                                                                                                                           Opinions of the United
2008 Decisions                                                                                                             States Court of Appeals
                                                                                                                              for the Third Circuit


3-18-2008

THE Ins Co v. Charles Boyer
Precedential or Non-Precedential: Non-Precedential

Docket No. 06-4715




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                                                                    NOT PRECEDENTIAL

                       UNITED STATES COURT OF APPEALS
                            FOR THE THIRD CIRCUIT


                                       No. 06-4715


                            T.H.E. INSURANCE COMPANY

                                            v.

                       CHARLES BOYER CHILDRENS TRUST
                        d/b/a BOYER’S WESTWOOD LANES,

                                                        Appellant


                      Appeal from the United States District Court
                         for the Middle District of Pennsylvania
                           (D.C. Civil Action No. 04-cv-01652)
                      District Judge: Honorable Thomas I. Vanaskie


                       Submitted Under Third Circuit LAR 34.1(a)
                                   February 4, 2008

                     Before: MCKEE and AMBRO, Circuit Judges,
                             and IRENAS,* District Judge

                              Opinion filed: March 18, 2008



                                        OPINION




       *
         Honorable Joseph E. Irenas, Senior District Judge for the District of New Jersey,
sitting by designation.
AMBRO, Circuit Judge

       T.H.E. Insurance Company1 (“T.H.E.”) sought a declaratory judgment that the

insurance policy it issued to Charles Boyer Children’s Trust, doing business as Boyer’s

Westwood Lanes (“Westwood”), did not cover water damage to Westwood’s bowling

alley. The United States District Court for the Middle District of Pennsylvania granted

T.H.E.’s motion for summary judgment. On appeal, Westwood contends that an

exclusion within its insurance policy for damage caused by “surface water” should not

apply to its claim. We affirm the District Court’s decision.

       A series of unfortunate events led to a great mass of water and mud collecting at

Westwood’s door. On the night of July 11, 2004, a rainstorm hit Pottsville, Pennsylvania.

A 36-inch sewer pipe within an embankment ruptured. The embankment was located

near the bowling alley, but at a higher elevation. Water from the broken sewer pipe

eventually collapsed the embankment. The debris from the collapse diverted the flow of

rainwater downward along the surface of a slope, eventually pooling in a low area next to

the bowling alley. T.H.E. asserts that water overflowing from the bowling alley’s east

parking lot and a grassy area between the lot and the building also accumulated in the

same low area, but Westwood disputes that this parking-lot-area water contributed to the


       1
         As far as we can tell, the initials “T.H.E.” do not stand for anything. Its name
appears to be a marketing tool to assert a singular ability to offer specialty insurance to
the amusement and entertainment industries. Of course, using initials also leads people to
write “the” in capital letters, providing emphasis whenever anyone discusses the company
by name. See T.H.E. Insurance Company, http://www.theinsco.com/index.html (last
visited Feb. 7, 2008).

                                             2
damage here. Either way, the water and mud rose to a level of over four feet before

bursting through the bowling alley’s door. Westwood alleges that the damage totaled $2

million.

       Westwood filed an insurance claim with T.H.E. for its losses. T.H.E. rejected

coverage and filed a complaint seeking a declaratory judgment that Westwood’s policy

did not cover the damage to the bowling alley. Westwood counterclaimed, alleging

entitlement to coverage, bad faith, and fraud. The District Court had diversity jurisdiction

over T.H.E.’s complaint2 and applied Pennsylvania law. After discovery, cross-motions

for summary judgment and oral argument, the District Court granted T.H.E.’s motion for

summary judgment.

       We have jurisdiction over Westwood’s appeal under 28 U.S.C. § 1291. We

exercise plenary review over a grant of summary judgment. Under Pennsylvania law, we

interpret an insurance contract’s language de novo, as it is a question of law, and we

construe ambiguities in favor of the insured. Donegal Mut. Ins. Co. v. Baumhammers,

938 A.2d 286, 290 (Pa. 2007).

       Westwood’s insurance policy with T.H.E. covered “Risks of Direct Physical

Loss,” subject to a list of exclusions and limitations. T.H.E. conceded in the District

Court that it had issued Westwood an “all-risk” policy as our Court has used the term.

See Intermetal Mexicana, S.A. v. Ins. Co. of N. Am., 866 F.2d 71, 74–76 (3d Cir. 1989).



       2
        T.H.E. is a Louisiana corporation and Westwood is a Pennsylvania corporation.

                                             3
Thus, Westwood’s counterclaim should succeed “unless the policy contains a specific

provision expressly excluding the loss from coverage.” Id. at 75 (quoting 13A Couch

Cyclopedia of Insurance Law § 48:141, at 139 (1982)). But the policy has a “lead-in

clause” to the list of exclusions: “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.” This

expansive lead-in clause limits the usefulness to Westwood of the “all-risk” nature of the

policy and our principle of construing ambiguities in favor of coverage.

       One of the exclusions was for water-damage, which includes “surface water” in its

list of non-covered causes of damage. Westwood contends on appeal that the District

Court erred by including water from the broken sewer pipe in its definition of surface

water, as the sewer pipe was sub-surface. It argues for a definition of surface water that

only includes the water from the east parking lot area. It also presented expert testimony

that water from that area “did not contribute significantly” to the damage to its bowling

alley. Therefore, Westwood argues, a factual dispute remains about whether surface

water caused the damage.

       The Superior Court of Pennsylvania has defined “surface waters” to include

“accumulated waters which flowed under a defective door during a heavy rainstorm” and

“ ‘waters on the surface of the ground, usually created by rain or snow, which are of a

casual or vagrant character, following no definite course and having no substantial or

permanent existence.’ ” Richman v. Home Ins. Co. of N.Y., 94 A.2d 164, 166 (Pa. Super.

                                             4
Ct. 1953) (quoting Fenmode, Inc. v. Aetna Cas. & Sur. Co., 6 N.W.2d 479, 481 (Mich.

1942)). We have held, in construing Pennsylvania law, that rainwater, once it hit the

ground, “ceased to be rain and, properly characterized, was by then surface water.” Al

Berman, Inc. v. Aetna Cas. & Sur. Co., 216 F.2d 626, 628 (3d Cir. 1954).

       The damage here stemmed from water that first hit the surface as rain, then entered

a sewer pipe, and finally became surface water a second time as it flowed down a slope

after the pipe ruptured. Thus, we agree with the District Court’s legal determination that

both the water from the broken sewer pipe and any water from the east parking lot

constituted surface water. We also agree that no disputed issue of material fact remains

as to whether surface water caused the loss. Thus, the damage to the bowling alley

resulted from an excluded cause under the policy.3

       Citing the principle that under an all-risk policy “all losses . . . are covered except

for those specifically excluded,” Westwood argues that the surface water exclusion is

ambiguous rather than specific. Spece v. Erie Ins. Group, 850 A.2d 679, 683 (Pa. Super.

Ct. 2004). But, unlike the more convoluted insurance-policy exclusions in Spece, the

term “surface water” has a clear definition under Pennsylvania and Third Circuit law

construing Pennsylvania law. Absent ambiguity and given an applicable exclusion,

Westwood cannot benefit from the all-risk nature of its policy from T.H.E.



       3
         Because we affirm the District Court’s holding that the surface water exclusion
applies, we need not reach the earth movement or sump-overflow exclusions in
Westwood’s insurance policy.

                                               5
         For these reasons, we affirm the District Court’s grant of summary judgment to

T.H.E.




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