[00:00:00] Speaker 03:
The next case before us this morning is 24-3127, Auto Owners versus Excelsior Westbrook.

[00:00:12] Speaker 00:
May it please the court.

[00:00:14] Speaker 00:
I am Mike Grizzly here on behalf of Appellant Excelsior Westbrook.

[00:00:20] Speaker 00:
The district court aired when it held that the auto owner's policy issued to my client did not provide coverage for a substantial water damage loss incurred at a property located in Lenexa, Kansas.

[00:00:36] Speaker 00:
The district court specifically held that the

[00:00:40] Speaker 00:
insurer, in this case auto owners, satisfied its burden of establishing the application of the policy's water exclusion on the facts of the loss that was incurred here.

[00:00:53] Speaker 00:
The case turns on application of the reasonable expectations doctrine under which an insured, in my client's position, is entitled to all of the coverage that it can reasonably expect based on the facts of the, based on the language of the policy and the facts of the case.

[00:01:14] Speaker 02:
But don't we only reach that doctrine if we find ambiguity in the policy?

[00:01:17] Speaker 00:
Well, that's correct, Your Honor.

[00:01:19] Speaker 00:
If the policy is unambiguous, there's no need to interpret the policy, if you will.

[00:01:25] Speaker 00:
We believe that the court erred in finding that it was unambiguous, because there are differing ways to interpret the phrase water under the ground surface, which is the key language in the policy.

[00:01:40] Speaker 03:
And which portion of the policy?

[00:01:43] Speaker 03:
I thought you acknowledged that the water exclusion applies here?

[00:01:49] Speaker 00:
No, absolutely not.

[00:01:51] Speaker 03:
And why not?

[00:01:52] Speaker 03:
Why isn't this covered by the water exclusion?

[00:01:55] Speaker 00:
Because the water exclusion, well first of all, it says the grant of coverage in the policy says that the insurer will pay damages caused by resulting from any covered cause of loss.

[00:02:13] Speaker 03:
Well, it also has an exclusion for underground pipes, right?

[00:02:16] Speaker 03:
It says we don't cover underground pipes.

[00:02:18] Speaker 00:
Right.

[00:02:19] Speaker 00:
Damage to the pipe itself would not be covered.

[00:02:22] Speaker 00:
But we're not dealing with the pipe itself.

[00:02:26] Speaker 00:
We're dealing with the substantial water damage to the property that occurred on the first floor of the property.

[00:02:35] Speaker 00:
Covered.

[00:02:36] Speaker 03:
And just tell me, the damage occurred to the first floor because it seeped

[00:02:42] Speaker 03:
up and seeped in?

[00:02:45] Speaker 03:
It went from the pipe, which was a few feet under the floor.

[00:02:51] Speaker 00:
A few feet under the floor.

[00:02:53] Speaker 00:
Not under the ground, but under the floor, which is a significant difference in terms of interpreting the policy.

[00:03:01] Speaker 03:
OK.

[00:03:03] Speaker 00:
Well, I would consider it this way.

[00:03:09] Speaker 00:
The earth is round.

[00:03:11] Speaker 00:
But when you dig a hole, it's not perfectly round anymore.

[00:03:15] Speaker 00:
When this building was built, there was a big hole dealt which changed the surface of the ground.

[00:03:23] Speaker 00:
And the spike was put in, there was fill material put in, and then a floor was put in.

[00:03:28] Speaker 00:
But it did not revert to a perfectly round orb, if you will, because the

[00:03:39] Speaker 00:
surface of the ground was substantially changed when this building was built.

[00:03:44] Speaker 03:
So... So your argument is that it has to be below the foundation to be under the ground?

[00:03:51] Speaker 00:
We believe that it is a reasonable interpretation of the language that under the ground surface would be under the foundation of the building.

[00:04:01] Speaker 02:
But why doesn't the Kansas Supreme Court case in Krug versus Mutual Millers Insurance Company from 1972 settle this question?

[00:04:09] Speaker 00:
Well, a couple reasons.

[00:04:12] Speaker 00:
One, there was no dispute that the water break occurred under the surface of the ground.

[00:04:20] Speaker 00:
The break was not under the building itself, but was adjacent to the building.

[00:04:27] Speaker 00:
And then water traveled across and caused the damage.

[00:04:32] Speaker 00:
So there was no question, no dispute that the pipe was under the ground surface.

[00:04:40] Speaker 00:
where it broke.

[00:04:41] Speaker 00:
In addition, the policy in the Crude case did not have the we will pay provision relating to water escaping a system containing water on the system, which is one of the arguments as to why the insurer would have a reasonable expectation of coverage in this case, because there's the general grant of coverage

[00:05:03] Speaker 00:
It says we'll cover causes of loss.

[00:05:07] Speaker 00:
It says that we'll cover direct risks of physical damage, which is italicized, which should mean it's a defined term.

[00:05:17] Speaker 00:
That defined term is nowhere.

[00:05:19] Speaker 00:
But the causes of loss special form has a definition of water damage that includes the type of water damage done here.

[00:05:29] Speaker 03:
But you only get there if you're under the rust

[00:05:33] Speaker 03:
The wear and tear, the rust exclusion, right?

[00:05:39] Speaker 03:
It's an exception to an exclusion.

[00:05:42] Speaker 00:
No.

[00:05:43] Speaker 00:
Respectfully, I'm sorry.

[00:05:45] Speaker 00:
Respectfully, I disagree with that analysis.

[00:05:48] Speaker 00:
Well.

[00:05:49] Speaker 00:
There is the exclusion for rest and wear, but then it says, it does not say, however, this exclusion does not apply if blah, blah, blah.

[00:06:00] Speaker 00:
It says something very different.

[00:06:02] Speaker 00:
It says, however, we will cover.

[00:06:04] Speaker 00:
We will pay.

[00:06:06] Speaker 03:
But if you look at it, you're under D, wear and tear, which is an exclusion.

[00:06:18] Speaker 03:
And then it says, however, we will cover, if one through, it relates back to two D one through seven, which is specifically wear and tear, and says what, they will cover a specified cause of loss, which includes water damage, right?

[00:06:40] Speaker 00:
That's obviously you've quoted the policy correctly.

[00:06:44] Speaker 03:
Okay.

[00:06:44] Speaker 03:
So to me, I look at that and it's pretty clear that that however paragraph relates only to wear and tear.

[00:06:53] Speaker 00:
Well, that would be one interpretation of course.

[00:06:54] Speaker 03:
Well, how do you interpret it anywhere else when it specifically says with respect to 2D1 through 7?

[00:07:05] Speaker 00:
Let's look at it from the perspective of an insured, not from a judge, not from an insurance lawyer.

[00:07:11] Speaker 03:
Well, even the perspective of an insured, it's an insured that can read.

[00:07:17] Speaker 00:
Yes.

[00:07:18] Speaker 03:
OK.

[00:07:18] Speaker 00:
Yes.

[00:07:18] Speaker 03:
And understands when it says we're referring to 2D, 1 through 7, and it's indented under D, wear and tear, that we have to assume that your insured has read the policy.

[00:07:35] Speaker 00:
Yes.

[00:07:36] Speaker 00:
And in fact, the insured testified that he did not believe that the exclusion applied and that there was coverage.

[00:07:45] Speaker 03:
But that's not relevant, is it?

[00:07:47] Speaker 00:
It's unreasonable.

[00:07:49] Speaker 00:
It is relevant to this extent.

[00:07:51] Speaker 00:
It is an interpretation of the policy.

[00:07:53] Speaker 00:
It is not controlling.

[00:07:55] Speaker 00:
But if it's a reasonable interpretation of the policy, I mean, I could say instead of the insured testify this, it could be argued that blah, blah, blah.

[00:08:07] Speaker 00:
It's an interpretation of policy.

[00:08:08] Speaker 00:
The question is whether that is a reasonable interpretation based on the facts of the case.

[00:08:13] Speaker 00:
And I go back to the policy language.

[00:08:15] Speaker 00:
And the policy language, of course.

[00:08:17] Speaker 00:
At the very beginning of the building and personal property coverage form it says read the entire policy carefully.

[00:08:25] Speaker 00:
to determine rights, duties, and what is not covered.

[00:08:29] Speaker 00:
So the insured is instructed to read the entire policy.

[00:08:34] Speaker 00:
When the policy reads, I'm sorry, when the insured reads the entire policy and it reads language that says, we will pay for the loss or damage caused by that specific cause or loss or building class breakage.

[00:08:48] Speaker 00:
It doesn't know that it's an exception to an exclusion.

[00:08:51] Speaker 00:
It is reading a grant of coverage.

[00:08:53] Speaker 00:
It is reading an agreement, a promise by the insurance company that it will pay for a loss that comes within a specific cause of loss.

[00:09:02] Speaker 03:
Well, but it also says if an excluded cause of loss, that is listed in 2D1 through 7, which is wear and tear.

[00:09:12] Speaker 00:
That is correct.

[00:09:13] Speaker 00:
That is correct.

[00:09:14] Speaker 03:
And so you're trying to use this to modify another section of the policy.

[00:09:20] Speaker 00:
I would push back on trying to modify another section of the policy.

[00:09:26] Speaker 00:
I'm trying to

[00:09:27] Speaker 00:
understand how a reasonable insurer would interpret the policy reading the entire policy, which includes the initial grant of coverage, the exclusions, and this language that talks about an agreement to pay for the loss of damage caused by the specific cause.

[00:09:46] Speaker 03:
If we were to conclude that the water exclusion, that the district court was correct, that the water exclusion applies here,

[00:09:56] Speaker 03:
and also that you might have an argument about wear and tear, does the anti-concurrent causes clause resolve any conflict there?

[00:10:13] Speaker 00:
We believe that it would not resolve it in that it speaks in terms of concurrent clauses, not whether there's more than one exclusion or not.

[00:10:23] Speaker 00:
And specifically it says,

[00:10:25] Speaker 00:
We will not pay for loss or damage caused directly or indirectly by any of the following.

[00:10:30] Speaker 00:
Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence of loss.

[00:10:39] Speaker 00:
It speaks in terms of causes or events.

[00:10:42] Speaker 00:
not provisions of the policy or whether there's more than one potential exclusion.

[00:10:47] Speaker 00:
And there's only one cause of this loss.

[00:10:49] Speaker 00:
The pipe burst and the water damage was caused to the building.

[00:10:54] Speaker 00:
So we believe that the anti-concurrent cause provision does not apply and will not prevent the existence of coverage.

[00:11:03] Speaker 02:
Council, can I get back to your distinction of Krug?

[00:11:05] Speaker 02:
You said that in Krug it wasn't disputed that the water was below the surface of the ground because that rupture from the water main and then the pipe coming to the house was 15 feet outside the northwest wall of the home.

[00:11:17] Speaker 00:
Correct.

[00:11:18] Speaker 02:
But here you say that this pipe, as we can see in the pictures, I think the words used in the brief were that it was within the footprint of the building.

[00:11:30] Speaker 02:
Correct.

[00:11:31] Speaker 02:
As I read the briefs, there seem to be courts across the country interpreting language, very similar languages as policy, but I may have missed it, but are there any cases that talk about the specific distinction about the footprint of the building making any difference?

[00:11:47] Speaker 00:
Well, I think it relates to the definition of water damage that's contained in the specific causes of loss because it speaks in terms of water damage means accidental discharge or leakage of water or steam as the directors often breaking apart of a system.

[00:12:05] Speaker 00:
on the described premises.

[00:12:07] Speaker 00:
So that's why it's important that it's on the described premises.

[00:12:11] Speaker 03:
Well, and if that description you just read only applies to wear and tear and we're interpreting the separate exclusion as to water damage, why would that be relevant?

[00:12:28] Speaker 00:
Well, because we are asking the court, as I think the case law would suggest, to read the policy as a whole and as the insurer is instructed to do.

[00:12:39] Speaker 00:
And it's not whether the insurer can provide a reasonable or a plausible definition.

[00:12:47] Speaker 00:
The question is whether the policy can be interpreted as a whole consistent with a reasonable expectation of coverage.

[00:12:55] Speaker 00:
And we believe that it does in this case.

[00:12:58] Speaker 00:
I would reserve the rest of my time.

[00:13:00] Speaker 00:
Thank you.

[00:13:01] Speaker 00:
Thank you.

[00:13:19] Speaker 01:
May I proceed?

[00:13:21] Speaker 01:
Yes.

[00:13:21] Speaker 01:
Good morning.

[00:13:22] Speaker 01:
You may please the court.

[00:13:23] Speaker 01:
My name is Aaron Freeman.

[00:13:24] Speaker 01:
I represent Auto Owners Insurance Company.

[00:13:27] Speaker 01:
This case presents a straightforward application of an unambiguous water exclusion.

[00:13:32] Speaker 01:
Now, the material facts of this case are not in dispute.

[00:13:36] Speaker 01:
On or about July 21st, 2022, an underground water pipe broke below a commercial property owned by Excelsior Westbrook.

[00:13:44] Speaker 03:
Well, I think there's a dispute on the very, was it underground?

[00:13:48] Speaker 03:
I mean, isn't that the argument we've just heard, that it was within the footprint of the building and therefore it's not underground?

[00:13:57] Speaker 01:
That is Excelsior's argument, but even if you take the facts that they contend shows it's above ground, that it's in the aggregate of the building, that's in the footprint, and that's connected to the building, none of these facts change the fact that the pipe itself is underground.

[00:14:12] Speaker 01:
And we see that just as a result of what they had to do to access the pipe itself.

[00:14:17] Speaker 01:
They had to break up the concrete floor.

[00:14:19] Speaker 01:
They had to dig out dirt, rock, and clay just to access it.

[00:14:23] Speaker 01:
Bob Cork, the plumber who repaired the pipe, testified that he had to dig down seven feet just to access the pipe.

[00:14:29] Speaker 01:
All the witnesses who observed the pipe agreed that it was underground.

[00:14:34] Speaker 01:
Now they point to Michelle White's testimony to argue that she never said it was underground.

[00:14:38] Speaker 01:
But if you look at the excerpt from the reply brief from her testimony, she agrees that they had to break up the floor and remove material to access the pipe.

[00:14:47] Speaker 01:
A reasonable inference from her testimony is that, yes, this was a pipe that was underground.

[00:14:52] Speaker 03:
Is there any definition of underground in the policy?

[00:14:55] Speaker 01:
I know there's not and the exclusion itself doesn't use the word underground.

[00:15:00] Speaker 01:
Yes, it uses the phrase below the surface of the ground.

[00:15:06] Speaker 01:
The courts that have addressed this exclusion, including the Kansas Supreme Court's decision,

[00:15:12] Speaker 01:
have uniformly held that underground pipes that break and the water that escapes from it is water that's under the surface of the ground.

[00:15:21] Speaker 01:
And to Judge Federico's question about whether CRUG sells this issue, I believe that it does.

[00:15:27] Speaker 01:
Even in that exclusion there, that exclusion didn't have the clarifying language that we have in this exclusion stating that it applies to natural causes and all other, well, paraphrasing a little bit, and other causes besides just natural ones.

[00:15:43] Speaker 01:
And so Krug reached its decision finding that the exclusion applied even absent that clarifying language.

[00:15:48] Speaker 01:
Now a lot of the cases that Excelsior-Wesbrook has relied on here to argue that the exclusion is ambiguous don't have that clarifying language.

[00:15:56] Speaker 01:
And indeed those cases also don't draw upon the distinction that they asked the court to make here.

[00:16:01] Speaker 01:
Those cases addressed whether the policy was ambiguous as applied to man-made sources of water versus natural sources of water.

[00:16:09] Speaker 01:
And that's not the issue in this case.

[00:16:11] Speaker 01:
Instead, their argument only addresses whether the policy is ambiguous as applied to the pipe here because the break itself was under the building.

[00:16:19] Speaker 02:
But why wouldn't every reasonable insured

[00:16:23] Speaker 02:
believe this was covered.

[00:16:25] Speaker 02:
I mean, if we were to just take a poll and say there's a water pipe that's connected to the building that is part of the fire suppression system that's going to rupture and flood the building, wouldn't every reasonable insured say, of course that's going to be covered?

[00:16:41] Speaker 01:
To Judge Federico's question earlier, we don't get to the reasonable expectations doctrine until the court finds that there is an ambiguity in the policy itself.

[00:16:50] Speaker 01:
And my second response to that question is,

[00:16:53] Speaker 01:
just because an insurer may expect something to be covered under a policy, that doesn't decide the issue.

[00:16:59] Speaker 01:
It's an objective test based on what a reasonably prudent insurer would believe.

[00:17:04] Speaker 01:
And now colloquially, people may believe that their policy covers things that may not actually be covered.

[00:17:10] Speaker 01:
So for example, your audit policy may not cover the windshield.

[00:17:13] Speaker 01:
your homeowner's policy may not cover flooding.

[00:17:17] Speaker 02:
So unless we find ambiguity in the policy, we don't even get to this doctrine.

[00:17:21] Speaker 02:
But let me ask you about

[00:17:24] Speaker 02:
the question about once you essentially change the earth to build a building.

[00:17:30] Speaker 02:
And I'm going to guess you're not going to dispute that the earth is round, but you may dispute that once you start to build the foundation of a building, including the pipes and all that, you've essentially changed what it means to be underground, even if there's dirt or soil, because the building itself encompasses what they call the footprint of the building, encompasses things that are

[00:17:50] Speaker 02:
under what used to be the surface of the ground.

[00:17:53] Speaker 02:
Now, I don't know which of you is right, but doesn't the fact that I say, well, that sounds kind of reasonable mean that this policy is ambiguous?

[00:17:59] Speaker 01:
I would disagree, Your Honor.

[00:18:02] Speaker 01:
So essentially what their argument is is the same argument they made to the district court that the

[00:18:09] Speaker 01:
A pipe can't be under the ground surface if the earth is disturbed above it.

[00:18:13] Speaker 01:
Now, so essentially what they're asking is, well, let's take an example of the pipe in Corporate Lakes, for example.

[00:18:19] Speaker 01:
The pipe in that case was essentially the same pipe that broke here.

[00:18:23] Speaker 01:
It was a water main pipe that connected the building's fire suppression system.

[00:18:27] Speaker 01:
However, the break in that pipe occurred away, not underneath the building, but away from the building a ways.

[00:18:33] Speaker 01:
Now, under their interpretation, that pipe would still not be underground, because at some point, someone had to dig up the earth to place that pipe in it.

[00:18:44] Speaker 01:
However, when it gets filled back in, well, there's your new upper boundary of the earth.

[00:18:49] Speaker 01:
And that's the same thing we have here.

[00:18:51] Speaker 01:
It just happens to be there's a building on top of it.

[00:18:54] Speaker 02:
I mean, but isn't that the difference?

[00:18:55] Speaker 02:
I mean, that's what I'm getting at, which is, you know, Krug tells us, and I think it would foreclose that example you just gave, because again, in Krug, the rupture happened 15 feet outside of the structure of the building.

[00:19:06] Speaker 02:
But what I just heard argued by Excelsior is, well, but once you start digging foundations in the building, you've now disrupted

[00:19:14] Speaker 02:
what used to be the ground surface.

[00:19:16] Speaker 02:
And so even if you're using dirt and pea gravel to fill it in, whatever that may be, you've sort of redefined what it means, the surface of the earth.

[00:19:25] Speaker 02:
And again, I don't know which of you is right, but I'm looking to see, well, what does the legal authority tell us about which of you is right?

[00:19:33] Speaker 02:
And in the absence of that, and I don't hear either party saying which one of you is right, I think, well, doesn't that mean it's ambiguous?

[00:19:38] Speaker 02:
So tell me why that's wrong.

[00:19:40] Speaker 01:
Well, if we look at the case law, your honor, none of the cases draw a distinction between pipes buried under the home or breaks that occur away from the building.

[00:19:49] Speaker 01:
That's a distinction that's not drawn on the case law.

[00:19:52] Speaker 01:
And actually, if we look at the A circus decision in Bull, that break did happen under the home, and the court still found that the water under the surface of the ground exclusion applied.

[00:20:07] Speaker 01:
Now, if I could turn to the anti-concurrent cause language, I would agree with the court's questions that it does apply where, or sorry, let me back up.

[00:20:20] Speaker 01:
So the issue with it is not whether two or more exclusions applied to the loss.

[00:20:25] Speaker 01:
And this was an issue that was noted by the district court as well.

[00:20:29] Speaker 01:
It's whether an excluded cause of loss, in this case our water exclusion, combines with a potentially covered cause of loss, which under Excelsior's position here would be the exception to the wear and tear exclusion for specified causes of loss.

[00:20:42] Speaker 01:
When those combined, the excluded cause of loss means that the loss is still excluded even if there's a potentially covered cause of loss.

[00:20:52] Speaker 01:
And Excelsior Westbrook hasn't offered any case law saying that a clause like this is ambiguous.

[00:20:58] Speaker 01:
And turning to their one cause of loss argument, this argument has similarly been made and rejected by courts, specifically the secure insurance case from the Wisconsin Appellate Court.

[00:21:11] Speaker 01:
They made almost an identical argument.

[00:21:13] Speaker 01:
In that case, an underground water pipe burst caused water to flow up into the building.

[00:21:21] Speaker 01:
The insured in that case similarly tried to argue that, well, there was only one cause of loss.

[00:21:25] Speaker 01:
There was a broken pipe.

[00:21:26] Speaker 01:
But the court, the security court observed in that case that, well, that's not entirely true.

[00:21:31] Speaker 01:
Because if the pipe had just broke and the water formed around it but never entered the building, there would be no other potentially covered or lost there.

[00:21:41] Speaker 01:
There would be no other damage to the building.

[00:21:43] Speaker 01:
You only get that damage by the water seeping or pushing through the walls or foundations of the building.

[00:21:51] Speaker 01:
And the only other case they cite on that point is the Katrina case from the Fifth Circuit.

[00:21:57] Speaker 01:
However, the issue in that case was whether a flood exclusion barred coverage.

[00:22:02] Speaker 01:
And the court held that that was the only issue.

[00:22:04] Speaker 01:
There were no other potentially covered causes of loss or excluded causes of loss.

[00:22:08] Speaker 01:
There was only the flooding.

[00:22:10] Speaker 01:
In fact, the court in that case explicitly warned about insurers trying to re-characterize their losses to avoid the application of exclusions.

[00:22:21] Speaker 01:
So I posit that Katrina simply has no application to this case here.

[00:22:25] Speaker 03:
But in order for you to have the advantage of the concurrent loss provision to deal with the wear and tear exception to the exclusion, we have to agree that this pipe was below the surface, right?

[00:22:43] Speaker 01:
That's correct, Your Honor.

[00:22:45] Speaker 03:
And you know, it doesn't really say surface of what.

[00:22:52] Speaker 01:
I believe it says under the ground surface.

[00:22:54] Speaker 03:
Well it says water under the ground surface pressing on or flowing or seeping through.

[00:23:02] Speaker 03:
Yeah, and so the question becomes this pipe broke.

[00:23:05] Speaker 03:
So if you had a pipe in the basement, right?

[00:23:08] Speaker 03:
So you've dug out the ground.

[00:23:11] Speaker 03:
So you're technically below the ground surface, but you're in somebody's basement, not below the basement floor.

[00:23:21] Speaker 03:
Does this cover it?

[00:23:22] Speaker 01:
I understand your honor.

[00:23:25] Speaker 01:
Taking your hypothetical correctly here.

[00:23:27] Speaker 01:
then that pipe would be above ground and this exclusion couldn't apply.

[00:23:31] Speaker 01:
So another hypothetical.

[00:23:34] Speaker 03:
So that would be above ground even though it is technically below the ground because you dug down and put in a basement.

[00:23:43] Speaker 01:
So I want to make sure I understand the hypothetical correctly.

[00:23:46] Speaker 03:
Hypothetical is I have a house and the ground level is the main floor and then they have put in a basement by excavating.

[00:23:58] Speaker 03:
and put in foundation, cement, and I have a basement.

[00:24:03] Speaker 03:
And I've got a pipe that's in my basement above the floor.

[00:24:08] Speaker 03:
Is it above or below the ground?

[00:24:09] Speaker 01:
I understand, Your Honor.

[00:24:10] Speaker 01:
That would be above ground.

[00:24:11] Speaker 01:
And we can see an example of this in the case that Excelsior Westbrook cites, which is the Hudson case from New York.

[00:24:17] Speaker 01:
In that case, like Your Honor's hypothetical, that pipe entered into the building through the foundation and was in a gravel material above ground

[00:24:27] Speaker 01:
but also below a concrete slab.

[00:24:30] Speaker 01:
Now, there's still other issues with that case, for example.

[00:24:32] Speaker 01:
It doesn't have our clarifying language here, the caused by, or caused by a natural act or other causes.

[00:24:40] Speaker 01:
But to your honors hypothetical, I think that's what we would be, we would be looking at a situation like that, where we have a pipe that is expressly above ground and within the home itself.

[00:24:51] Speaker 03:
Where do you, in the water exclusion, how do you, is there anything that clearly tells me that?

[00:24:57] Speaker 01:
Well, if we look at the examples of where the water has to pass through, it has to pass through a paved surface, whether it be a wall or floor, that is your boundary there in that case.

[00:25:07] Speaker 01:
And in your example, that pipe would already be in the home above the concrete floor.

[00:25:12] Speaker 03:
Well, what if it floods the basement and goes all the way up and goes into the main level?

[00:25:18] Speaker 01:
I think at that point, Your Honor, I think the exclusion still wouldn't apply because the water wasn't originating under the ground in that example.

[00:25:25] Speaker 03:
Well, and that's the question, isn't it?

[00:25:28] Speaker 01:
That is the question, Your Honor.

[00:25:29] Speaker 03:
Are you underground when you're in the basement?

[00:25:34] Speaker 01:
Oh, well, I would still say no in that case because at that point the pipe is already in the building.

[00:25:42] Speaker 01:
What the district court looked at was what is the upper boundary of the earth of that case?

[00:25:47] Speaker 01:
So to your honest hypothetical, if you dig down, the boundary of earth is where the basement ends and the ground begins.

[00:25:56] Speaker 01:
And that's in line with the surfaces and the, so that would be in line with the foundation, the floor, and the walls of a basement where the water would have to push or seep through.

[00:26:13] Speaker 01:
If there's no further questions, I will review it the rest of my time.

[00:26:16] Speaker 03:
Thank you.

[00:26:25] Speaker 00:
May I place the court?

[00:26:27] Speaker 00:
The policy does not contain a definition of underground.

[00:26:30] Speaker 00:
In fact, it doesn't even use the phrase underground.

[00:26:33] Speaker 00:
The phrase is under the ground surface and that is the task of trying to make sense of that.

[00:26:41] Speaker 00:
Now of course the insurer could have

[00:26:45] Speaker 00:
provided a definition for that, which would have clarified things.

[00:26:50] Speaker 00:
But it chose not to, which it had the right to.

[00:26:53] Speaker 00:
But it had to live with the consequences of not making the provision unambiguous, because it is ambiguous.

[00:26:59] Speaker 00:
And as the questions have suggested, maybe if you're just sitting around

[00:27:06] Speaker 00:
Could it mean this?

[00:27:06] Speaker 00:
Well, it could mean that it's, you know, where it used to be.

[00:27:10] Speaker 00:
It used to be this round ball, but there's a hole, but let's consider, you know, there's this film material.

[00:27:15] Speaker 00:
It's not really the earth as it used to be, but it's film material, but maybe that should be considered under the ground, or

[00:27:23] Speaker 00:
the interpretation, which I think was the reasonable interpretation, that under the foundation is where the ground surface now exists.

[00:27:32] Speaker 00:
It changed when this building was built.

[00:27:34] Speaker 00:
It's not a round ball in terms of where this occurs.

[00:27:39] Speaker 03:
Does it matter they had to dig down seven feet to get to the pipe?

[00:27:43] Speaker 03:
They had to break through the floor and dig down seven feet.

[00:27:46] Speaker 00:
Well, I think there's a small factual issue as to whether it was seven feet.

[00:27:49] Speaker 00:
OK, let's say three feet.

[00:27:53] Speaker 00:
No, because the hole was dug.

[00:27:58] Speaker 00:
There was fill material in that area, not the earth as it used to exist, but fill material, which was gravel.

[00:28:06] Speaker 00:
And so it is not considered the ground at that point.

[00:28:11] Speaker 00:
I will add, if I may briefly,

[00:28:14] Speaker 00:
The case that is really on point that we believe is not controlling because it's not a Kansas case, but the Hudson versus Allstate Insurance Company case from the New York Supreme Court, which says the exclusion said water below the surface regardless of its source.

[00:28:34] Speaker 00:
So the distinction that the insurer wants to make with regard to the case really doesn't apply.

[00:28:40] Speaker 00:
It's the exact same situation presented here.

[00:28:44] Speaker 03:
Thank you.