Windows, H. v. Erie Insurance Exchange

J-A29023-16

2017 PA Super 131

HOWARD WINDOWS, JR. AND ELEANOR IN THE SUPERIOR COURT OF

WINDOWS PENNSYLVANIA

Appellees

v.

ERIE INSURANCE EXCHANGE

Appellant No. 362 WDA 2016

Appeal from the Judgment Entered February 24, 2016

In the Court of Common Pleas of Allegheny County

Civil Division at No(s): GD-13-007822

BEFORE: DUBOW, J., MOULTON, J., and MUSMANNO, J.

OPINION BY MOULTON, J.: FILED MAY 1, 2017

Erie Insurance Exchange (“Erie”) appeals from the February 24, 2016

judgment entered in the Allegheny County Court of Common Pleas in favor

of Howard Windows, Jr. and Eleanor Windows (“Homeowners”). We reverse

and remand for further proceedings.

This matter arises from Erie’s denial of an insurance claim made by the

Homeowners following the infiltration of raw sewage into their home in May

2012. Erie denied the claim, and on May 2, 2013, the Homeowners filed a

complaint, alleging that Erie breached its policy. On March 9, 2015, Erie

filed a motion for summary judgment, arguing that the policy’s “general

exclusion for water damage unambiguously excludes coverage for the

Homeowners’ losses because the back up of raw sewage and water through

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the Warner Alley sewer system and the drain in the Homeowners’ basement

contributed to their losses.” Erie’s Mot. for S.J., at ¶ 25.1

On June 16, 2015, the Honorable Paul F. Lutty, Jr. denied the motion

in a one-line order. Before trial, Erie presented a motion in limine, arguing

that the law of the case did not apply and that Erie should not be precluded

from presenting evidence of its coverage defense, i.e., that the insurance

policy did not cover the Homeowners’ claims based on the water-damage

exclusion. The trial judge, the Honorable Michael E. McCarthy, denied the

motion and ruled that Judge Lutty’s order “operat[ed] as at least for that

limited purpose the law as to the case as to whether Exclusion 2B applies,

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1

The water-damage exclusion at issue provides:

WHAT WE DO NOT COVER – EXCLUSIONS

We do not pay for loss resulting directly or indirectly from

any of the following, even if other events or happenings

contributed concurrently, or in sequence, to the loss:

...

2. by water damage, meaning:

...

b. water or sewage which backs up through sewers or

drains or water which enters into and overflows from

within a sump pump, sump pump well or any other system

designed to remove subsurface water which is drained

from the foundation area;

...

Erie’s Mot. for S.J., Exh. I, Extracover Amendatory Endorsement, at 1 (bold

font in original).

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that is the water damage,” N.T., 11/30/15, at 9, and “defer[red] to Judge

Lutty’s determination that exclusion 2(b) of the policy could not be

construed to preclude plaintiffs’ claim,” Opinion, 5/9/16, at 3 (“1925(a)

Op.”). The case proceeded to trial, and on December 2, 2015, the jury

returned a verdict in favor of the Homeowners and awarded $75,073.56 in

damages.

On December 9, 2015, Erie filed a post-trial motion seeking a new

trial, arguing that the trial court erred in concluding that the denial of Erie’s

summary judgment motion had established the law of the case, thereby

denying Erie a trial on whether insurance coverage for the Homeowners’

losses existed and whether the water-damage exclusion applied. On

January 27, 2016, the trial court denied Erie’s motion. On February 24,

2016, the trial court entered judgment in the Homeowners’ favor. On March

8, 2016, Erie filed a timely notice of appeal.

Erie raises the following issues on appeal:

1. Whether the Honorable Paul F. Lutty, Jr. abused his

discretion or committed an error of law in denying Erie’s

Motion for Summary Judgment where the undisputed

material facts established that water or sewage that

backed up through sewers or drains caused or contributed

to the [Homeowners’] losses such that these losses were

excluded from coverage under the [Homeowners’]

insurance policy’s exclusion of losses caused by “water

damage.”

2. Whether the Honorable Michael E. McCarthy abused his

discretion or committed an error of law in denying Erie’s

Motion for Post-Trial Relief where he held that Judge

Lutty’s summary denial of Erie’s motion for Summary

Judgment without opinion constituted the law of the case

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as to the application of the policy’s exclusion for “water

damage,” and therefore held, as a matter of law and

without the benefit of trial or fact-finding by a jury, that

the policy’s exclusion for “water damage” did not exclude

any of the [Homeowners’] losses.

Erie’s Br. at 3.

We first address Erie’s challenge to Judge Lutty’s denial of its motion

for summary judgment.

When reviewing a trial court's grant of summary

judgment, our standard and scope of review are as

follows:

[O]ur scope of review is plenary, and our standard of

review is the same as that applied by the trial court. Our

Supreme Court has stated the applicable standard of

review as follows: [A]n appellate court may reverse the

entry of a summary judgment only where it finds that the

lower court erred in concluding that the matter presented

no genuine issue as to any material fact and that it is clear

that the moving party was entitled to a judgment as a

matter of law. In making this assessment, we view the

record in the light most favorable to the non-moving party,

and all doubts as to the existence of a genuine issue of

material fact must be resolved against the moving party.

As our inquiry involves solely questions of law, our review

is de novo.

Thus, our responsibility as an appellate court is to

determine whether the record either establishes that the

material facts are undisputed or contains insufficient

evidence of facts to make out a prima facie cause of

action, such that there is no issue to be decided by the

fact-finder. If there is evidence that would allow a fact-

finder to render a verdict in favor of the non-moving party,

then summary judgment should be denied.

Reinoso v. Heritage Warminster SPE LLC, 108 A.3d 80, 84 (Pa.Super.),

app. denied, 117 A.3d 298 (Pa. 2015) (alterations in original) (quoting Mull

v. Ickes, 994 A.2d 1137, 1139–40 (Pa.Super. 2010)). “With respect to the

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denial of summary judgment, ‘[w]e review the trial court's denial of

summary judgment for an abuse of discretion or error of law.’” Bezjak v.

Diamond, 135 A.3d 623, 627 (Pa.Super.), app. denied, 145 A.3d 722 (Pa.

2016) (alteration in original) (citation omitted).

On summary judgment, Erie argued that the water-damage exclusion

unambiguously precluded coverage for the Homeowners’ losses. We

disagree.

“A defense based on an exception or exclusion in a policy is an

affirmative one, and the burden is cast upon the defendant to establish it.”

Erie Ins. Exch. v. Transamerica Ins. Co., 533 A.2d 1363, 1366 (Pa.

1987) (quotation omitted). Because “[i]nsurance policies are contracts, []

the rules of contract interpretation provide that the mutual intention of the

parties at the time they formed the contract governs its interpretation.”

Am. & Foreign Ins. Co. v. Jerry's Sport Ctr., Inc., 2 A.3d 526, 540 (Pa.

2010). “While courts are responsible for deciding whether, as a matter of

law, written contract terms are either clear or ambiguous; it is for the fact[-

]finder to resolve ambiguities and find the parties’ intent.” Metzger v.

Clifford Realty Corp., 476 A.2d 1, 5 (Pa.Super. 1984).

A contract is ambiguous if it is reasonably susceptible of

different constructions and capable of being understood in

more than one sense. The “reasonably” qualifier is

important: there is no ambiguity if one of the two

proffered meanings is unreasonable. See Murphy v.

Duquesne Univ. Of The Holy Ghost, [] 777 A.2d 418,

430 (Pa. 2001) (“[C]ontractual terms are ambiguous if

they are subject to more than one reasonable

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interpretation when applied to a particular set of facts.”

(emphasis added)). Furthermore, reviewing courts will not

distort the meaning of the language or resort to a strained

contrivance in order to find an ambiguity. Finally, while

ambiguous writings are interpreted by the finder of

fact, unambiguous ones are construed by the court

as a matter of law.

Trizechahn Gateway LLC v. Titus, 976 A.2d 474, 483 (Pa. 2009)

(emphasis added) (some citations omitted). It is well-settled that “[w]here

a provision of a policy is ambiguous, the policy provision is to be construed

in favor of the insured and against the insurer, the drafter of the

agreement.” Prudential Prop. & Cas. Ins. Co. v. Sartno, 903 A.2d 1170,

1174 (Pa. 2006) (quoting Standard Venetian Blind Co. v. Am. Empire

Ins. Co., 469 A.2d 563, 566 (Pa. 1983)); see also Egyptian Sands Real

Estate, Inc. v. Polony, 294 A.2d 799, 803 (Pa.Super. 1972) (“Under

general contract rules, a promise . . . if ambiguous, [] will be construed

[c]ontra proferentum, against the party having drafted it.”) (italics added)

(footnote omitted). However,

it is equally clear that the rule is not intended as a

talismanic solution to the construction of ambiguous

language. Rules of construction serve the legitimate

purpose of aiding courts in their quest to ascertain and

give effect to the intention of parties to an instrument.

They are not meant to be applied as a substitute for that

quest. Where a document is found to be ambiguous,

inquiry should always be made into the circumstances

surrounding the execution of the document in an effort to

clarify the meaning that the parties sought to express in

the language which they chose. It is only when such an

inquiry fails to clarify the ambiguity that the rule of

construction . . . should be used to conclude the matter

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against that party responsible for the ambiguity, the

drafter of the document.

Burns Mfg. Co. v. Boehm, 356 A.2d 763, 767 n.3 (Pa. 1976) (citations

omitted). When an ambiguity in contractual language exists, “parol

evidence is admissible to explain or clarify or resolve the ambiguity,

irrespective of whether the ambiguity is patent, created by the language of

the instrument, or latent, created by extrinsic or collateral circumstances.”

Miller v. Poole, 45 A.3d 1143, 1146 (Pa.Super. 2012). While

[t]his Court may determine the existence of an ambiguity

as a matter of law, [] the resolution of conflicting parol

evidence relevant to what the parties intended by the

ambiguous provision is for the trier of fact. Where the

words used in a contract are ambiguous, the surrounding

circumstances may be examined to ascertain the intent of

the parties.

Walton v. Philadelphia Nat’l Bank., 545 A.2d 1383, 1389 (Pa.Super.

1988).

Here, the water-damage exclusion in the Homeowners’ insurance

policy provides that losses caused by “water or sewage which backs up

through sewers and drains” are excluded from coverage. The policy does

not define the term “backs up.” The parties, and the extremely limited

relevant case law, suggest two possible meanings of the term. Erie argues

that a “back up” pursuant to the policy occurs “whenever [water and

sewage] flow[s] into a dwelling through drains or pipes that normally carried

such effluent out of the premises.” Erie’s Br. at 23-24 (citing Jennings v.

Hartford Fire Ins. Co., 1991 WL 68019, at *2 (E.D. Pa. Apr. 25, 1991);

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Gammons v. Tennessee Farmers Mut. Ins. Co., 1986 WL 13039, at *3

(Tenn. Ct. App. Nov. 19, 1986) (“We find that the phrase ‘water which backs

up through sewers or drains’ refers simply to water in a sewer or drain that

flows in a direction opposite to the intended and usual flow.”)). In other

words, Erie argues that any water or sewage that enters the premises

through a sewer line or drain pipe, no matter where it originated, has

“backed up” into the premises.

The alternative interpretation is that water or sewage “backs up”

through drains only when it returns to the premises from whence it came.

This position was adopted by the Court of Appeals of Indiana, interpreting a

similar insurance policy water-damage exclusion. See Thompson v. Genis

Bldg. Corp., 394 N.E.2d 242, 245 (Ind. Ct. App. 1979)); Erie’s Br. at 26

(citing Thompson); see also Homeowners’ Br. at 18 (sewage flow in this

case “does not fit the definition of a backup”). The Thompson court

concluded that to “back up” means to “rise and overflow backward” when

checked, and therefore held that water flowing directly from a sewer line

into a basement has not “backed up” within the meaning of the insurance

policy in question. The Jennings court explicitly disagreed with this

interpretation of “back up.” Jennings, 1991 WL 68019, at *2.2

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2

We note that none of the cited cases constitutes authority binding on

this Court.

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Based on the language of the Erie policy, and on the limited case law

interpreting similar language, we conclude that the water-damage exclusion

is subject to more than one reasonable interpretation. Because the

provision is ambiguous, Erie failed to meet its burden at summary judgment

of proving that the Homeowners’ loss was necessarily excluded.

Accordingly, Judge Lutty did not abuse his discretion or commit an error of

law in denying Erie’s motion for summary judgment.

Next, we turn to Erie’s contention that Judge McCarthy erred in finding

that Judge Lutty’s denial of Erie’s summary judgment motion established the

law of the case. Here, we agree with Erie.

The law of the case doctrine refers to a family of rules

which embody the concept that a court involved in the

later phases of a litigated matter should not reopen

questions decided by another judge of that same court or

by a higher court in the earlier phases of the matter. . . .

The various rules which make up the law of the case

doctrine serve not only to promote the goal of judicial

economy . . . but also operate (1) to protect the settled

expectations of the parties; (2) to insure uniformity of

decisions; (3) to maintain consistency during the course of

a single case; (4) to effectuate the proper and streamlined

administration of justice; and (5) to bring litigation to an

end.

Commonwealth v. McCandless, 880 A.2d 1262, 1267 (Pa.Super. 2005)

(quoting Commonwealth v. Starr, 664 A.2d 1326, 1331 (Pa. 1995)).

Absent extraordinary circumstances, the doctrine bars a judge from

revisiting a ruling previously decided by another judge of the same court.

Commonwealth v. Lancit, 139 A.3d 204, 206 (Pa.Super.), app. denied, ---

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A.3d ----, 2016 WL 7387073 (Pa. Dec. 21, 2016). “In determining whether

the law of the case doctrine applies, the appellate court ‘looks to where the

rulings occurred in the context of the procedural posture of the case.’”

Mohney v. Am. Gen. Life Ins. Co., 116 A.3d 1123, 1132 (Pa.Super. 2012)

(citation omitted). Our Supreme Court has cautioned that

[i]n some circumstances, however, application of the rule

can thwart the very purpose the rule was intended to

serve, i.e., that judicial economy and efficiency be

maintained. Thus we [have said] that departure from the

rule of coordinate jurisdiction is allowed where the prior

holding was clearly erroneous and would create a manifest

injustice if followed. Moreover, the rule does not apply

where two motions differ in kind, then a second judge is

not precluded from granting relief though another judge

has denied an earlier motion. The rule does not apply

when distinct procedural postures present different

considerations, then a substituted judge may correct

mistakes made by another judge at an earlier stage of the

trial process, or, perhaps more accurately, may revisit

provisional rulings made earlier in the litigation.

Gerrow v. John Royle & Sons, 813 A.2d 778, 782 (Pa. 2002) (internal

citations and quotation marks omitted).

Judge McCarthy concluded in his Pennsylvania Rule of Appellate

Procedure 1925(a) opinion that he understood Judge Lutty to have

concluded that the water-damage exclusion “could not be construed to

preclude plaintiffs’ claim.” 1925(a) Op. at 3. This interpretation of Judge

Lutty’s denial of summary judgment, however, is not compelled by the

record. As noted above, Lutty’s order does not contain his rationale for

denying the motion. While he may have concluded that the water-damage

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exclusion did not apply at all, he instead may have believed it ambiguous,

requiring further litigation to determine its meaning. Or he may have

concluded that there was a genuine issue of material fact, such as whether

some or all of the infiltration of raw sewage and water into the Homeowners’

basement occurred due to a “back up” within the meaning of the water-

damage exclusion. Based on the record, and in the absence of an opinion,

we cannot determine the precise basis for Judge Lutty’s decision, and it

would be improper to speculate what his rationale may have been. See

Solcar Equip. Leasing Corp. v. Pennsylvania Mfrs.' Ass'n Ins. Co., 606

A.2d 522, 526 (Pa.Super. 1992) (“We do not have the benefit of [the

judge’s] rationale; nor are we a fact-finding entity which is entitled to

speculate.”).

Judge McCarthy erred by reading into the denial of summary judgment

a legal conclusion neither articulated by Judge Lutty nor necessary to that

denial. As a result, his ruling that the law of the case precluded further

litigation over the water-damage exclusion was incorrect. The question

remains, however, what consequences now flow from that conclusion. We

have presently concluded that the exclusion is ambiguous. This ambiguity

should have been resolved below; and but for the “law of the case” ruling, it

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could have been.3 Furthermore, the ruling precluded the parties from

litigating whether a “back up” occurred within the meaning of the exclusion

following resolution of the ambiguity.

Accordingly, we reverse the judgment and remand for further

proceedings consistent with this opinion.

Judgment reversed. Case remanded. Jurisdiction relinquished.

Judgment Entered.

Joseph D. Seletyn, Esq.

Prothonotary

Date: 5/1/2017

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3

Parol evidence, if it exists, may be used to allow the fact-finder to

determine the parties’ intent and to resolve the ambiguity. If parol evidence

does not exist, then interpretation is purely a matter of law, which falls to

the court. In the latter situation, according to principles of contract

interpretation, the provision would be construed against the drafter of the

document, Erie, and in favor of the Homeowners.

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