Sub-Surface Water Loss Mostly Excluded By Policy, Texas Judge Rules

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HOUSTON, Feb. 16 – A district judge in the Southern District of Texas has dismissed breach of coverage and bad faith claims against Praetorian Insurance Company, ruling that several of the policy’s coverage exclusions defeat the insured’s claims for property damage arising from a water related loss.

In Praetorian v. Arabia Shrine, a building owned by the Shrine suffered a subs-surface water loss which seeped into the building causing more than $1.8 million worth of damage to the foundation and building on March 14, 2014.   While the policy provided for coverage of for the loss of fire suppression equipment, and Praetorian paid nearly $64,000.00, it disclaimed nearly $2 million in other claims made by the Shrine.

The Policy contained an exclusion for damage to foundational elements, as well as an exclusion for damage to sub-surface piping.  The policy was also endorsed with a “Water Exclusion” disclaiming coverage for damage caused the escape or seepage of subsurface water into the building.

Judge Keith Ellison found that Praetorian met its burden of showing that the exclusions precluded the vast majority of coverage for the underground water loss.    The judge also found that since Praetorian had a reasonable basis to deny coverage, claims for breach of the Texas Insurance Code, and for the breach of Praetorian’s duty of good faith and fair dealing should also be dismissed by way of summary judgment as well.

Praetorian Ins. Co. v. Arabia Shrine Center Houston (S.D. Texas Feb. 16, 2016)

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Author: CJ Haddick

C.J. Haddick is a Director with the law firm of Dickie, McCamey, & Chilcote, PC, based in Pittsburgh, Pa. He has advised and represented insurers in insurance coverage and bad faith litigation for more than a quarter of a century, and written and spoken throughout the United States on insurance coverage and bad faith prevention and litigation. He is Managing Director of the firm's Harrisburg, Pa. office. Reach him at chaddick@dmclaw.com or 717-731-4800.

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