Iowa High Court: Insurer not on Hook for Leak at Shopping Center

The Iowa Supreme Court has ruled that an insurance company is not on the hook for a 2010 leak at Waterloo shopping center that damaged a store.

In a split decision on March 20, the high court sided with State Farm Insurance in a lawsuit filed by Amish Connection Inc.

A metal drainpipe at Crossroads Mall burst during a summer storm, diverting water into Amish Connection’s shop, damaging inventory, business records and other property, according to court records. State Farm, the business’ insurer, refused to cover the claim, saying its policy didn’t cover rain damage.

A lower court dismissed the suit, but the Iowa Court of Appeals sided with the store last year, and State Farm appealed.

The majority of the Iowa Supreme Court said that rainwater, even if from a broken pipe, is expressly exempt under the policy.

“If water is only considered rain while it is falling and becomes rainwater after it strikes a surface, then the policy’s limitation on coverage for damage ’caused by rain’ would be eviscerated,” Justice Thomas Waterman wrote for the majority. “Water does not damage property while merely falling through the air, but only after it strikes a surface.”

Justices Daryl Hecht, David Wiggins and Brent Appel dissented, saying a jury should have determined whether the policy exclusion applied in Amish Connection’s claim, noting that water damage due to accidental discharge from a broken pipe is among the incidents expressly covered by the policy.

“There is evidence in this record tending to prove the rain event was not the singular cause of Amish Connection’s loss,” Hecht wrote.