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How Sudden Is "Sudden?"

By Michael P. Coleman

Can the word "sudden" be interpreted to include an event taking place over a period of nine years? Relatively speaking, an event occurring over the span of nine years could certainly be considered sudden -- a mere blip on the earth's four and a half billion year existence. But can a nine year event be considered "sudden" in t he context of an insurance policy covering "sudden and accidental loss to physical property"? Recently, two federal district courts addressed this exact question and one of them held that water damage occurring over a nine year period was in fact a "sudden and accidental physical loss." Of course, the other one did not. How did these courts come to opposite conclusions and what can be done to prevent such a disparity?

Coming to opposite conclusions on this issue, decisions in the federal district courts of South Carolina and Minnesota shed light on the problem of judicial interpretation of language in insurance contracts. Interpreting identical policy language and faced with nearly identical factual situations, the courts came to opposite conclusions with regard to the meaning of the phrase "sudden and accidental physical loss." In one case, the court held that water intrusion taking place over nearly ten years was a "sudden and accidental" loss, and therefore covered under the policy. In the other, the court held that water intrusion taking place over a period of fifteen years was not a "sudden and accidental" loss, and therefore not covered under the policy. How is it possible that there can be such a drastic split between courts faced with identical policy language and nearly identical factual situations?

In Graf v. Allstate Ins. Co., No. 2:06 CV 1045, 2007 WL 221224 (D.S.C. Jan. 25, 2007), plaintiffs, owners of a house purchased in 1996 presented a claim for moisture damage nearly ten years after purchasing the house. The defendant denied coverage on the basis that there was no "sudden or accidental physical loss" as covered under the policy. In denying the defendant insurer's motion for summary judgment, the court made a number of interesting holdings.

First, the court in Graf concluded that the phrase "sudden and accidental" was ambiguous. It did so in reliance on a prior holding in Greenville County v. Ins. Reserve Fund, 443 S.E.2d 552 (S.C. 1994), which addressed identical policy language. In holding that the word "sudden" was ambiguous, the court in Greenville looked to the holdings of other jurisdictions, finding a split of authority on the meaning of the word and therefore an ambiguity. Interestingly, other courts have explicitly declined to define words by this method. See E.I. du Pont de Nemours & Co. v. Admiral Ins. Co., 711 A.2d 45 (Del. Super. Ct. 1995) (stating that "[t]he fact that other courts have determined 'sudden' is ambiguous based on extracontractual doctrines or extrinsic evidence is not relevant to my analysis of the pollution exclusion. Therefore, a split in case law does not render 'sudden' ambiguous."); Monsanto Co. v. Aetna Cas. & Sur. Co., No. 88C-JA-118, 1993 WL 563253 (Del. Sup. Ct. Dec. 9, 1993) (applying Missouri law, Crim v. Nat'l Life & Accident Ins. Co., 605 S.W.2d 73, 77 (Mo. 1980) (stating "Unless we can point out in language we are considering wherein it has a double meaning, we are not justified in saying that it is ambiguous, however many learned judges and unlearned laymen have voted 'yes' upon the question 'Is it ambiguous?'")). Under South Carolina law, as in many other states, the court in Graf was then forced to interpret the policy language in favor of the insured.

Second, again relying on the holding in Greenville, the court concluded that the phrase "sudden" should be interpreted to mean "unexpected" and that "accidental" should be interpreted to mean something akin to an "unfortunate result." Then, not surprisingly, the court found that the plaintiffs did not expect to find water damage when inspecting the house and that the damage was an unfortunate result of the defective installation:

The record does not show that the plaintiffs expected or intended their home to suffer from moisture intrusion. Nor does the record show that the plaintiffs expected or intended that the builder would defectively install the stucco exterior on their home. Therefore, the damage to the plaintiffs' house was sudden…The plaintiffs have experienced an unfortunate result of damage to their home because the builder's careless stucco installation caused moisture intrusion.

Graf, 2007 WL 221224, at *2.

The holding in Graf was therefore the culmination of a number of other holdings on the interpretation of insurance policies and their language. Nevertheless, future disputes involving similar language and factual scenarios will now look to Graf for guidance. Courts in other jurisdictions not yet presented with this kind of question may also look to Graf for assistance in interpreting similar policy language.

In contrast to the opinion in Graf, the federal district court of Minnesota held that the phrase "sudden and accidental" required a temporal element. While the facts were very similar, here the homeowners had owned the house for fifteen years instead of nine, the court in Tinucci v. Allstate Ins. Co., 487 F.Supp.2d 1058, 1062 (D. Minn. 2007), held that "sudden," when used in the phrase "sudden and accidental," "cannot reasonably be separated from its temporal connotation and means 'abruptly.'" In coming to this conclusion, the court held that the language in the policy was not ambiguous:

Just as the court will not read into the Policy an ambiguity where none exists, the court will not interpret the Policy to include a word or concept not included. As written, the Policy unambiguously provides coverage for a direct physical loss that is 'sudden and accidental.' The Policy is not reasonably susceptible to an interpretation that 'sudden and accidental' refers to the discovery of a loss. Therefore, the Policy is not ambiguous in that regard.

Id. (emphasis added). Again, as in Graf, in coming to the conclusion that "sudden" did not mean "unexpected," the court relied on the reasoning of a previous holding where the court ruled that to interpret "sudden" to mean "unexpected" would create a redundancy with the term "accidental." See Bd. of Regents v. Royal Ins. Co. of Am., 517 N.W.2d 888, 892 (Minn. 1994) (interpreting a Commercial General Liability policy in the context of gradual asbestos leakage from insured's product and stating that "[w]e have no difficulty concluding, in the context here used, that the term 'sudden' is used to indicate the opposite of gradual"). Thus, the court came to the conclusion that "[a]lthough unexpected, the water damage in the Tinucci residence was not a sudden loss." Tinucci, 487 F.Supp.2d at *1062.

The distinguishing characteristic between the holding in Graf and Tinucci is their respective conclusions on whether the phrase "sudden and accidental" is ambiguous. If the court determines that it is ambiguous, it is then forced to interpret the policy in favor of the insured. Conversely, where there is no ambiguity, the court will afford the phrase its plain and ordinary meaning, as was the case in Tinucci. Thus, in order to avoid a holding similar to that in Graf, it would be prudent to alter the language so as to remove any possible ambiguity. This could be done in a number of ways. The language could be altered to include something like "but in no event a loss occurring over an extended period of time, i.e., three months" (or any other time period deemed proper). The language could also be altered to include reference to a temporal element, thereby eliminating the possibility that the court could find that the word "sudden" has no temporal connotation and simply means "unexpected." Altering the language of the policy in any of these ways will remove any similar disputes from the shadow of precedents such as Graf and Greenville.


Michael P. Coleman is a Law Clerk at Mound Cotton Wollan & Greengrass.

Reprinted with permission from the Winter 2007 issue of Newsletter, a publication of Mound Cotton Wollan & Greengrass.

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April 2008

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