Supreme Judicial Court of Massachusetts holds that term "surface waters" in policy is ambiguous, so does not apply to water on surface of a roof

Sure, Steward Health Care has created a public health care emergency, but at least it has prevailed in an insurance coverage dispute. 

A storm in June 2020 caused an accumulation of rainwater on a rooftop courtyard and on roofs of Norwood Hospital. The rainwater seeped into the interior of the hospital buildings, causing significant damage.

Norwood Hospital's owner, Medical Properties Trust, Inc., which is insured by Zurich, and Steward, the hospital's operator, insured by AGLIC, sought coverage from their respective insurers.  

Both policies had sublimits (meaning, limited coverage) for damage caused by "Flood," which the policies defined as "a general and temporary condition of partial or complete inundation of normally dry land areas or structures caused by the unusual and rapid accumulation or runoff of surface waters." 

The insurers and insureds disagreed about whether water that accumulated on roofs and infiltrated the buildings was "surface water" and therefore subject to the flood sublimits rather than the higher policy limits.  

The insureds argued that the plain meaning of "surface waters" is waters at ground level or on a ground-level surface -- waters on the surface of the earth.  The insurers argued that the phrase means waters accumulating naturally on any surface whether or not at ground level.

In Zurich Am. Ins. Co. v. Medical Properties Trust, Inc., __ N.E.3d __, 2024 WL 3504060 (Mass. 2024), the Supreme Judicial Court of Massachusetts held that the meaning of "surface waters," and therefore of "Flood," under the policies is ambiguous with respect to accumulation of rainwater on roofs.  As ambiguous terms are interpreted in favor of policyholders, the court held that there was coverage for the loss.  

First Circuit holds that flooding from roof is covered because roof is a dry land area

I've been discussing Fidelity Co-operative Bank v. Nova Casualty Co., __ F.3d __, 2013 WL 4016361 (1st. Cir. 2013), in which the United States Court of Appeals for the First Circuit held that property damage from a flooded roof was proximately caused by the inadequate roof drainage system, a covered loss, not by rainwater, an excluded loss. 

Nova, the insurer, argued that there was no coverage because the water that flooded the building was surface water excluded by the policy.  The court agreed that the water was surface water. It held, however, that the surface water exclusion did not apply.  Although the policy excluded damage from surface water, an amendatory endorsement provided coverage for flooding caused by the unusual or rapid accumulation or runoff of surface waters from any source.  The flood coverage provision defined "flood" as a "general or temporary condition of partial or complete inundation of normally dry land areas."  The court held that the roof is a "dry land area" under the standard technical definition of land, which includes buildings, fixtures and fences.