Ninth Circuit Addresses the Meaning of "Ice" in an All Risk Property Insurance Policy
In Terminal Freezers Inc. v. U.S. Fire Ins., 2009 U.S. App. LEXIS 20321, an unpublished opinion issued on September 11, 2009, the Ninth Circuit Court of Appeals employed Washington law to examine the meaning of the undefined term “ice” as used in an “all risk” property insurance policy. In Terminal Freezers, the plaintiff, who runs a cold storage facility, made a claim for loss under three commercial “all risk” property insurance policies issued by U.S. Fire when areas of the facility were damaged by ice. U.S. Fire denied the claim. See Terminal Freezers, Inc. v. U.S. Fire Ins., 2008 U.S. Dist. LEXIS 48280 (W.D. Wash. June 23, 2008). Terminal Freezers’ claim involved two freezer warehouses, and the parties agreed that their construction was deficient in several respects, including that vapor retarders were not properly installed and caused excessive ice formation. Id. The district court granted U.S. Fire’s summary judgment motion brought on the grounds that the policy’s faulty workmanship exclusion precluded coverage, and that there is no coverage for damage caused by ice. Id.
On appeal, the Ninth Circuit, considered two questions in determining whether the insurance contract should cover the loss: first, which single act or event is the efficient proximate cause of the loss; and second whether the efficient proximate cause of the loss is a covered peril, noting that the efficient proximate cause is the predominant cause which sets into motion the chain of events producing the loss. The Ninth Circuit agreed with the district court’s conclusion that, based on an expert’s undisputed finding that “the excessive ice formation . . . [was] the result of a poorly installed vapor retarder,” and the policy, which precluded coverage for “loss or damage caused by or resulting from . . . [f]aulty, inadequate or defective . . . workmanship,” the faulty workmanship was the efficient proximate cause of the facility’s excessive ice formation, and that faulty workmanship is not a “covered peril” under the policy.
The policy did provide coverage, however, if faulty workmanship led to a “covered cause of loss.” Thus, even though the efficient proximate cause of Terminal Freezers’ loss was a poorly installed vapor retarder, Terminal Freezers could recover if the policy covered whatever resulted from the faulty vapor retarder--in this case, ice. While the policy specifically excludes ice as a covered cause of loss, it does not define the term. Terminal Freezers argued, relying on the canon of noscitur a sociis, a rule of interpretation that states that the meaning of unclear language in a contract or other legal document should be construed in light of the language surrounding it, that the policy only precludes ice in its “natural” form because the words surrounding “ice” in the policy - rain, snow, sleet, sand, and dust - are “natural” elements.
Following Washington’s rules to interpret the terms of an insurance contract, the Ninth Circuit declined to resort to canons of construction when the language of a contract is clear. If a term is undefined, Washington courts rely on the term’s ordinary meaning, and may look to dictionary definitions to determine that ordinary meaning. The Ninth Circuit determined that, as commonly used, and as defined in a dictionary, ice is “water reduced to the solid state by cooling . . . .” Apparently finding no support for Terminal Freezers’ contention, the Ninth Circuit noted that “[t]hat is the end of the inquiry.” Declining to modify the insurance contract to create ambiguity where none exists, the Ninth Circuit affirmed the district court’s finding of no coverage and grant of summary judgment to U.S. Fire.
