Selective Way Insurance v. Litigation Technology, Inc.

Eldridge, Judge. Litigation Technology, Inc. (“Litigation Technology”) sued its insurer, Selective Way Insurance Company (“Selective Way”), for breach of an insurance contract and bad faith refusal to pay a claim. Selective Way moved for summary judgment, asserting that Litigation Technology’s insurance policy’s “surface water” exclusion barred the claim. The trial court denied Selective Way’s motion and granted summary judgment to Litigation Technology on the breach of contract claim. With respect to bad faith refusal to pay, the trial court concluded that factual questions remain for resolution by a jury. Selective Way appeals and, for the reasons that follow, we affirm. 1. Summary judgment is appropriate when the record “show[s] that there is no genuine issue as to any material fact and . . . the moving party is entitled to a judgment as a matter of law.”1 Many of the facts in this case are undisputed. Litigation Technology leased office space in the basement of a building on Spring Street in Atlanta and insured that space through a policy issued by Selective Way. In February 2000, sewage began overflowing through the plumbing in Litigation Technology’s basement offices, and the City of Atlanta investigated to determine the cause. During the investigation, the City dug a large, 13-foot-deep pit beneath the surface of the ground under Spring Street, immediately adjacent to Litigation Technology’s building. Inside the pit, a pipe was uncovered which extended under the street and sidewalk into Litigation Technology’s basement wall, two feet above the floor. The pipe [39] was capped inside the basement, but a City worker removed the cap as part of the investigation. Following excavation, the pit was covered with a steel plate. On April 1 and 2, 2000, Atlanta experienced heavy rains. As a result, rainwater ran down Spring Street, seeped under the metal plate, and gathered into the City’s excavated pit. The water that pooled in the pit rose sufficiently to enter the uncapped pipe; it flowed through the pipe under the street and sidewalk, and discharged into Litigation Technology’s office space, causing water damage. Sewage also entered with the water. Litigation Technology filed a claim under its insurance policy for the water damage. Selective Way initially stated that it would cover the claim and did not contest it until Litigation Technology filed suit, over 18 months after the damage. Thereafter, Selective Way informed Litigation Technology that the insurance policy’s “surface water” exclusion barred the claim. That exclusion provides: We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss. . . . g. Water (1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not. (Emphasis supplied.) In its motion for summary judgment, Selective Way argued that the damage incurred by Litigation Technology resulted “directly or indirectly” from rain falling on the surface of the ground thereby placing the insurance claim within the “surface water” exclusion of the policy. The trial court denied the motion, finding that the policy covered Litigation Technology’s claim as a matter of law. Held: “The construction of an insurance contract is a question of law for the court,” and a court must enforce an unambiguous insurance policy as written.2 Here, the policy does not define the term “surface water”; however, under the “widely accepted definition,” such term means: [40] water which is derived from falling rain or melting snow, or which rises to the surface in springs, and is diffused over the surface of the ground, while it remains in such diffused state, and which follows no defined course or channel, which does not gather into or form a natural body of water, and which is lost by evaporation, percolation, or natural drainage.3 While Selective Way argues that the water which caused the damage in this case began as falling rain and thus the surface water exclusion applies, we do not find this argument persuasive; under a definitional umbrella that broad, most water could be considered “surface water.” Further, the exclusion’s “direct or indirect” language does not permit Selective Way’s construction involving damage caused by “indirect” surface water; for the exclusion to apply, the damage — whether caused directly, indirectly, or in conjunction with other factors — must still be caused by what can be defined as “surface water” at the time the damage is sustained. So, the issue here is whether falling rain loses its character as diffused “surface water” when it gathers into a 13-foot-deep underground hole, enters into a sewer pipe, and flows through the pipe under a sidewalk and into a building. In that regard, as the trial court correctly determined, this case is controlled by Aetna Fire Underwriters Ins. Co. v. Crawley,4 If my immediate drain pipe is clogged by grease, or the sewer line leading from my house is choked with roots, so that water discharged from my house is not properly carried away, the exclusion may well apply. But this water did not back up from the plaintiffs sewer or drains; it entered after collecting in an area remote from his premises and over which he had no control. Nor did it flow or leak through the plaintiffs sidewalks, driveway, foundations, walls, or floors. It. . . was discharged from his plumbing . . . systems. The insurer, under these circumstances, was clearly not entitled to a summary judgment.5 Contrary to Selective Way’s arguments, Crawley cannot legitimately be distinguished on the basis of the “direct or indirect” causation language of the policy at issue here, because the policy in Crawley [41] contained equally comprehensive causative language which excluded losses “caused by, resulting from, contributed to or aggravated by” surface water.6 “As with any insurance policy, we construe the policy exclusions most strongly against the insurer and in favor of providing the indemnity sought.”7 The water in this case lost its character as “surface water” under the well-recognized definition of that term. Water that gathers into a 13-foot-deep pit and flows into a structure through the length of an underground pipe is no longer diffused, is no longer on the surface of the ground, has gathered into a body, and has followed a defined course through the pipe and into the building. Because the damage in this case was not directly or indirectly caused by water that could be considered “surface water” at the time the damage was sustained, the exclusion does not apply. The trial court correctly denied Selective Way’s motion for summary judgment on this ground and entered judgment for Litigation Technology. 2. We find no error in the trial court’s denial of Selective Way’s motion for summary judgment on Litigation Technology’s allegation of a bad faith refusal to pay a claim. Selective Way’s exclusionary ground for refusing to pay was unfounded; this, coupled with the fact that Selective Way initially agreed to pay and did not assert its exclusionary defense for over a year and a half creates a jury issue as to whether it exercised bad faith in refusing to pay Litigation Technology’s claim. The existence vel non of bad faith is a jury question.8 Moreover, “[t]he issue of bad faith should be judged by the case made at trial, not by the preliminary proofs or other ex parte affidavits.”9 Judgment affirmed. Johnson, P. J., Miller and Adams, JJ., concur. Andrews, P. J., Ruffin, P. J., and Ellington, J., dissent. Footnotes [1] OCGA§ 9-11-56 (c). [2] Hirschfield v. Continental Cas. Co., 199 Ga. App. 654, 655 (405 SE2d 737) (1991). [3] (Citation and punctuation omitted; emphasis supplied.) Hirschfield v. Continental Cas. Co., supra. [4] 132 Ga. App. 181 (207 SE2d 666) (1974). [5] (Emphasis in original.) Id. at 183. See also Hirschfield v. Continental Cas. Co., supra (surface water exclusion applies to rainwater that backs up from a storm drain and enters a building from the surface of the ground in a diffused state). [6] Aetna Fire Underwriters Ins. Co. v. Crawley, supra at 182. [7] (Punctuation and footnote omitted.) Fidelity Nat. Title Ins. Co. v. Matrix Financial Svcs. Corp., 255 Ga. App. 874, 878 (1) (b) (567 SE2d 96) (2002). [8] Blue Ridge Ins. Co. v. Maddox, 185 Ga. App. 153 (3) (363 SE2d 595) (1987). [9] (Citation omitted.) Stegall v. Guardian Life Ins. Co., 171 Ga.App. 576, 577-578 (320 SE2d 575) (1984).