Typically, disputes over ensuing loss provisions focus on whether the “secondary” loss complained of is actually separate and distinct from the excluded loss, or whether the “secondary” loss is separately excluded. In Platek v. Town of Hamburg, 948 N.Y.S.2d 797 (App. Div. 4th Dep’t 2012), the Fourth Department considered whether the exception to the applicable exclusion was actually an ensuing loss provision.
In Platek, the insured’s basement suffered water damage after a water main ruptured, flooding the property. Allstate denied coverage based on an exclusion for losses caused by various described perils, including “Item 4”:
[w]ater . . . on or below the surface of the ground, regardless of its source . . . [,] includ[ing] water . . . which exerts pressure on, or flows, seeps or leaks through any part of the residence premises.
Plaintiff claimed that an exception to this exclusion applied, which provided that Allstate covered “sudden and accidental direct physical loss caused by fire, explosion or theft resulting from” the losses excluded, on the theory that the bursting of the water main purportedly constituted an “explosion.” Plaintiff and Allstate cross moved for summary judgment. The trial court granted Plaintiffs’ motion, denied Allstate’s motion and directed Allstate to pay the claim. Allstate appealed.
On appeal, Allstate argued that the exception is an “ensuing loss” provision such that any initial loss to the insured’s property caused by the conditions set forth in the exclusion, i.e., “[w]ater . . . on or below the surface of the ground,” is not covered, and that only in the event that there is an “explosion . . . resulting from” the initial excluded loss that results in an ensuing loss is covered. Plaintiffs argued that the language does not require an ensuing loss, and that the exception applies because there was an “explosion [of the water main] resulting from” the conditions set forth in item 4, i.e., “[w]ater . . . below the surface of the ground,” and causing “sudden and accidental direct physical loss” to their property. In a 3-2 decision, the majority (Smith, J.P, Fahey, and Sconiers, J.J.) determined that the language was ambiguous, both parties’ interpretations were reasonable, and that the provision should be construed against Allstate. The court also found that the abrupt rupturing of the water main constituted an “explosion” based on Plaintiffs’ engineering expert affidavit that was uncontested by Allstate. The Fourth Department therefore affirmed the trial court’s decision.
The dissent (Peradotto and Martoche, J.J.) noted that it was the Plaintiffs’ burden to establish that the exception to the exclusion applied and that, when read as a whole, the language unambiguously required an ensuing loss, i.e., that the excluded water loss must subsequently result in a fire, explosion or theft loss:
. . . the exception provides that Allstate covers “sudden and accidental direct physical loss caused by fire, explosion or theft resulting from” the entry of water into the residence as described in items 1 through 4 of the water loss exclusion. The phrase “resulting from” in the exception does not mean “caused by,” nor should it be interpreted in that manner. Indeed, interpreting the exception to cover a loss where an explosion is caused by water outside the residence, as plaintiffs urge, contravenes the purpose of the water loss exclusion, which is to preclude coverage for losses caused by water entry into the residence.
In further analysis, the dissent provided the following:
The difficulty with [the majority’s] interpretation is exposed when the same interpretation is applied to a loss from “theft,” also a part of the exception. Under plaintiffs’ interpretation, the exception covers a loss caused by a theft that is caused by water–an illogical, if not absurd, reading.
Given the strong dissent in Platek, an appeal to the Court of Appeals may result.