Facts
- State Farm Fire and Casualty Company insured Donald Roberts under a homeowners “all-risk” policy covering physical loss to the dwelling, subject to exclusions.
- The policy excluded certain losses, including loss caused by insects.
- The policy also contained an ensuing-loss provision: if an excluded event occurred, a later loss that followed could still be covered unless that later loss was itself excluded.
- The policy listed additional excluded categories that could bar coverage even for a later event (including items such as marring and settling).
- Roberts discovered bees in his attic and paid out of pocket to exterminate them; he did not seek reimbursement for extermination.
- After the bees were exterminated, the vacated hive began leaking honey into Roberts’s dining room, causing damage requiring repair.
- Roberts filed a claim for the honey-leakage damage under the homeowners policy.
- State Farm denied the claim on the ground that the loss was insect damage and therefore excluded.
- Roberts sued State Farm for coverage under the policy.
- The trial court granted summary judgment to State Farm, and the intermediate appellate court affirmed.
- Roberts sought review in the Arizona Supreme Court.
Issues
- Does a homeowners policy that excludes loss caused by insects nevertheless cover, under an ensuing-loss provision, physical damage caused when honey leaks from a beehive after the bees have been exterminated, where the honey damage is not otherwise excluded?
Decision
- The Arizona Supreme Court reversed the summary judgment for State Farm.
- The court held that the honey-leakage damage qualified as an ensuing loss and was covered because the later loss was not independently excluded by the policy.
- The case was remanded for further proceedings consistent with the coverage ruling.
Legal Principles
- Under an all-risk property policy, the insured bears the initial burden to show a direct physical loss within the policy’s coverage grant; the insurer bears the burden to show that an exclusion applies.
- An ensuing-loss clause functions as an exception to exclusions: a later loss that follows from an excluded event may be covered if the later loss is separate and is not itself excluded.
- The mere fact that an excluded peril appears in the causal background does not automatically bar coverage for later physical damage when the policy expressly restores coverage for ensuing loss.
- Courts apply the ordinary meaning of policy terms; when the term “ensuing” is used in its ordinary sense, a loss that follows as a consequence of an excluded event can fall within the ensuing-loss provision.
- Even when an ensuing-loss clause may restore coverage, coverage remains barred for any part of the claim that is the excluded loss itself (here, insect-related remediation costs), and coverage may still be barred if another exclusion independently applies to the ensuing damage.
Conclusion
Roberts held that although the homeowners policy excluded loss caused by insects, the honey that leaked from a beehive after extermination caused a distinct, later property loss that “ensued” from the excluded event and was covered because no other exclusion applied to the honey-leakage damage.