Amish Connection, Inc. v. State Farm Fire and Casualty Company

Summary

The Iowa Supreme Court held that a business insurance policy's limitation for loss to the interior of a building or property inside it caused by rain unambiguously excluded damage caused when a corroded interior drainpipe released rainwater during a storm. The court rejected the insured's argument that the water was no longer rain after entering the pipe and also held that the policy's water-damage provision did not independently create coverage. The court vacated the Iowa Court of Appeals decision and affirmed summary judgment for State Farm.

Holdings

1. Damage to property inside a building is caused by rain within the meaning of the policy's rain limitation when an interior drainpipe fails during a rainstorm and releases rainwater inside the building. Because neither exception to the rain limitation applied, the loss was not covered.
2. The water-damage definition and exception to the rust-and-corrosion exclusion do not create coverage where the loss is already limited by the rain provision. The policy's disjunctive lead clause operates as an enforceable anticoncurrent-cause provision, so the rain limitation controls even if the failed drainpipe was a concurrent cause and might otherwise fall within the water-system provision.

Questions Presented

1. Whether the policy's limitation excluding loss to a building's interior or property inside it caused by rain applies when rainwater escapes from a failed interior drainpipe during a rainstorm.
2. Whether the policy's definition of water damage as leakage resulting from the breaking of a system containing water creates coverage despite the rain limitation and rust-and-corrosion provisions.
3. Whether the policy's lead coverage provision, which denies coverage for losses either limited in the property-subject-to-limitations section or excluded in the losses-not-insured section, operates as an anticoncurrent-cause provision.

Disposition

vacated