824 F.3d 722
8th Cir.2016Background
- Homeowner Michael Bull submitted an insurance claim after water from a buried pipe beneath his garage slab caused settling, cracking, and mold damage.
- Bull's Nationwide homeowner policy contained an exclusion for losses from "water or water-borne material below the surface of the ground."
- Nationwide denied the claim based on that exclusion; Bull sued in Arkansas state court for breach of contract and defendant removed to federal court on diversity grounds.
- The district court granted summary judgment for Nationwide, concluding the exclusion unambiguously barred coverage for the damage at issue.
- On appeal, Bull argued the exclusion is ambiguous and should be read to exclude only naturally occurring subterranean water, not water from a pipe; he relied on other jurisdictions that have so held.
- The Eighth Circuit reviewed de novo under Arkansas substantive law and affirmed, holding the exclusion unambiguous and applicable to all subsurface water regardless of source.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy exclusion for "water ... below the surface of the ground" is ambiguous | Bull: Phrase should be limited to natural subterranean water, not water from pipes; other courts found ambiguity | Nationwide: Plain language excludes all subsurface water regardless of source; no need to graft limitations | Exclusion is unambiguous on its face and applies to water from a buried pipe |
| Whether extrinsic authority showing different holdings creates ambiguity under Arkansas law | Bull: Conflicting decisions show reasonable disagreement, so ambiguity exists | Nationwide: Arkansas law rejects reliance on other jurisdictions to create ambiguity when policy language is plain | Court: Disagreement among other jurisdictions does not make the term ambiguous under Arkansas law |
| Whether omission of explicit clarifying phrase ("regardless of its source") renders this policy ambiguous | Bull: Cases affirming exclusion used explicit "regardless of its source," so absence here creates doubt | Nationwide: Drafter's extra clarity in other policies doesn't imply ambiguity in plain language here | Court: Distinguishing language in other cases is not dispositive; plain wording controls |
| Whether rules of construction should supply a limitation for coverage | Bull: Ambiguity should be construed in favor of the insured | Nationwide: No ambiguity to resolve; give effect to plain exclusion | Court: When language is unambiguous, courts must enforce plain terms rather than rewrite the policy |
Key Cases Cited
- Weitz Co. v. Lloyd’s of London, 574 F.3d 885 (8th Cir.) (de novo review of summary judgment)
- Smith v. So. Farm Bureau Cas. Ins. Co., 114 S.W.3d 205 (Ark. 2003) (policy ambiguity assessed by plain meaning in context; unambiguous terms control)
- Corn v. Farmers Ins. Co., 430 S.W.3d 655 (Ark. 2013) (give effect to plain policy language without judicially adding limitations)
- Essex Ins. Co. v. Holder, 261 S.W.3d 456 (Ark. 2007) (declining to adopt other jurisdictions' differing interpretations as proof of ambiguity)
- Adrian Assocs. Gen. Contractors v. Nat'l Sur. Corp., 638 S.W.2d 138 (Tex. Ct. App.) (treating identical exclusion as not applying to pipe water)
- Hatley v. Truck Ins. Exch., 495 P.2d 1196 (Or. 1972) (construing "water below the surface" as subterranean/percolating waters)
- Carver v. Allstate Ins. Co., 76 S.W.3d 901 (Ark. Ct. App. 2002) (rejecting a natural-source/man-made-source distinction where policy expressly excluded subsurface water regardless of source)