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

IN THE COURT OF APPEALS OF IOWA
No. 3-1205 / 13-0124
Filed March 26, 2014
AMISH CONNECTION, INC.,
Plaintiff-Appellant,
vs.
STATE FARM FIRE AND CASUALTY
COMPANY,
Defendant-Appellee.
________________________________________________________________
Appeal from the Iowa District Court for Black Hawk County, Kellyann M.
Lekar, Judge.
Insured appeals an adverse grant of summary judgment holding loss was
not covered by insurance policy. REVERSED AND REMANDED.
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.
Considered by Vogel, P.J., and Mullins and McDonald, JJ.
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McDONALD, J.
What is the meaning of “rain”? That is the question presented in this
insurance coverage dispute. Amish Connection, Inc., (hereinafter “Amish
Connection”) appeals from an adverse grant of summary judgment in which the
district court held, as a matter of law, Amish Connection’s loss was not covered
under a business insurance policy issued by State Farm Fire & Casualty
Company (hereinafter “State Farm”) due to a limitation on “loss . . . to the interior
of any building or structure, or the property inside any building or structure,
caused by rain.” We reverse the judgment of the district court and remand for
further proceedings.
I.
Amish Connection leased space in the Crossroads Shopping Mall in
Waterloo to operate the Amish Connection Store. At all times relevant to this
suit, Amish Connection was using the leased space only for storage. Above the
ceiling and along the interior back wall of Amish Connection’s leased space was
a four-inch cast iron drain pipe connected to the building’s roof drain line. The
roof drain system in the mall was designed to collect water on the roof and
transport the water through interior pipes in the mall and down to the storm
sewer. On the evening of June 14 and the morning of June 15, 2010, it rained
heavily in Waterloo. At some point during this storm, the drain pipe over Amish
Connection’s unit burst, flooding portions of Amish Connection’s storage space
and causing damage to the unit and the property within.
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Amish Connection purchased a business policy from State Farm. The
policy insured “for accidental direct physical loss to property . . . unless the loss
is: 1. limited in the PROPERTY SUBJECT TO LIMITATIONS section; or 2.
Excluded in the LOSSES NOT INSURED section” of the policy. On or about
June 16, 2010, Amish Connection submitted a claim to State Farm for the water
damage to its storage space and inventory. By letter dated the same day, State
Farm denied Amish Connection’s claim for coverage, citing a limitation in the
PROPERTY SUBJECT TO LIMITATIONS section of the policy for loss “caused
by rain.”
On December 27, 2010, Amish Connection initiated this proceeding. In its
amended petition, Amish Connection asserted a claim against State Farm for
breach of contract arising out of State Farm’s denial of Amish Connection’s
claim. State Farm filed its motion for summary judgment, arguing that the rain
limitation precluded recovery for Amish Connection’s loss. The district court
agreed and granted State Farm’s motion for summary judgment.
II.
Summary judgment should be granted only “if the pleadings, depositions,
answers to interrogatories, and admissions on file, together with the affidavits, if
any, show that there is no genuine issue as to any material fact and that the
moving party is entitled to a judgment as a matter of law.” Iowa R. Civ. P.
1.981(3). The party seeking summary judgment has the burden of establishing
that the facts are undisputed and that the party is entitled to judgment as a matter
of law. See Estate of Harris v. Papa John’s Pizza, 679 N.W.2d 673, 677 (Iowa
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2004). Summary judgment is correctly granted where the only issue to be
decided is what legal consequences follow from otherwise undisputed facts. See
Emmet Cnty. State Bank v. Reutter, 439 N.W.2d 651, 653 (Iowa 1989). We
review the district court’s grant of summary judgment for correction of errors at
law. See Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013
III.
The standards for interpreting and construing insurance policies are well
established, and they need not be repeated at any great length here. See
Boelman, 826 N.W.2d at 501-02. We begin our analysis by looking at the plain
language of the policy. The policy provides that State Farm will pay for
“accidental direct physical loss to property covered” unless the loss is otherwise
limited or excluded. State Farm contends Amish Connection’s loss is not within
the initial grant of coverage pursuant to the following limitation on loss “caused by
rain”:
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;
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“Rain” is not a defined term in the policy. “Words that are not defined in
the policy are given their ordinary meaning, one that a reasonable person would
understand them to mean.” Bituminous Cas. Corp. v. Sand Livestock Sys., Inc.,
728 N.W.2d 216, 220-21 (Iowa 2007) (citation and internal quotation marks
omitted). The ordinary meaning of “rain” is well understood. Gene Kelly sang in
it. Noah sailed through it. It is water falling from the sky. The common
understanding of “rain” is reinforced by reference materials. See Merriam-
Webster, http://www.merriam-webster.com/dictionary/rain (last visited January 7,
2014) (defining “rain” as “water falling in drops condensed from vapor in the
atmosphere”); Webster’s Third New Int’l Dictionary (Unabridged) 1876 (1993)
(same). We think it fair to say that a reasonable person standing in the interior of
a shopping mall underneath a burst drain pipe would not conclude that he or she
was standing in the “rain.” Under the plain language of the policy, Amish
Connection’s loss is not limited by the provision on which State Farm relies.
The district court reached the opposite conclusion. In State Farm’s
memorandum in support of motion for summary judgment and at oral argument
on the motion, State Farm argued the water emitted from the burst pipe was
“rainwater.” Because the water from the pipe was “rainwater,” State Farm
contended the limitation applied. The district court agreed with the proposed
interpretation. In ruling on State Farm’s motion for summary judgment, the
district court stated, “The Court does not find that the language in the policy is
ambiguous. Rainwater only has one plain meaning.” The district court then
analogized the interior drain system in the mall to an external gutter. Because
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the water collected in an external gutter “would unquestionably be considered
rainwater,” the court determined “as a matter of law the water running through
the pipe which caused the loss on the leased premises was rainwater.”
Accordingly, the district court held, the loss was not within the initial grant of
coverage. We conclude the district court erred.
First, “[t]he plain meaning of the insurance contract generally prevails.”
Boelman, 826 N.W.2d at 501. Here, the policy limits coverage for loss “caused
by rain.” The policy does not use the term “rainwater.” The distinction is
important. As previously stated, “rain” is water falling in condensed drops from
the atmosphere. “Rainwater” is a separate and distinct term meaning “water
fallen as rain that has not had an opportunity to collect soluble matter from the
soil.” Webster’s Third New Int’l Dictionary (Unabridged) 1876 (1993). 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.” As one court noted:
“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”
although there may still be wet sidewalks and streets, puddles of
water resulting from the rain, or water running through gutters and
elsewhere as a result of the rain. It is not common or usual to say in
such instances that it is still raining . . . . If, by definition, “rain”
remains “rain” after it stops falling, then the water in streams and
lakes, coming from household faucets, etc. is “rain” since it
originated, partly at least, from water that fell from the sky.
State Farm Fire & Cas. Co. v. Paulson, 756 P.2d 764, 767 (Wyo. 1988) (holding
that “rain” became “surface water” upon striking the earth, and therefore, water
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that entered the building through a broken window was excluded under a
“surface water” exclusion); see also Unobskey v. Cont’l Ins. Co., 86 A.2d 160,
164 (Me. 1952) (noting that in an insurance policy excluding damage “caused by
rain,” the exclusion would not apply to “damage caused by running surface water
from rainstorm”). 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.
Second, even if “rain” could have a secondary meaning encompassing
“rainwater,” ambiguities in limitation provisions must be construed in favor of the
insured. See LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998)
(“Because of the adhesive nature of insurance policies, their provisions are
construed in the light most favorable to the insured.”). Thus, exclusions from and
limitations of coverage are construed strictly against the insurer. See id. “[W]hen
an insurer has affirmatively expressed coverage through broad promises, it
assumes a duty to define any limitations or exclusionary clauses in clear and
explicit terms.” Bituminous Cas. Corp., 728 N.W.2d at 220 (citation and internal
quotation marks omitted) (alteration in original). “Where the meaning of terms in
an insurance policy is susceptible to two interpretations, the one favoring the
insured is adopted.” N. Star Mut. Ins. Co. v. Holty, 402 N.W.2d 452, 454 (Iowa
1987). Thus, to the extent that “rain” could be interpreted to mean “rainwater,”
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the ambiguity should have been construed in favor of Amish Connection and
against State Farm.
IV.
The district court erred by finding that the rain limitation was applicable to
this case. The court has considered the parties’ remaining arguments and
concludes that the arguments are best addressed in the district court in the first
instance. The judgment of the district court is reversed and the matter is
remanded for further proceedings consistent with this opinion.
REVERSED AND REMANDED.