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Property Insurance Coverage Insights

Sewer Backup Exclusion Found Unambiguous by Rhode Island Supreme Court

Posted in Water Exclusion

As mentioned previously, there appears to be an influx of court cases arising from situations where heavy rainfall affects drain and sewer systems, resulting in property damage. The Rhode Island Supreme Court was recently tasked with handling such a case, reaching the same conclusion as the Massachusetts Supreme Judicial Court did in Boazova and Surabian Realty – i.e., no coverage.  However, unlike those cases, the Rhode Island Supreme Court upheld a denial of coverage without relying on anti-concurrent causation language, since the loss resulted solely from an excluded cause of loss.

More specifically, in Iozzi v. City of Cranston, No. 2010-87-Appeal, No. 2010-112-Appeal, No. 2010-113-Appeal, 2012 R.I. LEXIS 109 (R.I. July 5, 2012), the Iozzis owned a home located in Cranston, Rhode Island. In October 2005, excessive rainfall overwhelmed the sewer system servicing the Iozzis’ home, causing water and sewage to back up through a toilet and enter their basement. This resulted in extensive damage to their home and personal property.

The home and personal property were insured under a homeowners policy issued by Peerless Insurance Company (part of the Liberty Mutual group). The insurer denied coverage for the Iozzis’ claimed damage based, in large part, on an exclusion in the policy that precluded coverage for losses caused directly or indirectly by ”water which backs up through sewers.” The Iozzis filed suit against Peerless for breach of contract and declaratory judgment. The trial court granted the insurer’s motion for summary judgment, finding that the policy language was clear and unambiguous, and the water exclusion precluded coverage for the losses.

On appeal, the Iozzis argued that while the policy excluded damage caused by water backing up through sewers, the policy did not explicitly exclude damage caused by sewage and wastewater. The Rhode Island Supreme Court disagreed, finding that the policy expressly excluded water damage caused from “water which backs up through sewers,” and that type of water would necessarily include sewage. Furthermore, the record indicated that heavy rain overloaded the sewer system, causing water and raw sewage to enter the home from a toilet that was located in the basement. The court concluded that the Iozzis’ property damage was undoubtedly caused by a mixture of water and sewage, which the policy omitted from coverage.

Unlike in the Massachusetts cases previously reported on, the Rhode Island Supreme Court did not find it necessary to analyze the anti-concurrent causation language that preceded the water exclusion in the Iozzis’ policy because it was determined that the sole cause of the loss was water backing up through the home’s sewer system. Contrast this with the Massachusetts cases, in which it was determined that the damage resulted from a combination of a covered peril and an excluded peril, requiring the court to apply the water exclusion’s anti-concurrent causation language. Some courts in other jurisdictions addressing scenarios similar to the facts of Iozzi have relied upon anti-concurrent causation language in finding that the losses were excluded. Since the rationale for court decisions depends, in large part, on policy language and the facts giving rise to a claimed loss, it is always important to consult with counsel so that facts and law can be thoroughly evaluated.