Pakmark Corp. v. Liberty Mut. Ins. Co.

• Decision Date: 25 March 1997
• Docket Number: No. 70564,70564
• Citation: 943 S.W.2d 256
• Parties: PAKMARK CORPORATION, Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Respondent.
• Court: Missouri Court of Appeals

Page 256

943 S.W.2d 256

PAKMARK CORPORATION, Appellant, v. LIBERTY MUTUAL INSURANCE COMPANY, Respondent.

No. 70564.

Missouri Court of Appeals,

Eastern District,

Division Four.

March 25, 1997.

Louis J. Basso, St. Louis, for appellant.

Joseph L. Leritz, St. Louis, for respondent.

RHODES RUSSELL, Presiding Judge.

Pakmark Corporation ("Pakmark") appeals from a trial court order granting summary judgment in favor of Liberty Mutual Insurance Company ("Liberty Mutual") on Pakmark's claim to recover for losses resulting from sewer backup arising under an insurance policy. The trial court ruled that the terms of the insurance policy excluded from coverage damage to Pakmark's building caused by flood water and sewage backup. The granting of summary judgment was proper in that the insurance policy excluded loss caused directly or indirectly by flooding regardless of any sewage backup that contributed concurrently or in any sequence to the loss. We affirm.

Pakmark owns a building located in Chesterfield. The building is located approximately one to two miles away from the Missouri River. On the morning of July 30, 1993, Pakmark's president, Keith Kovacik, was warned about possible flooding in the Chesterfield Valley Area. Kovacik and his employees raised some of the company's equipment on skids and on tables in anticipation of the flood. The employees also built a sandbag levee around the building. A few weeks prior, Kovacik and some of his employees had noticed a foul odor emanating from the building's plumbing system. Kovacik noticed the odor again on July 30th. According to Kovacik, the toilets and sinks had not overflown prior to that time.

Later that evening, at approximately 10:40 p.m., the levee protecting the Chesterfield Valley Area broke. Kovacik and his employees were told by the police to evacuate the area. Kovacik was the last person to leave the building around 11:30 p.m. At that time, there was no sign of impending flood water nor sewage overflow.

The following morning, Kovacik saw the flooded Chesterfield Valley on the television news. He spotted the Pakmark building and an airplane which had floated up next to the building. Kovacik estimated that the flood waters appeared to be three to four feet high on the building. He did not know when the flood water reached the Pakmark building, but he estimated between midnight and 6:30 a.m.

Later that day, Kovacik went to the bluffs and observed the building with binoculars. The water had risen to approximately six feet against the building. The following day, the water reached its highest point at nine feet. On August 5, after the water in the building had receded to five feet, Kovacik inspected the building. While inside the building, he noticed that almost all of Pakmark's equipment was covered by water. He determined that the flood water had reached a height of 8' 7 3/4"' from the water marks on the wall.

After the water had completely receded, Kovacik observed a residue of two to four inches in the building. He described the residue as brownish black substance which contained chemicals, grease, and other contaminants. Pakmark claimed that the residue was sewage. The residue covered some of Pakmark's equipment. Kovacik was unable to determine the extent of the damage caused by the flood and the extent of damage caused by sewage backup. He stated that all of the property damage was from a combination of sewer backup and flood water.

At the time of the damage to the Pakmark building, Pakmark was insured under an all-risk policy of insurance issued by Liberty Mutual. On November 23, 1993, Pakmark submitted its proof of loss and supporting documentation claiming a loss as a result of sewer backup. Liberty Mutual rejected the proof of loss and refused payment on the claim.

Pakmark subsequently filed suit against Liberty Mutual for breach of contract and vexatious refusal. Liberty Mutual defended on the grounds that Pakmark's insurance policy did not provide coverage for its loss because of the following provision:

A. COVERED CAUSES OF LOSS

When Special is shown in the Declaration, Covered Causes of Loss means RISKS OF DIRECT PHYSICAL LOSS unless the loss is:

1. Excluded in Section B; Exclusions; or

2. Limited in Section C; Limitations; that follow.

B. EXCLUSIONS

1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.

* * * * * *

g. Water

(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not;

Both parties filed motions for summary judgment. On April 11, 1996, the trial court granted Liberty Mutual's motion for summary judgment and denied Pakmark's motion for summary judgment. The trial court found that summary judgment was appropriate because "any damage to Pakmark's property resulting from 'sewer backup' occurred in combination with and concurrently with the damage caused by the flood," and therefore, any damage caused by "sewage backup" was excluded by the policy. This appeal follows.

In its two points relied on, Pakmark contends the trial court erred in granting Liberty Mutual's motion for summary judgment. Pakmark first argues that the trial court erred because the all-risk policy does not specifically exclude loss from sewer backup, and therefore, under the language of the policy, there was coverage for its losses. Secondly, Pakmark contends the trial court erred in granting summary judgment because when an insured risk and an excluded risk constitute concurrent proximate causes of damage, the insurer is liable so long as one of the causes is covered by the policy. We disagree with both arguments.

A summary judgment is appropriate if the motion and response demonstrate that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. ITT Commercial Finance v. Mid-Am. Marine, 854 S.W.2d 371, 376 (Mo. banc 1993). The propriety of a summary judgment is purely an issue of law and our standard of review on appeal is essentially de novo. Id. We need not defer to the trial court's order granting summary judgment because its judgment is founded on the record submitted and the law. Id.

Summary judgment is particularly appropriate if the issue to be decided is the construction of a contract that is unambiguous on its face. Daniels Express and Transfer Co. v. GMI Corp., 897 S.W.2d 90, 91-92 (Mo.App.1995). Disputes arising from interpretation and application of insurance contracts are matters of law for the court where there are no underlying facts in dispute. Centermark Properties v. Home Indemnity Co., 897 S.W.2d 98, 100 (Mo.App.1995). Insurance contracts are designed to furnish protection, and therefore, they will be interpreted to grant coverage rather than defeat it. Id. at 100-01. Exclusion clauses in insurance policies are to be strictly construed against the insurer. Id. at 101. However, if the language of the insurance policy is clear and unambiguous, we do not have the power to rewrite the policy for the parties and must construe the policy as written. Madison Block Pharmacy, Inc. v. U.S. Fidelity & Guaranty Co., 620 S.W.2d 343, 346 (Mo. banc 1981).

Pakmark argues that its loss resulting from sewer backup is covered by the all-risk policy issued by Liberty Mutual because sewer backup is not specifically excluded from coverage. Pakmark's argument, however, ignores important language of the exclusionary clause contained in the policy. Although sewage backup is not per se excluded, the policy excludes from coverage "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."

Under an all-risk insurance policy, recovery will be allowed for all fortuitous losses, unless the policy contains a specific provision expressly excluding the loss from coverage. Missouri Commercial Investment Co. v. Employers Mutual Casualty Co., 680 S.W.2d 397, 400 (Mo.App.1984)(quoting 13A G. Couch Cyclopedia of Insurance Law § 48:141 at 139 (R. Anderson 2d ed. 1982)). Such a provision excluding the loss from coverage exists in the Liberty Mutual Policy.

Both Pakmark's president and the insurance adjuster conceded that the damage to the property was from a combination of sewer backup and flood water. Ferd Lasinski, a public adjuster, was assigned to adjust Pakmark's claim of loss. On September 28, 1993, Lasinksi met with Kovacik to inspect the building. By that point in time, the flood water was gone and the building had been partially cleaned up and hosed down. Lasinski observed sediments of varying colors on the floor which were six to seven inches in depth. Upon disturbing the sediments, he noticed that they released a strong odor. Lasinski also observed water marks on the walls seven to eight feet high. He also noted that there was a mark along the perimeter of the building which had a height of eight to nine inches and was much darker in color than the water marks. According to Lasinski, this mark was due to sewage.

Although Lasinski did not know how the flood water had entered the building, he believed that it entered through breaches in the building and through the sewer. It was Lasinski's understanding that once the sewers backed up, the flood waters came in and it was a joint effort that raised the sewage up to that level. Lasinski made a claim of loss for anything which had been touched by the sewage material. He acknowledged, however, that the items contained in the proof of loss were damaged by a combination of sewage backup and flood water.

Richard Gumerman, an engineer hired by Pakmark, visited the building on December 2, 1993. As part of his inspection, Gumerman observed "black muck" spread across the...