sand, or dust,
whether driven by wind or not, unless:
a. the building or structure first sustains
damage by an insured loss to its roof or
walls through which the rain, snow, sleet,
ice, sand or dust enters; or
b. the loss is caused by thawing of snow,
sleet or ice on the building or structure
....
....
LOSSES NOT INSURED
....
2. We do not insure for loss either consisting of, or
directly and immediately caused by, one or more
of the following:
....
d. smog, wear, tear, rust, corrosion, fungus,
mold, decay, deterioration, hidden or
latent defect or any quality in property
that causes it to damage or destroy itself.
But if accidental direct physical loss by
any of the "Specified Causes of Loss" or by
5
building glass breakage results, we will
pay for that resulting loss . . . .
The definitions section of the policy defined “Specified Causes of Loss” to
include:
14. water damage, meaning accidental discharge or
leakage of water or steam as the direct result of
the breaking or cracking of any part of a system
or appliance containing water or steam.
On June 16, State Farm declined Amish Connection’s claim based
on the rain limitation in paragraph 6 of the property subject to
limitations section. On December 27, Amish Connection filed a civil
action against its landlord and the mall operator alleging they had
concealed the water infiltration problem the tenant discovered when
ceiling tiles were removed after the drainpipe failed. Amish Connection
alleged those defendants “took insufficient efforts to remedy the water
infiltration problem and Defendants’ actions caused further water
damage to the lower level unit #102.” The lawsuit further alleged the
mall owner and operator “were guilty of gross negligence and willful
misconduct by renting [Suite 102] while knowing of, not disclosing, and
not taking remedial action to resolve the significant long-standing water
problems.”
On November 23, 2011, counsel for Amish Connection wrote to
State Farm asking it to reconsider its denial of the claim and provide
coverage for the water damage. State Farm responded on December 22
that it would investigate further and cited paragraph 2(d) excluding
coverage for “rust, corrosion, . . . and deterioration,” in addition to the
rain limitation in paragraph 6. On January 3, 2012, State Farm sent
another letter confirming its denial of coverage based on both provisions.
On January 20, Amish Connection moved to amend its petition to add
6
State Farm as a defendant to a claim of breach of its insurance contract.
Amish Connection later dismissed its claims against the mall owner and
operator. The lawsuit proceeded against State Farm alone.
On July 27, State Farm filed a motion for summary judgment
based on paragraph 6 excluding coverage for “damage caused by rain.”
Amish Connection resisted, arguing that the water damaging the interior
of Suite 102 was no longer “rain,” and the actual cause of the loss was
the failure of the drainage pipe, falling within coverage under paragraph
14. On October 18, the district court granted State Farm’s motion based
on paragraph 6, stating “as a matter of law the water running through
the pipe which caused the loss was rainwater.” Amish Connection
moved for a more specific ruling to address its alternative argument
under the exception to the rust-and-corrosion exclusion for water
damage resulting from the “breaking or cracking of any part of a system
or appliance containing water or steam.” State Farm resisted, arguing
that the ruling on the rain limitation was dispositive under the language
of the insuring agreement that provides coverage for accidents “unless
the loss is: 1. limited [by the rain limitation]; or 2. Excluded in the
Losses Not Insured section.” On December 20, the district court agreed
with State Farm’s interpretation and denied Amish Connection’s motion,
stating:
The policy reads that “We insure for accidental physical loss
to property covered under this policy unless the loss is: 1)
Limited in the PROPERTY SUBJECT TO LIMITATIONS
section; or 2) Excluded in the LOSSES NOT INSURED
section that follows.” (Emphasis Added). Therefore, if a loss
is excluded under either the PROPERTY SUBJECT TO
LIMITATIONS section or the LOSSES NOT INSURED section,
then it is excluded, and analysis under the other section is
not necessary. Therefore, the Court declines to rule on
whether the LOSSES NOT INSURED provision applies, as
the loss is already excluded by the other section.
7
Amish Connection appealed, and we transferred the case to the
court of appeals. The court of appeals reversed the summary judgment,
concluding the “district court erred by finding the rain limitation [in
paragraph 6] was applicable to this case.” The court of appeals, citing
dictionaries and cases from other jurisdictions, distinguished “rain” from
“rainwater”:
The definitions of “rain” and “rainwater,” although similar,
encompass two different points in time. As water is falling, it
is considered “rain.” After it has fallen—and, as here, been
collected on a rooftop and channeled into pipes for transport
to a storm sewer—it is considered “rainwater.”. . . While the
water emitting from the burst pipe may fall within the
definition of “rainwater,” it does not fall within the definition
of “rain”. Because loss caused by “rainwater” is not excluded
or otherwise limited under the policy, the district court erred
in interpolating the term “rainwater” into the policy and
concluding the interpolated term was unambiguous.
The court of appeals further concluded to the extent the limitation
of coverage for damage “caused by rain” in paragraph 6 is ambiguous, it
must be construed against State Farm. The court of appeals determined
the parties’ arguments under other terms of the policy “are best
addressed by the district court in the first instance” on remand. We
granted State Farm’s application for further review.
II. Standard of Review.
We review a district court’s summary judgment ruling that
interprets an insurance policy for correction of errors at law. Boelman v.
Grinnell Mut. Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013). Summary
judgment is appropriate when there is no genuine issue of material fact
and the moving party is entitled to judgment as a matter of law. Id. at
501 (citing Iowa R. Civ. P. 1.981(3)). We may affirm summary judgment
on a conflict “concerning only the legal consequences of undisputed
8
facts.” Id. We examine the record in the light most favorable to the
nonmoving party. Id.
III. Analysis.
This case presents our court’s first opportunity to adjudicate an
insurance claim under a policy limiting coverage for losses “caused by
rain.” The facts are undisputed as to the source of the water damage—a
corroded interior drainpipe burst during a rainstorm, flooding the rooms
inside with rainwater. The fighting issue is whether the damage was
“caused by rain” within the meaning of paragraph 6 of the limitations of
coverage. Neither side has offered any extrinsic evidence on the meaning
of the insurance contract. Accordingly, its interpretation is for the court
to decide. See id. (“Policy interpretation is always an issue for the court,
unless we are required to rely upon extrinsic evidence or choose between
reasonable inferences from extrinsic evidence.”). We conclude State
Farm was entitled to summary judgment in its favor based on the
limitation of coverage. Our holding is consistent with the decisions of
other courts construing equivalent policy language.
Our rules governing the construction and interpretation of
insurance policies are well-settled. “The cardinal principle . . . is that the
intent of the parties at the time the policy was sold must control.”
LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998). Except
in cases of ambiguity, we determine “the intent of the parties by looking
at what the policy itself says.” Boelman, 826 N.W.2d at 501. If a term is
not defined in the policy, we give the words their ordinary meaning. Id.
“We will not strain the words or phrases of the policy in order to find
liability that the policy did not intend and the insured did not purchase.”
Id.
9
“[A] policy is ambiguous if the language is susceptible to two
reasonable interpretations” when the contract is read as a whole. Id. “If
the policy is ambiguous, we adopt the construction most favorable to the
insured.” Id. at 502. “An insurance policy is not ambiguous, however,
just because the parties disagree as to the meaning of its terms.” Id.
Moreover, “ ‘[a]mbiguity is not present merely because the provision
“could have been worded more clearly or precisely than it in fact was.” ’ ”
Am. Family Mut. Ins. Co. v. Corrigan, 697 N.W.2d 108, 114 (Iowa 2005)
(quoting Cairns v. Grinnell Mut. Reins. Co., 398 N.W.2d 821, 824 (Iowa
1987)). “If an insurance policy and its exclusions are clear, the court
‘will not “write a new contract of insurance” ’ for the parties.” Boelman,
826 N.W.2d at 502 (quoting Thomas v. Progressive Cas. Ins. Co., 749
N.W.2d 678, 682 (Iowa 2008)). We construe exclusions strictly against
the insurer. Id. Nevertheless, “we must enforce unambiguous
exclusions as written.” Bituminous Cas. Corp. v. Sand Livestock Sys.,
Inc., 728 N.W.2d 216, 222 (Iowa 2007).
A. The Rain Limitation. Applying these principles here, we
conclude the rain limitation in paragraph 6 unambiguously defeats
coverage for the rainwater damage to Suite 102. This provision states
that subject to two exceptions the insurer “will not pay for loss . . . to the
interior of any building . . . or the property inside . . . caused by rain.”
Neither exception applies. The first allows coverage if “the building . . .
first sustains damage by an insured loss to its roof or walls through
which the rain . . . enters.” This exception would allow coverage, for
example, if a tornado dropped a tree on the roof, opening a hole through
which rain entered. Amish Connection alleges no damage to the
building’s roof or walls through which rain entered Suite 102. Rather,
the rainwater damage occurred when the interior drainpipe failed. The
10
second exception to the rain limitation provision allows coverage if “the
loss is caused by thawing of snow, sleet or ice on the building or
structure.” The June rainstorm involved no thawing of precipitates.
Amish Connection acknowledges these exceptions do not apply,
but argues the water damage in suite 102 was not “caused by rain”
within the meaning of paragraph 6. It contends the water escaping the
ruptured drainpipe was no longer “rain” but rather “rainwater.” The
court of appeals agreed, stating, “We think it fair to say that a reasonable
person standing in the interior of a shopping mall underneath a burst
drainpipe would not conclude that he or she was standing in the ‘rain.’ ”
True enough. But, “rainwater” unquestionably is “caused by rain,” and it
is undisputed the water damage occurred during a rainstorm when the
drainpipe ruptured to spill rainwater into Suite 102. We hold as a
matter of law that water damage is “caused by rain” within the meaning
of paragraph 6 of the limitations of coverage when an interior drainpipe
fails during a rainstorm and releases rainwater inside the building.
Under common parlance, damage caused by “rainwater” is “caused
by rain.” If water is only considered rain while it is falling and becomes
rainwater after it strikes a surface then the policy’s limitation on
coverage for damage “caused by rain” would be eviscerated. Water does
not damage property while merely falling through the air, but only after it
strikes a surface. Under the court of appeals’ interpretation, the rain
limitation in the policy would be superfluous, and the coverage for
rainwater damage would extend to leaky roofs and skylights. See Iowa
Fuel & Minerals, Inc. v. Iowa State Bd. of Regents, 471 N.W.2d 859, 863
(Iowa 1991) (“[A]n interpretation which gives a reasonable, lawful, and
effective meaning to all terms is preferred to an interpretation which
leaves a part unreasonable, unlawful, or of no effect.”).
11
State Farm argues its commercial property insurance policy is not
intended to provide coverage for damage resulting from deferred
maintenance. Other courts have agreed. In Petrick v. State Farm Fire &
Casualty Co., the New Jersey appellate court affirmed summary
judgment for the insurer based on a rain limitation and noted insurance
is not intended to pay costs resulting from poor maintenance:
If that coverage were found to exist, State Farm would
become the insurer of all water damage to personalty caused
by inadequate or delayed maintenance of a premises. That
is clearly a risk that the insurer did not agree and could not
reasonably be found to assume. We will not write for
plaintiffs a better policy of insurance than the one
purchased.
No. A-1152-09T3, 2010 WL 3257894, *5 (N.J. Super. Ct. App. Div.
Aug. 13, 2010) (per curiam); see also Dashtpeyma v. Liberty Mut. Grp.,
569 F. App’x 886, 887 (11th Cir. 2014) (per curiam) (affirming summary
judgment for insurer based on rain limitation “when rain water leaked
through rotted wood on window sills and pieces of siding”). It is
undisputed that the drainpipe that failed in Suite 102 was rusty,
corroded, and leaky for a long period preceding the rainstorm during
which it ruptured. This is not an insured loss under the rain limitation
in State Farm’s policy.
Other courts have reached the same result we do under equivalent
policy language. In Horizon III Real Estate v. Hartford Fire Insurance Co.,
the insured’s office basement flooded during a torrential rainstorm that
overwhelmed the building’s interior drainpipes or the connecting storm
sewer system. 186 F. Supp. 2d 1000, 1002 (D. Minn. 2002). The
insurance policy contained a rain limitation like State Farm’s that
provided no coverage for damage to the “interior of any building . . .
caused by or resulting from rain.” Id. at 1005. The insured, like Amish
12
Connection, argued the rain “stopped being ‘rain’ when it touched the
roof,” as it was no longer falling from the sky. Id. at 1006. The federal
district court rejected that argument, concluding the water damage “was
caused by or resulted from, a torrential rain storm” within the meaning
of the “unambiguous” rain limitation. Id. at 1006–07. Accordingly, the
court entered summary judgment for the insurer. Id. at 1002, 1009.
The Nebraska Court of Appeals, applying the same rain limitation
in a business policy, likewise rejected the argument that rain is no longer
rain once it lands on a rooftop:
[The insured] first argues that the damage he suffered was
not caused by rain, on the theory that the water which
entered his building had lost its nature as “rain” once it
entered the building. We are unswayed by this tortured
reading of a clearly worded exclusion. [The insured] does not
deny that rain fell and that the water resulting from that
rain, however characterized, entered the building. The policy
excludes damage “caused by or resulting from rain,” which is
precisely what happened in this case.
Einspahr v. United Fire & Cas. Co., No. A-99-371, 2000 WL 758654, at
*4, *6 (Neb. Ct. App. June 13, 2000) (affirming summary judgment for
insurer); accord Stufflebean v. Fireman’s Fund Ins. Co., 710 S.W.2d 931,
933 (Mo. Ct. App. 1986) (holding rain limitation excluded coverage for
water damage resulting from broken gutter); Kennel Delites, Inc. v T.L.S.
NYC Real Estate, LLC, 852 N.Y.S.2d 130, 130–31 (App. Div. 2008)
(applying exclusion for damage “caused by rain” when rainwater leaked
into building after debris clogged roof drain); U.S. Fire Ins. Co. v.
Matchoolian, 583 S.W.2d 692, 694 (Tex. Ct. App. 1979) (same). But see
Fidelity Coop. Bank v. Nova Cas. Co., 726 F.3d 31, 40–41 (1st Cir. 2013)
(holding water damage resulting from clogged roof drain was covered
under amendatory flood endorsement notwithstanding rain limitation in
original policy); id. at 42 (Kayatta, J., concurring in part and dissenting
13
in part) (“[C]overage would not exist here but for the amendatory
endorsement for flood coverage.”).
The court of appeals relied on State Farm Fire & Casualty Co. v.
Paulson for its conclusion that rain is “water falling from the sky.” 756
P.2d 764, 767 (Wyo. 1988) (“ ‘Rain’ is ordinarily and commonly thought
of as water falling from the sky. After it stops falling, one does not say
that it is ‘raining’ . . . .”). That case is inapposite. In Paulson, the
insured’s basement windows were broken by hail, allowing water from a
rainstorm to flow in through the broken windows. Id. at 764. The policy
contained a separate exclusion for damage from “flood [or] surface
water.” Id. at 765. Under the plain language of this exclusion, water
from the rainstorm that landed on nearby higher ground was “surface
water” when it flowed into the basement windows. Id. at 771–72. The
Paulson court distinguished rain from rainwater to hold the surface
water exclusion precluded coverage, not to avoid the rain limitation. See
id.
The court of appeals also relied on Unobskey v. Continental
Insurance Co., which is also inapposite. 86 A.2d 160 (Me. 1952). In
Unobskey, the outside door to a retail shop was “torn open” during “a
very severe storm with high wind and heavy rain.” Id. at 160–61. “[A]
‘river’ of water went through the doorway” and damaged inventory stored
in the basement. Id. at 161. The policy covered damage from wind but
excluded coverage for damage from “ ‘high water or overflow whether
driven by wind or not.’ ” Id. at 163. The court affirmed judgment for the
insurer because the policy “did not cover the damage caused by running
surface water from rainstorm and melting snow[] that overflowed the
catch basins and the parking area.” Id. at 164. Such cases adjudicating
surface water exclusions are inapplicable regardless of whether the water
14
causing damage accumulated in a rainstorm. 1 The rainwater causing
damage to Suite 102 had not reached the outside ground to become
surface water. Flooding from surface water presents a different risk than
rainwater landing on a building.
B. The “Water System” Exception to the Rust-and-Corrosion
Exclusion. Because the rain limitation is dispositive, we, like the district
court, reject Amish Connection’s alternative argument for coverage based
on paragraph 14 of the definitions. That provision defines “Specified
Causes of Loss” 2 to include: “water damage, meaning accidental
1The cases that Amish Connection relies upon are likewise inapposite. Amish
Connection cites two cases for the proposition that water may change its character by
entering an artificial channel. Heller v. Fire Ins. Exch., 800 P.2d 1006, 1009 (Colo.
1990) (concluding that runoff is no longer surface water when diverted into trenches);
Georgetowne Square v. U.S. Fid. & Guar. Co., 523 N.W.2d 380, 386–87 (Neb. Ct. App.
1994) (holding water ceases to be “surface water” when forced into an artificial trench).
Both of these cases deal with surface water rather than rainwater, and both rely on
precedent in their respective jurisdictions holding that “surface water” is not channeled
artificially. See Heller, 800 P.2d at 1008–09 & nn.3–10 (surveying caselaw);
Georgetowne Square, 523 N.W.2d at 385 (“The cases in Nebraska also emphasize that
the definition of surface water involves the ‘natural’ drainage of such water.”). By
contrast, other courts have held that surface water does not change status for coverage
purposes when it flows into a man-made channel or underground. Cameron v. USAA
Prop. & Cas. Ins. Co., 733 A.2d 965, 969–70 (D.C. Ct. App. 1999) (concluding water
flowing from a patio remained “surface water” even though it passed over an artificial
channel intended to direct the water’s course); State ex rel. State Fire & Tornado Fund of
N.D. Ins. Dep’t v. N.D. State Univ., 694 N.W.2d 225, 233 (N.D. 2005) ( stating “surface
water does not lose its character as surface water simply by being artificially channeled
underground”).
2The State Farm policy uses the term “Specified Causes of Loss” in some
provisions and the term “insured loss” in others. We read the policy as a whole.
Boelman, 826 N.W.2d at 501. The terms are not coextensive. See Chiodo v. Section
43.24 Panel, 846 N.W.2d 845, 853 (Iowa 2014) (“If the drafters intended the two
concepts to be coextensive, different words would not have been used.”); Andover Vill.
Ret. Cmty. v. Cole, No. 2013-A-0057, 2014 WL 5802674, at *3 (Ohio Ct. App. 2014)
(“Generally in interpreting a statute or a contract, we presume that the use of different
words indicates an intention that the words possess different meanings.”).
Rather, it is clear from reading State Farm’s policy as a whole that the terms
“Specified Causes of Loss” and “insured loss” have different meanings, and a specified
cause of loss is not a covered loss under some circumstances. For example, the defined
specified causes of loss include the “weight of snow, ice or sleet” in paragraph 13, yet
the policy specifically excludes losses to “gutters and downspouts caused by weight of
15
discharge or leakage of water or steam as the direct result of the
breaking or cracking of any part of a system or appliance containing
water or steam.” Amish Connection contends the drainpipe that burst is
a “system or appliance containing water.” If so, the water damage to
Suite 102 would fall within an exception to the separate exclusion for
“rust, corrosion, [and] deterioration.” 3 But, standing alone, paragraph
14 would not create coverage for rain damage because an exception to an
exclusion does not create coverage that otherwise is lacking. As the
Indiana Court of Appeals observed:
In general, “an exception to an exclusion cannot create
coverage where none exists. Exclusion clauses do not grant
or enlarge coverage; rather, they are limitations on the
insuring clause.” “In simplistic terms, the process is such: if
the insuring clause does not extend coverage, one need look
no further. If coverage exists, exclusions must then be
considered. If an exclusion excludes coverage, an exception
to the exclusion may re-grant coverage.”
______________________
snow, sleet or ice” in limitation 9. Thus, merely because a matter is included within the
policy’s defined “Specified Causes of Loss” does not mean it cannot be subject to a
separate limitation or exclusion.
3State Farm previously relied on that exclusion in addition to the rain limitation
in denying the insurance claim. At oral argument, counsel for State Farm noted it was
no longer relying on that exclusion found in the “LOSSES NOT INSURED” section of the
policy, which provides:
2. We do not insure for loss either consisting of, or directly
and immediately caused by, one or more of the following:
....
d. smog, wear, tear, rust, corrosion, fungus, mold,
decay, deterioration, hidden or latent defect or any
quality in property that causes it to damage or
destroy itself.
But if accidental direct physical loss by any of the
"Specified Causes of Loss" or by building glass
breakage results, we will pay for that resulting loss
....
16
Hartford Cas. Ins. Co. v. Evansville Vanderburgh, Pub. Library, 860
N.E.2d 636, 646 (Ind. Ct. App. 2007) (quoting Amerisure Inc. v. Wurster
Constr. Co., 818 N.E.2d 998, 1005 (Ind. Ct. App. 2004) (citation omitted)).
Unlike the exclusion for rust or corrosion, the rain limitation
contains no exception for “Specified Causes of Loss.” Yet, other
provisions in the “PROPERTY SUBJECT TO LIMITATIONS” section of
the policy do include exceptions for “Specified Causes of Loss.” For
example, on the same page, the policy provides:
We will not pay for loss: . . .
2. to fragile articles, such as glassware, statuary . . . and
other articles of a brittle nature, if broken, unless
caused by any of the ‘Specified Causes of Loss’ or by
building glass breakage.
If the State Farm policy were intended to cover water damage from a
breaking gutter or drainpipe releasing rainwater, then the rain limitation
in paragraph 6 likewise would have included an exception for specified
causes of loss such as a breaking pipe in a water system. See Oyens
Feed & Supply, Inc. v. Primebank, 808 N.W.2d 186, 194 (Iowa 2011)
(concluding that selective placement of phrase in one subsection but not
another meant the phrase did not apply where it was omitted). Coverage
for rainwater damage is lacking absent such an applicable exception
within the rain limitation.
We assume for the sake of argument the interior drainpipe that
failed while carrying rainwater from the roof to the storm sewer may be
considered “part of a system . . . containing water” within the meaning of
paragraph 14. Cf. Cameron v. USAA Prop. & Cas. Ins. Co., 733 A.2d 965,
971 (D.C. Ct. App. 1999) (applying surface-water exclusion to reject
coverage claim based on similar “water system” provision when gutter
failure during rainstorm contributed to water damage caused by
17
rainwater flowing from patio). We also assume the water damage in this
case would not have occurred but for both the rainstorm and the failure
of the interior drainpipe. That is, the breaking of the drainpipe was a
concurrent cause of the water damage to the office and its contents.
Nevertheless, paragraph 14 does not provide coverage because
State Farm’s policy effectively has an anticoncurrent-cause provision.
This means the rain limitation controls regardless of whether the
breaking drainpipe is considered a concurrent cause of the rainwater
damage. The operative anticoncurrent-cause language turns on the word
“or” in the lead paragraph of Section I of the policy, entitled “LOSSES
INSURED AND LOSSES NOT INSURED”:
We insure for accidental direct physical loss to property
covered under this policy unless the loss is:
1. limited in the PROPERTY SUBJECT TO
LIMITATIONS section; or
2. excluded in the LOSSES NOT INSURED section
that follows.
(Emphasis added.) The district court quoted and relied on this provision
in denying Amish Connection’s motion for a more specific ruling on
summary judgment. The “or” in this provision is disjunctive. See
Denison Mun. Utils. v. Iowa Workers’ Comp. Comm’r, 857 N.W.2d 230,
236 (Iowa 2014) (ascribing a disjunctive meaning to the word “or”
between statutory provisions); Monroe County v. Int’l Ins. Co., 609 N.W.2d
522, 525 (Iowa 2000) (holding disjunctive “or” between alternative
provisions of exclusion defeated coverage even though only one
alternative applied). As the district court correctly concluded, this means
there is no coverage under the State Farm policy for property damage
resulting under circumstances triggering either a limitation of loss in the
first numbered paragraph or an exclusion in the second. That is, if the
18
rain limitation applies, it does not matter whether this property loss
otherwise falls within the “water system break” exception to the rust
exclusion.
This makes sense. Water damage resulting from a breaking
sprinkler or hot water pipe or radiator could be covered despite the rust-
and-corrosion exclusion, but not water damage resulting from a breaking
gutter or roof drainpipe for rainwater subject to the rain limitation. Why
the difference? Because the insurer expects the property owner to keep
the rain out and writes the policy to avoid paying for damage from rain
resulting from deferred maintenance. See Petrick, 2010 WL 3257894, at
*5 (applying rain limitation as intended to avoid insuring for damage
resulting from deferred maintenance). Under Amish Connection’s
interpretation, rain damage resulting from breaking gutters or drainpipes
would be covered, and the “or” in Section I would be replaced with the
conjunctive “and” such that a loss is covered unless it is both within the
rain limitation and (not “or”) excluded separately. We will not rewrite
clear policy language. See Boelman, 826 N.W.2d at 502. Rather, “we
must enforce unambiguous exclusions as written.” Bituminous Cas.
Corp., 728 N.W.2d at 222.
The anticoncurrent-cause language in State Farm’s policy is
enforceable. See, e.g., TNT Speed & Sport Ctr., Inc. v. Am. States Ins. Co.,
114 F.3d 731, 733 (8th Cir. 1997) (enforcing anticoncurrent-cause
provision under Missouri law, noting “the most analogous and
persuasive cases from other states recognize that parties may contract
out of application of the efficient proximate cause doctrine”); see
generally Dale Joseph Gilsinger, Validity, Construction, and Application of
Anticoncurrent Causation (ACC) Clauses in Insurance Policies, 37
A.L.R. 6th 657 (2008 & Supp. 2014). Some insurance policies include
19
more expansive anticoncurrent-cause provisions than State Farm’s
policy. See id. at 669–70 (quoting standard long-form and short-form
provisions). The fact an insurer could have made an exclusion more
explicit does not make the existing language ambiguous. See In re
Katrina Canal Breaches Litig., 495 F.3d 191, 209–10 (5th Cir. 2007)
(enforcing flood exclusions for water damage allegedly resulting from the
negligent design, construction, or maintenance of flood-protection levies);
Corrigan, 697 N.W.2d at 114. Indeed, in Corrigan, we specifically held
the omission of an anticoncurrent-cause provision in the liability section
of the homeowners’ policy did not create ambiguity even though such a
provision was included in the property insurance section of the same
policy. 697 N.W.2d at 114–15. Thus, as the district court correctly
concluded, because the rain limitation applies, there is no coverage
regardless of whether the breaking drainpipe falls within the exception to
the separate rust-and-corrosion exclusion.
When insurance policies lack such an anticoncurrent-cause
provision, we have held an accident that has two independent causes,
one of which is covered and one excluded, is covered unless the excluded
cause is the sole proximate cause of injury. See, e.g., Grinnell Mut. Reins.
Co. v. Emp’rs Mut. Cas. Co., 494 N.W.2d 690, 693–94 (Iowa 1993)
(holding general liability insurer covered personal injury claim arising
from student’s fall from bus because school district’s negligent
supervision of loading fell outside scope of motor vehicle exclusion);
Kalell v. Mut. Fire & Auto. Ins. Co., 471 N.W.2d 865, 868 (Iowa 1991) (“We
hold that, when two independent acts of negligence are alleged, one
vehicle-related and one not vehicle-related, coverage is still provided
under the homeowners policy unless the vehicle-related negligence is the
sole proximate cause of the injury. Under Iowa law, of course, more than
20
one proximate cause may exist.”). In Kalell, the homeowners policy
excluded coverage for bodily injury arising out of use of a motor vehicle
owned by the insured. Id. at 866. The victim was injured when struck
by a tree limb the insured was pulling off a tree with a rope attached to
his pickup truck. Id. We noted coverage clearly would be outside the
scope of the exclusion if people had pulled on the ropes manually
without using the vehicle. Id. at 868. We concluded pulling the limb
with a rope and use of the truck were independent acts and held the trier
of fact must determine whether use of the motor vehicle was the sole
proximate cause of the injury. Id. at 869. These cases do not help
Amish Connection because neither case involved an anticoncurrent-
cause provision and paragraph 14 is not an independent coverage grant,
but rather merely removes breaking pipes from the rust-and-corrosion
exclusion.
More recently, in Corrigan, parents of a child injured in day care
sued the day-care providers, who sought liability coverage under their
homeowners policy. 697 N.W.2d at 109–110. The policy excluded
coverage for “bodily injury . . . arising out of . . . violation of any criminal
law for which any insured is convicted.” Id. at 110. One insured was
convicted of child endangerment. Id. at 109–10. Another was sued for
negligent supervision. Id. at 110. We held the insurer was entitled to
summary judgment based on the criminal act exclusion and
distinguished Kalell, noting that the covered and excluded acts were not
“independent” because to prove negligent supervision, one had to prove
the underlying tort by the person who was not properly supervised. Id.
at 112–13. That is, there would have been no injury without the
excluded criminal act. See id. Similarly, there would have been no water
damage here but for the rainfall, and damage caused by this rain is not
21
covered. This case is more like Corrigan than Kalell. In any event, we
resolve the coverage claims based on the unambiguous contract
language, not tort causation principles.
Amish Connection relies heavily on a New York trial court decision,
Wider v. Heritage Maintenance, Inc., 827 N.Y.S.2d 837 (Sup. Ct. 2007).
In that case, a third-party contractor working on the façade of the
insured’s building negligently placed tarps on scaffolding next to the
building that collected rainwater. Id. at 842. The tarps were not placed
on the scaffolding to keep rain out of the building, and “in the tarps’
absence, the rain would have merely fallen on the ground.” Id. at 845.
The tarps were attached to ornaments on the façade that broke off from
the weight of the pooled water, which then seeped in to damage the
interior of the building. Id. at 842. The insurer failed to show that the
tarps collapsed during a rainfall. Id. at 844. The trial court
acknowledged “it is clear that the Policy was not intended to cover
damage to the interior of the Building stemming from rain.” Id. at 845.
The trial court distinguished water damage from rain that directly enters
a building during a rainstorm from damage resulting from pooled
“surface water” that had collected in the tarps. Id. at 844. The trial
court denied the insurer’s motion for summary judgment on the rain
limitation, stating:
The ordinary business person purchasing the Policy at issue
here would not have expected the Rain Limitation to apply to
an incident in which a temporary, man-made structure
collected rainwater, diverting it from the ground and into the
policyholder’s Building. Therefore, the Rain Limitation
cannot be used to disclaim covered for damage and losses
stemming from the September Incident.
Id. at 845. Wider is distinguishable from this case in which the
drainpipe, installed to carry rainwater falling on the roof to the storm
22
sewer, failed and spilled rainwater as it flowed down during the
rainstorm. Nor are we persuaded by Tento International, Inc. v. State
Farm Fire & Casualty Co., which held a contractor’s negligent failure to
temporarily cover a hole it opened in the insured’s roof, rather than rain,
was the efficient proximate cause of water damage to electrical
equipment within the building. 222 F.3d 660, 662–63 (9th Cir. 2000)
(applying California law). The appellate court construed a separate
provision of the policy to allow coverage for property damage caused by
the negligence of a third-party contractor. Id. at 663. By contrast, the
rain limitation in State Farm’s policy contains no applicable exception for
the negligence of a third party. In any event, Wider and Tento
International are trumped by our decision in Corrigan, which we decline
to overrule.
We hold that under the unambiguous terms of State Farm’s policy,
damage from rainwater released by a breaking drainpipe during a
rainstorm is not an insured loss because the damage is caused by rain
within the meaning of the rain limitation, even though the breaking
drainpipe is a concurrent cause.
IV. Disposition.
For those reasons, the district court correctly granted State Farm’s
motion for summary judgment based on the rain limitation. We therefore
vacate the decision of the court of appeals and affirm the summary
judgment entered by the district court.
DECISION OF COURT OF APPEALS VACATED; DISTRICT
COURT SUMMARY JUDGMENT AFFIRMED.
All justices concur except Hecht, Wiggins, and Appel, JJ., who
dissent.
23
#13–0124, Amish Connection v. State Farm
HECHT, Justice (dissenting).
I respectfully dissent. While I agree with my colleagues in the
majority that the policy exclusion for losses “caused by rain” is an
important aspect of a proper analysis of this case, I disagree that our
disposition turns on the perceived distinction between rain and
rainwater.
It is important to understand precisely the loss for which Amish
Connection seeks coverage. Amish Connection does not claim coverage
for the cost of repairing or replacing the failed drain pipe. Cf. Berry v.
Commercial Union Ins. Co., 87 F.3d 387, 388 (9th Cir. 1996) (noting the
damage for which coverage was sought was a damaged irrigation pipe);
Arkwright-Boston Mfrs. Mut. Ins. Co. v. Wausau Paper Mills Co., 818 F.2d
591, 593–95 (7th Cir. 1987) (affirming summary judgment granted to the
insurer based on a corrosion exclusion when the only damage was the
cost of repairing a corroded reactor used to extract papermaking
chemicals). Rather, the loss was water damage to Amish Connection’s
inventory, furnishings, equipment, and documents after the pipe burst.
Water damage is among the “Specified Causes of Loss” covered by
the policy. The policy definition of “water damage” expressly includes
“accidental discharge or leakage of water or steam as the direct result of
the breaking or cracking of any part of a system or appliance containing
water or steam.” Thus, the casualty Amish Connection suffered is a
covered loss unless it falls within one of the narrowly construed
limitations or exclusions. See Farm & City Ins. Co. v. Gilmore, 539
N.W.2d 154, 157 (Iowa 1995) (“Insurance policy exclusions are strictly
construed against the insurer.”); see also Essex Ins. Co. v. Fieldhouse,
Inc., 506 N.W.2d 772, 776 (Iowa 1993) (“[W]hen an exclusion acts to
24
withdraw a promised coverage, it must be clearly and explicitly defined.”);
Grinnell Mut. Reins. Co. v. Emp’rs Mut. Cas. Co., 494 N.W.2d 690, 693
(Iowa 1993) (noting exclusionary clauses “require a narrow or restrictive
construction”); Kalell v. Mut. Fire & Auto. Ins. Co., 471 N.W.2d 865, 867
(Iowa 1991) (“[I]nsurance policies are adhesion contracts, and exclusions
will be strictly construed against the insurer.”).
My colleagues in the majority conclude as a matter of law the
policy provides no coverage for Amish Connection’s loss because it was
caused by rainwater. Because I believe a genuine issue of material fact
remains on the question whether the loss was in fact caused by rain or,
instead, by some other covered occurrence (or a combination of covered
and uncovered occurrences), summary judgment is inappropriate and
the case should proceed to trial.
“Causation has always been a troublesome concept for lawyers.”
Banks McDowell, Causation in Contracts and Insurance, 20 Conn. L. Rev.
569, 569 (1988) [hereinafter McDowell]. Particularly troublesome are
instances of “dual or concurrent causation—where two or more
occurrences lead to a loss and at least one is covered under the terms of
a single insurance policy.” Id. at 570 (footnotes omitted). In my view,
this case presents one such instance. Amish Connection suffered a loss
when a pipe burst during a heavy rainstorm. State Farm asserts the loss
was “caused by rain” because the pipe would not have failed without the
volume of water the storm produced. Yet, the summary judgment record
in this case leaves room for a reasonable fact finder to find the loss
Amish Connection suffered would not have occurred as a consequence of
the rain alone, but only because the pipe failed while the rainwater was
passing through it. In other words, a fact question remains whether the
loss might not have occurred but for the confluence of at least two
25
causes. See Randall L. Smith & Fred A. Simpson, Causation in Insurance
Law, 48 S. Tex. L. Rev. 305, 312 (2006) (“Perils A and B, independent of
each other, join in causing the loss, both perils being necessary to cause
the loss since neither peril alone is sufficient to do so.”).
“While the notion of causation is simple, the factual world to which
it must be applied is not.” McDowell, 20 Conn. L. Rev. at 573.
Complexity arises “in situations of concurrent causation because one
cause of the loss may be covered by an insurance policy and another
cause either not covered or specifically excluded from coverage.” Erik S.
Knutsen, Confusion About Causation in Insurance: Solutions for
Catastrophic Losses, 61 Ala. L. Rev. 957, 962 (2010) [hereinafter
Knutsen]. This case presents a causation and coverage quandary: Water
damage caused by accidental leakage is a “Specified Cause of Loss”
under the policy, but losses “caused by rain” are excluded.
In concurrent causation scenarios, some jurisdictions utilize a
“liberal approach” to coverage under which an entire loss is covered as
long as it was caused in part by a covered occurrence. See id. at 976 &
n.56 (listing the “minority of states” that follow this rule). Under this
approach, if two events combine to cause the loss—one covered and one
excluded—coverage exists even though the excluded event was a cause.
While this rule “is not perfect,” it “promulgates a fairer result in
instances where two . . . concurrent causes produce the loss and neither
on its own is sufficient to cause some harm.” Id. at 984; see also
Brendan R. Vaughan, Note, Watered Down: Are Insurance Companies
Getting Hosed in the Wind vs. Water Controversy?, 2008 U. Ill. L. Rev.
777, 796 (2008) (acknowledging a benefit of the liberal approach is its
“ease of use in situations where it is difficult to segregate independent
causes to determine which one is . . . dominant”).
26
Another approach is the “efficient proximate cause” test under
which the fact finder evaluates competing concurrent but-for causes to
determine which was the primary cause of the loss. See Knutsen, 61
Ala. L. Rev. at 974–75 (explaining this approach). This test does require
a decision about which of two competing causes was dominant. See
Tento Int’l, Inc. v. State Farm Fire & Cas. Co., 222 F.3d 660, 662 (9th Cir.
2000) (“While the rain may have been the most immediate cause of [the]
damages, the more important inquiry involves determining . . . the
efficient proximate cause of the damage.”). In this case, the “efficient
proximate cause” test would require the fact finder to determine whether
the magnitude of the rain event or the condition or capacity of the
drainpipe was the primary cause of the pipe failure and Amish
Connection’s loss.
Finally, the “conservative approach” is a third analytical option.
Under this approach, “if one cause in a causal chain is excluded from
insurance coverage, the entire loss must be excluded from coverage, even
if other causes may be covered by the policy.” Knutsen, 61 Ala. L. Rev.
at 972.
Although we have not consistently applied any of these tests in
Iowa, we have followed principles from both the liberal approach and the
efficient proximate cause approach. See Grinnell Mut. Reins. Co., 494
N.W.2d at 691, 694 (concluding an insurer’s exclusion of coverage for
bodily injury “arising out of the ownership, . . . operation, use, loading or
unloading of any automobile” did not preclude coverage for an injury
sustained by a student while exiting a school bus because the school’s
alleged “negligent supervision leading to negligent loading of the bus was
not vehicle-related and was, or could have been determined to be, a
proximate cause”); Kalell, 471 N.W.2d at 868 (“We hold that, when two
27
independent acts are alleged, one vehicle-related and one not vehicle-
related, coverage is still provided under the homeowners policy unless
the vehicle-related negligence [that was excluded from coverage] is the
sole proximate cause of the injury.”); Jordan v. Iowa Mut. Tornado Ins.
Co. of Des Moines, 151 Iowa 73, 84, 130 N.W. 177, 181 (1911) (using the
phrase “efficient cause” and noting the proposition “[t]hat other . . .
causes may also have contributed to the loss does not, of itself, relieve
the [insurer] from responsibility”); Bettis v. Wayne Cnty. Mut. Ins. Ass’n,
447 N.W.2d 569, 571 (Iowa Ct. App. 1989) (“[W]e look not necessarily to
the last act in the chain of events, but rather to the predominant cause
which set in motion the chain of events causing the loss.” (Emphasis
added.)).
My research reveals no instance in which we have applied the
approach styled as the “conservative approach.” This should not come
as a surprise given our adoption of principles protecting insureds’
interests in litigation against their insurers. See Grinnell Mut. Reins. Co.,
494 N.W.2d at 693 (“Coverage clauses are construed differently than
exclusionary clauses. When construing coverage clauses, the words . . .
are given a broad, general and comprehensive meaning. Exclusionary
clauses, however, require a narrow or restrictive construction.” (Citation
omitted.)); Kalell, 471 N.W.2d at 867 (“If an insurance policy is
ambiguous, we construe it in the light most favorable to the insured;
insurance policies are adhesion contracts, and exclusions will be strictly
construed against the insurer.”); N. Star Mut. Ins. Co. v. Holty, 402
N.W.2d 452, 454 (Iowa 1987) (“Where the meaning of terms in an
insurance policy is susceptible to two interpretations, the one favoring
the insured is adopted.”).
28
In my view, this is a case involving concurrent causes of a loss.
There is evidence in this record tending to prove the rain event was not
the singular cause of Amish Connection’s loss. The summary judgment
record leaves room for the possibility that a fact finder could determine
Amish Connection’s loss would not have occurred but for the pipe’s
weakened condition and its failure. When faced with multiple-cause
scenarios like this, some courts—including our own—have found
coverage as a matter of law when one of the causal factors was covered
by an insurance policy. Kinney v. Farmers’ Mut. Fire & Ins. Soc’y of
Kiron, 159 Iowa 490, 501–03, 141 N.W. 706, 710–11 (1913) (affirming the
district court’s decision to grant the insured’s motion for directed verdict
in a coverage dispute stemming from a winter windstorm featuring
blowing snow because the insurer did not “show that the loss or damage
was due to the [excluded hazards of] snow, or hail, . . . or some other
cause” rather than the covered hazard of wind); see also, e.g., Tento Int’l,
222 F.3d at 663–64 (concluding when the covered hazard of third-party
negligence interacted with the excluded hazard of rain, the loss was
covered as a matter of law under a State Farm policy very similar to the
one at issue here); Berry, 87 F.3d at 392–93 (finding coverage when the
covered hazard of third-party negligence caused irrigation pipes to
deteriorate from a chemical reaction to a fungicide, even though the
hazard of deterioration was otherwise excluded); Allstate Ins. Co. v.
Smith, 929 F.2d 447, 451 (9th Cir. 1991) (“We find that although rain
‘operate[d] more immediately in producing the disaster,’ it was the
contractor’s failure to cover the premises that ‘set in motion’ the chain of
events leading to Smith’s losses. The roofer’s failure to cover the exposed
premises, therefore, was the efficient proximate cause of Smith’s
losses. . . . [The insurer] must reimburse Smith for his losses to the
29
extent provided by the policy.” (quoting Premier Ins. Co. v. Welch, 189
Cal. Rptr. 657, 660 (Ct. App. 1983))); Safeco Ins. Co. of Am. v. Guyton,
692 F.2d 551, 555 (9th Cir. 1982) (finding coverage for flood damage
despite a flood exclusion in the policy because, had the negligently
maintained flood control structures been properly maintained, they
might not have collapsed when the flood struck them); Davidson Hotel
Co. v. St. Paul Fire & Marine Ins. Co., 136 F. Supp. 2d 901, 910 (W.D.
Tenn. 2001) (“[T]he covered peril of water, despite other factors leading to
the loss which might have been excluded, renders St. Paul liable on this
policy . . . . [T]he Court finds that summary judgment on the issue of
coverage is warranted and GRANTS [the insured’s] motion for partial
summary judgment on the issue of coverage.”); Mission Nat’l Ins. Co. v.
Coachella Valley Water Dist., 258 Cal. Rptr. 639, 647 (Ct. App. 1989)
(reversing a jury verdict and judgment in the insurer’s favor, remanding
with directions to enter judgment for the insured, and finding “coverage
because [the covered risk of] flooding contributed to or aggravated the
loss, even though the excluded design defect was found to be the efficient
proximate cause of the loss”).
In this case, however, we should not determine either coverage or
exclusion as a matter of law because the causation question is not well-
suited for summary judgment. A major insurance law treatise succinctly
describes the strong preference for a jury to resolve causation questions:
Issues of causation are almost always questions of
fact. Determining what perils were working and whether
they were working together independently or in succession
(and if so how), as well as identifying the type of damage
following the operation of each peril, all fall to the fact finder.
5 New Appleman on Insurance Law § 44.06[1], at 44-45 (Jeffrey E.
Thomas & Susan Randall eds., Library ed. 2014). A case decided by the
30
Washington Court of Appeals presents an apt illustration of this maxim.
Sunbreaker Condo. Ass’n v. Travelers Ins. Co., 901 P.2d 1079, 1085
(Wash. Ct. App. 1995). In the case, four possible causes of a loss were
indicated. See id. at 1081. One of the potential causes of the loss was
covered and three were excluded. See id. (noting damage from wind-
driven rain was covered, but damage from dry rot, seepage, or defective
construction was not). The court declined to resolve the coverage
question as a matter of law because causation “is an issue of material
fact precluding summary judgment.” Id. at 1085. The same principle
should be applied here.
Caselaw from other jurisdictions supports my view that summary
judgment should not have been granted in this case. See Mahaska Pork,
L.P. v. Travelers Indem. Co. of Am., 777 F. Supp. 2d 1185, 1192 (S.D.
Iowa 2011) (“The question of . . . proximate cause of the collapse is one
that must ultimately be determined by a jury, not by this Court on
motion for summary judgment.”); see also, e.g., Fidelity Coop. Bank v.
Nova Cas. Co., 726 F.3d 31, 38 (1st Cir. 2013) (“The failure of the drain
must properly be deemed the ‘efficient proximate cause’ of the damage,
not the rain. The blocked or inadequate roof drain was a covered loss
under the Policy . . . and was not excluded by any other exclusion.
Accordingly, it was error for the district court to conclude [as a matter of
law] that the interior damage was ‘caused by rain’ and was excluded from
coverage under the rain limitation provision.”); Paulucci v. Liberty Mut.
Fire Ins. Co., 190 F. Supp. 2d 1312, 1325 (M.D. Fla. 2002) (refusing to
grant summary judgment to the insurer because there remained a
question of fact whether the loss was caused by the excluded hazard of
preexisting rot or the covered hazard of tropical storm); Pioneer Chlor
Alkali Co. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 863 F. Supp. 1226,
31
1231–32 (D. Nev. 1994) (refusing to grant summary judgment to the
insurer because a jury could find either a covered event or an excluded
event caused the loss); Garvey v. State Farm Fire & Cas. Co., 770 P.2d
704, 714 (Cal. 1989) (concluding “the question of causation is for the
jury to decide” because the record contained sufficient evidence to
support either of two causal possibilities); Simonetti v. Selective Ins. Co.,
859 A.2d 694, 700 (N.J. Super. Ct. App. Div. 2004) (“[T]here remains a
factual question as to the actual cause of the damage to plaintiffs’ home
. . . . Clearly, issues of causation are for the jury to resolve.”); Wider v.
Heritage Maint., Inc., 827 N.Y.S.2d 837, 845 (Sup. Ct. 2007) (refusing to
grant summary judgment in the insurer’s favor despite a rain limitation
in the policy because the loss arguably caused by rain was also caused
by a third party’s negligent tarp placement); Villella v. Pub. Emps. Mut.
Ins. Co., 725 P.2d 957, 964 (Wash. 1986) (“[F]actual questions remain as
to whether an alleged negligently constructed drainage system (a covered
peril) was the efficient proximate cause of the loss. If so, the earth
movement exclusionary clause would not exclude coverage.”); Lawver v.
Boling, 238 N.W.2d 514, 521–22 (Wis. 1976) (“Here i[t] has not yet been
determined whether Lawver’s injuries resulted from negligence, if any, in
the actual operation of the truck (an excluded risk) or from negligence in
the choice of materials for and manner of construction of the rigging (a
covered risk), or both. . . . That determination presents a question of fact
which cannot be answered on a motion for summary judgment.”).
Some court decisions holding a coverage question could not be
resolved as a matter of law are not procedurally identical to this one, but
they are nonetheless supportive of my view that summary judgment was
inappropriate here. For example, we have concluded at least twice that
the causation question in insurance coverage disputes was properly
32
presented to a fact finder. Crozier v. Lenox Mut. Ins. Ass’n, 252 Iowa
1176, 1184, 110 N.W.2d 403, 407–08 (1961) (“Plaintiff was insured
against loss by windstorm. He claimed his loss was by windstorm. [The
insurer] claimed there was no windstorm and that the barn fell because
of faulty support during reconstruction. Fact issues for the jury were
presented.”); Jordan, 151 Iowa at 84, 130 N.W. at 181 (affirming a trial
court’s judgment after a bench trial in a dispute over whether the loss
was caused by the covered hazard of windstorm or the excluded hazard
of blowing snow, and noting causation “is a question of fact to be
determined from the testimony”).
Courts in other jurisdictions have reached similar conclusions.
See, e.g., Shinrone, Inc. v. Ins. Co. of N. Am., 570 F.2d 715, 716, 719 (8th
Cir. 1978) (affirming a jury verdict and judgment in a dispute over
whether a herd of cattle perished from the covered hazard of wind or the
excluded hazard of extreme temperature, and noting the causation
question was “properly submitted to the jury for the determination of
whether the windstorm was the dominant or efficient cause of the loss,
even though there may have been other contributing causes”); Lynch v.
Travelers Indem. Co., 452 F.2d 1065, 1066–67 (8th Cir. 1972) (affirming
a jury verdict and judgment in a dispute over whether a skating rink
collapsed due to the covered hazard of wind or the excluded hazard of
accumulated snow on the roof, because “[i]n the context of th[e] case, . . .
the trial court provided a proper framework for the jury to determine”
which hazard caused the loss); State Farm Fire & Cas. Co. v.
Von Der Lieth, 820 P.2d 285, 292 (Cal. 1991) (reinstating a jury’s
determination on causation and concluding it was error for an
intermediate appellate court to determine the question as a matter of
law); Davis v. United Servs. Auto. Ass’n, 273 Cal. Rptr. 224, 230 (Ct. App.
33
1990) (“Under the theory of the Davises’ expert, the cause of the loss was
the failure to adequately prepare the soil and foundation: but for the
negligence in preparing the soils and foundation, the earth movement
would not have caused a loss. Under the theory of USAA’s expert, but for
the earth movement, there would not have been a loss. In other words,
there was a conflict in the evidence and the trial court was entitled to
resolve this conflict . . . .”); Gillis v. Sun Ins. Office, Ltd., 47 Cal. Rptr.
868, 875 (Dist. Ct. App. 1965) (affirming the judgment entered after a
fact finder determined wind (a covered hazard) caused the loss despite
contribution from waves (an excluded hazard), and noting “[i]t may be
inferred that in the absence of the blow from the gangway [blown down
by wind], the docking facility would have ridden out the storm with no
appreciable damage”); Wallach v. Rosenberg, 527 So. 2d 1386, 1387–88
(Fla. Dist. Ct. App. 1988) (insisting “the question as to which of several
causes contributing to a loss is the . . . proximate cause[] is one for the
jury” and concluding “[w]here weather perils combine with human
negligence to cause a loss, it seems logical and reasonable” to allow the
jury to find coverage “even if one of the causes is excluded from
coverage”); Vormelker v. Oleksinski, 199 N.W.2d 287, 292–93 (Mich. Ct.
App. 1972) (“[T]here is a question of what the proximate cause of the
damage was: the earth movement or the inadequate foundation. Under
these circumstances, the trial court was correct in refusing to grant
either a directed verdict or a judgment n.o.v.”). Together, these cases—
both those that involved summary judgment and those in which a fact
finder decided causation—demonstrate that concurrent causation issues
often present factual questions only a fact finder should answer.
I acknowledge that some courts have granted summary judgment
to the insurer in concurrent causation circumstances. When granted in
34
those cases, summary judgment was typically founded on
anticoncurrent-cause language in the particular insurance policy. See,
e.g., TNT Speed & Sport Ctr., Inc. v. Am. States Ins. Co., 114 F.3d 731,
733–34 (8th Cir. 1997) (affirming summary judgment in the insurer’s
favor because although the loss was caused both by the covered hazard
of vandalism and the excluded hazard of flood, specific language in the
policy provided for exclusion in concurrent causation situations); Front
Row Theatre, Inc. v. Am. Mfr.’s Mut. Ins. Cos., 18 F.3d 1343, 1349 (6th
Cir. 1994) (affirming summary judgment in the insurer’s favor because of
express policy language excluding coverage from concurrently caused
loss even if one cause was otherwise covered); Freedman v. State Farm
Ins. Co., 93 Cal. Rptr. 3d 296, 301 (Ct. App. 2009) (affirming summary
judgment granted to State Farm because of express policy language that
excluded coverage for third-party negligence if it interacted in any way
with an otherwise-excluded cause). The effect, if any, of anticoncurrent-
cause language was not raised or decided in the district court and is not
before us in this appeal.
The majority characterizes the “LOSSES INSURED” section of
Amish Connection’s policy as a functional equivalent of anticoncurrent-
cause language. The LOSSES INSURED section of the policy states, in
its entirety:
We insure for accidental direct physical loss to property
covered under this policy unless the loss is:
1. limited in the PROPERTY SUBJECT TO
LIMITATIONS section; or
2. excluded in the LOSSES NOT INSURED section
that follows.
In my view, however, this is not an anticoncurrent-cause provision.
Cases cited by the majority in this case illustrate the fact that
35
anticoncurrent-cause provisions typically include the word
“concurrent”—for example: “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.” TNT Speed & Sport Ctr.,
114 F.3d at 732 (quoting an anticoncurrent-cause policy provision); see
also Am. Fam. Mut. Ins. Co. v. Corrigan, 697 N.W.2d 108, 114–15 (Iowa
2005) (enforcing an anticoncurrent-cause provision).
Amish Connection’s policy does include express anticoncurrent-
cause provisions like those involved in TNT Speed and Corrigan. For
example, paragraph 1 of the “LOSSES NOT INSURED” section reads:
1. We do not insure under any coverage for any loss
which would not have occurred in the absence of one
or more of the following excluded events. We do not
insure for such loss regardless of: (a) the cause of the
excluded event; or (b) other causes of the loss; or (c)
whether other causes acted concurrently or in any
sequence with the excluded event to produce the loss[.]
The “following excluded events” to which this provision refers are:
enforcement of any ordinance or law; earth movement; volcanic eruption;
water such as flood, surface water, waves, tides, mudslides, sewer
backup, and seeping groundwater; seizure or destruction of property by
order of governmental authority; nuclear hazard; failure of power to the
premises; and war or military action.
Paragraph 3 of the LOSSES NOT INSURED section contains
additional anticoncurrent-cause language:
We do not insure for any coverage for any loss consisting of
one or more of the items below. Further, we do not insure
for loss described in paragraphs 1. or 2. immediately above
regardless of whether one or more of the following: (a)
directly or indirectly cause, contribute to or aggravate the
loss; or (b) occur before, at the same time, or after the loss or
any other cause of the loss[.]
36
State Farm did not raise either of these provisions in its motion for
summary judgment. Nor did it raise them in its resistance to Amish
Connection’s motion for more specific ruling. Instead, State Farm relied
exclusively on language from a different section: the LOSSES INSURED
section. Notably, State Farm expressly argued the district court need not
consider any language from the LOSSES NOT INSURED section. The
district court agreed, and even when it denied Amish Connection’s
motion for a more specific ruling, the court expressly relied only on the
LOSSES INSURED section of the policy.
The majority concludes State Farm’s reliance on the LOSSES
INSURED policy provision effectively raised any anticoncurrent-cause
provisions in the policy. I strongly disagree. Both anticoncurrent-cause
provisions are in the LOSSES NOT INSURED section—and State Farm
expressly asserted the district court should not even consider language
from that section in making its summary judgment decision.
I acknowledge the maxim that “[t]he individual provisions of a
policy must be read in conjunction with the policy as a whole.” Ferguson
v. Allied Mut. Ins. Co., 512 N.W.2d 296, 300 (Iowa 1994); accord Grinnell
Mut. Reinsurance Co., 494 N.W.2d at 692. But this maxim does not
authorize State Farm to sing a completely different song on appeal than
it sang in the district court. See State v. Rutledge, 600 N.W.2d 324, 325
(Iowa 1999). Further, even if we were to consider policy provisions—the
LOSSES NOT INSURED section—not relied upon by State Farm in the
district court or the court itself in its summary judgment ruling, we
should not find them sufficient to decide the coverage question in this
case as a matter of law.
Amish Connection is not covered if its loss was “caused by rain,”
as stated in the PROPERTY SUBJECT TO LIMITATIONS section, or if it
37
is excluded in the LOSSES NOT INSURED section. I acknowledge that
the word “or” is disjunctive in this context. But whether the loss was
“caused by rain”—or by some other covered cause—is the fighting issue
in this case. In my view, provisions in the LOSSES NOT INSURED
section leave wide open the possibility that causes of loss other than rain
are not excluded—even when concurrent causes are involved—and are
therefore still in play here. A jury should be entitled to resolve factual
questions like these.
I begin with paragraph 1 of the LOSSES NOT INSURED section.
Paragraph 1 excludes any loss concurrently caused, even in part, by
occurrences from a list of “excluded events.” These events are
predominantly large-scale disasters—earthquakes, volcanic eruptions,
nuclear meltdowns. Paragraph 1(d) includes “surface water” as an
excluded event. However, because surface water is included in a list
alongside flood, waves, tides, mudslides, and groundwater seepage, it is
evident—using the canon of noscitur a sociis—that surface water in
paragraph 1(d) does not include the rainfall in this case. See Black’s
Law Dictionary 1224 (10th ed. 2014) (explaining that noscitur a sociis
means the definition of a word or phrase “should be determined by the
words immediately surrounding it”). None of the other “excluded events”
in paragraph 1 are remotely applicable to this case. Accordingly,
paragraph 1 does not preclude the possibility that, if Amish Connection’s
loss had multiple causes—one excluded and one covered—a jury could
find the covered hazard was predominant and should afford Amish
Connection coverage in this case.
I now turn to paragraph 3. This paragraph’s language must be
unpacked carefully. The first sentence states: “We do not insure for any
coverage for any loss consisting of one or more of the items below.”
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(Emphasis added.). The “items below” are subparts 3(a) and 3(b). 3(a)
refers to “conduct, acts or decisions, including the failure to act or
decide, of any person . . . , whether intentional, wrongful, negligent or
without fault”—essentially third-party negligence. 3(b) refers to “faulty,
inadequate, unsound or defective” planning, design, construction,
materials, and maintenance. But, as I have explained, Amish
Connection’s loss does not consist of third-party negligence or faulty
maintenance; if it did, the only costs for which Amish Connection would
be seeking coverage would be the cost of repairing or replacing the failed
pipe. Therefore, this first sentence of paragraph 3, standing alone, would
not preclude coverage for a loss “caused by”—not “consisting of”—faulty
maintenance.
The next sentence of paragraph 3 provides:
[W]e do not insure for loss described in paragraphs 1. and 2.
immediately above regardless of whether [the causes
described in 3(a) and 3(b)]: (a) directly or indirectly cause,
contribute to or aggravate the loss; or (b) occur before, at the
same time, or after the loss or any other cause of the loss[.]
As I have explained, paragraph 1 immediately above this language
contains “excluded events” that are all inapplicable to the factual
circumstances of this case. Paragraph 2 “immediately above” describes
sixteen types of loss, in subparts 2(a) through 2(p). Only two of these
could possibly be relevant here. Paragraph 2(k)—in conjunction with
paragraph 3—excludes coverage for loss caused by “continuous or
repeated seepage or leakage of water that occurs over a period of time”
when that seepage combines with third-party negligence or faulty
maintenance. However, the loss (water-soaked and ruined inventory)
claimed in this case by Amish Connection was not due to continued or
39
repeated seepage or leakage; it was due to a one-time event—the burst
pipe.
Paragraph 2(d) is the only other subpart of paragraph 2 that could
possibly be relevant here. It excludes loss caused by—not merely
consisting of—rust, corrosion, and deterioration. Combined with
paragraph 3, paragraph 2(d) could, at first blush, reasonably be read to
exclude coverage if faulty maintenance caused the pipe to rust, which in
turn caused the water damage in this case. However, paragraph 2(d)
contains an additional statement: “But if accidental direct physical loss
by any of the ‘Specified Causes of Loss’ . . . results, we will pay for that
resulting loss[.]” (Emphasis added.). In other words, although most loss
caused by rust, corrosion, or deterioration is excluded, “Specified Causes
of Loss” are still covered. As I have noted above, the Specified Causes of
Loss under this policy include “water damage” arising from “accidental
discharge or leakage of water or steam as the direct result of the
breaking or cracking of any part of a system or appliance containing
water or steam.” Thus, even if there is evidence that faulty maintenance
of the pipe allowed it to rust and ultimately fail, Amish Connection’s loss
is not excluded from coverage under paragraph 3(b).
My colleagues in the majority stress the fact that, according to
State Farm, the policy was never intended to cover faulty maintenance.
Whatever State Farm’s intent, however, the actual policy language belies
that assumption. The final clause of paragraph 3 states: “But if
accidental direct physical loss results from items 3.a. and 3.b., we will
pay for that resulting loss unless the resulting loss is itself one of the
losses not insured in this section.” Item 3(b) is faulty maintenance.
Thus, this express policy language indicates State Farm will pay for loss
resulting from faulty maintenance unless the resulting loss is not
40
insured in the LOSSES NOT INSURED section. Crucially, the rain
limitation is not found in the LOSSES NOT INSURED section. In sum,
even if State Farm and the district court had relied on the LOSSES NOT
INSURED section of the policy—and here they clearly didn’t—summary
judgment would not have been appropriate in this case.
Although the majority attempts to distinguish it, the Ninth
Circuit’s decision in Tento International is actually quite analogous to this
case. See Tento Int’l, 222 F.3d at 661. A roofing contractor was making
repairs but failed to install a temporary covering. Id. “Almost
predictably, rain fell and damaged Tento’s electronics equipment.” Id.
Tento’s insurance policy with State Farm contained a rain limitation
identical to the one in Amish Connection’s policy, and it also contained
an identical paragraph 3. See id. at 661–62. The court determined the
efficient cause, not merely the most immediate cause, should determine
coverage—even though the policy had several provisions materially
identical to the ones in Amish Connection’s policy. See id. at 662.
Further, the court examined the “inexact wording in the resulting-
loss provision.” Id. It determined Tento had coverage as a matter of law:
The resulting-loss provision states that, “if accidental
direct physical loss results from items 3.a. and 3.b. [i.e., the
contractor’s third-party negligence], we will pay for that
resulting loss unless the resulting loss is itself one of the
losses not insured in this section.” (emphasis added). The
question becomes whether the resulting loss—damage to
Tento’s goods by rain—is “one of the losses not insured in
this section.” (emphasis added). The words “in this section
appear in numbered paragraph 3 of the LOSSES NOT
INSURED section of the policy. Logically, then, the words “in
this section” refer to the LOSSES NOT INSURED section and
that section does not preclude coverage for rain damage.
We recognize it is arguable that the scope of the “in
this section” phrase could refer to the entire basic coverage
of Section I, which includes the LOSSES INSURED as well as
the LOSSES NOT INSURED sections. The LOSSES
41
INSURED section incorporates by reference the earlier
PROPERTY SUBJECT TO LIMITATIONS section, and that
section includes the rain-damage limitation. Under this
reading, the policy would not provide coverage for Tento’s
rain-damaged goods. We reject this reading, however,
because it is illogical, and defies a common-sense reading of
the policy. Moreover, we note that when the policy refers to
the entire “Section I,” it uses an upper case “S” to signal this
broader reference.
Id. at 663. Amish Connection’s policy also uses an uppercase S when
referring to the entire Section I. Applying the Tento analysis to the facts
of this case, Amish Connection might have coverage as a matter of law—
although its loss might fit more squarely under the paragraph 3(b) faulty
maintenance provision than under the paragraph 3(a) third-party
negligence provision.
But I do not advocate we go that far on this record. Rather, I
conclude the summary judgment should be reversed and the case
remanded for trial. The evidence will establish whether Amish
Connection’s loss was due to the mall’s faulty maintenance, or rust,
decay, or some other cause or combination of causes. Although coverage
is excluded if the loss was caused by rain, it could also have been caused
by something else, or by a combination of other causes for which
coverage exists.
When reviewing summary judgment rulings, we must make all
factual inferences supported by the record in the nonmovant’s favor.
See, e.g., Hagenow v. Am. Fam. Mut. Ins. Co., 846 N.W.2d 373, 376 (Iowa
2014); Pitts v. Farm Bureau Life Ins. Co., 818 N.W.2d 91, 96 (Iowa 2012);
Emp’rs Mut. Cas. Co. v. Van Haaften, 815 N.W.2d 17, 22 (Iowa 2012). In
this case, I believe a reasonable fact finder could find rain was neither
the sole nor even the primary factual cause of Amish Connection’s loss. I
would therefore affirm the court of appeals and afford Amish Connection
the opportunity to make its case on the causation question.
Wiggins and Appel, JJ., join this dissent.