OCTOBER 2013 BAD FAITH CASES: NO BAD FAITH WHERE NO COVERAGE DUE UNDER ENDORSEMENT FOR WATER DAMAGE (Philadelphia Federal)

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In Advertir Inc. v. Peerless Indemnity Insurance Company, plaintiff’s warehouse suffered water damage when water entered the warehouse through its loading dock doors during two heavy storms. The carrier denied coverage under the policy’s exclusion for damage caused by flood and surface water. Plaintiff claimed the denial of coverage was improper, and that the damage was covered by the policy’s endorsement for damage caused by water that “enters into and overflows from within a sump pump, sump pump well or other type of system designed to remove subsurface water which is drained from the foundation area.” It brought claims for breach of contract and bad faith.

The court did not have to reach the details of the bad faith issue, as it found the endorsement did not apply and there was no coverage, as the carrier asserted in denying the claim originally. The court found the endorsement language clear and unambiguous in not providing coverage for the damage at issue.

The evidence was unequivocal that the water which entered the warehouse never entered into the sump pump at the bottom of the loading bay, and therefore plainly did not fall within the provision covering damage from water that “enters into and overflows from within a sump pump or sump pump well.” The plaintiff did not argue otherwise, but instead posited that the entire loading bay, including the sloped concrete ramp, is an “other system designed to remove subsurface water which is drained from the foundation area.”

After a detailed analysis, which included a picture of the ramp as an exhibit to the Opinion, the court rejected that argument, and granted summary judgment to the carrier.

Date of Decision:  August 29, 2013

Advertir Inc. v. Peerless Indem. Ins. Co., CIVIL ACTION No. 12-1352, 2013 U.S. Dist. LEXIS 123450 (E.D. Pa. August 29, 2013) (Goldberg, J.)

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