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Goldberg Segalla Achieves Appellate Reversal in Flood-Exclusion Coverage Dispute

Case Study

Goldberg Segalla Achieves Appellate Reversal in Flood-Exclusion Coverage Dispute

In a November 2011 victory for an insurer client in the Appellate Division, Fourth Department, Goldberg Segalla not only succeeded in obtaining a reversal in favor of our client — we also contributed to creating case law on a particular flood exclusion point that can benefit other insurance carrier clients. The team included partners Paul D. McCormick and Sarah J. Delaney.

In this case, the plaintiff owned a parcel of property in Binghamton, New York. During a two-day rain storm in 2006, almost seven inches of rain fell in Binghamton and the property flooded. Shortly after the storm, the plaintiff submitted a more than $1.2 million claim to our client for damages caused by the flooding. The carrier investigated the claim and concluded that the flooding was caused by a nearby creek that overflowed as the result of the heavy rains and road culverts that were blocked by a build up of debris. The carrier disclaimed coverage because the damage to the property was caused by a flood and thus the damage fell within the flood exclusion clause of the policy. The plaintiff filed suit seeking breach of contract damages and a declaration that its losses were covered under the policy. After discovery, the trial judge denied the carrier’s motion for summary judgment and granted the plaintiff’s cross motion for summary judgment.

Our team succeeded on appeal. The Fourth Department unanimously reversed the trial court, determining that the lower court erred in denying the carrier’s motion and granting the plaintiff’s cross motion. As a result, the carrier will have to pay nothing.

The court concluded that the carrier met its initial burden on the motion by establishing that the damage to the plaintiffs’ property was caused by flooding, noting that “flood” was defined in the policy, in relevant part, as “[s]urface water … or overflow of any natural or man[-]made body of water from its boundaries … .”  It rejected the plaintiff’s argument that the source of the water that caused the flooding was a clogged culvert (i.e., a “back up” under the policy) rather than the creek itself or the surface water that had overflowed from the creek. It also rejected the plaintiff’s argument that the terms of the flood exclusion contained in the policy were ambiguous.

The court also rejected the plaintiff’s argument that the carrier failed to submit proof in admissible form to support its motion, concluding that the record contained sufficient evidence establishing that the cause of the flooding was heavy rain over a two-day period in the Binghamton area and that the property was damaged by the overflow of surface water.