Union Street Furniture and Carpet Inc. v. Peerless Indemnity Insurance Co.
An insurance policy that excludes coverage for "surface water" may not exclude coverage for damages from rainwater on the roof of a building, because water on the roof does not qualify as "surface water." Substantial rain on Oct. 11, 2007 severely affected the Stamford, Conn. warehouse facility of the plaintiff, Union Street Furniture and Carpet. Union Street's president testified that water dripped down the walls, chimney and skylight for approximately two hours and then water flowed into the facility through the loading dock. Allegedly, water was waist deep in the parking lot. Union Street's president testified that once a carpet becomes wet it cannot be sold. Union Street kept carpets on the warehouse floors and on shelves located about three feet above the warehouse floors. Union Street sued the defendant, Peerless Indemnity Insurance Co., alleging it failed to pay Union Street's water damages claim under a $400,000 "business personal property" policy, breached its contract and violated CUTPA, the Connecticut Unfair Trade Practices Act, because the refusal to provide insurance coverage was unconscionable. Peerless moved for summary judgment and argued that Union Street's water damages arose from flood and surface waters, which were excluded from coverage. Peerless claimed it paid the policy limit of $100,000 for damages caused by backed up sewers and drains and that another insurance company that provided flood insurance paid Union Street the policy limit for flood damages. The court found that there were genuine issues of material fact with respect to whether carpets located on the shelves were damaged by rainwater or by flood water. The court rejected Peerless' argument that water on the roof was "surface water." Peerless' partial denial of Union Street's claims was not unconscionable, as Union Street argued, and the court dismissed Union Street's CUTPA count.