The Ridgewood Group v. Millers Capital Insurance, The Ridgewood Group v. Millers Capital Insurance No. 1138 EDA 2016

Ridgewood owned a rental property insured by Millers under an all-risks businessowners policy that contained exclusions for surface water/flood and for loss caused by faulty, inadequate, or defective maintenance (negligent work), with an exception for ensuing covered causes of loss.
In March 2014 rainwater entered the basement during a storm after flowing from the roof into a window (air) well and then into the basement; Ridgewood admitted the water never reached the ground.
Millers denied coverage, citing the policy’s surface-water exclusion and the negligent-work exclusion; Ridgewood sued for breach of contract and bad faith.
The trial court granted Millers summary judgment; Ridgewood appealed arguing the surface-water exclusion did not apply.
The Superior Court reviewed disputed legal issues about whether the water was "surface water" and whether the negligent-work exclusion (and its ensuing-loss exception) precluded coverage.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the water that flowed from roof → window well → basement is “surface water” excluded by the policy	Water never reached the ground; it traveled directly from roof through an artificial channel (window well) so is not surface/ground water and thus is covered	Rain/melted snow are surface water even if traveling over artificial surfaces; exclusion applies	Court: water is not “surface water” under the facts (trial court erred on this ground)
Whether the negligent-work exclusion bars coverage or the exclusion’s ensuing-loss exception covers the loss	The exception negates the exclusion here (would swallow the exclusion), so the loss is covered	Exception applies only where an independent, new, non-foreseeable covered peril ensues; loss here was a foreseeable result of poor maintenance, so exclusion applies	Court: adopted a foreseeability test for the ensuing-loss exception; loss was a natural/foreseeable result of neglected roof/gutters and is excluded
Whether summary judgment for Millers was proper	Trial court erred because surface-water exclusion does not apply; coverage should be found	Even if surface-water exclusion doesn’t apply, negligent-work exclusion excludes coverage as a matter of law	Court: affirmed summary judgment for Millers based on negligent-work exclusion (alternative ground)

Richman v. Home Ins. Co. of N.Y., 94 A.2d 164 (Pa. Super.) (definition of “surface water” as waters on ground surface, casual and vagrant)
Heller v. Fire Ins. Exchange, 800 P.2d 1006 (Col.) (artificial channels that concentrate/redirect surface water can change its character)
TMW Enterprises, Inc. v. Fed. Ins. Co., 619 F.3d 574 (6th Cir.) (ensuing-loss clause analysis hinging on foreseeability and whether an independent new peril intervenes)
Platek v. Town of Hamburg, 24 N.Y.3d 688 (N.Y.) (discussion of ensuing-loss clauses’ historical purpose and use)
McEwing v. Lititz Mut. Ins. Co., 77 A.3d 639 (Pa. Super.) (insurer bears burden to prove applicability of exclusions)
Continental Cas. Co. v. Pro Machine, 916 A.2d 1111 (Pa. Super.) (policy interpretation is a question of law; words construed in ordinary sense)