In a previous post, I discussed a case that found that damage to a dwelling from a broken municipal water main was covered under a homeowners insurance policy. In that case,1 the New Jersey Appellate Division concluded that the term “surface water” in the insurance policy’s water exclusion was ambiguous and that the water main break’s water did not qualify as surface water under both definitions of the term.

Recently, a federal court in Pennsylvania interpreting that state’s law came to a directly contrary conclusion. In that case,2 a restaurant-insured suffered property damage when a water main broke in the street near its premises causing a large quantity of water to leak through the back wall of the insured’s building. The restaurant’s insurer denied the property damage claim, relying upon the “surface water” provision within the water exclusion.

During the ensuing litigation, the insurer maintained the insured could not support a breach of contract claim relative to the denied claim because the water exclusion applied. In contrast, the insured responded that the water exclusion was ambiguous and, consequently, must be construed against the insurer.

The court ultimately found the water that penetrated the insured’s building from the broken water main qualified as “surface water,” for which damage coverage was excluded under the water exclusion. The court noted that other courts that applied Pennsylvania law to the same policy language have generally held that surface water intrusion caused by a water main break falls within the coverage exclusions.

This case highlights how coverage for a loss may differ in neighboring states. If you have any questions about the interpretation of an insurance policy provision in your state, please contact your local Merlin Law Group attorney.
1 Sosa v. Massachusetts Bay Ins. Co., 458 N.J. Super. 639 (App. Div. 2019).
2 Sypherd Enterprises, Inc. v. Auto-Owners Ins. Co., 420 F.Supp.3d 372 (W.D. Pa. 2019).