Wade Clark Mulcahy LLP

<p style="text-align: justify;">In coverage disputes, courts and counsel for the insured often lose sight of the type of policy at issue and the triggering language in a coverage grant.  But as one recent New Jersey decision demonstrates, most courts are still faithful to clear policy language.</p>
<p style="text-align: justify;">In <em><a href="https://www.wcmlaw.com/wp-content/uploads/2020/03/Cusamano-v.-NJ-Insurance-Underwriting-Assn.pdf">Cusamano v. NJ Insurance Underwriting Ass'n</a></em>, the insureds sought coverage under their homeowner’s insurance policy after the New Jersey duplex they owned sustained damage from a leaking pipe. The insurers argued that no coverage existed because the particular water damage is not a “named peril.”  The trial court had disagreed, and held that because the couple’s policy didn’t specifically exclude water damage from leaky pipes, there was enough ambiguity to resolve the dispute in their favor. But on appeal, the Appellate Division reversed, and held that there was no coverage in the first instance.</p>
<p style="text-align: justify;">In doing so, the court reasoned that the policy was a named perils policy, meaning that it provided for loss caused by particular perils included in the policy.  Because the policy did not list water damage from leaking pipes as a covered peril, no coverage existed in the first instance.  For that reason, the absence of an exclusion did not revive coverage.</p>
<p style="text-align: justify;">Cusamano is a decision that should provide some comfort to insurers.  Not only does it highlight the distinction between “Open” and “Named” perils coverage, it also reaffirms principle that all coverage analysis begins with the initial coverage grant of coverage.  It was also significant for reaffirming that courts need not consider an insured's reasonable expectations when the policy language is clear.</p>
<p style="text-align: justify;"><span>Thanks to James Papadakis for his contribution to this post.  Please email <a href="mailto:mgauvin@wcmlaw.com">Mike Gauvin </a></span><span>with any questions.</span></p>