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Pennsylvania Superior Court adopts narrow interpretations of surface water exclusion and ensuing loss clause

March 21, 2017

In the Ridgewood Group LLC v Millers Capital Insurance Company, No. 1138 EDA 2016, February 27, 2017, the Superior Court of Pennsylvania analyzed two often troublesome policy provisions, the surface water exclusion, and the ensuing loss cause.

The underlying claim involved water leakage into the basement of a residential rental property. Both parties agreed that the building’s rotting roof, gutters and downspouts allowed rainwater and melting snow to overflow a debris-clogged gutter and flow into the building’s basement through a window well. The court concluded that the water which entered the basement was not excluded “surface water” as it went straight from the roof and gutters into the basement window well and never traveled along the surface of the ground.

The court also found that the exclusion for faulty, inadequate or defective maintenance applied as all of the water damage was the consequence of the insured’s failure to maintain the building. In rejecting the insured’s argument that the water damage was an insured ensuing loss from faulty maintenance, the court held that the ensuing loss clause is only intended to apply to those losses which do not “naturally and foreseeably” arise from the excluded cause of loss. 

This narrow reading of the exception to the exclusion will keep the ensuing loss clause from nullifying the underlying exclusion.