Novick v. Commerce & Industry Insurance Company, 35 N.Y.2d 758 (1974)
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When a contract provision is ambiguous, parol evidence is admissible to determine the intention of the parties regarding the scope of coverage.
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Summary
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This case addresses whether an insurance policy covered water damage to a nursing home. The policy covered damage from the accidental discharge of water from a plumbing system. The dispute centered on whether the city water system was considered part of the nursing home’s system. The court found the contract language ambiguous, necessitating parol evidence to determine the parties’ intent regarding coverage. The court reversed the summary judgment in favor of the insurer, holding that the ambiguity required further factual determination.
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Facts
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The plaintiff, a nursing home, sought coverage under an insurance policy for water damage. The policy covered damage caused by the accidental discharge or leakage of water from within a plumbing system. The specific policy language covered discharge resulting from the breaking or cracking of pipes forming part of “such system.” The dispute arose as to whether the city water system was part of the nursing home’s plumbing system, which would determine whether the damage was covered under the policy. The insurance company denied coverage.
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Procedural History
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The lower court granted summary judgment in favor of the insurance company, implying that the determination of whether the city water system was part of the nursing home’s system could be made solely on the submitted documents. The New York Court of Appeals reversed the order and denied the motion for summary judgment, remitting the case for further proceedings.
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Issue(s)
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Whether the insurance policy provision regarding water damage from a plumbing system is ambiguous, thus requiring parol evidence to determine the parties’ intent regarding the scope of coverage, specifically whether the city water system was considered part of the nursing home’s plumbing system.
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Holding
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No, because the policy provision “K” is ambiguous and requires parol evidence to determine the intention of the parties with respect to coverage.
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Court’s Reasoning
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The court reasoned that the policy language was ambiguous. If the city system and the nursing home system were considered one and the same, it would imply a single large system in the entire city. The court noted, “If that is so, it is difficult to see why the language ‘cracking of any pipes * * * forming * * * such system’ was used since there is no realistically alternate system to juxtapose with the city-wide ‘system’.” The use of the word