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Up On The Roof: “Surface Water” and Property Coverage - Authored by KSLN Partner, Alexander Douglas, Esq.

Updated: Oct 11


 

The gist:

 

Property damage insurance policies often contain an exclusion or limitation for damages caused by “surface water.”  Some courts have found that the phrase “surface water” includes water pooled on the surface of a roof.   This is because contracts are presumed to not contain any superfluous terms, and many such policies refer to “surface water” while also containing phrases like “ground surface” and “water on or under the ground.”  In turn, “surface water” impliedly includes water on top of other man-made surfaces, including roofs.  However, courts also find the term to be ambiguous.

 

 

 


  When this old world starts getting me down

And people are just too much for me to face

I climb way up to the top of the stairs

And all my cares just drift right into space

 

The Drifters, Up on the Roof (Atlantic Records 1964).

 

There is a recent trend of case law in federal district courts ruling that an exclusion for “surface water” includes water that has pooled and collected on top of the surface of a building’s roof.  While counterintuitive, courts have reached this conclusion based on an analysis of the applicable policy language.  This article discusses two such recent district courts cases and why the courts interpreted the policies in this manner. 

 

What does “surface water” mean in a non-legal context?  A dictionary definition is “natural water that has not penetrated much below the surface of the ground : drainage water.”[1]  The National Geographic Encyclopedic entry is similar: “any body of water found on the Earth’s surface, including both the saltwater in the ocean and the freshwater in rivers, streams, and lakes.”[2]  In its common usage, the word “surface” in that phrase refers to the surface of the Earth and not to other man-made surfaces.

 

In a legal context, courts often define the phrase in the same manner.  One insurance law treatise writes that “surface water” is “generally understood to mean water that  . . . is diffused over the surface of the ground.”[3]  In an insurance coverage case, the Colorado Supreme Court defined it as “water from melted snow, falling rain, or rising springs, lying or flowing naturally on the earth’s surface . . .”[4]  In a different context, the Minnesota Supreme Court held in 1948 that surface water included “rain, springs, or melting snow which lie or flow on the surface of the earth, but which do not form part of a well-defined body of water or natural water-course.”[5]  The Black’s Law Dictionary definition is “water lying on the surface of the earth but not forming part of a watercourse or lake.”[6]

 

There is intuitive appeal to this interpretation.  It tracks the common usage of the phrase and the scientific community.  After all, “surface” refers to the surface of something, and what else if not the Earth?

 

However, much like water itself, the interpretation of “surface water” continues to flow in different directions.  Two federal district courts recently held that water ponded on the top of a roof of the building also constitutes “surface water” for the purposes of the water exclusion in the property coverage form.  This had massive implications for the insureds’ respective claims in those cases.   

 

Courts have noted the general rule that “language of insurance contracts should be read as a whole and must be construed to give effect to every word, clause, and phrase.”[7]  In other words, courts should read insurance contracts to avoid rendering any term or phrase as superfluous.[8] 

 

Danville

 

The first such case (Danville Commer. Indus. Storage, LLC v. Selective Ins. Co.) was decided by a W.D. Va. District court.[9]  In Danville, the insured plaintiff owned a warehouse.  A large volume of rain fell onto the roof over a short period of time.  The rain overwhelmed the roof drains on the insured’s building, causing water to pond on the roof.  As a result of the weight of the water, a portion of the roof collapsed, and the remainder of the roof was damaged by water infiltration.  While the carrier conceded that the policy covered the cost of repairing the collapsed portion of the roof, it disputed that the policy required the carrier to replace the entire 235,000 square foot roof (for which the insured sought roughly $4.7 million, according to the carrier in its motion papers).[10]  The carrier argued that the non-collapsed portion of the roof was damaged by water infiltration from the “surface water” that had ponded on the roof and sought partial summary judgment dismissing the insured’s claims for damages beyond the collapsed portion of the roof.  

 

The relevant exclusion provided that the policy did not cover damage caused directly or indirectly by:

  g.      Water


(1) Flood, surface water, waves, tides, tidal waves, or their spray, all whether driven by rain or not;

 ***

  (4) Water under the ground surface pressing on, or flowing or seeping through;

 

(a)        Foundations, walls, floors, or paved surfaces;

 

(b)        Basements, whether paved or not; or

 

(c)        Doors, windows or other openings.[11]

 

There was another endorsement in the insurance policy that provided that the insured could extend its coverage to pay for losses caused by “water under the ground surface.”[12] 

 

In Danville, the parties agreed that Virginia law applied to the dispute.  Virginia law includes the well-known rule that ambiguous policy language is construed against the carrier.[13]  The plaintiff urged the court to find the phrase ambiguous and resolve the ambiguity in its favor.[14]  Although the term “surface water” was not defined in the policy, the court noted that the majority of the courts which had addressed the question (in recent years) have concluded that “surface water” includes water on a roof.[15]  The plaintiff cited a series of Virginia water rights cases for the proposition that “surface water” is defined as water that is diffused “over the surface of the ground.”  However, the court noted that those cases did not turn on the definition of “surface water.”[16]

 

Finally, and arguably most importantly, the court noted that the other terms used in the insurance policy, which included the phrase “water under the ground surface,” implied that “surface water” includes water that pooled on a surface other than the surface of the ground, which would include the roof of the plaintiff’s warehouse.  To hold otherwise would make the word “ground” superfluous in the insurance policy, and courts will presume that contracts do not contain superfluous terms.[17] The court granted the defendant’s partial motion for summary judgment and ruled that the exclusion applied to water damage caused by “ponded water infiltrating the roof.”[18]  The parties settled the case shortly after the decision, which undoubtedly had a massive financial impact on the plaintiff’s position in settlement negotiations.

  

Medical Properties Trust

 

Another recent federal case followed the logic in Danville and reached the same conclusion.  Zurich Am. Ins. Co. v. Med. Props. Tr., Inc., 636 F. Supp. 3d 239, 241 (D. Mass. 2022).  In Medical Properties Trust, the defendant owned a hospital facility that was hit by several severe thunderstorms and torrential rain.[19]  The rain flooded the roofs of various buildings and the courtyard of a main building, which was a roof for the floors below it.  Some of the buildings had  “parapet” roofs that created basins for water to be collected and discharged through roof drains.[20]  The rainwater accumulated on the roofs and infiltrated the upper floors of the hospital.  Such rainwater never touched the surface of the Earth before entering the hospital. 

 

The applicable insurance policy included damage caused by “floods” as defined in its “Described Causes of Loss” section, which included a $100 million sublimit.[21]  The policy defined “flood” as such:

 

7.23.    Flood -  A general and temporary condition of partial or complete inundation of normally dry land areas or structure(s) caused by:

 

7.23.01. The unusual and rapid accumulation or runoff of surface waters, waves, tides, tidal waves, tsunami, the release of water, the rising, overflowing or breaking of boundaries of nature or man-made bodies of water; or the spray there from all whether driven by wind or not; or

 

7.23.02. Mudflow or mudslides caused by accumulation of water on or under the ground.[22]

 

“Surface waters” was not defined in the policy.  The carrier took the position that substantially all of the building damages were subject to the $100 million sublimit and filed the declaratory judgment action against the insured seeking a declaration as such. 

 

The court first noted Massachusetts contract interpretation principles, including (1) interpreting all words in their usual and ordinary sense, (2) construing insurance policies as a whole, without according special emphasis to one part over another, (3) interpreting ambiguous contract language in favor of the insured, and (4) defining “ambiguous” as where the phrasing can support a reasonable difference of opinion as to the phrase’s meaning.[23]  With those principles in mind, the court determined that the carrier had the better argument:

 

In the policy, the term “surface waters” is not limited to the accumulation of water on the ground. Section 7.23.01 stands in contrast to its neighbor, Section 7.23.02 which covers “mudflow or mudslides caused by accumulation of water on or under the ground.” Dkt. No. 36-1, § 7.23.02, at 69.  Therefore, requiring surface water to reach the ground is an implausible reading of the policy which makes specific reference to ground water in the next provision. See Danville Commer. Indus. Storage, LLC v. Selective Ins. Co., 442 F. Supp. 3d 921, 927 (W.D. Va. 2020) (declining to limit the definition of “surface water” to water on the ground because “this would make the term ‘ground’ superfluous in the [policy], and contracts are presumed not to use superfluous terms.”).[24]


In opposition, the defendant cited a case from Massachusetts’ highest court (“Boazova”) that described “surface water” as “waters from rain, melting snow, springs, or seepage, or floods that lie or flow on the surface of the earth and naturally spread over the ground but do not form a part of a natural watercourse or lake.”[25]  The district court noted that Boazova still held that surface water included waters included on raised patio surfaces or paved parking lots, not just water on the ground.[26]  Ultimately, the court awarded partial summary judgment for the carrier.[27] 

 

Reversal by the Supreme Judicial Court of Massachusetts


However, Medical Properties Trust was recently reversed.  The U.S. Court of Appeals for the First Circuit certified the following question to Massachusetts’ highest court, the Supreme Judicial Court of Massachusetts (“SJC”):

 

Whether rainwater that lands and accumulates on either (i) a building’s second-floor outdoor rooftop courtyard or (ii) a building's parapet roof and that subsequently inundates the interior of the building unambiguously constitutes “surface waters” under Massachusetts law for the purposes of the insurance policies at issue in this case?[28]


The SJC ultimately ruled that the term was ambiguous in this case due to the various interpretations of the term across the country.[29]  In particular, the court noted the inconsistency of the case law on the topic, and held:

 

We conclude that the meaning of “surface waters,” and thus the definition of “Flood” under the policies, is ambiguous in regard to the accumulation of rainwater on roofs.  The uncertainty in the case law in Massachusetts and other jurisdictions confirms this ambiguity.  Indeed, the conflicting interpretations of the term “surface waters” are a direct result of the term's ambiguity.  As we must resolve such ambiguity in favor of the policy holders and against the insurance companies that drafted the policies, we conclude that the definition of “surface waters” does not include the rainwater that landed and accumulated on the rooftop courtyard and parapet roofs in this case, or at least it does not unambiguously include such accumulation of water on a roof.”[30] 


Conclusion


Case law on this topic is varied.[31]  The recent decision by the Massachusetts SJC suggests that other courts might also follow suit and decide that the term is ambiguous. 

 

The issue has not been definitively decided in New York, although one recent E.D.N.Y. case implied that “surface water” existed on top of a parking lot, which supports the proposition that “surface water” could exist on other man-made surfaces.[32]  Appellate state courts in Colorado and Texas have reached similar holdings.[33] 

 

Of course, applying this argument to a specific claim requires a detailed analysis of the specific language in the insurance policy and the relevant case law in your jurisdiction.  The next time you’re “up on the roof,” you may wish to consult an experienced insurance coverage attorney to discuss whether you should rely on this defense in a disclaimer and/or litigation.  

 


 

Author information

 



Alexander J. Douglas is a partner at Kenney Shelton Liptak Nowak LLP in its Insurance Coverage Group.  He advises clients on a variety of insurance coverage related matters, including defense of first-party property litigation claims in state and federal courts in New York. 


 

Footnotes and cited materials


[1] https://www.merriam-webster.com/, accessed October 18, 2023.

[3] 5 New Appleman on Insurance Law Library Edition § 45.08. 

[4] Heller v. Fire Ins. Exch., 800 P.2d 1006, 1008 (Colo. 1990) (collecting cases).

[5] Enderson v. Kelehan, 226 Minn. 163, 167 (1948).

[6] Corp. Lakes Prop., LLC v. Amguard Ins. Co., No. 22-2161-KHV, 2023 U.S. Dist. LEXIS 1366, at *11 (D. Kan. Jan. 4, 2023) (quoting Black’s Law Dictionary (11th ed. 2019)).

[7] Drennen v. Certain Underwriters at Lloyd's of London (In re Residential Capital), 610 B.R. 725, 735 (Bankr. S.D.N.Y. 2019) (quoting McGrath v. Allstate Ins. Co., 290 Mich. App. 434, 439 (2010)).

[8] Givati v. Air Techniques, Inc., 104 A.D.3d 644, 645 (2d Dept. 2013); Schleicher & Stebbins Hotels, LLC v. Starr Surplus Lines Ins. Co., No. 2022-0155, 2023 N.H. LEXIS 69, at *19 (May 11, 2023) (courts “will not presume language in a contract to be mere surplusage”).

[9] Danville Commer. Indus. Storage, LLC v. Selective Ins. Co., 442 F. Supp. 3d 921 (W.D. Va. 2020).

[10] Danville, Defendant’s Memorandum of Law in Support of Motion for Partial Summary Judgment at 1-2 (Dkt. No. 71).

[11] Id. at 923. 

[12] Id. at 924. 

[13] Id. at 926.

[14] Danville, Plaintiff’s Memorandum of Law in Opposition to Defendant’s Motion for Partial Summary Judgment at 21-22 (Dkt. No. 88).

[15] Id. at 927 (citing Fidelity Co-op. Bank v. Nova Cas. Co., 726 F.3d 31, 40 (1st Cir. 2013); Oak Hill Inv. IV LLC v. State Farm Fire & Cas. Co., Civ. No. 15-cv-1996, 2017 U.S. Dist. LEXIS 158851, at *8-9 (N.D. Ohio Sep. 27, 2017) (“the majority of courts have interpreted surface water to include that which lands on artificial surfaces”)). 

[16] Id. at 928.

[17] Id. at 927.

[18] Id. at 929.

[19] Zurich Am. Ins. Co. v. Med. Props. Tr., Inc., 636 F. Supp. 3d 239, 241 (D. Mass. 2022).

[20] Id.

[21] Id.

[22] Id. at 241-242 (emphasis in original).

[23] Id. at 242-43.

[24] Id. at 243.

[25] Boazova v. Safety Ins. Co., 462 Mass. 346, 354, 968 N.E.2d 385, 392 (2012) (citing 5 J.A. Appleman & J. Appleman, Insurance Law and Practice § 3145, at 463 (1970)). 

[26] Zurich Am. Ins. Co., 636 F. Supp. 3d at 244.

[27] Id. at 245.

[28] Zurich Am. Ins. Co. v. Med. Properties Tr., Inc., 88 F.4th 1029, 1035 (1st Cir. 2023), certified question answered, 494 Mass. 382, 237 N.E.3d 733 (2024).

[29] Zurich Am. Ins. Co. v. Med. Properties Tr., Inc., 494 Mass. 382 (2024).

[30] Id. at 384.

[31] Schwartzben v. Nat’l Fire, No. 22-20755-CIV-MARTINEZ-BECERRA, 2023 U.S. Dist. LEXIS 78525, at 8 (S.D. Fla. May 3, 2023) (Florida law) (the phrase applies “strictly to water on the surface of the ground”); Villamil v. Sentinel Ins. Co., 356 F. Supp. 3d 418, 426 n.4 (D.N.J. 2018) (New Jersey law) (“the Court assumes, but does not hold, that water which lands on a roof is not ‘surface water’ pursuant to the Policy”); Bethany Boardwalk Grp. LLC v. Everest Sec. Ins. Co., 611 F. Supp. 3d 41, 62 (D. Md. 2020) (Maryland law) (the defendant “cites to no Maryland authority, and I am aware of none, supporting the contention that surface water includes water that collects on a roof before soaking into a building”); Union St. Furniture & Carpet, Inc. v. Peerless Indem. Ins. Co., No. FSTCV085008699S, 2012 Conn. Super. LEXIS 2635, at 9 (Super. Ct. Oct. 23, 2012) (Connecticut law) (the court “concludes that the phrase ‘surface water’ as it occurs in the [defendant’s] policy does not include water collected on a roof”).

[32] 7001 E. 71st St., LLC v. Chubb Custom Ins. Co., 417 F. Supp. 3d 150, 157 (E.D.N.Y. 2019) (noting that “surface water also infiltrated the main floor from the parking lot” and referring to “the infiltration of parking lot surface water”).

[33] Crocker v. Am. Nat’l Gen. Ins. Co., 211 S.W.3d 928, 936 (Tex. App. 2007) (“[t]he ordinary meaning of the words ‘surface water’ in the [plaintiffs’] policy reasonably can include rainwater that has collected on the surface of their patio”); Morley v. United Servs. Auto. Ass’n, 465 P.3d 71, 77 (Colo. Ct. App. 2019) (“[w]e agree that man-made surfaces, such as roofs or patios, can intercept precipitation and generate surface water”). 

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