Case Law Summaries

Fairlawn Industries, Ltd. v. Gerling America Insurance Company

• Opinion Date: July 10, 2001
• Real Property Law
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INSURANCE; DEFINITIONS; LAND—Breaks that occur in pipes lying under a river bed are considered to have occurred “on land.”

The owner of an industrial complex maintained a waste disposal pumping station on its property. That station pumped industrial and human waste through a pipeline underneath its own property and then under a river bed. The line continued on the ground to an interceptor line of a sewage authority. The pipeline broke approximately 385 feet away from a property line, discharging waste into the river. The property owner repaired the break and submitted an insurance claim. The “Schedule of Locations” on its insurance policy covered not only the premises, but also land within 1,000 feet thereof. The insurance company argued that no coverage was included under the policy because its insured’s loss did not occur on “land.” The Court disagreed, holding that “a reasonable insured would expect that the [river] bed constituted ‘land’ despite the fact that the river bed was covered with water.” The term “on land within 1,000 feet” was not defined within the policy. “It is well-settled that insurance policies are contracts of adhesion and, as such, are subject to special rules of interpretation.” Although a “court’s function is to enforce the contract and ‘should not write for the insured a better policy of insurance than the one purchased,’ ... ambiguities in an insurance policy are to be resolved in favor of the insured.” Further, “insurance policies are construed to effectuate the reasonable expectations of the insured.” There was no question that the loss occurred 1,000 feet from the property; therefore, the only question was whether the loss occurred “on land” within the confines of the insurance policy. The Court found that, “New Jersey case law has recognized that the term ‘land’: includes water, and this understanding seems to be supported by abundant authority. The word ‘land,’ ... includes, not only the naked earth, but everything within it, and the buildings, trees, fixtures, fences, stones, minerals, water, and herbage upon it.” Further, “an object annexed to the land, even if under water, would be legally comprehended within the meaning of the word ‘land.’” Therefore, the insurance company’s contention was rejected because, in essence, it was arguing that there was no coverage simply because the river bed was covered by water.

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