The insured argued that it had coverage under the BFWD because the cause of the damage was groundwater. The insurer countered that the section to which the BFWD provision was added specifically stated that all policy exclusions apply; so, the insurer said that the damage at issue was barred by another of the policy's exclusions. The Supreme Court said that the resolution of the case required it to interpret the language of the policy as would a reasonable person in the position of the insured based upon a more than casual reading of the policy as a whole.

 The court noted that the BFWD provisions grant, in relevant part, coverage for damage caused by water under the ground surface pressing on or seeping through foundations, walls, and floors. The expert witnesses showed that the damage was indeed caused by water under the ground pressing on the walls and floor of the pump chamber, a concrete box. While the insurer contended that the terms “walls and floor” cannot be applied to the pump chamber because both terms can only reasonably be construed as applying to parts of a building, not parts of a subterranean septic system, the Supreme Court disagreed.

 The court said that, although walls and floors are typically associated with buildings, there is no reason why one would not refer to the bottom of a box as its floor and the sides perpendicular thereto as its walls. These terms offer a simple, easily-understood description of the orientation of the surfaces of a box and, thus, using these terms for such a descriptive purpose is consistent with their natural and ordinary meaning. Accordingly, the damages at issue fall within the BFWD coverage provision.

 Next, the court considered the exclusions. The insurer relied on the earth movement exclusion that excluded coverage for damage caused by soil conditions that cause disarrangement of foundations or other parts of realty due to water under the surface of the ground. The court found that this exclusion directly contradicts the BFWD provision that provides coverage for damage resulting from water under the ground surface pressing on or flowing or seeping through foundations, walls, and floors. And, when forced to reconcile contradictory clauses in an insurance policy, the court said it must adopt the interpretation that most correctly reflects the reasonable expectations of the insured.

 The test of reasonable expectations, said the court, is whether the ordinary layman in the position of the insured could reasonably be expected to understand that certain exclusions qualified the policy's grants of coverage. Under the circumstances in this case, the court concluded that a layperson could not reasonably be expected to understand that even though he paid for additional coverage that covers the damage at issue, the policy would nevertheless exclude coverage for such damage because another policy provision negates the additional grant of coverage. Simply put, a reasonable layperson would not understand that the additional coverage he paid for does not actually provide such coverage. Accordingly, the Supreme Court upheld the ruling that the policy provides coverage for the damage to the insured's septic system.

 Editor's Note: The theory of “reasonable expectations” has been used by many courts to provide insurance coverage for insureds when insurers thought the policy exclusions would prevent the coverage. In this case, the New Hampshire Supreme Court ruled that the language of the additional coverage that the insured purchased directly contradicted the exclusionary wording used by the insurer to deny coverage, and that resulted in a ruling favorable to the insured. The ordinary layman (the insured) could reasonably expect to have coverage for the water damage in this instance because the exclusionary language was not clearly understandable.