MAY 2014 BAD FAITH CASES: TERM “A PERIOD OF TIME” IN POLICY FOUND NOT TO BE AMBIGUOUS IN COVERAGE DISPUTE; AND AS NO COVERAGE WAS DUE THERE WAS NO VIABLE BAD FAITH CLAIM (New Jersey Federal)

In Fifth v. State Farm Insurance Company, the case involved damage to a home from water leaking and mold. The policy excluded coverage for losses caused by continuous or repeated seepage or leakage of water or steam from a plumbing system which occurs over “a period of time”, which the insurer argued encompassed the facts in this case. The insureds argued that the term “a period of time” was ambiguous and undefined in the policy.

The court recognized that a failure to define can render the term ambiguous, but the absence of a definition does not create ambiguity per se. The court then looked at the plain meaning of the language, including the use of dictionaries to come to that plain meaning.

It found that the plain meaning of “period” is a length of time during which a series of events or an action takes place or is completed, and the plain meaning of “time” is “the thing that is measured as seconds, minutes, hours, days, years, etc.” Events occurring over a period of one month fell within the plain meaning, and the insurer’s evidence was not rebutted that the mold damage was caused by a small leak that was on-going over a period of time. The court did note that it was possible under a different set of facts that “over a period of time” might have been ambiguous; but such was not the case here.

Thus, summary judgment was entered for the insurer. In light of the court’s determination that the policy did not cover the loss, it did not need to address the carrier’s alternative claims that it did not act in bad faith, among other claims. Date of Decision: March 25, 2014

Fifth v. State Farm Ins. Co., Civil Action No. 11-7440 (NLH - JS), 2014 U.S. Dist. LEXIS 39731 (D.N.J. March 25, 2014) (Hillman, J.)