Vict. Family Ltd. Liab. Lt.d P'ship v. Ohio Sec. Ins. Co.
| Decision Date | 31 July 2020 |
| Docket Number | Case No.: 19-CV-2159-CAB-WVG |
| Citation | 475 F.Supp.3d 1106 |
| Court | U.S. District Court — Southern District of California |
| Parties | VICTORIA FAMILY LIMITED LIABILITY LIMITED PARTNERSHIP, Plaintiff, v. OHIO SECURITY INSURANCE COMPANY and Liberty Mutual Insurance Company, Defendants. |
Rob G. Leach, Charmasson, Buchaca & Leach, LLP, San Diego, CA, for Plaintiff.
Jessica Bich Anh Do, Ropers Majeski Kohn & Bentley, Los Angeles, CA, for Defendants.
ORDER GRANTING MOTION FOR SUMMARY JUDGMENT
This matter is before the Court on a motion for summary judgment filed by Defendant Ohio Security Insurance Company ("OSIC"). The motion has been fully briefed, and the Court held oral argument on July 30, 2020. For the following reasons, the motion is granted.
This is an insurance coverage and bad faith action arising out of damage that occurred at a property owned by Plaintiff Victoria Family Limited Liability Limited Partnership ("Victoria") on December 28, 2018. Victoria made a claim on an insurance policy issued by OSIC bearing policy number BZS 57316014 (the "Policy"). OSIC denied coverage under the property damage coverage provided by the main coverage form of the Policy, but it paid Victoria $25,000 based on an endorsement to the Policy that extended coverage of up to $25,000 for water back-up and sump pump overflow.
Victoria filed this lawsuit against OSIC and Liberty Mutual Insurance Company ("LMIC") for coverage under the Policy for the full amount of its loss. The Court granted LMIC's motion to dismiss on the grounds that LMIC was not a party to the Policy. [Doc. No. 19.] Now, before any discovery has occurred, OSIC moves for summary judgment that there is no coverage under the Policy beyond what OSIC already paid Victoria because of a Water Exclusion in the Policy. Victoria concedes in its opposition that the parties agree on the essential facts concerning its claim. [Doc. No. 31 at 12.] Moreover, while the opposition invites the Court to deny the motion "if the Court finds any material issues of fact" related to the existence of coverage [id. at 33], it does not actually identify any such factual disputes. Indeed, although Plaintiff did not cross-move for summary judgment on the breach of contract claim, it opposes OSIC's motion for summary judgment not because there are disputes of fact for the jury concerning coverage, but because, according to Victoria, the undisputed facts demonstrate the existence of coverage under the Policy. These undisputed facts are recounted below.
For the purposes of the instant motion at least, OSIC does not dispute the description in the first amended complaint ("FAC") of the loss for which Victoria seeks coverage under the Policy, and Victoria agrees that the parties agree as to the essential facts. [Doc. No. 31 at 12.] According to the FAC:
On or about December 28, 2018, while the Policy was in full force and effect, the Insured Property was damaged by water, including as described below and referred to as the "Water Damage Incident". After normal business hours, an upstairs toilet on the Insured Property malfunctioned and began to flush incessantly. At first, the water went down the toilet drain, but apparently because of a clog down line in the drain system, the water flushing into the toilet eventually could not go down the drain. The flushing water eventually filled the toilet bowl instead of going into the drain and began spilling over the sides of the toilet bowl. The water continued flushing into the toilet bowl, and unable to go down the drain, spilled out of the toilet bowl and spread across the floor, flooding the bathroom, nearby rooms, and sending water down the building's walls into the rooms below.
[Doc. No. 12 at ¶ 16.]1 In its opposition, Victoria again acknowledges that that "the toilet drain filled because of a clog down line, causing the continuously flushing water to overflow from the toilet bowl." [Doc. No. 31 at 6, 12.] Victoria also provides additional evidence indicating that the toilet flushing mechanism malfunctioned due to internal corrosion of the components of the flush valve that resulted in the solenoid plunger being stuck open. [Id. at 11-13; Doc. No. 31-2.] OSIC does not dispute the details or cause of the toilet flushing mechanism malfunction, arguing only that such details are not material because there is no coverage regardless. This incident caused in excess of $100,000 in water damage to Victoria's property. [Doc. No. 12 at ¶ 17.]
There is no dispute that Victoria was a named insured under the Policy and that the Policy was in effect at the time of the incident. The Policy provided a variety of first party property and third party liability insurance coverage, most of which is not in question here. Relevant here, the Policy stated that OSIC "will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss." [Doc. No. 8-2 at 56 (§ I.A.).] There is no dispute for the purposes of this motion that water overflowing from the toilet caused damage to Covered Property, as that term is defined in the Policy, at the premises described in the Declarations to the Policy.
The Policy describes "Covered Causes of Loss" as "Direct physical loss unless the loss is excluded or limited under Section I—Property." [Id. at 57 (§ I.A.3.).] Those exclusions to coverage under Section I—Property appear at subsection B, which begins:
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. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
[Id. at 75 (§ I.B.1.).] OSIC partially denied Victoria's claim, and argues here for summary judgment of no coverage beyond what it has already paid, based on an exclusion for Water (the "Water Exclusion") that states: "Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment." [Id. at 76 (§ I.B.1.g.(3)).]
OSIC paid Victoria the limit of $25,000 pursuant to a "Businessowners Property Extension Endorsement" (the "BPE Endorsement") that modified section I.A.6. of the coverage form to add coverage for "Water Back-up and Sump Overflow" as follows:
[Id. at 142 (BPE Endorsement § I.G.5.).]
In its opposition, Victoria argues for coverage based on an exclusion for "Other Types of Loss," (the "OTL Exclusion") pursuant to which the Policy states that OSIC "will not pay for loss or damage caused by or resulting from" either "Wear and tear" or "Mechanical breakdown, including rupture or bursting caused by centrifugal force." [Id. at 79 (§ I.B.2.l.(1) and (6)).] The OTL Exclusion includes an exception stating" "But if an excluded cause of loss that is listed in Paragraphs (1) through (7) above results in a ‘specified cause of loss’ or building glass breakage, we will pay for the loss or damage caused by that ‘specified cause of loss’ or building glass breakage." [Id. at 80 (§ I.B.2.l.).] The Policy defines "specified causes of loss" as "fire; lightning; explosion; windstorm or hail; smoke; aircraft or vehicles; riot or civil commotion; vandalism; leakage from fire extinguishing equipment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage." [Id. at 93 (§ I.H.12.).] The definition of "specified causes of loss" then explains several of these terms, including "water damage," which it defines as:
[Id. at 93-94 (§ I.H.12.c.).]
Victoria also argues that it is entitled to coverage under an Equipment Breakdown Coverage Endorsement ("EBC Endorsement") to the Policy. This endorsement modified section A.5. of the coverage form to add coverage for "direct physical damage to Covered Property that is a direct result of an ‘accident’ to ‘covered equipment’." [Id. at 153 (EBC Endorsement § I.A.1.).] The EBC Endorsement also incorporated and modified the Water Exclusion and OTL Exclusion as follows:
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