Wear And Tear Exclusion In All-Risk Policy Precludes Coverage For Gas Leak Repairs
March, 2004
The New York Appellate Division has held that gas leaks caused by ordinary wear were excluded under the wear and tear exclusion of the insureds’ all-risk policy.
Facts
In Simkowitz v. Firemen’s Fund Ins. Co., 774 N.Y.S.2d 684, gas leaks were discovered in the insured building that concededly were the result of normal deterioration. Upon discovery of the leaks, the entire gas system was shut down and integrity testing was performed upon it as mandated by the Administrative Code of the City of New York § 27-922(d). The integrity testing involved the use of pressure in the system at levels much greater than normal.
After the testing was complete, numerous additional leaks were discovered. The insureds argued that the additional leaks were caused by the integrity testing and sought to recover under their all-risk policy. The insurer rejected the claims under the ordinary wear and tear and failure to maintain exclusion. The trial court granted summary judgment to the insurer, a result which the appellate court affirmed.
Analysis
The appellate court found that the wear and tear exclusion applied, noting that the insureds had presented no evidence that the gas system’s proclivity to leak, as revealed by the testing, was caused by anything other than the same ordinary wear and tear that caused the initial leaks. In reaching this conclusion, the appellate court relied upon St. Paul Fire & Mar. Ins. Co. v. 111 Tenants Corp., 2003 U.S. Dist. LEXIS 8923, *13, 2003 WL 21242998 *4 (S.D.N.Y.), which found that “the ordinance requiring testing at greater than normal pressure embodies a legislative determination that a gas system that leaks under the more extreme conditions should not be put back into service, and must be repaired or replaced.”
Learning Point:
This New York court properly applied an unambiguous exclusion to the claim facts. The insureds failed to demonstrate that an external, fortuitous event caused the numerous additional leaks. Rather, the court found, based on the evidence presented, that the additional leaks were proximately caused by ordinary wear and tear. ¨
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