Knight Nicastro MacKay Wins Summary Judgment for Insurance Company in the United States District Court for the District of Kansas

With guidance from Elaine Moss and Jon Morrow, St. Louis Office’s Aaron Freeman secured a summary judgment in favor of our insurance company client. The suit concerned water damage to a building caused by a broken pipe under the building. The insurer sought a declaratory judgment that its policy did not cover the loss because the policy excluded losses caused by water under the ground surface that presses on, flows through, or seeps through the foundation, floors, basement, walls, doors, or windows of the building (the “Water Exclusion”). The building owner filed a counterclaim for breach of contract based on the alleged failure to pay under the policy and for violating the Kansas Uniform Trade Practices Act (“KUTPA”). The building owner sought damages in excess of $1.9 million and statutory penalties, interest, and attorney fees. The insurer and the building owner filed Cross-Motions for Summary Judgment.

The United States District Court for the District of Kansas granted Summary Judgment in favor of the insurer on its claim for declaratory judgment and in the insurer’s favor on the building owner’s counterclaims. The District Court found that the insurer showed the Water Exclusion applied and barred coverage for the loss.

The District Court agreed that there was no reasonable dispute that the pipe was under the building and that the water that escaped from the pipe entered the building through the bottom floor. As such, the “Water Exclusion” unambiguously applied and barred coverage for the loss. The District Court disagreed with the building owner’s position that the exclusion did not apply or was ambiguous because the pipe at issue connected to the building’s fire suppression system was within the footprint of the building and was part of the building’s infrastructure. The District Court noted that nothing in the language of the exclusion suggested it was inapplicable to water originating in the building’s fire suppression or plumbing system or from pipes within the footprint of the building. On the contrary, the exclusion stated that it applied to water under the ground surface that “is caused by an act of nature or is otherwise caused.” The District Court also held that the Anti-Concurrent Cause Provision barred any coverage potentially covered under the Specified Cause of Loss Exception to a separate wear and tear exclusion because the “Water Exclusion” applied.

The District Court declined to find that the “Water Exclusion” was ambiguous. The building owner argued the exclusion was ambiguous because an average lay person would not understand that the exclusion barred coverage for water escaping from pipes associated with the building or from artificial sources. The Court found that the owners’ position contradicted the plain language of the exclusion that extended its application to both natural sources of water and source of water connected to the building. In a similar vein, the Court declined to find a “conflict ambiguity” between the Water Exclusion and the Specified Cause of Loss Exception because of the Anti-Concurrent Cause Provision.

Finally, the District Court granted summary judgment in favor of the insurer on the building owners’ Kansas Unfair Trade Practice Act Counterclaim because the Kansas Unfair Trade Practice Act (“KUTPA”) does not create a private right of action.