Back in May of 2014, I wrote a blog post entitled: Stranger Than Fiction: Property Insurance Policies Do Not Cover…Exploding Corpses!!?! Today, I write on a more recent case out of Colorado.1 What do they have in common, you ask? Both cases deal with creative ways lawyers try to argue the losses at issue were explosions.
On September 12, 2013, after torrential rain hit Boulder, Colorado, “a violent flow of water, mud, and debris thundered down a hillside and into the [commercial] Building, causing extensive damage.”2 The property owner, Paros Properties, LLC, submitted a claim to their commercial insurance carrier, Colorado Casualty Insurance Company. The carrier briefly inspected the property and denied the claim stating, “[t]he inspection revealed that there was a Mudslide that caused the damage to your buildings. Damages caused by Mudslides or Mudflows are specifically excluded under your policy.”
Following the denial, Paro hired counsel to challenge the denial:
Counsel hired an engineer, who inspected the Building on October 15, 2013, and (after a site inspection a year later) issued a report on his findings on November 3, 2014. According to the report, “The debris laden flow impacted the south elevation of the structure, causing a sudden reaction of the wall structure.” [] The impact caused the property to “split into two separate structures along a north-south wall line. The eastern portion laterally displaced to the northeast, while the western portion laterally displaced to the northwest. The roof structure collapsed where the building separation occurred due to the sudden loss of the bearing walls.” [] …
On October 24, 2013, counsel for the Owner sent a letter to the Insurer claiming wrongful denial of coverage. It stated that the “force of the mudslide caused [the Owner’s] building, literally, to explode,” [] and that the resultant damage was therefore compensable under the explosion exception to the mudslide exclusion in the Policy.3
The policy at issue contained the following “Water Exclusion Endorsement, which exclud[ed] from coverage any damage caused by the following water-based sources:
1. Flood, surface water, waves (including tidal wave and tsunami), tides, tidal water, overflow of any body of water, or spray from any of these, all whether or not driven by wind (including storm surge);
2. Mudslide or mudflow;
3. Water that backs up or overflows or is otherwise discharged from a sewer, drain, sump, sump pump or related equipment;
4. Water under the ground surface pressing on, or flowing or seeping through:
a. Foundations, walls, floors or paved surfaces;
b. Basements, whether paved or not; or
c. Doors, windows or other openings; or5. Waterborne material carried or otherwise moved by any of the water referred to in Paragraph 1., 3., or 4., or material carried or otherwise moved by mudslide or mudflow.
This exclusion applies regardless of whether any of the above, in Paragraphs 1. through 5., is caused by an act of nature or is otherwise caused.
There is, however, an exception to this exclusion for damage from explosions:
But if any of the above, in Paragraphs 1. through 5., results in fire, explosion or sprinkler leakage, we will pay for the loss or damage caused by that fire, explosion or sprinkler leakage (if sprinkler leakage is a Covered Cause of Loss).
In short, the Policy does not cover damage caused by water, but does cover damage caused by an explosion caused by water.”
The Carrier, after removing the matter to federal court, moved for summary judgment. The United States District Court for the District of Colorado granted the motion. The policyholder appealed to the Tenth Circuit Court of Appeals.
The Tenth Circuit ultimately found Paro’s argument unconvincing, “[t]he Owner contends that the mudslide ‘caus[ed] the Building to violently and suddenly burst apart with a loud boom,’ that is to say, caused the building to explode, thus bringing the damage within the explosion exception to the water exclusion. [] We disagree that demolition by an external cascade of water, mud, and debris is an explosion under the Policy.” As the policy at issue did not define the term, “explosion,” the court had to interpret the contract and assign the term is “plain and ordinary meaning.”
Rather than attempt to paraphrase, I’ll provide you with the court’s entire breakdown:
The Policy itself does not define the term explosion. But that does not mean that the term must be construed to encompass all possible meanings, even if found in the dictionary. Context matters. We would be reluctant, for example, to construe policy language to include figurative meanings. See Rhinelander v. Ins. Co. of Pennsylvania, 8 U.S. (4 Cranch) 29, 44, 2 L.Ed. 540 (1807) (“Commercial contracts have but little connection with figurative language.”). Although a football player may “explode” off the line of scrimmage, we would not construe the exception to the exclusion to include damage to a wall from someone (even someone who is 6′6″ tall and weighs 330 pounds) fleeing a flash flood. Nor does it make sense to construe the term explosion in a way that would undermine the exclusion to which it is an exception. The Owner urges us to find an explosion any time an external impact transfers sufficient kinetic energy to a structure to destroy it. But the exclusion includes tidal waves, tsunamis, and mudslides, which all typically produce extreme forces that can smash anything in their paths; to adopt the Owner’s conception would be to read those exclusions out of the Policy.
What makes most sense in the present context is the classical notion of an explosion, as from a bomb or leaking gas. Such an explosion involves a buildup of internal pressure and a sudden bursting outward in all available directions. The exception would apply, for example, if a mudslide damaged a gas pipe, creating a leak of gas that was ignited and exploded. Our understanding of the term is consistent with that of other courts construing “explosion” in an insurance policy. See Pre–Cast Concrete Prods., Inc. v. Home Ins. Co., 417 F.2d 1323, 1328 (7th Cir. 1969) (“[A]n explosion occurs when the pressure inside the container exceeds the strength of the container and results in a sudden release of the pressure.”); Jersey Ins. Co. of N.Y. v. Heffron, 242 F.2d 136, 139 (4th Cir. 1957) (finding an explosion where “the roof, falling intact like a huge piston … gradually built a compression of air … great enough to burst the first story windows”); Commercial Union Fire Ins. Co. v. Bank of Ga., 197 F.2d 455, 457 (5th Cir. 1952) (In a bursting-fire-hydrant case, “the bursting [was] caused by excessive pressure, and the pressure [was] caused by pent-up energy.”); Bower v. Aetna Ins. Co., 54 F.Supp. 897, 898 (N.D. Tex. 1944) (“The application of a force from within the radiators which the radiators, or the pipes, could not resist, and burst, or exploded is apparently what happened.”); Sperling v. Allstate Indemnity Company, 182 Vt. 521, 944 A.2d 210, 217 (2007) (“In the absence of the release of energy through an ignitable substance, decisions require a buildup of internal pressure preceding the rupture in order to define the event as an explosion.”).
To convince us that the term explosion includes causes not driven by internal pressure, the Owner points to Stone Container Corp. v. Hartford Steam Boiler Inspection & Ins. Co., 165 F.3d 1157, 1160 (7th Cir. 1999), which states in dictum that a watermelon explodes when shot through with a bullet. But that statement does not help the Owner. The court was asked to limit the term explosion to an event caused by “combustion or some other chemical reaction.” Id. at 1159. It declined, explaining that to limit explosion in that way would improperly exclude from the term’s scope an atomic bomb or “volcanic explosions, as well as the ‘explosion’ of a tire caused by a blowout, the explosion of a melon caused by a bullet….” Id. at 1160. This comment reflects a (seemingly correct) belief that the melon explodes due to some source other than combustion or chemical reaction. It does not suggest that the source is something other than a buildup of internal pressure. And that is, in fact, the case, as far as we can discern: a bullet entering a watermelon compresses the fluid within it and creates a hydrostatic shock wave through the fluid that presses in all directions against the rind until it bursts. See “Hydrostatic shock,” available at https://en.wikipedia.org/wiki/Hydrostatic_shock (last visited August 2, 2016); “Why do watermelons explode,” available at http://bit.ly/1qC0OfW (last visited August 2, 2016).
Given our understanding of the policy language, we must affirm the district court. The Owner does argue briefly that a buildup of internal pressure did damage the building. Drawing an analogy to the popping of an overfilled balloon, the Owner suggests “that mud, water, and debris may have filled up the Building to the point of failure, at which time the walls burst outward in a catastrophic and sudden explosion.” [] The problem for the Owner is that there is no evidence to support this argument. The Owner’s own engineer found that the north-traveling mudslide displaced the building’s walls upon impact, not after filling the building with mud. [] Report [] at 65 (“The debris laden flow impacted the south elevation of the structure, causing a sudden reaction of the wall structure….”). The walls moved laterally to the north, not outward in all directions. And the roof did not burst outward as from an explosion, but rather “collapsed.” []
While an interesting and certainly creative argument, much like the matter of the exploding corpse, the court ultimately found for the carrier and summary judgment was granted.
As always, I’ll leave you with a (mildly) related tune. Here’s Fleetwood Mac with Landslide:
https://youtube.com/watch?v=6yY4bNCx9TY
1 Paros Properties, LLC v. Colorado Casualty Ins. Co., 2016 WL 4502286 (10th Cir. August 29, 2016).
2 Id. at *1.
3 Id. internal citations omitted.
