Iowa Court of Appeals Says That “Rainwater” is Not “Rain” for Purposes of An Insurance Policy Exclusion

Overview

The Iowa Court of Appeals has determined that “rain” is not “rainwater” when interpreting an insurance policy coverage exclusion.

Facts of the Case

The case stemmed from an insurance dispute between the plaintiff and its business insurer. The plaintiff leased space in a Waterloo shopping mall to operate a store. At the times relevant to this action, however, the plaintiff was using the space only for storage. Above the ceiling and along the interior back wall of the plaintiff’s leased space ran a four-inch cast iron drain pipe connected to the building's roof drain line. The mall employed a roof drain system through which rainwater would be collected on the roof and transported through interior pipes to the storm sewer. One night, during a heavy rain, the drain pipe over the plaintiff’s unit burst, flooding its storage space and causing damage to the unit and property within.

The plaintiff sought coverage for the damage from its insurer, from whom it had purchased a business policy. The policy provided coverage for “accidental direct physical loss to property,” but excluded from coverage damage “caused by rain” unless the building first sustained damage by an insured loss to its roof or walls through which the rain entered. The insurer denied coverage for the claim on the same day it received it, asserting that the loss fell under the exclusion for damage “caused by rain.”

The plaintiff filed a breach of contract action against the insurer, and the district court entered summary judgment in favor of the insurer. The district court ruled that the rain limitation unambiguously barred coverage.

Appellate Opinion

On appeal, the Iowa Court of Appeals reversed the district court’s judgment, ruling that it was not “rain” that had caused the plaintiff’s damage, but “rainwater.” As such, the “rain” exclusion did not bar coverage of the plaintiff’s loss.

In reaching this decision, the court sought to define the word “rain,” which was not defined in the policy. The court stated that words that are not defined in a policy are given their ordinary meaning and that the ordinary meaning of “rain” was well understood.  “Gene Kelly sang in it, and Noah sailed through it.” The court stated that a “reasonable person standing in the interior of a shopping mall underneath a burst drain pipe would not conclude that he or she was standing in the ‘rain.’” Thus, the court found, under the plain language of the policy, the plaintiff’s loss was not limited by the “rain” exclusion.  The court noted that the district court and the insurer had substituted the word “rainwater” for the word “rain” in their respective opinion and argument. The court found that the definitions of the two words, while similar, were different. “Rain” is “water falling in condensed drops from the sky.” “Rainwater,” however, is “water fallen as rain that has not had an opportunity to collect soluble matter from the soil.”

Because loss caused by "rainwater" was not excluded or otherwise limited under the policy, the court found that the loss was not excluded. The court stated that the district court erred by interpolating the term "rainwater" into the policy and by then finding that interpolated term to be unambiguous. Even if “rain” could be secondarily defined as “rainwater,” the court found, all ambiguities are decided in favor of the insured. The court then remanded the case to the district court for further proceedings.

Conclusion

Given that this is a common exclusion, we will likely see this case before the Iowa Supreme Court. We will keep you updated. And it’s true, “singing in the rainwater,” just doesn’t have the same ring.