Amish Connection, Inc. v. State Farm Fire and Casualty Company
861 N.W.2d 230
| Iowa | 2015Background
- Amish Connection leased Suite 102 in a mall; an interior four-inch cast-iron drainpipe carrying rooftop rainwater was corroded and hidden behind ceiling/wall materials.
- After heavy rain on June 14, the interior drainpipe ruptured and released rainwater into Suite 102, damaging inventory, fixtures, and records.
- Amish Connection filed a claim under its State Farm commercial property policy; State Farm denied coverage citing a "rain" limitation (no coverage for loss “caused by rain” to interiors unless rain enters through damaged roof/walls) and a rust/corrosion exclusion.
- The district court granted summary judgment for State Farm, holding the damage was “caused by rain” and that the policy’s structure (disjunctive “or” between limitations and exclusions) made other exceptions inapplicable.
- The court of appeals reversed, distinguishing “rain” from post-fall “rainwater” and finding ambiguity in the rain limitation; the Iowa Supreme Court granted further review.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether interior water damage from a burst indoor drainpipe during a storm is loss “caused by rain” under the rain-limitation | The spilled water was no longer "rain" but "rainwater" or was caused by the pipe failure (a "water damage" Specified Cause of Loss) and therefore is covered | Water that originated as rain and entered the interior via a failed drainpipe is “caused by rain” and falls within the rain limitation; policy structure bars other exceptions | The damage is unambiguously “caused by rain”; summary judgment for insurer affirmed |
| Whether the Specified Cause of Loss definition for "water damage" (breaking of a water system) creates coverage despite the rain limitation | The pipe break is a covered "water damage" (Specified Cause) that excepts loss from rust/corrosion exclusion | Even if the pipe break qualifies, the policy’s disjunctive provision (loss excluded if either limited in PROPERTY SUBJECT TO LIMITATIONS OR excluded in LOSSES NOT INSURED) means the rain limitation alone bars coverage | The court rejects this argument: an exception to an exclusion cannot create coverage where the insuring clause/limitations negate coverage; anticoncurrent-cause effect controls |
| Whether the policy is ambiguous as to "rain" v. "rainwater," requiring construction against insurer | The court of appeals: ordinary meaning distinguishes falling "rain" from collected "rainwater," creating ambiguity | Majority: common parlance treats rainwater as caused by rain; reading otherwise renders the rain-limitation superfluous | Majority: no ambiguity; exclusion enforced as written |
| Whether concurrent-cause or efficient-proximate-cause doctrines require trial on causation rather than summary judgment | Plaintiff: material factual dispute exists whether pipe failure (rust/deferred maintenance) — not rain alone — was the operative cause, so summary judgment is improper | Defendant: policy language (disjunctive “or” and overall Section I wording) makes the rain limitation dispositive as a matter of law; anticoncurrent-cause effect applies | Majority: policy language bars coverage as a matter of law; dissent disagrees and would remand for trial on causation |
Key Cases Cited
- Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494 (Iowa 2013) (governs policy interpretation principles and summary-judgment review)
- Bituminous Cas. Corp. v. Sand Livestock Sys., Inc., 728 N.W.2d 216 (Iowa 2007) (unenforceable to rewrite unambiguous exclusions; enforce exclusions as written)
- Am. Family Mut. Ins. Co. v. Corrigan, 697 N.W.2d 108 (Iowa 2005) (enforcement of anticoncurrent-cause language and strict construction rules)
- TNT Speed & Sport Ctr., Inc. v. Am. States Ins. Co., 114 F.3d 731 (8th Cir. 1997) (upholding anticoncurrent-cause provision; insurer not liable when excluded cause contributed concurrently)
- Horizon III Real Estate v. Hartford Fire Ins. Co., 186 F. Supp. 2d 1000 (D. Minn. 2002) (damage from interior flooding during storm excluded by similar rain-limitation)
- Tento Int’l, Inc. v. State Farm Fire & Cas. Co., 222 F.3d 660 (9th Cir. 2000) (concurrent-cause/efficient-proximate-cause analysis; contrasting outcomes where policy wording differs)
- Paulson v. State Farm Fire & Cas. Co., 756 P.2d 764 (Wyo. 1988) (distinguishes rain from surface/surface-water concepts; cited for limited principle but held inapplicable here)