Courts Reaffirm Pro Policyholder Insurance Principles in 2019

Fundamental rules of New Jersey insurance law construction should be at the heart of every insurance coverage
case, as demonstrated by the four leading cases construing New Jersey insurance law in 2019. Sosa v. Massachusetts Bay Ins. Co., 438 N.J. Super. 639 (App. Div. 2019), concerned a water main break. The water flowed over the surface and entered the policyholder’s basement. The insurance company relied upon a flood and surface water exclusion to deny coverage. In support of the flood part of the exclusion, the insurance company pointed to testimony from the policyholder that “there was a flood and there was damage to my home.” The court disagreed. It looked at case law from other jurisdictions and definitions indicating that a flood is “a general and temporary condition of partial or complete inundation of normally dry land areas.”

The insurance company next looked to the surface water exclusion to deny coverage. The Appellate Division also rejected this argument. It found that the policy did not define “surface water,” and looked both to dictionary definitions and the definition of surface water in DEP regulations to hold that the term was ambiguous. As a matter of law, it construed the ambiguity in favor of coverage.

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