Karon v. Safeco Ins. Co. of Am.
| Decision Date | 05 August 2021 |
| Docket Number | CV-20-01522-PHX-DJH |
| Parties | Andrew Karon and Brenda Marshal, Plaintiffs, v. Safeco Insurance Company of America, Defendant. |
| Court | U.S. District Court — District of Arizona |
Pending before the Court is Defendant Safeco Insurance Company of America's (“Safeco”) Motion for Summary Judgment. (Doc. 18). Plaintiffs filed a Response (Doc. 21) and Defendant filed a Reply (Doc. 24). The matter is fully briefed.[1] The Court now issues its ruling.
This is an insurance coverage dispute for water damage to a home owned by Plaintiffs in Sun City West, Arizona (the “Property”). (Doc. 1 at ¶ 4). Safeco insured the Property under a homeowner's insurance policy (the “Policy”) for the period of January 25, 2019 to January 25, 2020. (Docs. 1 at ¶ 5; 18-3 at 11).
Damage to the Property occurred in September 2019. (Doc. 1 at ¶ 17). Plaintiffs were not present since they primarily reside in Minnesota and use the Property as a secondary home during the winter months. (Docs. 21 at 2; 1 at ¶ 16). Plaintiffs suspected a problem when their water bill for September 10, 2019 to October 8, 2019 indicated 32, 000 gallons of water usage. (Doc. 21 at 2). When they asked their neighbors to check on the Property, their neighbors informed them there was water flowing out of the back of the home. (Id.) The Property had incurred “extensive water damage” (the “Loss”). (Doc. 1 at ¶ 21). On October 23, 2019, Plaintiffs reported the Loss to Safeco. (Id. at ¶ 24). Safeco denied coverage the next day, stating that Plaintiffs' “policy does not afford coverage for continuous repeated seepage and leakage.” (Id. at ¶ 25).
The Policy covers “accidental direct physical loss to property . . . except as limited or excluded.” (Doc. 18-3 at 14). The Policy does not cover certain types of water damage. (Doc. 18-3 at 14-16). The pertinent exclusionary clause states as follows:
(Id.) (emphasis added).
After Safeco denied coverage citing this provision, Plaintiffs' counsel sent Safeco a letter on April 13, 2020, asking Safeco to reconsider its decision. (Doc. 1 at ¶ 45). The letter stated that “the refrigerator water line was discharging approximately 1, 000 gallons of water per day into the home for a period exceeding two weeks, ” but that the Loss was not subject to Policy exclusions because Plaintiffs were only seeking coverage for damages that occurred in the first 13 days. (Id. at ¶¶ 37, 41). Safeco declined to reconsider its decision. (Id. at ¶ 46).
Plaintiffs bring two causes of action against Safeco. They seek damages for breach of contract and a declaratory judgment that “damages due to water losses occurring within the first thirteen (13) days are not excluded pursuant to the Policy.” (Id. at ¶ 55). Safeco's fourth affirmative defense is that the Loss is excluded from coverage under Section 5. (Doc. 18 at 1). Safeco seeks summary judgment on both of Plaintiffs' claims and on its fourth affirmative defense. (Id. at 1-2).
The Court may grant summary judgment “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Jesinger v. Nevada Fed. Credit Union, 24 F.3d 1127, 1130 (9th Cir. 1994). The materiality requirement means “[o]nly disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “[S]ummary judgment will not lie if the dispute about a material fact is ‘genuine,' that is, if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id.
The moving party bears the initial burden of identifying the portions of the record, including pleadings, depositions, answers to interrogatories, admissions, and affidavits that it believes demonstrates the absence of a genuine issue of material fact. Celotex Corp., 477 U.S. at 323. If the moving party meets its initial burden, the opposing party must establish the existence of a genuine dispute as to any material fact. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-86 (1986). “A fact is material if it might affect the outcome of the case, and a dispute is genuine if a reasonable jury could find for the nonmoving party based on the competing evidence.” Hunton v. Am. Zurich Ins. Co., 2018 WL 1182552, at *1 (D. Ariz. Mar. 7, 2018) (citing Anderson, 477 U.S. at 248). “[T]he non-moving party's evidence is to be taken as true and all inferences are to be drawn in the light most favorable to the non-moving party.” Eisenberg v. Ins. Co. of N. Am., 815 F.2d 1285, 1289 (9th Cir. 1987) (citing Anderson, 477 U.S. at 255).
Count II of Plaintiffs' Complaint is based on Safeco's alleged breach of contract for failure to pay policy benefits. Safeco argues Plaintiffs' Loss is precluded from coverage under the Section 5 policy exclusion. (Doc. 18 at 2). Plaintiffs contest this interpretation and argue that even if it were interpreted in the way Defendant proposes, the Court should deny summary judgment under the reasonable expectations doctrine. (Doc. 21 at 11).
Insurance contract interpretation is a question of law. Thomas v. Liberty Mut. Ins. Co., 842 P.2d 1335, 1337 (Ariz.Ct.App. 1992) (citing Sparks v. Republic Nat'l Life Ins. Co., 647 P.2d 1127, 1132 (Ariz. 1982)). “[W]here the provisions of the contract are plain and unambiguous upon their face, they must be applied as written, and the court will not pervert or do violence to the language used, or expand it beyound [sic] its plain and ordinary meaning or add something to the contract which the parties have not put there.” D.M.A.F.B. Fed. Credit Union v. Emps. Mut. Liab. Ins. Co. of Wis., 396 P.2d 20, 23 (Ariz. 1964) (citing A. J. Bayless Mkts. v. Ohio Cas. Ins. Co., 104 P.2d 145 (Ariz. 1940)). Furthermore, “[t]he language used in an insurance contract must be viewed from the standpoint of the average layman who is untrained in the law or the field of insurance.” Liristis v. Am. Fam. Mut. Ins. Co., 61 P.3d 22, 25-26 (Ariz.Ct.App. 2002). Id. .
However, “[i]f an insurance policy is subject to different interpretations, ” the court determines the meaning of the term by examining “the specific language of the provisions, any applicable public policy considerations, and the purpose of the transaction as a whole.” Liristis, 61 P.3d at 26 (citing State Farm Mut. Auto. Ins. Co. v. Wilson, 782 P.2d 727, 733 (Ariz. 1989)). If ambiguity remains, only then does a court construct the ambiguity “in favor of the insured and coverage, and against the insurer.” Roberts v. State Farm Fire & Cas. Co., 705 P.2d 1335, 1336-37 (Ariz. 1985) (citing State Farm Mut. Auto. Ins. Co. v. Paynter, 593 P.2d 948, 954 (Ariz.Ct.App. 1979)). This rule applies “with even greater force where the ambiguity appears in an exclusionary clause.” Id. at 1337 (citing State Farm Mut. Auto. Ins. Co., 593 P.2d at 954).
The parties' dispute centers on Section 5 of the Policy. Safeco argues Section 5's language is clear, unambiguous, and excludes Plaintiffs' claim for damages resulting in the first 13 days of the Loss. (Doc. 18 at 7). In response, Plaintiff's argue the Section 5 exclusion does not apply for two reasons. (Doc. 21 at 6).
Plaintiff's first argue that Section 5 does not apply because the Loss was not caused by seepage or leakage, it was caused by a broken water line. (Id.) They argue the ordinary meaning of “seepage or leakage” does not encompass a “ruptured water line dispensing 1, 000 gallons of water per day.” (Id.) The Court finds that, given the ordinary meanings of seepage and leakage, Plaintiffs' first argument fails. Seepage is defined as “percolation or oozing of water or fluid ” “a process in which a liquid flows slowly out of a hole or through something, ” or the course of passing or flowing “slowly through fine pores or small openings.” Landrum v. Allstate Ins. Co., 2019 WL 5068656, at *3 (M.D. Ga. Oct. 9, 2019) (internal citations omitted). Leakage is defined as an “admission or escape of water or other fluid through a hole in a vessel, etc., ” “escap[ing] from a hole or crack in a pipe or container, ” or “enter[ing] or escap[ing] through an opening usually by a fault or mistake.” Id. (internal citations omitted). Therefore, the Court is unpersuaded by Plaintiffs' argument that the terms seepage and leakage do not encompass a ruptured water line because “the Policy's exclusion of both seepage, which in some definitions includes a speed component, and leakage, which does not include a speed component, clearly indicates...
To continue reading
Request your trial