Amish Connection, Inc. v. State Farm Fire and Casualty Company

IN THE COURT OF APPEALS OF IOWA

No. 3-1205 / 13-0124
Filed March 26, 2014

AMISH CONNECTION, INC.,
Plaintiff-Appellant,

vs.

STATE FARM FIRE AND CASUALTY
COMPANY,
Defendant-Appellee.
________________________________________________________________

Appeal from the Iowa District Court for Black Hawk County, Kellyann M.

Lekar, Judge.

Insured appeals an adverse grant of summary judgment holding loss was

not covered by insurance policy. REVERSED AND REMANDED.

Samuel C. Anderson and Joseph G. Martin of Swisher & Cohrt, P.L.C.,

Waterloo, for appellant.

Mark W. Thomas of Grefe & Sidney, P.L.C., Des Moines, for appellee.

Considered by Vogel, P.J., and Mullins and McDonald, JJ.
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McDONALD, J.

What is the meaning of “rain”? That is the question presented in this

insurance coverage dispute. Amish Connection, Inc., (hereinafter “Amish

Connection”) appeals from an adverse grant of summary judgment in which the

district court held, as a matter of law, Amish Connection’s loss was not covered

under a business insurance policy issued by State Farm Fire & Casualty

Company (hereinafter “State Farm”) due to a limitation on “loss . . . to the interior

of any building or structure, or the property inside any building or structure,

caused by rain.” We reverse the judgment of the district court and remand for

further proceedings.

I.

Amish Connection leased space in the Crossroads Shopping Mall in

Waterloo to operate the Amish Connection Store. At all times relevant to this

suit, Amish Connection was using the leased space only for storage. Above the

ceiling and along the interior back wall of Amish Connection’s leased space was

a four-inch cast iron drain pipe connected to the building’s roof drain line. The

roof drain system in the mall was designed to collect water on the roof and

transport the water through interior pipes in the mall and down to the storm

sewer. On the evening of June 14 and the morning of June 15, 2010, it rained

heavily in Waterloo. At some point during this storm, the drain pipe over Amish

Connection’s unit burst, flooding portions of Amish Connection’s storage space

and causing damage to the unit and the property within.
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Amish Connection purchased a business policy from State Farm. The

policy insured “for accidental direct physical loss to property . . . unless the loss

is: 1. limited in the PROPERTY SUBJECT TO LIMITATIONS section; or 2.

Excluded in the LOSSES NOT INSURED section” of the policy. On or about

June 16, 2010, Amish Connection submitted a claim to State Farm for the water

damage to its storage space and inventory. By letter dated the same day, State

Farm denied Amish Connection’s claim for coverage, citing a limitation in the

PROPERTY SUBJECT TO LIMITATIONS section of the policy for loss “caused

by rain.”

On December 27, 2010, Amish Connection initiated this proceeding. In its

amended petition, Amish Connection asserted a claim against State Farm for

breach of contract arising out of State Farm’s denial of Amish Connection’s

claim. State Farm filed its motion for summary judgment, arguing that the rain

limitation precluded recovery for Amish Connection’s loss. The district court

agreed and granted State Farm’s motion for summary judgment.

II.

Summary judgment should be granted only “if the pleadings, depositions,

answers to interrogatories, and admissions on file, together with the affidavits, if

any, show that there is no genuine issue as to any material fact and that the

moving party is entitled to a judgment as a matter of law.” Iowa R. Civ. P.

1.981(3). The party seeking summary judgment has the burden of establishing

that the facts are undisputed and that the party is entitled to judgment as a matter

of law. See Estate of Harris v. Papa John’s Pizza, 679 N.W.2d 673, 677 (Iowa
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2004). Summary judgment is correctly granted where the only issue to be

decided is what legal consequences follow from otherwise undisputed facts. See

Emmet Cnty. State Bank v. Reutter, 439 N.W.2d 651, 653 (Iowa 1989). We

review the district court’s grant of summary judgment for correction of errors at

law. See Boelman v. Grinnell Mut. Reins. Co., 826 N.W.2d 494, 500 (Iowa 2013

III.

The standards for interpreting and construing insurance policies are well

established, and they need not be repeated at any great length here. See

Boelman, 826 N.W.2d at 501-02. We begin our analysis by looking at the plain

language of the policy. The policy provides that State Farm will pay for

“accidental direct physical loss to property covered” unless the loss is otherwise

limited or excluded. State Farm contends Amish Connection’s loss is not within

the initial grant of coverage pursuant to the following limitation on loss “caused by

rain”:

PROPERTY SUBJECT TO LIMITATIONS

We will not pay for loss:

....

6. to the interior of any building or structure, or the property
inside any building or structure, caused by rain, snow, sleet, ice,
sand or dust, whether driven by wind or not, unless:
a. the building or structure first sustains damage by an insured
loss to its roof or walls through which the rain, snow, sleet, ice,
sand or dust enters; or
b. the loss is caused by thawing of snow, sleet or ice on the
building or structure;
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“Rain” is not a defined term in the policy. “Words that are not defined in

the policy are given their ordinary meaning, one that a reasonable person would

understand them to mean.” Bituminous Cas. Corp. v. Sand Livestock Sys., Inc.,

728 N.W.2d 216, 220-21 (Iowa 2007) (citation and internal quotation marks

omitted). The ordinary meaning of “rain” is well understood. Gene Kelly sang in

it. Noah sailed through it. It is water falling from the sky. The common

understanding of “rain” is reinforced by reference materials. See Merriam-

Webster, http://www.merriam-webster.com/dictionary/rain (last visited January 7,

2014) (defining “rain” as “water falling in drops condensed from vapor in the

atmosphere”); Webster’s Third New Int’l Dictionary (Unabridged) 1876 (1993)

(same). We think it fair to say that a reasonable person standing in the interior of

a shopping mall underneath a burst drain pipe would not conclude that he or she

was standing in the “rain.” Under the plain language of the policy, Amish

Connection’s loss is not limited by the provision on which State Farm relies.

The district court reached the opposite conclusion. In State Farm’s

memorandum in support of motion for summary judgment and at oral argument

on the motion, State Farm argued the water emitted from the burst pipe was

“rainwater.” Because the water from the pipe was “rainwater,” State Farm

contended the limitation applied. The district court agreed with the proposed

interpretation. In ruling on State Farm’s motion for summary judgment, the

district court stated, “The Court does not find that the language in the policy is

ambiguous. Rainwater only has one plain meaning.” The district court then

analogized the interior drain system in the mall to an external gutter. Because
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the water collected in an external gutter “would unquestionably be considered

rainwater,” the court determined “as a matter of law the water running through

the pipe which caused the loss on the leased premises was rainwater.”

Accordingly, the district court held, the loss was not within the initial grant of

coverage. We conclude the district court erred.

First, “[t]he plain meaning of the insurance contract generally prevails.”

Boelman, 826 N.W.2d at 501. Here, the policy limits coverage for loss “caused

by rain.” The policy does not use the term “rainwater.” The distinction is

important. As previously stated, “rain” is water falling in condensed drops from

the atmosphere. “Rainwater” is a separate and distinct term meaning “water

fallen as rain that has not had an opportunity to collect soluble matter from the

soil.” Webster’s Third New Int’l Dictionary (Unabridged) 1876 (1993). The

definitions of “rain” and “rainwater,” although similar, encompass two different

points in time. As water is falling, it is considered “rain.” After it has fallen—and,

as here, been collected on a rooftop and channeled into pipes for transport to a

storm sewer—it is considered “rainwater.” As one court noted:

“Rain” is ordinarily and commonly thought of as water falling from
the sky. After it stops falling, one does not say that it is “raining”
although there may still be wet sidewalks and streets, puddles of
water resulting from the rain, or water running through gutters and
elsewhere as a result of the rain. It is not common or usual to say in
such instances that it is still raining . . . . If, by definition, “rain”
remains “rain” after it stops falling, then the water in streams and
lakes, coming from household faucets, etc. is “rain” since it
originated, partly at least, from water that fell from the sky.

State Farm Fire & Cas. Co. v. Paulson, 756 P.2d 764, 767 (Wyo. 1988) (holding

that “rain” became “surface water” upon striking the earth, and therefore, water
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that entered the building through a broken window was excluded under a

“surface water” exclusion); see also Unobskey v. Cont’l Ins. Co., 86 A.2d 160,

164 (Me. 1952) (noting that in an insurance policy excluding damage “caused by

rain,” the exclusion would not apply to “damage caused by running surface water

from rainstorm”). While the water emitting from the burst pipe may fall within the

definition of “rainwater,” it does not fall within the definition of “rain”. Because

loss caused by “rainwater” is not excluded or otherwise limited under the policy,

the district court erred in interpolating the term “rainwater” into the policy and

concluding the interpolated term was unambiguous.

Second, even if “rain” could have a secondary meaning encompassing

“rainwater,” ambiguities in limitation provisions must be construed in favor of the

insured. See LeMars Mut. Ins. Co. v. Joffer, 574 N.W.2d 303, 307 (Iowa 1998)

(“Because of the adhesive nature of insurance policies, their provisions are

construed in the light most favorable to the insured.”). Thus, exclusions from and

limitations of coverage are construed strictly against the insurer. See id. “[W]hen

an insurer has affirmatively expressed coverage through broad promises, it

assumes a duty to define any limitations or exclusionary clauses in clear and

explicit terms.” Bituminous Cas. Corp., 728 N.W.2d at 220 (citation and internal

quotation marks omitted) (alteration in original). “Where the meaning of terms in

an insurance policy is susceptible to two interpretations, the one favoring the

insured is adopted.” N. Star Mut. Ins. Co. v. Holty, 402 N.W.2d 452, 454 (Iowa

1987). Thus, to the extent that “rain” could be interpreted to mean “rainwater,”
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the ambiguity should have been construed in favor of Amish Connection and

against State Farm.

IV.

The district court erred by finding that the rain limitation was applicable to

this case. The court has considered the parties’ remaining arguments and

concludes that the arguments are best addressed in the district court in the first

instance. The judgment of the district court is reversed and the matter is

remanded for further proceedings consistent with this opinion.

REVERSED AND REMANDED.