SHREE RIDDHI SIDDHI HOSPITALITY, LLC VS. SCOTTSDALE INSURANCE COMPANY(L-0627-15, MONMOUTH COUNTY AND STATEWIDE), A-5210-15T2

Background

Plaintiff Shree Riddhi Siddhi Hospitality LLC owns an apartment that suffered extensive property damage from a sewerage backup.
Plaintiff sought coverage under its homeowner/landlord insurance policy issued by Scottsdale Insurance Company.
Scottsdale denied coverage, citing a General Exclusion for “Water or water-borne material which backs up through sewers or drains.”
Plaintiff sued for coverage; Scottsdale moved for summary judgment.
The trial court granted summary judgment to Scottsdale, finding the policy unambiguous and excluding sewer backup losses.
Plaintiff appealed; the Appellate Division affirmed, applying de novo review of the policy interpretation.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the policy excludes sewerage-backup losses	The policy contains provisions (Perils Insured Against and an “Exception to c.(8)”) that create ambiguity and support coverage	The General Exclusions unambiguously exclude loss from sewer/drain backups; other provisions do not create ambiguity	Court held exclusion is clear; no coverage for sewerage backup losses
Whether the “Perils Insured Against” wording overrides General Exclusions	Perils Insured Against broadly covers direct physical loss and exceptions suggest coverage	That provision expressly defers to the General Exclusions, so it does not override them	Court held Perils provision expressly excludes losses excluded under General Exclusions
Whether subsection c.(8) or its exception applies to this loss	Plaintiff contends the Exception to c.(8) could cover accidental sewer discharge	Defendant notes c.(8) lists other causes (wear/tear, corrosion, pests, pollutants, etc.) which did not cause this loss, so c.(8) and its exception are inapplicable	Court found c.(8) inapplicable; the exception does not create coverage because it only modifies c.(8) exclusions and disclaims coverage for losses otherwise excluded
Whether the policy is ambiguous such that ambiguities must be construed for the insured	Plaintiff argues the cross-referencing and exceptions create a genuine ambiguity	Defendant argues the language is plain and unambiguous excluding sewer backups	Court held no genuine ambiguity; average policyholder can determine coverage boundaries, so terms enforced as written

Key Cases Cited

Conley v. Guerrero, 228 N.J. 339 (de novo review of summary judgment standard)
Templo Fuente De Vida Corp. v. Nat'l Union Fire Ins. Co., 224 N.J. 189 (policy plain language controls; avoid strained constructions)
Selective Ins. Co. of Am. v. Hudson E. Pain Mgmt. Osteopathic Med. & Physical Therapy, 210 N.J. 597 (coverage/exclusions interpretive principles)
Weedo v. Stone-E-Brick, Inc., 81 N.J. 233 (ambiguity standard — average policyholder test)
Stafford v. T.H.E. Ins. Co., 309 N.J. Super. 97 (far-fetched interpretations insufficient to create ambiguity)
Abboud v. Nat'l Union Fire Ins. Co., 450 N.J. Super. 400 (avoid rewriting policy for insured)