Jack Nelson Jones Professional Association

June 26 - July 2, 2017

Ford v. Safeco Inc. Co. of Am., 2017 Ark. App. 363 (May 31, 2017)

This appeal comes from the Pulaski County Circuit Court, Sixth Division, honorable Tim Fox presiding. This case concerns exclusions in a homeowners’ insurance policy.

In May 2014, the Jeffrey and Sarah Ford noticed a low spot in their living room floor. A foundation-repair contractor suspected a plumbing leak. An initial plumbing inspection in May did not detect a problem, but a second test in July concluded there was a leak somewhere under the house. The Fords filed a claim with their homeowner’s insurance provider, Safeco Insurance Company of America (Safeco), the same day the leak was detected. Safeco denied the claim. The estimate to repair the damage was about $75,000.

The Fords filed a complaint against Safeco alleging that the claim was covered under their insurance policy and that Safeco had breached the contract by denying it. In its motion for Summary judgment, Safeco asserted that its denial of the claim was proper because the policy explicitly excluded loss caused by both (1) settling of foundations or floors and (2) continuous or repeated leakage or seepage of water that occurs over a period of weeks, months, or years.

To support its first point, Safeco included an affidavit from an engineer who stated that, in his professional opinion, “at the time of construction of the Plaintiffs’ home, there was inadequate compaction of the fill material below the concrete slab foundation,” and that “[a]s a result, the fill material has been settling over time, which in turn caused the concrete slab foundation to settle.” As to the second point, Safeco reasoned that the Fords noticed the damage in May but did not make their claim until July; thus, to the extent a drain-line leak caused or contributed to the damage, it would have been occurring over a period of weeks by the time the Fords submitted their claim to Safeco.

The Fords responded with testimony that they contacted Safeco as soon as they knew a leak existed and provided an affidavit from their own expert, who attested that the damage to the Fords’ home was caused by a “mechanical failure in the plumbing system located at the premises” and that “[i]t is not possible to determine with any certainty when the plumbing system failure occurred, and any opinion as to the time of the plumbing malfunction would be speculative at best.” The trial court ruled in favor of Safeco, and the Fords appealed.

On appeal, the Court began by explaining that summary judgment should only be granted when it is clear that there are non genuine issues of material fact, and the party is entitled to judgment as a matter of law. Safeco contended that the damages sustained by the Fords were excluded under the policy and that summary judgement in its favor was proper. The policy covered “accidental direct physical loss” to the home “except as limited or excluded.” A list of those limitations and exclusions ensued. Of note to the Court, the policy excluded loss caused “directly or indirectly” by “continuous or repeated seepage or leakage of water or steam, or the presence or condensation of humidity, moisture or vapor which occurs over a period of weeks, months or years” or “settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundations, walls, floors, roofs, ceilings, swimming pools, hot tubs, spas or chimneys.” It also specifically excluded loss from “water damage,” except in cases of “overflow and escape caused by malfunction” or “obstruction . . . of a drain or plumbing appliance.”

Which provision of the policy may or may not apply, however, simply could not be ascertained at trial because, the Court reasoned, it must first know what caused the damage. Succinctly, the Fords argued a plumbing malfunction caused the damage to their home, and Safeco refuted the same. The Fords supported their claim with deposition testimony, an expert affidavit, a loss report, and coverage-denial letters from Safeco (each letter asserting a different policy exclusion in support of the denial).

The caselaw, the Court said, was replete with the proposition that causation is almost always a question of fact for the jury and not appropriate for summary judgment. Safeco argued that it was immaterial whether a plumbing leak also caused, or contributed to, the damages to the Fords’ home because of the broad lead-in clause preceding the exclusions. That clause stated that Safeco did not cover loss caused directly or indirectly by any of the following excluded perils. Such loss, the clause continued, was excluded “regardless of any other cause or event contributing concurrently or in any sequence to the loss.” Finally, pursuant to the clause, these exclusions applied “whether or not the loss event results in widespread damages or affects a substantial area.”

The Court found Safeco’s argument unpersuasive. This provision still contemplated first assigning a “cause” to the loss. The Court reasoned that Safeco’s argument would have the Court put the cart before the horse in interpreting the insurance policy to deny coverage without ever establishing the cause of the loss. Only when causation is established can it be determined whether and which exclusionary provisions might apply. Accordingly, the Court determined that summary judgment was granted in error. Reversed and remanded.