In an issue of apparent first impression in New York, an appellate court has found that an ambiguity existed in an insurance policy as to losses resulting from a backup and/or overflow from sewers, drains, and/or plumbing systems.

1. The Insurance Coverage Law Information Center
The following article is from National Underwriter’s latest online resource,
FC&S Legal: The Insurance Coverage Law Information Center.
NEW YORK APPEALS COURT FINDS AMBIGUITY AS TO LOSSES
RESULTING FROM BACKUP OR OVERFLOW FROM SEWERS, DRAINS,
OR PLUMBING SYSTEMS
May 20, 2014 Steven A. Meyerowitz, Esq., Director, FC&S Legal
In an issue of apparent first impression in New York, an appellate court has found that an ambiguity existed in an
insurance policy as to losses resulting from a backup and/or overflow from sewers, drains, and/or plumbing systems.
The Case
The plaintiff in this case owned a four building apartment complex that was covered by an insurance policy issued by
Dryden Mutual Insurance Company. While the policy was in effect, two of the buildings sustained substantial water
damage when waste water entered the first floor apartments through, among other things, toilets, bathtubs, and
condensation drains.
The plaintiff filed a property loss notice but Dryden disclaimed coverage on the basis that the loss fell within multiple
exclusions in the policy. The plaintiff thereafter submitted a sworn statement in proof of loss prepared by the plaintiff’s
adjuster, contending that the cause of the loss – specifically, “[a]ccidental [o]verflow/[d]ischarge of a [p]lumbing [s]ystem”
– was covered under the policy; Dryden again disclaimed coverage.
The plaintiff sued for breach of contract and for a declaration that the loss was covered under the terms of the policy.
Following joinder of issue and discovery, the plaintiff moved for partial summary judgment on liability and Dryden
cross-moved for summary judgment dismissing the complaint.
The trial court granted the plaintiff’s motion, finding that water damage exclusions were ambiguous and should be
reconciled so that they applied to a backup that originated off an insured’s property (i.e., in a municipal sewer or drain)
but not to an occurrence originating within the insured’s property (i.e., in a property owner’s plumbing system).
The trial court then declared that the loss was covered under the policy and denied Dryden’s cross motion.
Dryden appealed.
The Policy
The policy’s “Water Damage” exclusion applied to a loss caused by:
water which backs up through sewers or drains.
A second exclusion, also entitled “Water Damage,” provided that there was no coverage:
for loss caused by repeated or continuous discharge, or leakage of liquids or steam from within a plumbing ... system.
This second exclusion also provided (the “coverage provision”) that the policy covered:
loss caused by the accidental leakage, overflow or discharge of liquids or steam from a plumbing ... system.
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2. The Appellate Court’s Decision
The appellate court upheld the trial court’s policy analysis.
In its decision, the appellate court pointed out that the policy did not define the terms sewer, drain, plumbing system,
backup, or overflow. It explained that when the exclusion and coverage provision were read together, an ambiguity
existed in the insurance policy as to losses resulting from a backup and/or overflow from sewers, drains, and/or
plumbing systems. Observing that the resolution of this ambiguity appeared to be an issue of first impression in New
York, the appellate court then upheld the trial court’s analysis – that a plumbing system, as referenced in the coverage
provision, included drains that were on the insured’s property.
In short, the appellate court declared:
water damage caused by a backup/overflow that originates from a pipe or clogged drain located within the insured’s
property line comes from the insured’s plumbing system and is covered by the policy; conversely, if the cause of the
backup/overflow is from outside the insured’s property boundaries—such as a clogged municipal sewer that forces
water from outside the insured’s plumbing system to overflow—the sewer or drain exclusion is applicable.
The case is Pichel v. Dryden Mutual Ins. Co., No. 517551 (N.Y. App.Div. 3d Dep’t May 15, 2014). Attorneys involved include:
Levene Gouldin & Thompson, LLP, Binghamton (Lauren A. Saleeby of counsel), for appellant; Bond, Schoeneck & King,
PLLC, Syracuse (Katie I. Reid of counsel), for respondent.
FC&S Legal Comment
The appellate court’s policy analysis in this case is consistent with decisions in other jurisdictions that have interpreted
the interplay of similar competing provisions. See, e.g., Jackson v. American Mut. Fire Ins. Co., 299 F.Supp. 151 (M.D.N.C.
1968], affd 410 F.2d 395 (4th Cir. 1969); Cheetham v. Southern Oak Ins. Co., 114 So. 3d 257 (Fla. 2013), review denied 129
So. 3d 1069 (2013); Kozlowski v. Penn Mut. Ins. Co., 295 Pa Super 141 [1982]; Haines v. United Sec. Ins. Co., 43 Colo. App.
276 (1979); Hallsted v. Blue Mtn. Convalescent Ctr., Inc., 23 Wash. App. 349 (1979), review denied 92 Wash.2d 1023 (1979).
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