The Iowa Court of Appeals recently gave a stark reminder of the limits of insurance policies when it comes to floods. In the case, Mt. Zion Missionary Baptist Church v. Church Mutual Insurance Co.,Mt. Zion sought coverage from its insurer, Church Mutual, for damage sustained during a flood. The insurer denied the claim. Zion then sued Church Mutual for breach of the insurance contract. The trial court rejected Zion's claim because of the policy's exclusion for flood damage.
Zion had property insurance on its church building, but not flood insurance, through its Church Mutual. In 2008, the Cedar River overflowed its banks and inundated Cedar Rapids. Several hours before the surface waters reached the church, the sewer backed up into the church basement. Zion then sought coverage for the damage caused by the sewer backup.
Zion's problem was that the Church Mutual explicitly excluded coverage for flood damage or sewer backups caused by a flood. The applicable coverage exclusion foreclosed coverage for "[f]lood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not. . . ." The church may have had sewer backup coverage, but "only if caused by an event away from the described buildings and when the damage is not caused by flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not." So the trial court ruled against Zion because the sewer backup was caused by a flood.
The Iowa Court of Appeals spent little time dismissing the church's arguments on appeal. Quoting from an earlier case that also involved a Church Mutual policy, the court noted that "[t]he policy language is clear that water or sewage back up that enters the property due to an event away from the covered property is not covered if the water or sewage back up was caused by flood, surface water, or the overflow of any body of water. The policy language cannot be reasonably read in any other way. The provision of the policy pertaining to sewer back up coverage simply reinforces that coverage is not provided for damage resulting from flood, surface water, or overflow of any body of water that enters the building through foundations, walls, floors, windows, cracks, roofs, or through other opening of the building."
Zion tried to escape the flood exclusion by arguing that its "reasonable expectations" were frustrated by the Church Mutual’s decision to deny coverage for the sewer backup damages. The "reasonable expectations doctrine" can only be invoked when an exclusion (1) is bizarre or oppressive; (2) eviscerates terms explicitly agreed to; or (3) eliminates the dominant purpose of the transaction. The reasonable expectations is sometimes, but rarely, used to allow policyholders to avoid the insurance policy's plain language. But the court decided that the reasonable expectations doctrine was inapplicable to Zion's sewer backup claim.
Mt. Zion is really a straightforward, uncomplicated insurance contract/policy case. The starting point in insurance dispute cases is to look at the policy's actual language. Unless that language is ambiguous, courts generally look no farther in determining whether there's insurance coverage for a certain event. Only if the policy's language is ambiguous and subject to more than one interpretation will a court engage in a deeper analysis. And only in rare instances will a court ignore the policy's language through application of the reasonable expectations doctrine. In short, the language of your insurance policy will probably govern. You're presumed to have read that policy, so it's always best to do so, familiarize yourself with the policy's coverages, exclusions, and other terms and conditions, and modify your coverage or buy additional coverage if necessary.
Please feel free to contact us if you need the assistance of a Des Moines insurance lawyer.