A federal court in Houston recently granted summary judgment in favor of State Farm in a lawsuit by two homeowners for property damage. Salazar v. State Farm Lloyds, No. H-13-1094, 2014 WL 2862760 (June 24, 2014) (Rosenthal, J.). The Salazars sued under their homeowners’ policy, alleging State Farm had wrongfully denied their claim for foundation movement and related damage allegedly caused by water leaks and plumbing leaks.

Judge Lee Rosenthal addressed the relationship between two policy endorsements, the Dwelling Foundation Endorsement (“DFE”) and the Water Damage Endorsement (“WDE”). The DFE limited coverage for foundation and related damage to 15% of the $229,100 Dwelling limit. Although the parties agreed to this limit for foundation damages, the Salazars argued the WDE obligated State Farm to cover additional damage from foundation movement due to plumbing leaks. The court correctly concluded, however, that the DFE expressly limited foundation movement caused by plumbing problems and the WDE excluded coverage for loss caused by foundation movement. The type of loss covered by the WDE was loss from deterioration, wet rot, or dry rot caused by continuous water leaks, factors not present in this case.  In a significant win for State Farm, the court ruled that the Salazars’ coverage was limited to $34,365 (15% of the DFE limit), less their deductible, rather than the $229,100 which they argued applied.

Editor’s Note: State Farm was represented by Chris Martin and Leslie Tan of our firm and we greatly appreciate the opportunity to help State Farm defend this case.

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