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Click here for the full text of this decision FACTS:SMI Realty Management Corp. had property insurance with Underwriters at Lloyd’s, London. After discovering foundation damage at one of its apartment properties, SMI filed a notice of property loss with Underwriters, attributing the damage to a plumbing leak underground. Underwriters refused to pay the claim. Underwriters cited the exclusion for loss due to “Corrosion or rust; Erosion; Leakage; any other gradually occurring loss.” SMI sued, raising claims under Texas Insurance Code Articles 21.21 and 21.55. During discovery, SMI produced two report by a licensed engineer who attributed the foundation damage to a deteriorated cast iron pipe in the underground sewage system that was leaking into the ground around the foundation. Underwriters moved for summary judgment, saying the policy did not cover direct or indirect damage caused by deterioration, corrosion or leakage. Underwriters used the engineer’s report, as well as the policy and SMI’s notice of property loss, as summary judgment evidence. SMI contended that the term leakage under the policy was ambiguous, that it could be reasonably read to exclude only losses that occur gradually over time, not ones that occurred in a relatively short time period. SMI also contended that the engineer’s reports were not competent summary judgment evidence because the engineer was not SMI’s designated expert. SMI consequently produced another report from another engineer it did designate as an expert who said that the cause of the sewer pipe leaks was unknown � more likely from a break than from corrosion. The trial court granted Underwriters’ motion for summary judgment. HOLDING:Reversed and remanded. The court confirms that Underwriters reads the exclusionary term of “Leakage” as meaning any type of leakage, regardless of whether it occurred rapidly or gradually. SMI reads the terms as meaning only gradually occurring leaks were excluded. The court also confirms that Underwriters is relying on the statutory construction canon of contra proferentem, or construing a contract term against the insurer in favor of coverage. SMI, meanwhile, relies on reverse of the interpretive canon of ejusdem generis, that, when words of a general nature are used in connection with the designation of particular objects or classes of persons or things, the meaning of the general words will be restricted to the particular designation. Here, each peril listed in the exclusion also has independent significance, that is, a loss caused by any one of the enumerated perils is excluded. The semicolons in the exclusion appear to denote the word “or,” and are not completely self-referential. Further, contrary to Underwriters’ assertion, the exclusions can be read to avoid superfluities. “In sum, though Underwriters interpretation of the term”Leakage’ is reasonable, it does not render SMI’s reading unreasonable. To the contrary, we conclude that SMI’s reading that”Leakage’ is limited to gradually occurring leakage is not an unreasonable interpretation in light of the word choice and syntax utilized by Underwriters in drafting the exclusionary provision. . . . Thus, the exclusionary provision in the policy, in particular the term”Leakage,’ is ambiguous. . . . Because SMI is the insured, we must adopt their interpretation as the proper construction of the policy. . . . By offering the expert opinion of [the second engineer] that the damage to the foundation had occurred as a result of a broken sewer line”in a relatively short period of time,’ SMI created a genuine issue of material fact regarding coverage.” OPINION:Higley, J., delivered the court’s opinion. DISSENT:Radack, C.J. “Because I believe that the policy unambiguously excludes coverage for all”leakage,’ both sudden and gradually occurring, I respectfully dissent. . . . I cannot read the policy to exclude only”gradually occurring leakage,’ as the term”leakage’ is not so modified in the policy.”

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