In Iowa, Rain is What Gene Kelly Sang In – Not Water From a Burst Drain Pipe

Earlier this year, an Iowa court recognized that rain becomes rainwater once it has fallen, and it held that policy language excluding loss caused by “rain” – without more – will not operate to bar coverage for water from a burst drain pipe that ruptured during a rainstorm.  The decision is reported at Amish Connection, Inc. v. State Farm Fire & Cas. Co., 847 N.W.2d 237, 2014 WL 1234161 (Iowa Ct. App., March 26, 2014).

shutterstock_170611241The insured, Amish Connection, Inc., leased space in a mall in Waterloo, Iowa, and its merchandise was damaged after a 4” cast iron drain pipe above the ceiling burst during a rainstorm.  The pipe carried water from the roof drains to a storm sewer.  The policyholder reported the loss on the day after the storm, and its commercial property insurer, State Farm Fire & Casualty Company, denied by letter on the same afternoon, stating that the loss was “caused by rain.”  The contract of insurance excluded loss “to the interior of any building or structure, or the property inside any building or structure, caused by rain, snow, sleet, ice, sand or dust, whether driven by wind or not[.]”  Rain itself was not a defined term.

Amish Connection brought suit.  The district court granted summary judgment to State Farm, ruling that the exclusion applied because the water that cascaded from the burst pipe was “rainwater.”  On appeal, a unanimous panel of the state’s intermediate level appellate court reversed, and they did so for exactly that reason – the loss was caused by rainwater and not the excluded peril of rain.

Judge Christopher L. McDonald’s opinion began by asking:  “What is the meaning of ‘rain’?”  For the attorneys in our readership, that undoubtedly brings to mind Frigaliment Importing Co. v. B.N.S. Int’l. Sales Corp., 190 F.Supp. 116 (S.D.N.Y. 1960) – a decision by Judge Henry Friendly that all of us read in first year contracts which begins with the famous line “The issue is, what is chicken?”

The judge’s answer was as follows:

The ordinary meaning of “rain” is well understood.  Gene Kelly sang in it.  Noah sailed through it.  It is water falling from the sky.

Judge McDonald then held that the district court had erred because rainwater was not an excluded peril.  As his opinion explained:

Here, the policy limits coverage for loss “caused by rain.”  The policy does not use the term “rainwater.”  The distinction is important.  . . .   “Rainwater” is a separate and distinct term meaning “water fallen as rain that has not had an opportunity to collect soluble matter from the soil.”  Webster’s Third New Int’l Dictionary (Unabridged) 1876 (1993).  The definitions of “rain” and “rainwater,” although similar, encompass two different points in time.  As water is falling, it is considered “rain.” After it has fallen – and, as here, been collected on a rooftop and channeled into pipes for transport to a storm sewer – it is considered “rainwater.”

Because the word rain was undefined, the Court of Appeals’ task was to give it its ordinary meaning.  As Judge McDonald noted, “[w]e think it fair to say 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’.”

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About The Property Insurance Law Observer
For more than four decades, Cozen O’Connor has represented all types of property insurers in jurisdictions throughout the United States, and it is dedicated to keeping its clients abreast of developments that impact the insurance industry. The Property Insurance Law Observer will survey court decisions, enacted or proposed legislation, and regulatory activities from all 50 states. We will also include commentary on current issues and developing trends of interest to first-party insurers.
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