Thereafter, Mr. Keelen submitted correspondence requesting that QBE reconsider its coverage position. Specifically, Mr. Keelen refuted QBE's conclusion that the damage to the dwelling had been caused by “water damage” and asserted that “the damage to [the dwelling], which was built in 2005 to FEMA elevation and modern foundation code requirements, was caused by [the] massive impact of the house next door.”

In response to this correspondence, QBE retained Rimkus Consulting Group, Inc., an engineering company, to determine the cause of the damage to the dwelling. After its inspection of the dwelling, Rimkus concluded, among other things, that “[t]he [dwelling's] foundation had fallen to the northwest…. The cause of the foundation failure was due to buoyant forces uplifting the house combined with lateral forces including hydrodynamic wave forces and impact force of the displaced adjacent house.”

Furthermore, Rimkus found that, “[t]he [dwelling] presented none of [the] precursors to structural wind damage. The [dwelling] had only one small area of observable wind related damage. A portion of the fascia along the front of the house was missing. No other wind damage was found.”

Based on this report, QBE maintained its position denying coverage on the homeowners' claim.

Thereafter, the homeowners retained Structural Workshop LLC to “investigate the conditions” of the property and to opine as to cause of the damage to the dwelling. Following its investigation, Structural Workshop issued a report stating, among other things, that there was “no question that there was a significant impact [from the house next door to the dwelling]. This impact is clearly responsible for a significant portion of the damage, movement and dislodgement of [the dwelling].”

The report did not, however, opine as to “how the neighbor's residence (Number 6) was caused to impact the [homeowners' dwelling] (Number 8.).”

The homeowners sent this report to QBE.

QBE replied:

We have reviewed the materials you provided … including but not limited to the report from Structural Workshop LLC dated February 13, 2013. We are writing to advise, based upon a review of these materials as well as the terms of the policy, that QBE … maintains its prior denial of coverage for any and all losses sustained by you at the [property] as a result of Superstorm Sandy…. As indicated previously, the damages sustained by your client in the course of the storm as a result of “flood” as defined by the policy are excluded from coverage.

In particular, QBE asserted that “the exclusion specifically denies coverage for damages attributable to water-borne material which would encompass damage caused by the neighboring structure striking your home.”

Thereafter, the homeowners filed a complaint alleging that QBE's denial of coverage constituted a breach of the policy and a breach of the covenant of good faith and fair dealing.

QBE moved for summary judgment on these claims, arguing that storm surge had caused damage to the insured home and the policy “excludes coverage for damages 'caused directly or indirectly' by storm surge, 'regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

In opposition, the homeowners did not dispute or concede that damage had been caused by storm surge but argued that the policy's exclusion was ambiguous. In particular, they asserted that it was unclear whether the term “material” in the exclusion for damage caused by “waterborne material” included the “intact entirety of the Keelen's neighbor's structure.”

In its reply, QBE argued that the meaning of “waterborne material” was “completely irrelevant” because the “[w]ater exclusion [in the policy] applies to any one of four types of occurrences, only one of which implicates anything that has to do with the waterborne material.”

Noting that the homeowners had not refuted the evidence that storm surge had contributed to the damage to their dwelling, QBE argued that the policy's “anti-concurrent causation” clause barred coverage.

The QBE Policy

The QBE policy included an exclusion for damage arising out of:

Water

, defined to include:

[w]aterborne material carried or otherwise moved by any of the water [from flood, surface water, waves, including tidal wave[s] … tidal water, overflow of any body of water … all whether or not driven by wind, including storm surge]

The policy also provided that QBE did not insure for:

loss caused directly or indirectly

by any of the excluded causes, and that:

such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.

The court granted QBE's motion.

In its decision, the court agreed with QBE that the policy's “anti-concurrent causation” clause barred coverage of the homeowners' claim.

It explained that the policy did not cover “loss caused directly or indirectly by [storm surge],” adding that that loss was “excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss.”

The court found that the homeowners had not offered any evidence showing that storm surge did not, at least indirectly, cause their loss. Indeed, it found, Mr. Keelen's deposition testimony was consistent with the theory that storm surge had indirectly caused the loss. It pointed out that, in response to the question, “what did you believe happened to your neighbor's house that caused it to crash into yours,” Mr. Keelen responded that the house could have been pushed by water.

The court pointed out that the homeowners had not offered “even a scintilla of evidence” showing that there was any dispute as to whether storm surge, at least indirectly, had caused the losses.

Therefore, the court concluded, pursuant to the policy's anti-concurrent causation clause, the policy did not cover the homeowners' claim for property damage.

The case is Keelen v. QBE Ins. Corp., No. 13-6941 (MAS) (TJB) (D. N.J. April 27, 2016).