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Cardio Diagnostic Imaging, Inc v. Farmers Insurance Exchange et al

December 18, 2012


APPEAL from a judgment of the Superior Court for Los Angeles County, Carl J. West, Judge. (Los Angeles County Super. Ct. No. BC404888)

The opinion of the court was delivered by: Willhite, Acting P. J.



This case involves the interpretation of an insurance policy exclusion. The exclusion at issue excludes any "loss or damage caused directly or indirectly by . . . [w]ater that backs up or overflows from a sewer, drain or sump." The question is whether this exclusion applies to damage caused when a malfunctioning toilet failed to shut off the intake of water and, because there was a blockage in the sewer line, the toilet overflowed, causing water to leak into the business premises occupied by plaintiff and appellant Cardio Diagnostic Imaging Inc. (Cardio). The trial court found that the language of the exclusion was unambiguous and that the damages Cardio suffered were excluded from coverage under the insurance policy issued to Cardio by defendant and respondent Farmers Insurance Exchange (Farmers). We agree. Accordingly, we affirm the summary judgment entered in favor of Farmers.


Farmers insured Cardio under a first-party commercial property insurance policy. The policy includes a water exclusion that excludes damages caused directly or indirectly by "(1) Flood, surface water, waves, tides, tidal waves, overflow of any body of water, or their spray, all whether driven by wind or not; [¶] (2) Mudslide or mudflow; [¶] (3) Water that backs up or overflows from a sewer, drain or sump; or [¶] (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." The exclusion at issue here is number three (Water Exclusion #3). The policy states that the exclusion applies "regardless of any other cause or event that contributes concurrently or in any sequence to the loss."

On January 14, 2007, water overflowed from a toilet in a business suite on the third floor of the building in which Cardio rented a suite on the first floor. The water from the third floor suite flooded Cardio's suite, causing extensive damage to the floors and equipment, including a CAT scan imaging machine. Cardio tendered an insurance claim to Farmers the next day. Within two days, the claims representative assigned by Farmers to handle the claim had spoken with Cardio's president, inspected and photographed the damage to Cardio's suite, and spoken with a representative of the building's management company, who said that the toilet that overflowed was new and possibly defective.

Farmers denied coverage, citing Water Exclusion #3. Farmers subsequently determined that an exclusion for negligent work also would apply,*fn1 after Cardio requested reconsideration on the ground that the defective toilet caused the damage.

Cardio filed a lawsuit against Farmers, alleging claims for breach of contract, breach of the implied covenant of good faith and fair dealing, and declaratory relief.*fn2 It sought both compensatory and punitive damages.

Farmers moved for summary judgment or, in the alternative, summary adjudication of issues on the ground that both the Negligent Work exclusion and Water Exclusion #3 excluded coverage for Cardio's loss. At the same time, Cardio moved for summary adjudication, seeking a determination that for Water Exclusion #3 to apply, "the water causing damage must, at a minimum, have been inside the relevant sewer, drain, or sump and then come out of the sewer, drain, or sump causing the damage."

In support of its motion, Farmers submitted, among other evidence, excerpts from the deposition of Jay Chase, a licensed plumber who had installed the toilet at issue. Chase inspected and tested the toilet in place after the water overflowed, then removed the toilet and conducted additional tests at his facility. He concluded that there was a blockage in the sewer line approximately 20 to 40 feet away from the toilet, and that blockage caused the water in the toilet to overflow.

Cardio did not dispute that the blockage caused the loss. Indeed, in the context of arguing that the Negligent Work exclusion did not apply under the efficient proximate cause doctrine, Cardio observed that "[w]ithout a blockage, . . . a running toilet wastes water but does not cause a flood," and asserted that "since the water damage would not have occurred absent drain blockage, the blockage was, as a matter of law, the most important cause of loss." Cardio contended, however, that the fact that the blockage caused the loss did not preclude coverage. Relying upon outside sources, including advertisements and internet searches, as well as the placement of Water Exclusion #3 in the policy, Cardio argued that Water Exclusion #3 was intended to apply in cases of large-scale disasters, and was not intended to apply to situations in which water is unable to flow down an inside drain due to a blockage.

The trial court found that Water Exclusion #3 was clear and unambiguous (and thus the extraneous material Cardio relied upon was not relevant), and that Cardio's claim "falls directly outside of coverage." The court granted Farmer's motion and entered judgment against ...

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