The Oklahoma Supreme Court remanded a case in which judgment was entered dismissing an insurer, finding that a homeowner’s policy had conflicting language in its “sewer or drain backup” exclusion and the accidental-discharge-coverage provision. Porter v. Oklahoma Farm Bureau Mut. Ins. Co., 2014 WL 2726942 (Okla. June 17, 2014).
The insureds filed a claim with their property insurer, which was denied. The insureds then sued their insurer, which became a class action suit. The policy covered “[a]ccidental discharge or overflow of water or steam from within a plumbing, heating, air conditioning or automatic fire protection sprinkler system or domestic appliance,” excluding loss “on the residence premises caused by accidental discharge or overflow which occurs off the residential premises.” However, the “sewer or drain backup” exclusion provided “we do not cover loss resulting directly or indirectly from: 3. Water damages meaning … b. water which backs up through sewers or drains ….” The insureds argued that the policy provisions simultaneously include and exclude coverage for raw sewage damage and that the ambiguity should be reconciled by finding coverage. The district court and Oklahoma Court of Appeals both found that no disputed fact existed and held in favor of the insurer.
The Oklahoma Supreme Court held this finding to be in error because the insurer maintained that the loss resulted from a severed sewer line off-premises while the insureds maintained that the loss resulted from sewage and wastewater overflow. The Supreme Court held that the policy actually provided distinct coverage for real and personal property and thus did not create an ambiguity because appliances, such as an ice maker, bathtub or hot water tank, may overflow without the overflow originating in drains or sewers and applied only to personal property. As the insureds claimed only real property damage, the Supreme Court remanded the matter for a determination as to the source of the insured’s damage, holding that coverage would exist under the general provisions of the policy if the plumbing system was the source but none would exist if the severed sewage line were the source.