A recent federal decision from Illinois is a reminder of something seasoned coverage lawyers understand instinctively. The ambiguity of insurance contract interpretation does not jump out at everyone. It is found, developed, and proven by those who have spent years studying how policy language works in the real world.
In Vinayaka Hospitality LLC v. Owners Insurance Company, 1 the court was asked to interpret a familiar but often misunderstood exclusion. The policy excluded coverage for damage caused by:
[W]ater under the ground surface pressing on, or flowing or seeping through… foundations, walls, floors or paved surfaces.
At first glance, many might assume that language is straightforward. Water below ground enters a building, and there is no coverage. Case closed. But that is not how insurance law works. It is certainly not how experienced policyholder lawyers approach these cases.
Facts matter. The building suffered water damage because a corroded pipe beneath the structure developed a hole, allowing water to escape and enter the building. The insurer denied the claim, arguing that this was precisely the kind of “water under the ground surface” the exclusion was meant to bar.
The policyholder’s attorneys saw something different. They recognized that the phrase “water under the ground surface” is not nearly as clear as insurers would like courts to believe. Is that phrase referring to naturally occurring groundwater, such as subsurface water, percolating water, or underground streams? Or does it include any water that happens to be located below ground, including water escaping from a man-made pipe?
Those are two very different readings. Importantly, both are reasonable.
The court agreed with the policyholder’s interpretation. It found that a reasonable person could interpret “water under the ground surface” as referring only to naturally existing water below the ground. Under that reading, water escaping from a pipe would not fall within the exclusion, and coverage would apply. At the same time, the court acknowledged the insurer’s competing interpretation, that any water originating from beneath the surface, regardless of source, would be excluded.
That is the definition of ambiguity under Illinois law. Is the policy language susceptible to more than one reasonable meaning? When that happens, the rule is clear that the ambiguity is construed against the insurer.
What is most striking about this case is not just the outcome. It is how the outcome was achieved. This was not a situation where the court discovered ambiguity on its own. The ambiguity was identified, framed, and supported through legal argument grounded in experience, precedent, and a deep understanding of how courts across the country have wrestled with similar language.
The opinion itself reflects that effort. The court surveyed decisions from multiple jurisdictions, with some limiting the exclusion to naturally occurring water and others extending it to artificial sources such as pipes. That split was not incidental. It was central to demonstrating that the language is genuinely debatable.
This is where the quality of advocacy matters. Lawyers who regularly handle property insurance disputes understand that policy language is rarely as simple as it appears. Words like “water,” “surface,” and “below” seem ordinary, but their interaction within a policy creates layers of meaning. Those layers only become visible when someone with the right background takes the time to dissect them.
Inexperienced counsel might read this exclusion and move on. Experienced counsel ask harder questions. What does the phrase mean in context? How have other courts interpreted similar language? Does the policy elsewhere distinguish between natural and artificial causes? What would a reasonable insured understand this language to mean?
Those questions are not academic. They are the difference between a denied claim and a covered loss.
This decision also carries an important lesson for insurers. If the intent is to exclude water damage from all subsurface sources, natural or artificial, the policy must say so clearly. Vague, generalized language will not always carry the day, especially when courts are presented with well-developed arguments showing multiple reasonable interpretations.
Insurance policies are contracts of adhesion. The burden is on the drafter to be clear. When that clarity is lacking, courts will not rewrite the policy to save the insurer from its own imprecision.
For policyholders and lawyers who represent them, this case is another example of why expertise in insurance coverage law is not optional. The ability to identify ambiguity, support it with authority, and explain it persuasively is what turns difficult cases into successful ones.
The phrase “water under the ground surface” may look simple. In the hands of a skilled advocate, it became the key to coverage.
Who was the policyholder’s lawyer? Ed Eshoo. Some of the best blogs and educational pieces you can ever read on property insurance law can be found by searching for “Eshoo” on the search function of this blog and simply reading his articles. Ed is one of the top insurance recovery attorneys in the country. He does not get enough credit for his work. This recent case is just one example.
Thought For The Day
“The more you know, the more you realize how much you don’t know.”
— Aristotle
1 Vinayaka Hospitality v. Owners Ins. Co., No. 1:24-cv-12301 (N.D. Ill. Mar. 31, 2026).
