Background
The Croxdales purchased an insurance policy from Travelers to cover their Iowa home. The policy excluded coverage for loss caused by constant or repeated seepage or leakage of water or steam that occurs over a period of fourteen days or more. An Iowa-specific endorsement amended this to exclude leaks occurring over weeks, months, or years. After a pipe burst while the Croxdales were away, a leak lasted about one month. Travelers denied coverage, and the district court granted summary judgment to Travelers on both the breach of contract and bad-faith claims.
The court’s reasoning
The court applied de novo review and Iowa law, which interprets insurance policies according to their plain meaning. The court found the policy language unambiguous, stating that the phrase ‘that occurs over a period of weeks, months, or years’ modifies the source of the damage, not the loss itself. Consequently, any leak lasting more than fourteen days necessarily occurred over a period of weeks and is excluded. The court rejected the argument that the policy should be interpreted to cover only the first thirteen days or that the endorsement expanded coverage. Regarding the bad-faith claim, the court noted that an insured cannot prevail if the policy does not provide coverage, and the insurer had a reasonable basis for denial.
What it means going forward
This decision clarifies that water damage exclusions in insurance policies covering leaks over extended periods apply to the entire loss if the leak duration exceeds the specified timeframe, even if the initial damage occurred within a shorter window.