The very best courtroom in Massachusetts lately held that time period “Flood” and the related phrase “floor waters,” as utilized in two all-risk insurance coverage insurance policies, is ambiguous within the context of water that gathered on a parapet roof and rooftop courtyard, thereby negating the insurers’ try and restrict protection to a sublimited protection for “Flood.”
Background
In June 2020, a extreme storm prompted injury to Norwood Hospital, owned by Medical Properties Belief, Inc. (“MPT”) and leased to Steward Well being Care System (“Steward”), the policyholders. The related portion of the injury included injury from rain that gathered on the rooftop courtyard and seeped into the inside of the constructing inflicting injury to the constructing and its contents.
Zurich issued a business property insurance coverage coverage to MPT with a basic restrict of $750 million. AGLIC issued a business property coverage to Steward with a basic restrict of $850 million. Each insurance policies afforded sublimited protection for injury attributable to “Flood” ($100 million within the Zurich coverage and $150 million within the AGLIC coverage), which each insurance policies outlined in pertinent half as “[a] basic and non permanent situation of partial or full inundation of usually dry land areas or construction(s) attributable to[] [t]he uncommon and speedy accumulation or runoff of floor waters.”
Based mostly on the definition and its reference to “floor water,” the insurers restricted protection to solely that accessible below the sublimited protection for “Flood.” In response to the insurers, water that collected on the floor of a roof and courtyard earlier than getting into the constructing constituted “floor water” and thus met the insurance policies’ definition of “Flood.” MPT and Steward countered, arguing that the time period “floor water,” as used within the context of the definition of “Flood,” ought to be restricted to water that flows on the floor of the earth and emanates from the bottom up, not rainwater that falls from the sky and swimming pools on a roof or different raised floor.
The district courtroom sided with the insurers and MPT appealed to the First Circuit, which licensed to the Massachusetts Supreme Judicial Courtroom the query of whether or not rainwater that accumulates on a roof or different raised floor can moderately be understood to be “floor water” within the context of an all-risk insurance coverage coverage.
Holding and Evaluation
The Massachusetts SJC rejected the insurers’ arguments and held that rainwater that accumulates on a raised floor and enters a constructing leading to injury doesn’t clearly represent “floor water,” and, thus, doesn’t clearly meet the definition of “Flood.”
Find the time period to be ambiguous, the courtroom appeared first to the definition of Flood contained within the insurance policies. The courtroom decided that each events proposed believable interpretations primarily based on the coverage language alone. For instance, the courtroom discovered that MPT’s interpretation of “floor water,” was affordable as a result of the Flood provision referenced “waves, tides . . . [and] the rising overflowing or breaking of boundaries of . . . our bodies of water,” which supported the interpretation that it have to be waters on the floor of the bottom. The courtroom additionally discovered the insurers’ extra literal interpretation – that “floor waters” imply waters that accumulate on a floor—to be affordable. Given the a number of affordable interpretations, the courtroom discovered the time period to be ambiguous, however not earlier than trying to caselaw from courts inside Massachusetts and elsewhere to affirmation the absence of a uniform interpretation of the phrase. The courtroom likewise revisited its personal earlier choices addressing the that means of Flood, solely to conclude that in none of these prior choices did the courtroom’s evaluation contain information like these introduced on this case.
Importantly, the courtroom famous that the provisions at difficulty pertain to protection sublimits reasonably than specific exclusions to protection. This, the courtroom discovered, was a distinction with out a distinction. Because the courtroom defined, whether or not the supply is an specific exclusion or merely a sublimited protection, when the supply operates to “diminish the safety bought by the insured,” the supply have to be interpreted topic to the principles relevant to coverage exclusions.
Conclusion
The MPT choice is a reminder that insurance coverage protection exclusions and, as right here, different sorts of provisions that work to restrict protection, have to be said clearly and able to one and just one affordable interpretation. The choice additionally stands as a reminder of the possibly broad and far-reaching penalties {that a} single misguided choice can have for policyholders. As illustrated by amicus United Policyholders, the district courtroom’s choice right here, if left uncorrected, might have adversely affected protection that’s relied upon by hundreds of thousands of economic and residential property homeowners and lenders in Massachusetts and past.
Accordingly, policyholders ought to pay attention to how “Flood,” “floor water” and different outlined and undefined coverage phrases are interpreted of their jurisdiction, and be sure that they’re adequately protected in opposition to dangers of loss. Skilled protection counsel can assist to clarify how undefined coverage phrases can affect broad coverage provisions and definitions and help when an insurer acts unreasonably.