United States District Court, D. Nevada
RICHARD F. BOULWARE, II UNITED STATES DISTRICT JUDGE
the Court are Plaintiffs Robert and Myrna Danganan's
(“the Danganans”) and Defendant American Family
Mutual Insurance Company's (“American
Family”) Motions for Summary Judgment. ECF Nos. 42, 43.
For the following reasons, the Court denies American
Family's Motion in its entirety and grants the
Danganans' motion in part.
Danganans sued American Family in the Eighth Judicial
District Court of Clark County on or around October 4, 2017.
ECF No. 1. In their complaint, the Danganans brought breach
of contract and tortious bad faith claim-handling claims
against American Family for its failure to make payments for
water damage allegedly covered by its policy. ECF No. 1-1.
American Family removed the case to this Court on November 3,
2017. ECF No. 1. American Family answered on November 14,
2017. ECF No. 5. Both parties moved for summary judgment in
October 2018. ECF No. 42, 43. Both motions were fully
briefed. ECF Nos. 44, 45, 46, 47. The Court held a hearing on
the motions for summary judgment on April 24, 2019. ECF No.
49. The Court took both motions under submission for a
written order to issue. ECF No. 49.
Court makes the following findings of fact. These findings
are limited to this order and are not meant to usurp findings
that a jury would have to make in a jury trial.
Danganans purchased a home located at 9610 Drayton Avenue,
Las Vegas, Nevada 89148 (the “property”) in 2001.
The home and its contents were insured by American Family
under an insurance policy that provided certain insurance
coverage effective January 8, 2016 through January 8, 2017
Policy generally provides insurance coverage for damage to
structures, personal property and loss of use of property.
Under the main heading, “Coverage A-Dwelling and
Dwelling Extension”, and the subheading “Losses
Not Covered, ” the Policy proceeds to list eight
conditions under which losses are excluded. Number three
under that subheading states that American Family
“do[es] not cover loss . . . resulting directly or
indirectly from . . .Continuous or Repeated Seepage or
leakage of water or steam from within a plumbing . . . system
. . . which occurs over a period of weeks, months or
years.” Number six under that same subheading is titled
“Other Causes of Loss.'' Within that subheading
of “Other Causes of Loss, ” the Policy provides
that it “do[es] not cover loss to the property . . .
resulting directly or indirectly from or caused by one or
more of the following . . .birds, vermin, rodents, insects or
domestic animals.” However, and importantly, within
that same “Other Causes of Loss” subsection, the
Policy also states that “[i]f any of these cause water
or steam to escape from a plumbing . . . system,
we cover loss caused by the water or
steam.” (emphasis added). The finally
sentence under the category “Losses Not Covered”
section states that the Policy “do[es] cover any
resulting loss to property described in Coverage A-Dwelling
and Dwelling Extension from items 2 through 8 above, not
excluded or excepted in this policy.” The words
“seepage” and “leakage” are not
defined in the Policy.
evening of September 21, 2016, Pat Warczynski, the
Danganans' daughter's future mother -in-law, went to
stay at the property for a few days with the Danganans'
permission. When she arrived, the property appeared to be
flooded. At that point, no one was living at the property
full-time, and it was unknown what had caused the failure of
the water supply line. Warczynski spoke with the Danganans
via video chat, who observed that a “continuous
flow” of water appeared to be coming out of the water
line to the toilet in the bathroom.
September 21, 2016, at around 9:30pm, the Danganans submitted
a claim with American Family. On September 22, 2016, the
Danganans' claim was assigned to Denise Newman, who
completed an initial review and phone conversation with the
Danganans on that same day. Also on that same day, September
22, 2016, American Family completed review of photos of the
property that it had received through a company hired to
inspect the leak called Service Master. American Family
determined that “the cause of loss [was] the supply
line of the toilet on [the] first floor.” American
Family noted that it was “unknown if the line broke or
was chewed by the rats/mice seeking water.” Notes
entered by American Family into its claim activity log at
around that time indicated that it appeared that the leak had
been “occurring for an extended time . . . a month or
longer.” Based on this information, a note was entered
into American Family's claim activity log that there was
“compelling evidence due to the extent of water, mold,
deterioration and rodent damages[sic] to indicate that this
toilet supply line leak has been continuing for at least 2
weeks or more.” On Friday September 23, 2016, the
Danganans travelled to Nevada and inspected the property with
Newman. Vermin droppings and mold were present throughout the
property on the date of inspection. Sometime between
September 23 and September 26, 2016, American Family reviewed
water bill statements. Water usage in the billing statement
for July 8 through August 8, 2016 showed an increase in water
usage from 55 gallons to 218 gallons in average daily use.
Another billing statement from between August 9, 2016 through
September 7, 2016 showed an increase in water usage from 218
gallons to 466 gallons in average daily use. After reviewing
this information, American Family determined that the water
damage was caused by a continuous or repeated leakage of
water or steam from within a plumbing system which occurred
over a period of at least several weeks if not months, and
denied the claim on September 26, 2019. American Family sent
a denial of coverage letter to the Danganans on September 26,
Danganans hired Hudson Public Adjusters to assist them with
their appeal of American Family's denial of their claim.
The Danganans also hired an expert, M. Chris Gusik, a Senior
Field Consult and Managing Partner with Adaptive
Environmental Consulting, who evaluated the evidence
concerning the water damage. The expert noted that
“[s]ubject property water damage would have occurred
immediately at line rupture provided water pressure. Water
escape occurred over a period of 57 to 70 days provided
calculated cycle flow rates and billings.” The expert
also stated that “[t]he water line condition and
Property conditions support the water line observed, as well
as other in-property water lines pictured attached to
appliances, failed likely from “vermin” chew
damage.” American Family's corporate representative
testified in his deposition that, under the Policy, if a
rodent, like a mouse/rat chewed through the water supply line
causing it to fail, American Family would cover the loss
caused by the water if the “the water damage occurred
right away.” American Family's representative also
agreed that gnaw marks would be indicative that rodents or
vermin had chewed through the line.
the Danganans nor American Family dispute the fact that the
cause of the supply line leak in the toilet was due to