Dallas Fort Worth Insurance Lawyer BlogArlington insurance attorneys will get phone calls where a home owner has a claim denied by the insurance company where the insurance company says the foundation damage is not covered under the policy. The United States District Court, Houston Division issued an opinion recently that deals with a claim denial for foundation damage. The style of the case is, Salazar v. State Farm Lloyds. Here is the relevant information from the opinion.
This is an insurance coverage dispute. The plaintiffs, Diane Salazar and Jesse Salazar, obtained a homeowners’ insurance policy (the “Policy”) from State Farm Lloyds. The Salazars allege that State Farm breached the Policy and extracontractual duties by denying their claim for losses for damage to the interior of the home caused by water leaking from plumbing pipes under the home. The Salazars allege that the damage was caused by foundation movement resulting from the water leaks. State Farm Lloyds denied coverage for the collateral losses from the foundation movement.
The parties filed cross-motions for partial summary judgment. The issue is the relationship of two endorsements: the Dwelling Foundation Endorsement (DFE) and the Water Damage Endorsement (WDE). The DFE limits coverage for foundation and related damage to 15% of the Policy’s Coverage A–Dwelling limit. The Salazars’ Dwelling limit is $229,100. State Farm asks this court to grant partial summary judgment that any recovery is limited to 15% of that amount, or $34,365.00. In their cross-motion and response, the Salazars contend that the WDE provides coverage for losses due to foundation movement caused by plumbing leaks. They assert that the WDE provides broader coverage than the DFE and therefore controls. Alternatively, they assert that the endorsements are conflicting, producing ambiguity that must be construed in their favor.
Based on the parties’ cross-motions and submissions, the record, and the applicable law, this court concluded that the Policy is not ambiguous and that the WDE excludes coverage for loss which consists of, or is caused by, foundation movement,” even when the movement is related to plumbing leaks. As a result, the DFE applies to limit any recovery to 15% of the Coverage A Dwelling limit. State Farm’s motion for partial summary judgment was granted and the Salazars’ was denied.
The reasons for the ruling are explained below.
The Salazars’ Policy provides in part as follows:
SECTION I LOSSES INSURED COVERAGE A–DWELLING We insure for accidental direct physical loss to the property described in Coverage A, except as provided in SECTION I-LOSSES NOT INSURED.
Section I Losses Not Insured, further provides:
SECTION I LOSSES NOT INSURED 1. We do not insure for any loss to the property described in Coverage A which consists of, or is directly and immediately caused by, one or more of the perils listed in items a. through n. below, regardless of whether the loss occurs suddenly or gradually, involves isolated or widespread damage, arises from natural or external forces, or occurs as a result of any combination of these:
** *
l. settling, cracking, shrinking, bulging, or expansion of pavements, patios, foundation, walls, floors, roofs or ceilings;….
The DFE amended the Policy, as follows:
Dwelling Foundation Coverage.We cover loss caused by and consisting of settling, cracking, shrinking, bulging, or expansion of the foundation, floor slab or footings that support the dwelling caused by seepage or leakage of water or steam from within a plumbing, heating, air conditioning or automatic fire protective sprinkler system.
This coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system from which the leakage or seepage occurred.
We do not cover loss to the system from which the water or steam escaped.
Limit of Liability.Our limit of liability for this coverage will not exceed an amount equal to 15% of the COVERAGE A–DWELLING limit applicable on the date of loss.
The WDE also amended the Policy, stating as follows:
Water Damage Coverage.
1. We cover the deterioration, wet rot or dry rot of property described in Coverage A and Coverage B caused by the continuous or repeated seepage or leakage of water or steam from a:
a. Heating, air conditioning or automatic fire protective sprinkler system;
b. Household appliance; or c. Plumbing system, including from, within or around any shower stall, shower bath, tub installation, or other plumbing fixture, including their walls, ceilings or floors.
This coverage includes the cost of tearing out and replacing any part of the building necessary to repair the system or appliance from which seepage or leakage occurred.
State Farm Lloyds agrees that the DFE provides limited coverage for foundation damage that would otherwise be excluded. State Farm Lloyds contends that the DFE covers foundation movement and related damage caused by a plumbing leak, but that any recovery is subject to the 15% cap. The Salazars contend where, as here, plumbing leaks under the home-combined with severe drought conditions-caused foundation movement that in turn caused damage to interior walls and other parts of their home, the WDE controls. The Salazars contend that the WDE provides coverage not limited to 15% of the Coverage A–Dwelling limits.
The parties agree that the DFE limits the amount payable under the Policy to $34,365. The Salazars argue that under the WDE, State Farm Lloyds is also contractually obligated to cover collateral loss or damage that occurs as the result of any foundation movement due in whole or in part to plumbing leaks. The Salazars testified that the only damage to their home was not caused by the plumbing leak itself, but only by the foundation movement that they allege was partly due to the plumbing leak.
The Policy excludes coverage for “settling, cracking, shrinking, bulging or expansion of pavements, patios, walls, floors, roofs, or ceilings.” The DFE provides limited coverage for “loss caused by and consisting of” foundation movement, including damage caused by foundation movement due to a plumbing leak, but limited to 15% of Coverage A.
The unendorsed Policy also excludes loss caused by or consisting of continuous or repeated water leaks. The WDE provides coverage for “deterioration, wet rot or dry rot” of the structure and contents caused by continuous or repeated seepage or leakage of water from, among other things, a plumbing system.
The WDE does not provide the broad coverage the Salazars seek for collateral damage due to foundation movement caused by plumbing leaks. The WDE excludes coverage for loss caused by foundation movement. That type of loss is present here. The WDE covers loss from deterioration, wet rot, or dry rot caused by continuous or repeated water leaks from sources that include a plumbing system. That type of loss is not present here. The DFE, not the WDE, applies. The DFE explicitly and unambiguously limits liability for foundation damage to an amount not exceeding “15% of the Coverage A–Dwelling limit of liability at the time of loss.”
The Policy language is clear and unambiguous and must be applied as written.
State Farm Lloyds’s motion for partial summary judgment was granted, and the Salazars’ cross- motion for partial summary judgment, was denied. The maximum amount the Salazars may recover under their claim is $34,365, less the deductible, or 15% of the Policy’s Coverage A–Dwelling limit benefits.
Water Damage To Foundation
