Opinion
Plаintiff Penn-America Insurance Company (Penn-America) appeals from an adverse judgment in its declaratory relief action to determine whether the insurance policy it issued to Mike’s Tailoring (Mike) covered the loss suffered.
The trial court determined the loss, which occurred when a clogged sewer line running underneath Mike’s property caused raw sewage to flow into Mike’s basement, was covered by the policy. It concluded the loss was covered under the terms of a policy covering the discharge of pollutants caused by the discharge of water directly resulting from the breaking or cracking of a part of a system containing water. The trial court found the exclusion for damage caused by “[wjatеr that backs up from a sewer or drain” was not applicable because it encompassed damage caused by water and did not include pollutants carried by water. We disagree.
We shall conclude the exclusion from coverage for “[wjater that backs up from a sewer or drain” must be given its common sense interpretation to include the sеwage that inevitably accompanies the water in a sewer. We shall reverse the judgment.
FACTUAL AND PROCEDURAL BACKGROUND
Penn-America issued a commercial lines insurance policy to Mike. Under the terms of the policy, Penn-America would pay for physical loss or damage to covered property caused by any “Covered Cause of Loss.” The “Covered Causes of Loss” are “RISKS OF DIRECT PHYSICAL LOSS” unless the loss was excluded or limited by the policy.
“We will not pay for loss or damage caused directly or indirectly by any of thе following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. . . . m... m
“g. Water [f] . . . ffi
“(3) Water that backs up from a sewer or drain . . . . ”
The second exclusion is the pollutant exclusion. It states in relevant part:
“We will not pay for loss or damage caused by or resulting from any of the following: [1] . . . [f]
“L. Discharge, dispersal, seepage, migration, relеase or escape of ‘pollutants’ unless the discharge, dispersal, seepage, migration, release or escape is itself caused by any of the ‘specified causes of loss.’ But if loss or damage by the ‘specified causes of loss’ results, we will pay for the resulting damage caused by the ‘specified causes of loss.’ ”
“Specified Causes of Loss” are defined as:
“Fire; lighting; explosion; windstorm оr hail; smoke; aircraft or vehicles; riotor civil commotion; vandalism; leakage from fire extinguishing equip ment; sinkhole collapse; volcanic action; falling objects; weight of snow, ice or sleet; water damage, . . . [1]
“3. Water damage means accidental discharge or leakage of water or steam as the direct result of the breaking or cracking of any part of a system or appliance containing water or steam.”
“Pollutant” is defined as “any solid, liquid, gaseous or thermal irritant or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste includes materials to be recycled, reconditioned or reclaimed.”
For the purposes of this appeal, we accept the following findings of the trial court. A sewer pipe servicing Mike’s premises and that of an adjacent property ran beneath the concrete floor of Mike’s basement. The sewer pipe conveyed all waste water from both properties and the water contained, inter alia, grease, vegetable matter, and human excrement. The sewer pipe was connected to a clean-out pipe. The two were joined beneath the basement floor, and the clean-out pipe ascended vertically at an angle until it breached the basement floor of Mike’s premises. At the time of the incident, the clean-out pipe was covered with a plastic cap where it exited the basement floor.
Approximately 20 to 25 feet downstream from the plastic cap the sewer pipe had a “discernible brief and abrupt change in direction.” The change in direction was “more likely than not the result of a break in the sewer pipe at that point.” The break allowed solid matter in the waste water to cоllect at that point, resulting in a blockage. The blockage constricted the flow of water and sewage, causing it to accumulate upstream from the obstruction.
The pressure of the accumulating water and sewage caused the plastic cap on the clean-out pipe to fail, and the contents of the sewer line were forced up the clean-out pipe into Mike’s basement. The water and sewage from the sewer line flooded Mike’s basement, and the water, sewage and fumes accompanying the sewage damaged Mike’s property.
Based on these findings of fact, the trial court concluded the loss was covered notwithstanding the pollutant exclusion because the lоss was one of the “Specified Causes of Loss” in the form of water damage. The trial court determined the downstream break in the sewer pipe and the failure of the clean-out cap constituted accidental breaks in the system causing a discharge of water and pollutants.
The trial court further concluded the water backup exclusion did not apply because it only encompassed damage caused by water, not damage caused by the pollutants carried by water. The trial court granted judgment in Mike’s favor on the issues of insurance coverage presented in the complaint.
DISCUSSION
I
Review of Insurance Policies
Absent a factual dispute, the interpretation and application of insurance contracts is an issue of law which we review de novo.
(Century Transit Systems, Inc. v. American Empire Surplus Lines Insurance Co.
(1996)
A contract is to be interpreted so as to give effect to the intent of the parties at the time the contract is formed. (Civ.
“Thus, if the meаning a lay person would ascribe to contract language is not ambiguous, we apply that meaning.”
(AIU Ins. Co.
v.
Superior Court
(1990)
If there is ambiguity in an insurance contract, the ambiguous provision is to be construed in the sense the insurer believed the insured understood the provisiоn at the time the contract was formed.
(AIU Ins. Co. v. Superior Court, supra,
We shall conclude the meaning a lay person would ascribe to the phrase, “[wjater that backs up from a sewer or drain” is not facially ambiguous and the record does not establish a latent ambiguity. Consequently we shall apply a common sense meaning in interpreting the policy.
II
Sewer Backup Exclusion
a. “Water” v. “Pollutant”
As explained, the trial court found the sewer backup exclusion inapplicable because it found the damage was caused by “pollutants” rather than water. Notwithstanding this dеtermination, the trial court also stated: (1) the loss was “caused by water, waste, and sewage;” (2) the sewer pipe conveyed “waste-water . . . and that water contained many pollutants;” (3) the sewer line contained water and sewage, and the contents of the sewer line was forced up the clean-out pipe into Mike’s basement and flooded the basement; and (4) the leakage of water constituted a “ ‘specified cause of loss’ in the form of ‘water damage’ . . . .”
The phrase “[wjater that backs up from a sewer or drain” is facially unambiguous. It is unreasonable to assume that water in a sewer will be free from waste, contaminants, and other noxious substances that are commonly referred to as sewage. A lay person reading the policy would assume that a backup of water from a sewer would contain both water and contaminants. No reasonable person would assume that water backing up from a sewer would be pure water. It is also unreasonable to assume the term “sewer,” which is facially unqualified, has a latent, technical meaning whiсh limits its application to the public portion of the sewer line.
In
Capelouto
v.
Valley Forge Ins. Co.
(1999)
In
Citrano v. Hingham Mut. Fire Ins. Co.
(2003)
b. Efficient Proximate Cause
Mike argues the loss was covered notwithstanding the sewer backup exclusion because the trial court found the “efficient proximate cause” of the loss was the brеaking or cracking of a system carrying water, a covered risk. Under the efficient proximate cause theory, a loss that is caused by a combination of covered and excluded risks is covered if the covered risk is the efficient proximate cause of the loss.
(Pieper
v.
Commercial Underwriters Ins. Co.
(1997)
The efficient рroximate cause theory does not apply here. First, the trial court’s statement of decision did not contain any finding relating to the efficient proximate cause theory. Second, the efficient proximate cause theory
does not apply unless there are two separate or distinct perils, each of which could have caused thе loss independently.
The facts here are analogous to those in Pieper v. Commercial Underwriters, where the insurance policy covered loss occasioned by arson, but not loss directly or indirectly occasioned by a brush fire. A brush fire started by an arsonist destroyed the insured’s rare mask collection. The court held that rеgardless of what started the fire, there was only one cause of loss, the brush fire, and the efficient proximate cause theory was inapplicable. (Pieper v. Commercial Underwriters, supra, 59 Cal.App.4th at pp. 1020-1021.) Likewise, we conclude that regardless of what may have initiated the obstruction of the sewer beneath Mike’s basement, there was only one cause of the damage, the backup of water in the sewer clean-out pipe. 3
c. “Backs Up"
Mike argues that the term “backs up” means to move in a reverse direction, and there was no evidence the water reversed its flow. Consequently a loss caused by an overflow from water backed up in a sewer line is a covered loss. We disagree.
The dictionary definition of “back up” is an intransitive vеrb meaning “to accumulate in a congested state . . . .” (Webster’s New Collegiate Dict. (1979) p. 82.) It also means “to rise and flow backward or overflow adjacent areas . . .” such as “water checked by an obstruction.” (Webster’s 3d New Internat. Dict. (1971) p. 160.) These definitions accurately describe what happened in this case.
d. Blockage Within the Insured Premises
Mike argues the sewer backup exclusiоn does not apply if the blockage of the sewer is within the insured premises. Mike argues the term “sewer” applies to the public part of a sewer line and the part that is within the insured’s premises is called the plumbing system. However, there is no policy language that qualifies the term “sewer” by dividing it into parts and hence no language which shows the sewer backup exсlusion is to be so construed.
Likewise in
World Fire & Marine Ins. Co. v. Carolina Mills Distributing Company
(1948)
These cases, which read the exclusion language in the light of the particular coverage language, are of no aid here. The coverage provisions in this policy are general, covering all risks that are not otherwise excluded. The “water damage” definition, listed under “specified causes of loss,” is relevant only to the sepаrate exclusion question whether damage from the release of “pollutants” contained in the sewer water was an excluded risk. But there is no coverage provision which includes damage from the discharge of water from a plumbing system and hence no coverage provision which bears on the meaning of the exclusion provision.
Accordingly, we conclude the sewer backup exclusion includes loss or damage caused by sewage and pollutants contained in sewer water, and the loss in this case was excluded from coverage.
DISPOSITION
The judgment is reversed. Appellant shall recover costs on appeal.
Raye, J., and Morrison, J., concurred.
A petition for a rehearing was denied February 3, 2005, and respondent’s petition for rеview by the Supreme Court was denied April 20, 2005. George, C. J., did not participate therein.
Notes
Since we find the first exclusion applies we need not discuss the application of the second exclusion to the cause of loss in this case.
We note the policy in this case applies to a loss “caused . . . indirectly” by an excluded condition.
The sewer backuр exclusion contains a potentially more expansive provision than the efficient proximate cause doctrine. It excludes loss “caused directly or indirectly” by the specified exception, and excludes such a loss “regardless of any other cause or event that contributes concurrently or in any sequence to the loss.”
Insurance Code section 530 provides: “An insurer is liable for a loss of which a peril insured against was the proximate cause, although a peril not contemplated by the contract may have been a remote cause of the loss; but he is not liable for a loss of which the peril insured against was only a remote cause.” Because the efficient proximatе cause doctrine is codified in this section, several appellate courts have found policy provisions attempting to restrict the efficient proximate cause doctrine invalid.
(Howell v. State Farm Fire & Cas. Co.
(1990)