An exclusion in a homeowner’s policy for loss resulting from “water . . . below the surface of the ground” is not limited to naturally occurring water, according to a recent decision of the Eighth Circuit Court of Appeals in Bull v. Nationwide Mut. Fire Ins. Co., 2016 U.S. App. LEXIS 9703 (8th Cir. May 27, 2016).

The insured in Bull v. Nationwide discovered that a pipe buried beneath his garage had leaked, causing mold damage, foundation settlement and cracking.  Nationwide denied the claim on the basis of an exclusion for “water or water-borne material below the surface of the ground,” and the insured filed suit.  The District Court granted Nationwide’s motion for summary judgment, and the insured appealed to the Eighth Circuit.

The insured, relying on case law from other jurisdictions (Adrian Associates, General Contractors v. National Surety Corp., 638 S.W.2d 138, 141 (Tex. 1982); Hatley v. Truck Ins. Exch., 261 Ore. 622, 624, 495 P.2d 1196 (1972)), first argued that the court should find that the exclusion is ambiguous, and should only apply to water from natural sources.  The Eighth Circuit rejected the insured’s argument, noting that it would be inappropriate to “graft limitations onto otherwise plain and straightforward policy language.” The court emphasized that the breadth of the exclusion did not render it ambiguous, and looked to the Arkansas Supreme Court’s previous refusal to accept disagreement among other courts over the meaning of a term as dispositive of ambiguity.

The Eighth Circuit also rejected the insured’s argument that the District Court had erroneously relied on two Arkansas Court of Appeals cases, in which the court interpreted policy language specifying that the exclusion applied to losses caused by “water . . . below the surface of the ground regardless of its source.”  Recognizing that those cases were indeed distinguishable, the court nevertheless concluded that demonstrating that other policies’ provisions were perhaps drafted more carefully was insufficient to show ambiguity in the language at issue.

This decision may prove helpful to insurers responding to policyholders’ arguments relying on other jurisdictions and other policy language to demonstrate ambiguity.