A federal court in Texas held that a water exclusion endorsement precluded coverage for damages resulting from a failed pipe under the insured property. Praetorian Insurance Company v. Arabia Shrine Center Houston, 2016 WL 687564 (S.D. Tex. Feb. 19, 2016).

The insurer issued a CGL policy to an event venue. During the policy period, a pipe beneath the floor in the ballroom lobby failed, causing more than a million gallons of water to be released into the facility. The facility’s insurer denied the claim in part, accepting only the limited additional coverage for water damage and personal property coverage. The facility disputed the denial, and the insurer filed a declaratory action in federal court asserting that the policy did not cover damages beyond the amounts already paid. The facility counterclaimed alleging breach of contract, breach of the duty of good faith and fair dealing, and violations of the Texas Insurance Code. The parties filed cross-motions for summary judgment.

The court granted the insurer’s motions for summary judgment affirming its coverage position and denied the facility’s motion. The court held that the damage sought resulted from an excluded cause of loss pursuant to the policy’s water exclusion. It provided that the insurer would not pay for loss or damage resulting directly or indirectly from “water under the ground surface pressing on, or flowing or seeping through” the facility’s “foundation, walls, floor or paved surfaces.” The court also found that the facility’s counterclaims failed because the insurer had no obligation to provide additional coverage and the facility presented insufficient evidence that the insurer unreasonably delayed making a coverage decision.

The insurer was represented by Phelps Dunbar attorneys. Please contact Peri Alkas or Laura Englert in our Houston office for further details about this opinion.