A water tank that was separated from the dwelling by clear space but connected by an underground pipe was not “attached” to the dwelling and, therefore, was subject to a fire policy’s lower limit of liability for “Other Structures.” ( Adamo v. Fire Insurance Exchange (2013) 219 Cal.App.4th 1286)
Facts
Vincent Adamo owned land that included a house; two sheds; an avocado grove consisting of about 1,000 trees; and a water system consisting of a 10,000-gallon water tank, an irrigation system and culverts. The water system was separated from Adamo’s dwelling by clear space and was completely detached from the dwelling, except for an underground water pipe connecting the dwelling and water tank.
A wildfire caused damaged Adamo’s house, sheds, avocado grove and water system. At the time of the loss, Fire Insurance Exchange (FIE) insured Adamo under a first-party residential fire insurance policy. The policy provided two separate categories of coverage for: (1) the “Dwelling” (Coverage A); and (2) “Other Structures” (Coverage B). The declaration page showed that the limit for the Dwelling coverage was $531,000 and the limit for the Other Structures coverage was $53,100.
The Dwelling coverage applied, among other things, to: (1) “the dwelling on the Described Location, used principally for dwelling purposes”; (2) “structures attached to the dwelling”; (3) “materials and supplies on or adjacent to the Described Location for use in the construction, alteration or repair of the dwelling or other structures on this location”; and (4) “if not otherwise covered in this policy, building equipment and outdoor equipment used for the service of and located on the Described Location.”
The “Other Structures” coverage applied to “other structures on the Described Location, separated from the dwelling by clear space,” including other structures “connected to the dwelling by only a fence, utility line or similar connection.”
The policy also contained an “Other Coverages” section which provided, in part, as follows: “Other Structures – You may use up to 10% of the Coverage A limit of liability [i.e., 10% of $531,000] for loss by a Peril Insured Against other structures described in Coverage B. Use of this coverage does not reduce the Coverage A limit of liability for the same loss.”
FIE paid Adamo the “Other Structures” limit of $53,100, but refused to issue any further payments for the damage to the woodsheds and water system. Adamo asserted that, because the water tank was connected the house by an underground pipe, the tank was “attached” to the dwelling and, therefore, covered under the Dwelling coverage. Adamo also asserted that the “Other Coverages” section provided coverage up to an additional $53,100 (i.e., 10% of the Dwelling limit). Ultimately, Adamo sued FIE for breach of contract, bad faith, promissory estoppel, declaratory relief and reformation. After a bench trial, the court ruled in favor of FIE. Adamo appealed.
Holding
The Court of Appeal affirmed. It held that the $53,100 Coverage B limit for “Other structures” was the only coverage available for Adamo’s sheds and water system. The Coverage B limit applied to the 10,000-gallon water tank, irrigation system and culverts because Coverage B defined “other structures” as those “separated from the dwelling by clear space” (which, the court concluded, meant an “an open area”). Further, the policy expressly stated that the “Other Structures” coverage applied to structures, like the water tank, connected to the dwelling only by a “utility line or similar connection.”
The appellate court also rejected Adamo’s argument that the “Other Coverages” section provided an additional limit of $53,100 for other structures. The court held that, when read as whole, the plain of Coverage A and Coverage B dictated that the two coverage parts were to be mutually exclusive, not compounded. Because the court concluded that no additional coverage existed for these other structures, the Court did not address Adamo’s claim that FIE acted in bad faith.
Comment
Based on the wording of the policy, the appellate court’s conclusion that the water tank was an “other structure” and was not “attached” to the dwelling is logical. However, the court’s conclusion as to why the “Other Coverages” section did not provide additional coverage is not well-explained.