Insurance lawyers handling water damage claims under homeowners policies need to dread this 2024 opinion from the Western District of Texas, San Antonio Division. It is styled, Ghassan Abulehieh v. State Farm Lloyds.
This is a water damage claim under a homeowners policy wherein the insureds assert a plumbing leak in a master bathroom resulted in water damage and mold growth to adjoining areas of the house. The facts of the case can be gleamed from reading the facts in the opinion.
Here is the reasoning the Court used to deny State Farm’s motion for summary judgment.
Plaintiff’s Original Petition asserts a cause of action for breach of contract, which alleges that State Farm breached the Policy by refusing to pay for covered damage under the Policy. Texas law governs Plaintiff’s breach of contract claim because this case arises under the Court’s diversity jurisdiction. Under Texas law, insurance policies are contracts that establish the respective rights and obligations to which an insurer and its insured have mutually agreed. Texas courts construe insurance policies using
the same rules that govern the construction of any contract.
The primary concern of a court in construing a written contract is to ascertain the true intent of the parties as expressed in the instrument and to ensure contract terms are construed according to “the ordinary, everyday meaning of the words to the general public.” The most important consideration in interpreting the meaning of a contract is “the agreement’s plain, grammatical language.” To that end, the terms used in the policy are given their plain, ordinary meaning unless the policy itself shows that the parties intended the terms to have a different, technical meaning. Context is important, and this Court must examine the entire writing and endeavor to harmonize and give effect to all the provisions so that none are rendered meaningless. If an insurance policy is ambiguous, a court must resolve the uncertainty by adopting the construction that most favors the insured.
An insured bears the initial burden of establishing coverage under the terms of the policy. If the insured proves coverage, then to avoid liability the insurer must prove the loss is within an exclusion. If the insurer proves that an exclusion applies, the burden shifts back to the insured to show that an exception to the exclusion brings the claim back within coverage. Policy exclusions are strictly construed against the insurer under Texas law.
The Policy establishes that the Property was insured in December 2022 when Plaintiff discovered the water damage and contacted State Farm to file a claim. State Farm does not dispute that it relied on a Policy exclusion in denying coverage. State Farm therefore bears the burden of proving that the asserted exclusion applies. State Farm has not proved that the damage at issue fell within the exclusion so as to entitle it to summary judgment as a matter of law. State Farm argues that the pictures upon which it relied in denying coverage and its own claim notes conclusively establish that the damage at issue fell within a Policy exclusion. State Farm argues that the extended nature of the peril is obvious due to the references to and depictions of rust, mold, wood rot, and a cracked toilet flange in the photos and claim notes. But State Farm has not presented the Court with any evidence from any expert or any witness with knowledge or experience related to plumbing leaks to support these assertions. State Farm merely provided the Court with a declaration from the Claims Specialist, Ms. Browne, who participated in the claim denial in this case, detailing State Farm’s process and reasoning in denying the claim. State Farm has not established the nature of Ms. Browne’s expertise as to plumbing, engineering, or construction, and the claims records establish that neither she nor any other State Farm employee ever inspected Plaintiff’s Property. Ms. Browne’s declaration offers little to the Court other than a recitation and reiteration of the reasons set forth in State Farm’s claim notes and denial letter for denying Plaintiff’s claim.
State Farm, unlike the insurers in the cases it relies on, has not provided the Court with evidence similar to the expert testimony on plumbing leaks or water damage in those cases, or even declarations from the subcontractors involved in investigating Plaintiff’s leak and estimated repairs. State Farm did provide one expert report in support of its motion for summary judgment, the report of Mr. Hinojosa. But Mr.
Hinojosa inspected Plaintiff’s home in October 2023, almost a year after the leak and damage was identified. And Mr. Hinojosa only opined that the scope of work proposed in the estimates by Restoration 1 and Trinity Contracting Systems exceeded the necessary repairs to address the plumbing leak, which had already been fixed. Mr. Hinojosa’s opinion does not offer any testimony regarding the nature of the plumbing leak that might bear on the applicability of the continuous seepage and leakage exclusion.
State Farm ultimately asks the Court to grant it summary judgment based on its own claim records, plumbing photographs (without any accompanying interpretative explanation), and the self-serving affidavit of a Claims Specialist who denied the claim (without inspecting the Property) to find that the damage at issue was undisputably a result of long-term water leakage and seepage. Without evidence from a plumber, contractor, engineer, or other related witness or expert to interpret the photographs and notes in the claims file, the Court is unable to resolve this dispute regarding the application of the exclusion as a matter of law in State Farm’s favor.
State Farm bears the burden to prove the damage fell within the Policy exclusion, i.e., that the water damage at issue was the result of continuous, repeating, gradual, intermittent, slow, or trickling seepage or leakage. State Farm has not provided the Court with evidence to that effect aside from the conclusions of its own claims handlers. Accordingly, State Farm has not carried its burden to demonstrate it is entitled to summary judgment on Plaintiff’s breach of contract claim.