Opinion
2 CA-CV 2023-0047
08-02-2023
Joshua Ryder, Plaintiff/Appellant, v. State Farm Fire & Casualty Company,
Raymond, Greer & McCarthy P.C., Scottsdale By Michael J. Raymond and Daniel W. McCarthy Counsel for Plaintiff/Appellant Broening Oberg Woods & Wilson P.C., Phoenix By Kelley M. Jancaitis and Robert T. Sullivan Counsel for Defendant/Appellee
Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court
Appeal from the Superior Court in Pinal County No. S1100CV202200369 The Honorable Lacey Stover Gard, Judge
Raymond, Greer & McCarthy P.C., Scottsdale By Michael J. Raymond and Daniel W. McCarthy Counsel for Plaintiff/Appellant
Broening Oberg Woods & Wilson P.C., Phoenix By Kelley M. Jancaitis and Robert T. Sullivan Counsel for Defendant/Appellee
Chief Judge Vasquez authored the decision of the Court, in which Presiding Judge Eppich and Judge Kelly concurred.
MEMORANDUM DECISION
Vasquez, Chief Judge
¶1 Joshua Ryder appeals from the superior court's summary judgment in favor of State Farm Fire & Casualty Company on Ryder's claims arising out of State Farm's denial of his property damage claim. Ryder argues summary judgment was improper because State Farm did not meet its burden of showing the insurance policy's exclusion for flood damage caused by subsurface water applied to his claim. Ryder also argues the court erred in denying his motion for partial summary judgment as to coverage on the basis that the policy's subsurface water exclusion applies to damage caused by plumbing leaks. For the following reasons, we vacate the court's judgment and remand for further proceedings.
Factual and Procedural Background
¶2 We view the facts and reasonable inferences therefrom in the light most favorable to Ryder, the party opposing summary judgment. See Windhurst v. Ariz. Dep't of Corr., 252 Ariz. 240, ¶ 2 (App. 2021). In August 2021, Ryder discovered a water leak that resulted in damage to his residence, which was insured by a State Farm homeowners policy. Ryder hired a plumbing company to diagnose the water leak, which was determined to have originated "directly underneath the water heater" beneath the residence's concrete slab. The plumbing company repaired the leak by intercepting the main water service entry and rerouting the line through the wall. Because the repair bypassed the subsurface water line, the plumbing company was unable to determine the exact depth of the faulty water line but estimated it was around twelve to eighteen inches below the slab based on the relevant codes and Arizona's hot climate.
¶3 The insurance policy generally covers "accidental direct physical loss" to the residence, which includes the fill area "not more than [twelve] inches directly below" the residence's slab. The policy also includes several exclusions, or "losses not insured." State Farm denied Ryder's claim under one such exclusion-the subsurface water exclusion. That exclusion provides, in pertinent part:
We will not pay for, under any part of this policy, any loss that would not have occurred in the absence of one or more of the following excluded events. We will not pay for such loss regardless of: (a) the cause of the excluded event; or (b) other causes of the loss; or (c) whether other causes acted concurrently or in any sequence with the excluded event to produce the loss; or (d) whether the event occurs abruptly or gradually, involves isolated or widespread damage, occurs on or off the residence premises, arises from any natural or external forces, or occurs as a result of any combination of these:
....
Water, meaning:
....
[W]ater or sewage below the surface of the ground, including water or sewage that exerts pressure on, or seeps or leaks through a building structure, sidewalk, driveway, swimming pool, or other structure; .... (Emphasis omitted.)
¶4 Ryder filed a civil action against State Farm, asserting claims for breach of contract and bad faith. In his complaint, Ryder asserted that the subsurface water exclusion was "only meant to bar coverage for subsurface water such as natural springs and the like, not pipe leaks that are below the slab of the home." State Farm moved for summary judgment, arguing that Ryder's claims fail as a matter of law because applying the policy's unambiguous language to the undisputed material facts demonstrates there is no coverage. The superior court granted State Farm summary judgment on that basis. Ryder appealed, and we have jurisdiction under A.R.S. §§ 12-120.21(A)(1) and 12-2101(A)(1).
Discussion I. Subsurface Water Exclusion Interpretation
¶5 On appeal, Ryder contends that his claim is covered because plumbing leaks are excepted from the policy's subsurface water exclusion, which he argues only applies to damage from naturally occurring water sources. State Farm contends, and the superior court agreed, that Ryder's interpretation is inconsistent with the policy's plain language, which is unambiguous and "plainly excludes coverage for sub-surface water damage, regardless of its cause." We review the court's grant of summary judgment, which is based upon its interpretation of State Farm's homeowners insurance policy, de novo. See Cal. Cas. Ins. Co. v. Am. Fam. Mut. Ins. Co., 208 Ariz. 416, ¶ 5 (App. 2004).
¶6 In interpreting an insurance policy, we accord the words therein their plain and ordinary meanings and analyze it "from the viewpoint of an individual untrained in law or business." Desert Mountain Props. Ltd. P'ship v. Liberty Mut. Fire Ins. Co., 225 Ariz. 194, ¶ 14 (App. 2010). A policy subject to "conflicting reasonable interpretations" is ambiguous. Teufel v. Am. Fam. Mut. Ins. Co., 244 Ariz. 383, ¶ 10 (2018) (quoting State Farm Mut. Auto. Ins. v. Wilson, 162 Ariz. 251, 258 (1989)). And provisions in a policy that are "actually ambiguous" are construed against the insurer, particularly when the ambiguity involves an exclusionary clause. Thomas v. Liberty Mut. Ins. Co., 173 Ariz. 322, 325 (App. 1992). However, where the policy language is unambiguous, a court may not invent ambiguity and then resolve it to find coverage, even if doing so would "accomplish a so-called good purpose." Sec. Ins. Co. of Hartford v. Andersen, 158 Ariz. 426, 428 (1988) (quoting Stearns-Roger Corp. v. Hartford Accident & Indem. Co., 117 Ariz. 162, 165 (1977)).
¶7 Applying these principles here, there is no question that damage resulting from "water or sewage below the surface of the ground" is outside the scope of the policy's coverage when the source of the water damage is located "more than [twelve] inches directly below" the building structure's slab. Ryder nevertheless argues that plumbing leaks are not included within the subsurface water exclusion's term "water," which he posits is "uniformly define[d] . . . to mean something that is naturally occurring or otherwise outside the plumbing system." Ryder's interpretation is belied by the inclusion of the term "sewage" in the meaning of water in several instances under the policy's exclusions. The plain and ordinary meaning of the term sewage is "[l]iquid and solid waste carried off in sewers or drains." Sewage, The American Heritage Dictionary (5th ed. 2011). We decline to adopt Ryder's reading of the exclusion that the references to sewage must refer to only sewage found outside of the plumbing system because to do so would require us to create ambiguity where none exists. See Andersen, 158 Ariz. at 428.
¶8 Our interpretation is supported by the introductory clause to the subsurface water exclusion which states State Farm will not pay for any loss resulting from a detailed list of excluded events, "regardless of . . . the cause of the excluded event." Contrary to Ryder's assertion that this clause is "largely irrelevant," we conclude it defines the scope of the policy's exclusions. The policy unambiguously excludes any loss resulting from water damage that is more than twelve inches below the building structure's slab regardless of whether it is caused by a natural water source or a leak in the plumbing system.
II. Location of Water Leak
¶9 Ryder also contends summary judgment to State Farm was improper because there is a genuine factual dispute concerning the depth of the water leak. We agree that the depth of the water leak is an essential fact in determining whether summary judgment was proper. Summary judgment is appropriate "if the moving party shows that there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law." Ariz. R. Civ. P. 56(a). However, "[a]ny evidence or reasonable inference contrary to the material facts . . . will preclude summary judgment." United Bank of Ariz. v. Allyn, 167 Ariz. 191, 195 (App. 1990). "Mere speculation or insubstantial doubt as to the facts will not suffice, but where the evidence or inferences would permit a jury to resolve a material issue in favor of either party, summary judgment is improper." Id. We review de novo whether there are any genuine issues of material fact. Eller Media Co. v. City of Tucson, 198 Ariz. 127, ¶ 4 (App. 2000).
¶10 The policy covers "accidental direct physical loss" to the "building structure on the residence premises used as the primary private residence." (Emphasis omitted.) As relevant here, the term "building structure" includes the fill material "located not more than [twelve] inches directly below" the building structure's slab, "including water supply lines, domestic water pipes, and sewer pipes located within this fill material."
¶11 In its motion for summary judgment, State Farm argued the plain language of the policy "is subject to only one reasonable interpretation and excludes coverage for losses caused by a water leak from [twelve] or more inches below the ground surface." But this argument misquotes the policy's language that the building structure includes the fill material that is "not more than [twelve] inches" below the slab. Notably, in its statement of facts, State Farm conceded: "For purposes of this Motion . . . if a water leak originates from within the bounds of the building structure '(within the fill but not more than [twelve inches] [underground]) that would not be considered sub-surface.'" Therefore, the parties apparently agree, and so do we, that if a water leak originated not more than twelve inches below the building structure's slab, any resulting damage regardless of its source, would be covered by the policy.
¶12 In support of its motion, State Farm submitted records from the plumbing company as evidence of the water pipe's depth. The plumber who performed the repair noted, "It is impossible to know how deep the lines are under the slab since we never went through the concrete." But he noted that "Code requires [twelve to eighteen] inches deep so our assumption is that they are around [twelve] inches." After State Farm requested "clarification for the depth of the leak," the plumbing company manager explained, "We expect it to be at least [eighteen] inches deep in the dirt (not counting concrete) because of summer heat."
¶13 State Farm argued that based on this evidence, "no reasonable juror could find [it] declined payment for covered losses or otherwise breached the contract" and it was therefore entitled to summary judgment. Ryder however disputed that this evidence supported State Farm's determination that the loss was excluded. He maintained the subsurface water exclusion does not apply because the plumber's statement "suggest[ed] that the leak may be within [twelve] inches of the slab."
¶14 Both parties are entitled to all reasonable inferences that can be drawn from the undisputed evidence that the water leak originated somewhere between twelve and eighteen inches below the building structure's slab. See Allyn, 167 Ariz. at 195; cf. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 596-97 (1986) (noting that "equally plausible explanations" for circumstantial evidence may defeat summary judgment). And based on this evidence, a reasonable juror could conclude that Ryder's loss is within the scope of the policy's coverage. As noted above, the plumber stated that the applicable code requires lines to be buried twelve to eighteen inches deep, "so our assumption is that they are around [twelve] inches." To the extent State Farm contends the clarification from the manager proves the leak originated more than twelve inches below the building structure's slab, this is a question for the trier of fact because weighing the evidence, making credibility determinations, and choosing among competing inferences is not appropriate at the summary judgment stage. See Orme Sch. v. Reeves, 166 Ariz. 301, 310-11 (1990). Summary judgment was therefore improper on Ryder's breach of contract claim because there is a genuine factual dispute whether the policy covers the loss.
Ryder requests that we instruct the superior court on remand to enter judgment in his favor, arguing the subsurface water exclusion does not apply to plumbing leaks and even if it did, State Farm failed to prove the water leak originated more than twelve inches below the slab. Given our interpretation of the subsurface water exclusion and the absence of any evidence the leak definitively originated twelve inches or less below the slab, we decline to do so.
¶15 The superior court also granted State Farm's motion for summary judgment on Ryder's claims for bad faith and punitive damages based on its finding that there was "no genuine dispute that the insurance company had a reasonable basis for denying the claim here." On remand, in light of this decision, the court may reconsider whether summary judgment on these claims is warranted.
III. Attorney Fees on Appeal
¶16 Ryder requests an award of attorney fees under A.R.S. § 12-341.01. State Farm requests its attorney fees and costs under Rule 21(a), Ariz. R. Civ. App. P., and A.R.S. §§ 12-341 and 12-341.01. Section 12-341.01 permits the award of attorney fees "[i]n any contested action arising out of a contract." In our discretion, we decline to award fees to either party. However, as the prevailing party, Ryder is entitled to his costs on appeal upon his compliance with Rule 21. See § 12-341.
Ryder also requests his attorney fees "in the trial court." We decline this request because he has provided no basis for our authority to award attorney fees on behalf of the superior court. See Hale v. Amphitheater Sch.Dist. No. 10, 192 Ariz. 111, ¶ 20 (App. 1998) (attorney fees award is within the sound discretion of the superior court).
Disposition
¶17 For the foregoing reasons, we vacate the superior court's summary judgment in favor of State Farm and remand for further proceedings consistent with this decision.