Melkir Capital v. Erie Insurance ( 2018 )

J-A27013-17
NON-PRECEDENTIAL DECISION - SEE SUPERIOR COURT I.O.P. 65.37
MELKIR CAPITAL, LP, IN THE SUPERIOR COURT
OF
PENNSYLVANIA
Appellant
v.
ERIE INSURANCE EXCHANGE,
Appellee No. 302 WDA 2017
Appeal from the Order Entered January 24, 2017
In the Court of Common Pleas of Allegheny County
Civil Division at No(s): No. GD 14-21669
BEFORE: BENDER, P.J.E., SHOGAN, J., and MUSMANNO, J.
MEMORANDUM BY BENDER, P.J.E.: FILED MARCH 7, 2018
Appellant, Melkir Capital, LP (“Melkir”), appeals from the trial court’s
January 24, 2017 order granting Appellee’s, Erie Insurance Exchange (“Erie”),
motion for summary judgment and denying Melkir’s motion for summary
judgment. After careful review, we vacate the trial court’s order and remand
for further proceedings consistent with this memorandum.
The trial court summarized the facts alleged by Melkir in its motion for
summary judgment as follows:
[Melkir] is the owner of property located at 3336 Babcock
Boulevard, Pittsburgh, PA 15237 (“the Property[]”)[.] The
Property is situate[d] at the northeast corner of the intersection
of Babcock Boulevard and Hillcrest Drive. At all times in question,
the Property was insured by Erie….
During the effective period of the [insurance policy at issue, the
Ultrapack Plus Policy (hereinafter “Policy”)], Melkir [] suffered a
loss in the form of a sinkhole collapse in an area adjacent to the
parking lot of the Property immediately adjacent to Hillcrest Drive.
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An engineering consulting firm was retained to inspect the
sinkhole and to determine its cause and origins. Following his
inspection, Chief Engineer Harold P. McCutcheon of KU Resources
issued a report, in which he concludes that the sinkhole collapse
occurred due to water moving in and around a subterranean
culvert system that had displaced the soil and limestone
aggregate backfill under the pavement, creating a void under the
area of collapse. The water was allowed to move freely outside of
the culvert system due to cracks and breaks in the metal piping
which comprises the culvert system in that area. The displaced
material was then flushed away through the openings in the
culvert system, resulting in the formation of a sinkhole.
On August 5, 2014, Erie [] issued a denial for the sinkhole collapse
on the property, prior to reviewing their own expert report. The
expert report issued by Erie[’s] expert[,] Joshua Hunt, PE.,
concurred with the findings of [Melkir’s] expert, KU Resources
Inc.[,] and rendered the following conclusions:
1. It appears likely that the noted significant water
infiltration through the concrete masonry block of the
exterior walls of the exterior stairwell is largely
attributable to elevated groundwater levels resulting
from the leaking of the storm water line that is located
along the southern (right) edge of the property. I
observed no visible evidence that would indicate
that the conclusions expressed in the letter
prepared by KU Resources Inc. [,] the engineer
retained by Melkir…[,] were incorrect, and I
recommend that this storm water line be repaired as
soon as practically possible to mitigate against
additional damages resulting from the enlargement
of the existing sinkhole and/or the creation of
additional sinkholes.
2. However, I cannot rule out that at least a portion of
this water infiltration through the blockwork of the
walls of the exterior stairwell is the result of surface
water seeping through the gapping at the junctures of
the concrete curbs at the top of the south (right) and
west (rear) stairwell walls and the surrounding
concrete sidewalk/pavement. In addition, I cannot
rule out that at least a portion of this water infiltration
is [a] result of surface water seeping through the
cracking in the asphalt pavement at the juncture of
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the asphalt pavement and the concrete pavement. I
recommend these areas be properly sealed.
3. Furthermore, I cannot rule out that at least a portion
of this water infiltration through the block work of the
walls of the exterior stairwell is the result of an
improperly functioning underground rainwater
conductor that is discharging water into the soils in
this area. I recommend that these conductors be
inspected with a sewer camera and any required
repairs be implemented. I also recommend that the
drain in the slab at the base of the exterior stairs be
inspected with a sewer camera to ensure that it is
functioning properly.
4. No significant cracking or other visible signs of
structural distress were noted in the exterior walls of
the stairwell at the time of my inspection. However,
if elevated groundwater levels resulting from the
leaking of the storm[]water line are not corrected, it
is likely that the resultant lateral hydrostatic pressures
will cause the exterior walls of the stairwell to laterally
displace inward.
On July 3, 2014, Melkir…, by and through counsel, submitted a
claim for its losses arising from the sinkhole collapse.
Correspondence was received on October 13, 2014, by which Erie
… notified Melkir … it was denying the claim.
Trial Court Opinion (TCO), 4/12/2017, at 1-3 (quoting Melkir’s Brief in Support
of Motion for Summary Judgment, 10/31/2016, at 2-4) (internal brackets and
citation omitted; emphasis in original).1
____________________________________________
1 We note that Erie disputes whether a sinkhole actually exists. See Erie’s
Brief at 56 (remarking that it continues to dispute whether “the collapse of
earth qualifies as a sinkhole collapse”) (unnecessary emphasis and
capitalization omitted). As discussed infra, in accordance with the applicable
standard of review for summary judgment motions, the trial court accepted
Melkir’s allegations that the collapse at issue qualified as a sinkhole. See TCO
at 1-3, 5, 17; Feleccia v. Lackawanna College, 156 A.3d 1200, 1209 (Pa.
Super. 2017) (“When considering a motion for summary judgment, the trial
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Subsequently, Melkir filed a complaint against Erie, seeking, inter alia,
a declaratory judgment that the Policy covers Melkir’s losses stemming from
the sinkhole event.2 Thereafter, the parties each filed motions for summary
judgment.
To support its motion for summary judgment, Erie argued, inter alia,
that (1) the sinkholes and the deterioration of the culvert system are not
losses to covered property; (2) loss to the exterior wall of the rear exterior
stairwell is excluded by the Policy’s water exclusion; (3) Melkir did not incur
any covered losses caused by a collapse; and (4) the Policy’s extension of
coverage for building ordinance or law coverage does not cover Melkir’s losses.
See Erie’s Brief in Support of Motion for Summary Judgment, 8/30/2016, at
17, 19, 26, 34.
Conversely, Melkir argued, inter alia, in support of its summary
judgment motion that (1) the area adjacent to the parking lot where the
sinkhole collapse occurred is covered property under the Policy; (2) damage
has occurred to the building on the property, therefore the loss is covered
under the Policy; (3) the insured purchased additional coverage for sinkhole
collapses, therefore the sinkhole collapse in this case is covered under the
____________________________________________
court must take all facts of record and reasonable inferences therefrom in a
light most favorable to the non-moving party.”) (citations omitted). We do
the same, and therefore refer to the collapse at issue as a sinkhole.
2 The trial court mentions that Melkir also sought damages for breach of
contract and bad faith. See TCO at 3. However, those counts have been
bifurcated. Id. at 3 n.1.
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Policy; and (4) the insured purchased an extension of coverage for building
ordinance or law coverage, therefore the sinkhole collapse in this case is a
covered loss under the Policy. See Melkir’s Brief in Support of Motion for
Summary Judgment at 9, 11, 12, 15. Further, in response to Erie’s motion
for summary judgment, Melkir additionally contended (1) the Policy
specifically includes coverage for damage to “walks” as an extension of
coverage; and (2) damage that has occurred to the building on the property
was concurrently caused by the sinkhole collapse, therefore the loss is covered
under the Policy. See Melkir’s Brief in Opposition to Motion for Summary
Judgment filed by Erie, 12/9/2016, at 4, 6.
As mentioned above, on January 24, 2017, the trial court granted Erie’s
motion for summary judgment and denied Melkir’s motion for summary
judgment. In doing so, it determined, among other things, that the sinkhole
located in an area adjacent to the parking lot was not covered property under
the Policy, and that the Policy’s additional coverage for collapse did not apply
given that there had been no abrupt collapse of an insured building or part
thereof. See TCO at 6-7, 8-9. Further, it recognized that Melkir had not cited
any provision of the Policy to support its concurrent cause argument. Id. at
15-17.
On February 17, 2017, Melkir filed a timely notice of appeal. The trial
court did not instruct Melkir to file a concise statement of errors complained
of on appeal pursuant to Pa.R.A.P. 1925(b). Presently, Melkir raises the
following issues for our review:
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1. Do “all-risk” insurance policies provide coverage for any and
all losses unless the insurance company can specifically
identify and prove the applicability of a specific written
policy exclusion?
2. Are “walks” or “walkways” where the incident occurred in
this case covered by the all-risk policy at issue here?
3. Are “sinkholes” covered by the all-risk policy at issue here?
4. Does the “Additional Coverage” provide coverage for the
sinkhole that opened under a walkway in this case?
5. Where [Melkir’s] and [Erie’s] experts agree that the loss
occurred near but not on pavement, does the Policy provide
coverage because the “paved area” exclusion does not
apply?
6. Did the trial court commit an error of law when it granted
summary judgment to Erie … on the basis of unsupported
conjecture that repairing the loss would require interacting
with a paved portion of the property?
7. Is the damage which occurred to the insured building
covered by the [P]olicy?
8. Did the trial court commit an error of law by relying on non-
material facts that are not in the record when it granted
summary judgment to Erie … on the basis that Erie’s expert
could not exclude additional unnamed causes of the loss?
Melkir’s Brief at 4-5.3,4
____________________________________________
3 We reorder Melkir’s issues for ease of disposition.
4 We remind Melkir that the argument section of the appellant’s brief “shall be
divided into as many parts as there are questions to be argued[.]” See
Pa.R.A.P. 2119(a). The argument section of Melkir’s brief “is not divided into
appropriate subsections which correspond to the questions … raised on
appeal.” See Forrester v. Hanson, 901 A.2d 548, 551 n.2 (Pa. Super. 2006)
(citation omitted). Specifically, Melkir raises eight issues on appeal, but
divides its brief into four sections, with eight subsections therein.
Notwithstanding, “this defect does not substantially impair our ability to
review the issues presented,” and we will therefore address Melkir’s claims.
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Initially, we set forth our standard of review:
[I]n reviewing the grant of summary judgment, the following
principles apply. Summary judgment is appropriate only in those
cases where the record clearly demonstrates that there is no
genuine issue of material fact and that the moving party is entitled
to judgment as a matter of law. When considering a motion for
summary judgment, the trial court must take all facts of record
and reasonable inferences therefrom in a light most favorable to
the non-moving party. In so doing, the trial court must resolve
all doubts as to the existence of a genuine issue of material fact
against the moving party, and, thus, may only grant summary
judgment where the right to such judgment is clear and free from
all doubt. On appellate review, then, an appellate court may
reverse a grant of summary judgment if there has been an error
of law or an abuse of discretion. But the issue as to whether there
are no genuine issues as to any material fact presents a question
of law, and therefore, on that question our standard of review is
de novo. This means we need not defer to the determinations
made by the lower tribunals. To the extent that this Court must
resolve a question of law, we shall review the grant of summary
judgment in the context of the entire record.
Feleccia, 156 A.3d at 1209 (citations and original brackets omitted).
Moreover, we observe that:
Where an insurer relies on a policy exclusion as the basis for its
denial of coverage..., the insurer has asserted an affirmative
defense, and accordingly, bears the burden of proving such
defense. To determine whether [the a]ppellant has met its burden
of proof, we rely on well-settled principles of contract
interpretation.
The task of interpreting an insurance contract is generally
performed by a court rather than by a jury. The goal of that task
is, of course, to ascertain the intent of the parties as manifested
by the language of the written Instrument. Where a provision of
a policy is ambiguous, the policy provision is to be construed in
favor of the insured and against the insurer, the drafter of the
agreement. Where, however, the language of the contract is clear
and unambiguous, a court is required to give effect to that
language.
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Contractual language is ambiguous ‘if it is reasonably susceptible
of different constructions and capable of being understood in more
than one sense.’ This is not a question to be resolved in a vacuum.
Rather, contractual terms are ambiguous if they are subject to
more than one reasonable interpretation when applied to a
particular set of facts. We will not, however, distort the meaning
of the language or resort to a strained contrivance in order to find
an ambiguity.
The polestar of our inquiry, therefore, is the language of the
insurance policy.
Spece v. Erie Insurance Group, 850 A.2d 679, 682 (Pa. Super. 2004)
(internal brackets, quotations, citations, and formatting omitted).
We now turn to Melkir’s first issue. To begin, Melkir argues that “‘all-
risk’ insurance policies provide coverage for any and all losses unless the
insurance company can specifically identify and prove the applicability of a
specific written policy exclusion[.]” Melkir’s Brief at 4 (citations omitted). In
other words, “[w]here … an insurance company provides an ‘all-risk’ policy,
losses are presumed to be covered unless and until the insurance company
proves an exclusion applies.” Id. at 15.
We see no need to delve deeply into this issue, as neither the trial court
nor Erie seem to oppose this assertion. See TCO at 4 (“The policy at issue is
an ‘all[-]risk’ policy. … The burden of proof under an ‘all[-]risk’ policy shifts
to the insured only after the insurer has established some exclusion in the
policy[.]”); Erie’s Brief at 17-18 (“If an all-risks policy — one that covers all
loss except that which is specifically excluded — is at issue, however, the
insured need only prove that a loss occurred. Thereafter, the insurer must
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prove that the loss falls within a particular exclusion.”) (citations omitted).5
Accordingly, we apply the standard set forth supra. See Spece, 850 A.2d at
682 (“Where an insurer relies on a policy exclusion as the basis for its denial
of coverage..., the insurer has asserted an affirmative defense, and
accordingly, bears the burden of proving such defense.”).
In its second issue, Melkir contends that “[t]he loss occurred on a ‘walk’
which is covered through the ‘Extensions of Coverage’ [s]ection of the Policy.”
Melkir’s Brief at 21 (emphasis omitted). Specifically, Melkir argues that “[a]t
[s]ection I(B), labeled Property Not Covered, the Policy notes it does not cover
‘underground pipes, flues, or drains,’ ‘land,’ or ‘walks.’” Id. at 22. Yet, Melkir
goes on to point out that “‘walks’ and therefore the ‘land’ walks are composed
of, are added back into coverage at [s]ection VIII – Extensions of Coverage
at [subsection] A(3).” Id.
We examine the relevant portions of the Policy. It sets forth:
SECTION I – COVERAGES
INSURING AGREEMENT
____________________________________________
5 We acknowledge, however, that Erie also asserts that, “[a]lthough the Policy
affords coverage on an all-risks basis, it does not cover all property. Rather,
it unambiguously provides that it covers only that property which qualifies as
‘Covered Property,’ and defines that property that does and does not qualify
as such.” Erie’s Brief at 18 (citations omitted). It is unclear to us if Melkir
intended to challenge this specific proposition. To the extent that it did, we
find this claim waived. See, e.g., Wirth v. Commonwealth, 95 A.3d 822,
837 (Pa. 2014) (“Where an appellate brief fails to provide any discussion of a
claim with citation to relevant authority or fails to develop the issue in any
other meaningful fashion capable of review, that claim is waived. It is not the
obligation of an appellate court … to formulate [the] appellant’s arguments for
him [or her].”) (citation and original brackets omitted).
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We will pay for direct physical “loss” of or damage to Covered
Property at the premises described in the “Declarations” caused
by or resulting from any Covered Cause of Loss.
BUILDING(S) – COVERAGE 1
A. Covered Property
Building(s) means buildings described in the “Declarations”
and anything permanently attached.
***
B. Property Not Covered
Building(s) does not apply to:
***
4. Bridges, roadways, patios, or other paved surfaces;
***
6. The cost of excavations, grading, backfilling, or filling;
***
8. Underground pipes, flues, or drains;
9. Land (including land on which covered property is
located) or water; and
***
SECTION VIII – EXTENSIONS OF COVERAGE
A. Extensions of Coverage
We will pay the following “losses” at your option. Payments
under these Extensions are not an additional amount of
insurance and will not increase the total amount of
insurance available for the coverage involved.
***
3. Fences, Walks, Unattached Outbuildings, Tennis
Courts, and Inground Swimming Pools – Coverage 1.
We will cover “loss” to fences, walks, unattached
outbuildings, tennis courts, and inground swimming pools
caused by a peril insured against on the premises described
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in the “Declarations.” We will pay up to 10% of the
Building(s) – Coverage 1 limit but not to exceed $25,000 for
any one “loss.” If you are a tenant and no limit is shown for
Building(s) – Coverage 1, we will pay up to 10% of the
Business Personal Property and Personal Property of Others
– Coverage 2 limit (minimum of $1,000) but not to exceed
$25,000 for any one “loss”.
See Policy at 1, 13 (attached as Exhibit A to Erie’s Motion for Summary
Judgment).
In granting Erie’s motion for summary judgment and denying Melkir’s
motion for summary judgment, the trial court explained:
[Melkir] argues the area of the sinkhole is not excluded from
coverage because [Erie’s] adjuster, Michael Umpleby, agreed at
deposition the sinkhole was adjacent to, rather than in, the
parking lot. [Melkir] argues the terms “parking lot” and “area
adjacent to parking lot” are not listed as Property Not Covered
and, therefore, the sinkhole collapse is a covered loss. However,
Joseph Urban, of J.L. Urban Construction Services, who inspected
the sinkhole collapse on behalf of [Melkir], testified there was
grass and asphalt in the area of the sinkhole. He further testified
there was cracking in the parking lot; the whole pipe would have
to be replaced in addition to filling in the sinkhole; the pipe basin
would have to be enlarged or replaced; and the asphalt would
have to be cut two feet on either side of the pipe so that when the
excavation was performed the rest of the asphalt would not be
damaged. Asphalt clearly qualifies as a “paved surface.” The area
of the sinkhole and the work required to remediate it clearly fall
within subsection 4 [of section I(B), stating that bridges,
roadways, patios, or other paved surfaces are not covered
property under the Policy]. Further, if the sinkhole was adjacent
to the parking lot, it was excluded under subsection 9 [of section
I(B), stating that land (including land on which covered property
is located) or water are not covered property under the Policy].
In either instance, the plain language of the [P]olicy indicates the
sinkhole is not Covered Property. Furthermore, [Melkir] has failed
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to address [Erie’s] other assertions as to why the area of the
sinkhole is not Covered Property.[6]
TCO at 7 (footnotes omitted).
Although Melkir raised whether the area where the sinkhole occurred
could be considered a “walk” under section VIII(A)(3) in its brief in opposition
to Erie’s motion for summary judgment and at the summary judgment
hearing, the trial court did not specifically address that issue in its opinion.
See Melkir’s Brief in Opposition to Motion for Summary Judgment filed by Erie
at 4-6; N.T. Summary Judgment Hearing, 12/13/2016, at 20-21.7,8 Melkir
claims that the term “walks” as used in the Policy means “a passage for
walking[,]” and that “[t]he sinkhole opened under an area near the parking
lot used as a walkway.” Melkir’s Brief at 21, 22 (citations omitted; emphasis
in original). Moreover, it notes that “the Policy does not distinguish between
paved and unpaved walks.” Melkir’s Reply Brief at 5 (citations omitted).
On the contrary, Erie claims that the term walks “suggests an area that
is defined in some fashion as an area for walking, such as, for example, a
____________________________________________
6 Erie had also argued that the sinkhole was not Covered Property because it
involved excavations, backfilling, filling, and underground pipes. See Erie’s
Brief in Support of Motion for Summary Judgment at 28; see also section
I(B)(6), (8), supra. The trial court did not evaluate this argument.
7 Erie also does not suggest that Melkir has waived this issue.
8 The trial court did conclude that Melkir’s loss is not covered under section
IV(A)(4)(i), which applies to walks, roadways, and other paved surfaces. See
TCO at 10. However, in reaching that conclusion, it did not articulate if — let
alone why — the area where the sinkhole formed qualifies as a walk under the
Policy. Id.
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sidewalk, a concrete or stone pathway, or an elevated pathway.” See Erie’s
Brief at 43-44 (citations omitted). Erie further argues that “[d]espite
Melkir[’s] arguments to the contrary, pictures in this case indisputably show
that the collapsed earth formed in, and at the entrance of, a parking lot on
the Property[,]” and that “[t]he parking lot is not an area designated or
defined in some fashion for walking, but is an area specifically designated for
parking vehicles.” Id. at 44, 46. It adds that “[i]f the parties intended walks
to include land and other paved surfaces, there would be no need to explicitly
exclude land and other paved surfaces from the definition of ‘Covered
Property.’” Id. at 45.
Given that an issue exists that the trial court has not addressed, we
consider it appropriate to vacate the trial court’s order and remand this case
so that the trial court can determine in the first instance if the sinkhole formed
in a walk as contemplated in section VIII(A)(3) and, if so, whether the Policy
covers such a loss. See Branton v. Nicholas Meat, LLC, 159 A.3d 540, 562
n.21 (Pa. Super. 2017) (observing that the trial court did not address an issue
in its opinion granting summary judgment and therefore remanding the matter
so that the trial court could rule on the issue in the first instance). Despite
this disposition, however, we will address Melkir’s other issues in the interest
of judicial economy. See East Texas Motor Freight, Diamond Division v.
Lloyd, 484 A.2d 797, 800 (Pa. Super. 1984) (“Having found a new trial is
necessary, we nonetheless address the remaining contentions in the interest
of judicial economy and so as to give guidance to the trial court.”).
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In its third issue, Melkir raises whether sinkholes are covered by the all-
risk policy at issue here. Melkir’s Brief at 4. In particular, it states that, under
section III(A)(5)(d) of the Policy, “[w]hile ‘earth sinking’ is excluded from
coverage, sinkholes are specifically included in coverage without any
qualification or limitation.” Id. at 19 (emphasis in original; citation omitted).
Further, it asserts that “[s]inkholes are also covered under an exception to
the ‘collapse’ exclusion which appears at [s]ection III(B)(7).” Id. (citation
omitted).
The pertinent provisions of the Policy provide as follows:
SECTION III – EXCLUSIONS
A. Coverages 1, 2, and 3
We do not cover under Building(s) – Coverage 1 … “loss” or
damages caused directly or indirectly by any of the following.
Such “loss” or damage is excluded regardless of any cause or
event that contributes concurrently or in any sequence to the
“loss”:
***
5. Earth Movement
***
d. Earth sinking (other than sinkhole collapse), rising, or
shifting including soil conditions which cause settling,
crackling or other disarrangement of foundations, or
other parts of realty. Soil conditions include
contraction, expansion, freezing, thawing, erosion,
improperly compacted soil, and the action of water
under the ground surface.
This exclusion applies regardless of whether any of the
above, in Paragraphs 5.a. through 5.d., is caused by an
act of nature or is otherwise caused.
***
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B. Coverages 1, 2, and 3
We do not cover under Building(s) – Coverage 1 … “loss” or
damage caused:
***
7. By collapse, including any of the following conditions of
property or any part of the property:
a. An abrupt falling down or caving in;
b. Loss of structural integrity, including separation of
parts of the property or property in danger of falling
down or caving in; or
c. Any cracking, bulging, sagging, bending, leaning,
settling, shrinkage, or expansion as such conditions
relates to a. or b. above.
But if collapse results in a peril insured against at the
premises described in the “Declarations”, we will pay for
the “loss” or damage caused by the peril insured against.
Exclusion B.7. does not apply:
a. To the extent that coverage is provided in Section IV
– Additional Coverages, A. Collapse; or
b. To collapse caused by one or more of the following:
1) Fire;…sinkhole collapse….
Sinkhole collapse means “loss” caused by sudden
sinking or collapse of land into underground empty
spaces created by the action of water on limestone
or dolomite.
This peril does not include:
a) The cost of filling sinkholes; or
b) “Loss” or damage to property caused by or
resulting from the sinking or collapse of land
into man-made underground cavities.
***
SECTION IV – ADDITIONAL COVERAGES
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A. Collapse
The coverage provided under this Additional Coverage –
Collapse applies only to an abrupt collapse as described
and limited in A.1. through A.7.:
1. For the purpose of this Additional Coverage –
Collapse, abrupt collapse means an abrupt falling
down or caving in of a building or any part of a building
with the result that the building or part of the building
cannot be occupied for its intended purpose.
2. We will pay for direct physical “loss” or damage to
covered property, caused by abrupt collapse of a
building or any part of a building that is insured under
this Coverage Part or that contains Covered Property
insured under this Coverage Part, if such collapse is
caused by one or more of the following:
***
d. Use of defective material or methods in
construction, remodeling, or renovation if the
abrupt collapse occurs after the course of the
construction, remodeling, or renovation is
complete, but only if the collapse is caused in part
by:
***
2) Fire;…sinkhole collapse….
Sinkhole collapse means “loss” caused by sudden
sinking or collapse of land into underground
empty spaces created by the action of water on
limestone or dolomite.
This peril does not include:
a) The cost of filling sinkholes; or
b) “Loss” or damage to property caused by or
resulting from the sinking or collapse of land
into man-made underground cavities.
3) Water damage resulting from the accidental
discharge or leakage of water or steam as the direct
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result of the breaking apart or cracking of any part
of plumbing, heating, air conditioning, or other
equipment or appliances, but does not include
damage from a sump pump, sump pump well, or
any other system designed to remove subsurface
water which is drained from the foundation areas[.]
See Policy at 4, 5, 6, 7, 8-9.
As discussed above, the trial court initially determined that the area
where the sinkhole occurred was not covered property, and that the Policy did
not cover Melkir’s losses as a result. See TCO at 7, supra. It did not conduct
an alternative analysis as to whether the loss would be covered under the
Policy if that area were covered property.9
On the other hand, the trial court did determine that Melkir’s building,
which sustained damage, was covered property. Id. at 7-8. Nevertheless, it
concluded that the Policy excludes this loss. See id. at 8. As mentioned
above, in its motion for summary judgment, Erie alleged that the Policy does
not cover any damage to the building because of the Policy’s water exclusion
under section III(A)(6)(d)(1). See, e.g., Erie’s Brief in Support of Motion for
Summary Judgment at 19.10 To counter the water exclusion claimed by Erie
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9 As we explained previously, if the area is covered property because it
qualifies as a walk under section VIII(A)(3), the trial court would still have to
determine if the Policy covers Melkir’s loss.
10 The water exclusion states, in pertinent part:
SECTION III – EXCLUSIONS
A. Coverages 1, 2, and 3
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in its motion, Melkir first averred that “[i]n addition to the general, ‘all-risks’
coverage provided by the Policy, Melkir … also purchased certain coverage as
‘additional coverage,’ within which coverage for sinkhole collapses is
specifically provided.” See Melkir’s Brief in Support of Motion for Summary
Judgment at 12; Melkir’s Brief in Opposition to Motion for Summary Judgment
filed by Erie at 7. Relying on this additional coverage provided under section
IV(A)(2)(d)(2), set forth supra, Melkir claimed that “a pipe within a culvert
system which freely allows water to escape its enclosure is ‘defective’ for its
intended purpose. Therefore, such a system inarguably contains ‘defective
material or methods in construction.’” Melkir’s Brief in Support of Motion for
Summary Judgment at 14. The trial court disagreed, noting that the Collapse
coverage under section IV(A)(2)(d)(2) only “applies if there has been an
____________________________________________
We do not cover under Building(s) – Coverage 1 … “loss” or
damages caused directly or indirectly by any of the following.
Such “loss” or damage is excluded regardless of any cause or
event that contributes concurrently or in any sequence to the
“loss”:
***
6. Water
***
d. Water under the ground surface pressing on, flowing,
or seeping through:
***
1) Foundations, walls, floors, or paved surfaces[.]
See Policy at 4, 5.
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abrupt collapse of a building or a part thereof, which did not occur here.” TCO
at 9.
Next, Melkir tried to convince the trial court that the water exclusion did
not apply by making a concurrent causation argument. It claimed that
“[a]ccording to experts, the sinkhole collapse had the direct effect of causing
water to leak into the building foundation … because … the leaking of a
storm[]water line resulted in a sinkhole collapse.” Melkir’s Brief in Opposition
to Motion for Summary Judgment filed by Erie at 7 (footnote omitted). Thus,
Melkir reasoned that “[t]he cause of the sinkhole collapse adjacent to the
parking lot resulted in the damage to the building. Therefore, this was a
proximate cause of the loss and, hence, covered under the ‘all[-]risk’ policy.”
Id. Once again, the trial court disagreed, finding that the water exclusion
excludes such loss regardless of any cause contributing concurrently to the
loss, and that Melkir did not cite any provisions of the Policy in support of its
concurrent cause argument. See TCO at 16.
Now, on appeal, Melkir apparently attempts to overcome the water
exclusion precluding coverage for the building’s damage by (1) identifying an
exception to the water exclusion under section III(A)(6)(e)11; and (2) arguing
that the water exclusion does not preempt sinkhole coverage because its
____________________________________________
11 This exception provides that the water exclusion “does not apply to water
flowing or seeping from a broken water main where the break occurs on the
premises described in the ‘Declarations[.]’” See Policy at 4, 5.
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broad lead-in language stands in conflict with sections III(A)(5)(d) and
III(B)(7), thereby creating an ambiguity as to the Policy’s scope of coverage.
See Melkir’s Brief at 20; Melkir’s Reply Brief at 9-10. It appears, however,
that Melkir did not raise these arguments before the trial court.12 It is well-
established that appellants are not permitted to raise new arguments on
appeal. See Pa.R.A.P. 302(a) (“Issues not raised in the lower court are waived
and cannot be raised for the first time on appeal.”); Newman Development
Group of Pottstown, LLC v. Genuardi’s Family Market, Inc., 98 A.3d 645,
658 n.16 (Pa. Super. 2014) (“A new argument cannot be raised in support of
an issue on appeal if it was not first presented before the trial court. Thus,
this argument is waived.”) (citation omitted). Consequently, we find these
arguments waived, and conclude that — based on the arguments properly
preserved by Melkir — the Policy does not cover any loss to the building
stemming from the sinkhole due to the water exclusion raised by Erie.
Likewise, in Melkir’s fourth issue, it states that “[t]he ‘Additional
Coverages’ [s]ection of the [P]olicy specifically mentions the mechanism of
loss which occurred here and therefore also covers Melkir’s losses.” Melkir’s
Brief at 23 (unnecessary emphasis omitted). It explains:
Section IV, labeled Additional Coverages, provides coverage for
“defective material or methods of construction,” “sinkhole
collapse,” and[,]
____________________________________________
12 Further, in contravention of Pa.R.A.P. 2117(c), Melkir does not identify
where it preserved these arguments either. See Pa.R.A.P. 2117(c) (requiring
that the statement of the case include a statement of place of raising or
preservation of issues).
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water damage resulting from the accidental discharge or
leakage of water or steam as the direct result of the
breaking apart or cracking of any part of plumbing…[.]
Section IV(A)(2)(d)[(2),] (3) [of the Policy]. Again, this is an apt
description of the loss at issue here: a pipe broke apart, water
leaked, and the land collapsed forming a sinkhole which caused
damage to the building. The loss is covered.
Id. (internal citations to record omitted). Initially, it does not appear that
Melkir raised its argument relating to section IV(A)(2)(d)(3) below.
Notwithstanding, as addressed supra, section IV(A)(2) only provides coverage
for an abrupt collapse of an insured building or part thereof, which did not
occur here. Therefore, even if preserved, this argument lacks merit.
In its fifth issue, Melkir questions whether the “paved area” exclusion
applies where the parties’ experts agree that the loss occurred near but not
on pavement. See Melkir’s Brief at 4. It argues in full:
The sinkhole opened under an area near the parking lot used as a
walkway. While the parking lot itself may not be covered under
the Policy, areas near the parking lot cannot be encompassed by
this exclusion. Had Erie wanted to exclude areas near the parking
lot it could and should have so specified. It did not. Any argument
regarding coverage of the parking lot is a red herring as the
[p]arties agree the parking lot was not damaged.
Id. at 21 (internal citations and footnote omitted; emphasis in original).
We find Melkir’s argument confusing and off base. As Erie discerns,
“[t]he Policy … excludes more than just parking lots from the definition of
‘Covered Property.’ Rather, it specifically excludes ‘bridges, roadways, patios,
and other paved surfaces,’ and thus this provision applies to more than just
parking lots on its face.” Erie’s Brief at 19 (referring to section I(B)(4);
citations and original brackets omitted).
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To the extent Melkir intended to contest whether the area of the sinkhole
consisted of grass or a paved surface, we agree with the trial court that this
is somewhat of a distinction without a difference. As the trial court observes,
even if the area of the sinkhole were grass and not asphalt or a paved surface,
the Policy does not cover “[l]and (including land on which covered property is
located)….” See Policy at I(B)(9); see also TCO at 7. Thus, whether grassy
or paved, the area would be excluded either way. Notwithstanding, we
reiterate that the trial court did not address whether the area is a walk under
section VIII(A)(3) and, if so, whether a loss would be covered under the Policy.
Relatedly, in its sixth issue, Melkir avers that the trial court committed
an error of law when it granted summary judgment to Erie on the basis of
unsupported conjecture that repairing the loss would require interacting with
a paved portion of the parking lot. See Melkir’s Brief at 4. In particular, it
states that the trial court “mistakenly read into the Policy an exclusion related
to performing remedial work that touched on excluded portions of the
property.” Id. at 25 (citation omitted). Melkir insists that “nothing in the
Policy permits Erie to disclaim coverage of property or perils because the
remediation is expected to require interacting with a paved area.” Id.
In determining that the area of the sinkhole likely constituted a paved
surface and was therefore not covered property, the trial court observed that
Joseph Urban — who inspected the sinkhole on behalf of Melkir — testified
that, in order to remediate the sinkhole, “the asphalt would have to be cut
two feet on either side of the pipe so that when the excavation was performed
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the rest of the asphalt would not be damaged.” See TCO at 7 (footnote
omitted). As Erie persuasively acknowledges:
Although the court did rely upon [Mr.] Urban’s testimony
regarding the remediation of the collapsed earth, it did so in
concluding that the area of the collapsed earth consisted of
asphalt, and thus a paved surface. It noted [Mr.] Urban’s
testimony that the area surrounding the collapsed earth was
asphalt, as well as that regarding the additional remediation work
to repair the damage to the asphalt. … Contrary to Melkir[’s]
argument, the trial court never concluded that its losses were
excluded because remediation work would affect the parking lot.
Erie’s Brief at 51-52 (internal citations omitted). Accordingly, we do not
determine that the trial court committed an error of law on this basis.
Seventh, Melkir contests whether the Policy covers the damage to the
insured building. See Melkir’s Brief at 5. It argues that the trial court erred
by holding that “because the building itself did not collapse the Policy did not
provide any coverage for any part of the loss.” Id. at 26. Melkir declares that
“the Policy includes coverage for any ‘loss’ caused by sinkholes as well as
losses which result from ‘water flowing or seeping from a broken water main
where the break occurs on the premises…[,]’…or ‘water damage resulting from
the accidental discharge or leakage of water … resulting from the breaking
apart or cracking of any part of plumbing…[.]’” Id. (citing section III(A)(5)(d),
(6)(e); section IV(A)(2)(d)(3); and section VIII(A)(3); original brackets
omitted).
We believe we have already addressed these arguments. We reiterate
that, in its motion for summary judgment and brief in opposition to Erie’s
motion for summary judgment, Melkir challenged the applicability of the
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Policy’s water exclusion by raising a concurrent causation argument, and
pointing to additional coverage for collapse under section IV(A)(2)(d)(2)
(providing coverage for loss caused by the “abrupt collapse of a building or
any part of a building that is insured … or that contains Covered Property…” if
such collapse is caused by “[u]se of defective materials or methods in
construction…”). It did not raise below the applicability of section III(6)(e)
(stating that the water exclusion “does not apply to water flowing or seeping
from a broken water main where the break occurred on the premises…”) or
section IV(A)(2)(d)(3) (providing coverage for loss caused by abrupt collapse
of an insured building or part thereof, if such collapse is caused by “[w]ater
damage resulting from the accidental discharge or leakage of water or steam
as the direct result of the breaking apart or cracking of any part of
plumbing…”). Therefore, we repeat that Melkir has waived those arguments.
See Pa.R.A.P. 302(a) (“Issues not raised in the lower court are waived and
cannot be raised for the first time on appeal.”).13 Further, the trial court
considered that the building had not collapsed because Melkir had argued for
coverage under section IV(A)(2)(d)(2), which requires the abrupt collapse of
a building or part thereof. Based on the foregoing, we conclude that the Policy
does not cover the damage to Melkir’s building based on the arguments it
made before the trial court.
____________________________________________
13 In any event, as mentioned supra, section IV(A)(2)(d)(3) requires the
abrupt collapse of an insured building or part thereof in order to apply, and
such events did not occur here.
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Finally, in its eighth issue, Melkir insists that the trial court “erred by
granting summary judgment to Erie at least in part based on its finding that
Erie’s expert was unable to exclude alternative possible causes of Melkir’s
loss.” Melkir’s Brief at 27 (citation omitted). It claims that “[n]ot only is this
an overly charitable reading of [Erie’s expert’s] report … but this is not an
appropriate basis for the granting of summary judgment.” Id.
Specifically, Melkir seems to complain of the following discussion by the
trial court:
At page 7 of its brief in opposition to summary judgment, [Melkir]
argues as follows:
According to experts, the sinkhole collapse had the direct
effect of causing water to leak into the building foundation
according because of the leaking of a storm[]water line
resulted in a sinkhole collapse. [sic] The sinkhole[,] which
is a covered claim and had the effect of damaging the
building due to water infiltration, notwithstanding the water
exclusions. [sic] [W]hen there are two … or more causes
of loss, the policyholder’s claim is covered as long as the
immediate or proximate cause of the loss is covered by the
policy. The cause of the sinkhole collapse adjacent to the
parking lot resulted in the damage to the building.
Therefore, this was a proximate cause of the loss and,
hence, covered under the “all[-]risk” policy.
Record references, quotes, citations, and footnote omitted.
I cannot agree. As discussed above, the sinkhole was not a
covered loss under the [P]olicy. Furthermore, the experts did
not agree the sinkhole collapse had the “direct effect” of
causing water to leak into the building foundation. …
[Erie’s] expert only stated he did not find any visible
evidence that [Melkir’s] expert[’s] conclusions25 were
incorrect. However, he listed three other possible causes
of the water infiltration that could not be ruled out.
- 25 -
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25 The conclusions were that water from elevated
groundwater levels, resulting from the leaking storm water
line, infiltrated through the concrete masonry block of the
exterior walls of the exterior stairwell.
[Melkir] does not cite to any provisions of the [P]olicy in support
of its concurrent cause argument. Section III-EXCLUSIONS,
Section A. Coverages 1, 2, and 3, provides:
We do not cover under Building(s)-Coverage 1 …
“loss” or damage caused directly or indirectly by any
of the following. Such “loss” or damage is excluded
regardless of any cause or event that contributes
concurrently or in any sequence to the “loss”…[.]
***
The resolution of the instant motions for summary judgment [do]
not hinge on issues of proximate or concurrent causation. This
case involved a determination of the applicability of the exclusions
relied upon by [Erie] in denying coverage and whether the loss
sustained by [Melkir] fell within any of the coverages relied upon
by [Melkir]. The sinkhole was not a covered loss.
TCO at 15-17 (some emphasis added; footnote omitted).
To begin, the trial court did not grant summary judgment in favor of
Erie based, even in part, on its finding that Erie’s expert was unable to exclude
alternative possible causes of Melkir’s loss. See Melkir’s Brief at 27. Erie aptly
describes:
The trial court … only found that Melkir … ascribed too much to
[Erie’s expert’s] report in arguing that [Erie’s expert] agreed that
the collapsed earth directly caused water to leak into the building’s
foundation, noting that [Erie’s expert] stated only that he did not
find visible evidence that [Melkir’s expert’s] conclusions were
wrong and identified three other possible causes of loss. In the
end, the trial court concluded that no provisions of the [P]olicy
supported Melkir[’s] argument that the collapse of the earth was
the proximate cause of its loss, and that, therefore, the loss was
covered. In other words, the trial court concluded that, regardless
of the fact that [Erie’s expert] was unable to exclude other causes
of loss, coverage under the Policy did not exist.
- 26 -
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Erie’s Brief at 54 (internal citations omitted).
As Erie points out, the trial court simply observed that Melkir seemed to
overstate the extent to which Erie’s expert agreed with its own expert.
Notwithstanding, as the trial court determined, Melkir points to no concurrent
causation language in the Policy that could overcome the water exclusion
raised by Erie under section III(A)(6)(d)(1).14 Here, the Policy excludes loss
or damage caused by the exclusions set forth in section III, “regardless of any
cause or event that contributes concurrently or in any sequence to the ‘loss….’”
See Policy at 4. This Court has interpreted a nearly identical clause to mean
that “if an exception, in its entirety, applies then the loss is excluded, even if
other events contributed to the loss.” Spece, 850 A.2d at 684. Erie explains
____________________________________________
14 Again, this provision sets forth, in relevant part:
SECTION III – EXCLUSIONS
B. Coverages 1, 2, and 3
We do not cover under Building(s) – Coverage 1…“loss” or
damages caused directly or indirectly by any of the following.
Such “loss” or damage is excluded regardless of any
cause or event that contributes concurrently or in any
sequence to the “loss”:
***
6. Water
***
d. Water under the ground surface pressing on, flowing,
or seeping through:
***
1) Foundations, walls, floors, or paved surfaces;
See Policy at 4, 5 (emphasis added).
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that “[t]he parties agree that the water that infiltrated the exterior stairwell
traveled underground until it backed up against the exterior wall of the
stairwell.” Erie’s Brief at 30 (citations omitted). Erie maintains that
“underground water that pressed on, flowed through, and/or seeped through
foundations and walls caused or contributed to Melkir[’s] loss to the exterior
stairwell, which is sufficient to exclude the losses to the exterior stairwell
[under section III(A)(6)(d)(1)] even if other covered causes of loss also
contributed.” Id. at 33. Therefore, even assuming that the sinkhole collapse
caused water to leak into the building’s foundation as Melkir alleges, Melkir
has not advanced a meritorious argument as to why section III(A)(6)(d)(1)
would not exclude the loss to Melkir’s building.
To summarize, we vacate the trial court’s order and remand for the trial
court to determine if the area of the sinkhole qualifies as a walk under section
VIII(A)(3). If the area qualifies as a walk under section VIII(A)(3), the trial
court must determine if the Policy covers Melkir’s loss. The other issues raised
by Melkir do not warrant relief.
Order vacated. Case remanded for further proceedings consistent with
this memorandum. Jurisdiction relinquished.
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Judgment Entered.
Joseph D. Seletyn, Esq.
Prothonotary
Date: 3/7/2018
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