1335 Piccard LLC v. National Fire Insurance Company of Hartford

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 05-1466
1335 PICCARD LLC,
Plaintiff - Appellant,
versus
NATIONAL FIRE INSURANCE COMPANY OF HARTFORD,
Defendant - Appellee.
Appeal from the United States District Court for the District of
Maryland, at Greenbelt. Alexander Williams, Jr., District Judge.
(CA-04-1230-AW)
Argued: February 1, 2006 Decided: March 23, 2006
Before WIDENER, NIEMEYER, and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: Roy I. Niedermayer, PALEY, ROTHMAN, GOLDSTEIN, ROSENBERG,
EIG & COOPER, CHTD, Bethesda, Maryland, for Appellant. Vincent
Timothy Bambrick, NILES, BARTON & WILMER, L.L.P., Baltimore,
Maryland, for Appellee. ON BRIEF: Lucinda E. Davis, NILES, BARTON
& WILMER, L.L.P., Baltimore, Maryland, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).

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PER CURIAM:
We are presented with the issue of whether a business
risks insurance policy issued by National Fire Insurance Company
of Hartford (“National Fire”) to 1335 Piccard LLC (“Piccard”)
covers Piccard’s loss of rental income caused by a sewer backup at
one of its commercial properties.
In May 2001, a municipal sewer backed up into the
commercial building at 1335 Piccard Drive in Rockville, Maryland,
owned by Piccard. Piccard’s first-floor tenant, a medical clinic,
vacated the premises for four months while the premises were being
restored and, during that period, paid only one-half the rent
otherwise due, causing Piccard to sustain a loss of rental income
in the amount of $80,394.52.
After Piccard restored the building, it submitted a
claim to National Fire for the cost of repair and its loss of
rental income. National Fire paid Piccard the $50,000 policy
limit for property damage caused by a sewer backup, but it refused
to pay Piccard’s claim for its loss of income, asserting that the
policy did not cover loss of business income caused by a sewer
backup.
Piccard commenced this action against National Fire in
Maryland state court for $80,394.52, plus interest, costs, and
attorneys fees. National Fire removed the case to federal court,
based on diversity jurisdiction. Following the parties’ cross-

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motions for summary judgment, the district court entered judgment
in favor of National Fire, concluding that the policy that it
issued to Piccard did not cover loss of business income from a
sewer backup. This appeal followed.
The policy -- a “Business Account Package Policy” --
provides in § A that it will pay for “direct physical loss of or
damage to" Piccard’s property "caused by or resulting from any
Covered Cause of Loss" (emphasis added). In § A.5.f(1), the
policy provides “additional coverage” for “the actual loss of
business income” incurred during a suspension of operations
“caused by or resulting from any Covered Cause of Loss” (emphasis
added). The term “Covered Cause of Loss” is defined in § A.3 to
include all risks of direct physical loss unless excluded in
“Section B. EXCLUSIONS.” The exclusions in § B provide that
losses from sewer backups are not “Covered Causes of Loss.”
Specifically, § B.1.f(3) provides that National Fire “will not pay
for loss or damage caused” by “water that backs up from a sewer or
drain.” The exclusion, however, does not, by its terms, stop
coverage under § A.6.q, the “Back Up of Sewer or Drain Water
Damage Coverage Extension.” The coverage extension in § A.6.q
provides that National Fire will pay for “loss or damage to
covered property caused by water that backs up from a sewer or
drain. . . . The most we will pay for direct physical damage is
[$50,000].”

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Thus, while the policy provides coverage under § A.6 for
property damage caused by a sewer backup, it does not provide
coverage under § A.5 for business income loss. A loss of income
is covered only when it is the result of a “Covered Cause of Loss”
and a “Covered Cause of Loss” does not, under § B, include a loss
caused by a sewer backup. Accordingly, we affirm the district
court.
Piccard argues that because National Fire paid $50,000
for property damage under § A.6.q (the coverage extension for
sewer backup losses), the loss caused by sewer backup is a “cause
of loss” that is “covered” by the policy such that the business-
income-loss provision also applies because that provision applies
to losses “caused by a Covered Cause of Loss.” Piccard’s argument
asks us to interpret the clause “Covered Cause of Loss” loosely so
as to include any loss paid for under the policy. This
interpretation, however, would obliterate the specific language of
the policy which defines “Covered Cause of Loss” to exclude losses
caused by a sewer backup (except for $50,000 in physical property
damage). In determining whether a policy provides coverage, we
must apply the terms of the insurance contract as written, and if
the policy defines terms, we must likewise apply those terms as
defined. See Bausch & Lomb, Inc. v. Utica Mutual Insurance Co.,
330 Md. 758, 779 (1993).

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Piccard also argues that the language of § A.6.q is
written so as to afford coverage not only for physical damage to
covered property but also for other types of “loss,” such as
business income loss. Section A.6.q provides coverage for “loss
or damage to covered property” whereas other sections, such as §
A, use the phrase “loss of or damage to covered property”
(emphasis added). Piccard maintains that by leaving out the
preposition “of,” the policy provides separate coverages (1) for
all loss and (2) for damage to covered property, thus delinking
“loss” from “covered property.”
We do not find Piccard’s construction to be the natural
reading of the policy, especially when we consider the same
omission of the preposition “of” in other places within the
policy. In those provisions, e.g., §§ A.6.c(1), A.6.e, and A.6.f,
if we were to delink “loss” from “covered property,” the policy
would make little sense and render other policy provisions
redundant or superfluous. For instance, under Piccard’s argument,
which reads “loss” to stand alone, § A.6.c(1) would read that
National Fire “will pay for direct physical loss . . . caused by
or resulting from a Covered Cause of Loss,” a meaningless phrase,
especially when we consider the language as it relates to the
object of coverage -- valuable papers. As written, § A.6.c(1)
provides coverage of “direct physical loss [of] or damage to

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‘valuable papers and records’ . . . caused by or resulting from a
Covered Cause of Loss.”
Thus, we read the phrase “loss or damage to covered
property” to have the same meaning as the phrase “loss of or
damage to covered property.” Under both clauses, the word “loss”
is linked to “covered property.” When applied to § A.6.q,
therefore, “loss” refers to “loss of covered property,” not to
business income loss.
Because no provision of National Fire’s policy covers
Piccard’s loss of rental income caused by a sewer backup, we
affirm the judgment of the district court.
AFFIRMED

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