457 P.3d 997
Okla.2019Background
- Oklahoma Schools Risk Management Trust (OSRMT) issued a Plan of Coverage to McAlester Public Schools for Aug 2012–Aug 2013. A buried water main under Parker Middle School ruptured on Aug 13, 2013, causing foundation damage.
- OSRMT denied coverage, citing exclusionary clauses for "earth movement," "water," and "wear and tear/rust or corrosion."
- McAlester conceded the underground pipe itself was not covered but sought coverage for damage to the building caused by the pipe rupture, arguing exclusions apply only to naturally occurring events.
- The district court granted summary judgment for OSRMT relying on prior Oklahoma precedent (Broom). The Court of Civil Appeals affirmed. McAlester sought certiorari.
- The Oklahoma Supreme Court reversed: it held the earth-movement and subsurface-water exclusions were ambiguous as applied to loss caused by a man-made ruptured pipe, and remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether earth-movement exclusion bars recovery for damage caused by ruptured underground pipe | Exclusion covers earth movement "including...action of water under the ground surface," and omission of coverage for underground pipes shows intent to exclude resulting damage | Exclusion targets naturally occurring earth movement (earthquakes, landslides); does not clearly encompass man-made pipe rupture | Earth-movement exclusion ambiguous as to man-made causation; insurer failed to show exclusion precluded coverage |
| Whether subsurface water exclusion bars recovery for flow from a ruptured pipe | "Water under the ground surface flowing or seeping through" excludes such damage regardless of cause | Exclusion should be read as applying to natural water movement; majority-rule treats silent exclusions as ambiguous when man-made causation not specified | Water-exclusion ambiguous as to man-made causes; insurer failed to show it excluded coverage |
| Whether reading policy as whole (underground pipes not "covered property") defeats coverage for consequential building damage | Non-covered status of the pipe, plus exclusionary clauses read together, preclude recovery for damage caused by pipe failure | Non-coverage of the pipe itself does not automatically erase coverage for other damaged covered property absent an unambiguous exclusion | Court rejects conflating covered-property definition with exclusions; cannot rewrite contract—ambiguity resolved for insured |
| Burden of proof on coverage vs. exclusion | Insurer contends exclusions unambiguous; thus no coverage | Insured contends loss is within all-risk coverage and insurer must prove an exclusion applies | Under all-risks principles, once insured shows a covered loss, insurer bears burden to prove a clear exclusion; insurer did not meet that burden here |
Key Cases Cited
- Broom v. Wilson Paving & Excavating, 356 P.3d 617 (Okla. 2015) (discusses ambiguity of earth-movement exclusions when applied to man-made events)
- Powell v. Liberty Mut. Fire Ins. Co., 252 P.3d 668 (Nev. 2011) (reversed insurer denial where policy language did not unambiguously exclude damage from ruptured pipe causing soil movement)
- BP America, Inc. v. State Auto Prop. & Cas. Ins. Co., 148 P.3d 832 (Okla. 2005) (policy read as whole; ordinary meaning controls)
- Hensley v. State Farm Fire & Cas. Co., 398 P.3d 11 (Okla. 2017) (courts will not rewrite insurance contracts; clear exclusions are enforceable)