By Ken Behrend, TLC 2008
After 14 months of waiting, this morning I received an order from the Supreme Court of Pennsylvania denying allocator to the defendant insurance company’s petition seeking reversal of the Superior Court’s decision I argued and won, which reversed the trial court’s decision dismissing the claim at summary judgment. Thus, ends a legal odyssey that began September 17, 2004, when the remnants of Hurricane Katrina hit western Pennsylvania. In a small run down town, called Millvale, the water cascaded down the hills into the valley where the town is located and caused the municipal sewage system to, literally, explode up into basements of homes and businesses. BUT, since the water kept falling from the sky, the local creek flooded and essentially wiped out the town.

This is the same Hurricane Katrina that wiped out the gulf coast. You may have read in the news how thousands of insurance claims were denied in the gulf coast because even though there was wind damage to the properties, there was also flood damage. The courts upheld the denials on the basis that the policies contained “concurrent cause” provisions. (If one source of loss is covered and one is not, and they occur concurrently – no coverage has to be provided if one is excluded). In the gulf coast cases, the flooding cause of loss was excluded and the insurers won those cases.

The clients are a mom and pop operation, they owned a wholesale fabric business that did about $1 million a year in sales. Responsibly, he purchased $600,000 of business interruption insurance coverage. He also purchased a rider which included coverage for loss caused by sewer back-up, which would trigger payment also under the business interruption coverage. Since the sewer back-up destroyed the entire inventory of fabric stored in the basement, a claim was made. In denying the claim, the insurer asserted that the flooding also destroyed the inventory of fabric and the “concurrent cause” provision in the policy controls. The concurrent cause was from both sewer back-up (covered loss) and flood loss (not covered).


The insurer pointed to all of the decisions from other states, particularly in the gulf coast, where the courts routinely supported the denial of the claims caused by Hurricane Katrina.

In overcoming this defense, fortunately, I was able to successfully argue that the sewer back-up coverage was provided by a rider to the policy and cost extra. As such, the rider should trump the policy terms since the concurrent cause provision was in the main policy but was NOT part of the rider language. Indeed, the Superior Court called the denial using language in the main policy to deny a claim based upon the rider language a: “sleight of hand.” Bishops, Inc. v. Penn National Insurance, 984 A.2d 982 (Pa. Super. 2009), appeal dnd. ___ A.3d ___ (Pa. April 3, 2011).

In both the brief writing and the appellate oral argument, I used TLC methods. I told the story of the case from the perspective of the RIDER and why it was more important than the main policy language, as well as how the use of the main policy language was deceptive!


Much to the annoyance and chagrin of the insurer, the Superior Court agreed that the Rider “trumps” the language in the main policy, and now the Supreme Court has permitted the decision to stand!
 

The Supreme Court’s ruling is very dramatic in result, (client will be paid around $900,000 which includes 6% interest), but anti-climatic at the same time, since there is no one to witness, this blessed event. All there is, is a cold lifeless a piece of paper. This case may never be heard about in the media, and the public will never know that there are possible ways to beat an insurer’s deceptive use of the “concurrent cause” provision that was used so successfully in the gulf coast cases.