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Plaintiff insurer sought a declaratory judgment that the insurance policy it issued to Defendant insured did not cover the mud and water damage to the insured’s bowling alley following a heavy rainstorm.  Plaintiff contended that it was not obligated to cover the loss by reason of the policy’s exclusions; specifically, that the damage at issue was not covered by the policy because it was cause at least in part, by earth movement and water within the meaning of the policy exclusions.

Defendant countered by arguing that coverage remained available if the damage was proximately caused by a non-excluded event or factor, even if an excluded event or factor contributed to the damage. However, the United States District Court for the Middle District of Pennsylvania held that Defendant insured’s argument conflicted with the “lead-in” clause to the policy’s exclusions section, which stated, “[w]e will not pay for loss or damage cause directly or indirectly by any of the following [enumerated exclusions].  Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”

Because there were no Pennsylvania cases directly on point, the Court looked to other jurisdictions that have held that the efficient proximate cause doctrine does not apply in the face of an expansive qualifying lead-in clause, like the one found in this case.

With regards to the policy’s exclusions, the Court held that although there was a jury question concerning the applicability of the earth movement exclusion, the surface water exclusion and the lead-in clause unambiguously combined to exclude the loss at issue from coverage under the policy.

In any case, the Court held that this ruling necessarily meant that Defendant could not recover on its contractual and statutory bad faith counterclaims.

Date of Decision:  October 11, 2006

T.H.E. Ins. Co. v. Charles Boyer Children’s Trust, United States District Court for the Middle District of Pennsylvania, No. 3:CV-04-1652, 455 F.Supp. 2d 284, 2006 U.S. Dist. LEXIS 73983 (M.D.Pa. October 11, 2006) (Vanaskie, J.).

This decision was affirmed in T.H.E. Ins. Co. v. Charles Boyer Childrens Trust