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Home / Insurance / Merlin Law Group overturns denial of coverage over interpretation of the term "sudden" – Blog about real estate insurance legislation

Merlin Law Group overturns denial of coverage over interpretation of the term "sudden" – Blog about real estate insurance legislation



Imagine walking around your house one night and the lights suddenly flickering. You immediately investigate the problem, open a living room wall and determine that the electrical wiring behind the wall is burnt due to water leaking from the bathroom above. You close the main valve to the bathroom immediately and call an electrician. Before that, there were no signs of any plumbing or management problems that would have told you that you had problems in your home. It is stated afterwards that the wax ring on your toilet, which is hidden and not visible, has failed and has leaked. You file an insurance claim only to know that the loss is excluded.

The above is the scenario that unfolded for my clients in their trial. The insurance company referred to several exceptions in its insurance, which included the following:

[W] e does not cover loss consisting of or caused by any of the following:

a) Wear, aging, stains, scratches, deterioration, inherent load or latent defect

If any of (a) to (g) causes sudden or unintentional discharge of water or steam from a
plumbing, heating or air conditioning system, appliance or fire protection sprinkler
system in your home, we will cover the direct the physical damage caused by water or
steam …

The insurance company's company representative was dismissed to explain why the subsequent damage provision would not apply in these circumstances. The representative considered that the broken wax ring did not constitute a "sudden" loss under the insurance. However, the representative admitted that the loss was "unintentional". The question before the court was therefore whether the water leak due to the wax ring having broken is considered a "sudden" loss in connection with the subsequent loss provision in the exception "wear".

The policy did not define the term "sudden" or the phrase "sudden and unintentional." Merriam-Webster defines the term "suddenly" as happening or coming unexpectedly. The insured claimed that they did not expect the wax ring under their toilet to break, which would lead to water leaking behind their walls and therefore coverage should apply. Or, in the alternative, the insurance should apply because the insurance was ambiguous as to what constituted a "sudden" loss.

Judge Ferrelli at the Burlington County Superior Court in New Jersey agreed with the insured's argument. By revoking the denial of coverage, Judge Ferrelli concluded:

The defendant has provided insurance with an ambiguous, undefined term. New Jersey case law is clear that all ambiguities should be interpreted against the insurer and in favor of coverage for the insured. See e.g., Doto 1

40 N.J. of 556, and cases cited above. The subject matter policy includes an exception clause that justifies a strict analysis, and where, as here, the court finds that there is more than a reasonable interpretation of the language of a policy, the court applies the meaning that supports the coverage rather than the one that limits it. . Cobra Prods. 317 N.J. Super. At 401.

This court must engage in a fair interpretation according to Stafford 309 N.J. Super. 97, to determine whether the policy language is in fact ambiguous. Since the defendant chose not to define the term "sudden" in the insurance, the insured were left to their own reasonable interpretation based on the simple meaning of the chosen language. A fair and reasonable interpretation of the meaning of "sudden" as stated in the various dictionary definitions noted above shows that the subject policy contains an ambiguity that must be interpreted against the insurer, the insurer and in favor of the interpretation support coverage on behalf of the insured, plaintiffs here. Therefore, this Court finds that the term "sudden" in the exclusive phrase "the sudden and unintentional discharge of water or steam" refers to a water discharge which was "unexpected" or "unforeseen" without a temporal requirement of immediacy as prescribed by Defendant. The water damage to the plaintiffs' homes was both unexpected and unforeseen by the plaintiffs, no matter how long it took to appear, and therefore the court finds coverage for the plaintiffs for the damage to their property according to the clear language of the police.

A copy of the Order can be read here

Policyholders should not accept an insurance company's denial as gospel. If a homeowner believes that an insurance company has wrongly denied their claim, they will need someone who knows the details of the policy to make the right arguments to overturn the wrong coverage decision. If you would like a copy of the motion briefs associated with this order, please contact me at DBallard@MerlinLawGroup.com.

This matter will be one of the cases I will discuss as part of my case study presentation at the upcoming PPAANJ event on November 10, 2021 at Hotel LBI. If you are a public adjuster and have not registered, please contact me at the email above.


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