Appeal from an order of the District Court of Nassau County, First District (Anthony W. Paradiso, J.), entered March 18, 2008. The order, insofar as appealed from, granted defendant's motion for summary judgment dismissing the complaint and denied plaintiff's cross motion for summary judgment.

Order, insofar as appealed from, modified by vacating the provision granting defendant's motion for summary judgment dismissing the complaint and by providing that defendant's motion is denied; as so modified, affirmed without costs.

Plaintiff brought the present action seeking insurance coverage for losses totaling $49,414.18 that it incurred as a result of the breakdown of a natural-gas-fired co-generator system it owned and operated. Defendant, which had issued an equipment breakdown insurance policy to plaintiff, denied coverage and moved for summary judgment dismissing the complaint, on the ground that the breakdown, which was allegedly caused by a backfire in the generator's combustion system, was not a covered loss under the insurance policy for two reasons: first, because the breakdown did not constitute an "accident" within the policy's coverage; and second, because the policy specifically excluded coverage for loss, damage and expense "caused directly or indirectly" by "combustion explosion." In an affidavit submitted in support of defendant's motion for summary judgment dismissing the complaint, defendant's expert, engineer John Charles Vronay, stated, "A backfire' is the common term used to describe a combustion explosion that occurs outside the combustion chamber." Defendant claimed that the "backfire" that caused plaintiff's loss was thus a "combustion explosion" which fell within the policy's exclusions.

Plaintiff cross-moved for summary judgment. While conceding that the policy terms [*2]excluded loss from combustion explosion, plaintiff argued that the policy defendant had issued to it was, by its terms, designed for steam boiler systems, and that literal application of the policy exclusion would render the policy coverage "illusory" for plaintiff's natural-gas-fired co-generator system. In support of this argument, plaintiff referred in part to the deposition testimony of defendant's employee, Zakkiyah Shah, for the proposition that steam boilers operate by using one energy source within a firebox to heat water, and then obtain energy from the expansion of water as it forms steam. Thus, the only potential trigger for the policy exclusion for combustion explosion in a steam boiler would occur if something blew up inside the boiler's firebox. Plaintiff offered unrefuted evidence that, unlike the situation with a steam boiler, its natural-gas-fired co-generator involved herein consisted of a large 12-cylinder internal combustion engine, which employed combustion explosions in its ordinary operation. The affidavit of Howard E. Goodman, the owner and chief engineer of Rudox Engine and Equipment Company, which had built, maintained and repaired plaintiff's co-generator, was offered, in which he stated that "a backfire of the engine is not a regular combustion explosion, but rather a misfire caused by a prior failure within the engine, which may result in a failure of the engine or some of its parts. Many times a backfire occurs and there is no noticeable damage to the engine." It was plaintiff's contention that the prior failure within the engine was the cause of the accident, and that the policy did not exclude coverage for such a failure.

The District Court found that there had been a mechanical breakdown," which constituted a covered accident" under the policy, but concluded that the policy exclusion for loss, damage or expense resulting from a combustion explosion" was so specific and unambiguous as to preclude recovery by plaintiff. Summary judgment was accordingly awarded to defendant dismissing the complaint. Since neither party disputes the District Court's finding that the loss constituted mechanical breakdown" within the meaning of the general coverage of the policy, the only question before this court is whether the District Court erred in concluding that the loss was nevertheless barred under the policy's exclusions. We conclude that a question of fact exists as to the parties' intentions respecting the policy exclusions, which precludes summary judgment.

[T]he proponent of a summary judgment motion must make a prima facie showing of entitlement to judgment as a matter of law, tendering sufficient evidence to demonstrate the absence of any material issues of fact" (Alvarez v Prospect Hosp., 68 NY2d 320, 324 [1986]). Where an exclusion to insurance coverage is claimed, the insurer bears the burden of establishing that the exclusion applies and that the exclusionary clause is not subject to any other reasonable interpretation. The burden is a heavy one, and if the language is doubtful or uncertain in its meaning, any ambiguity will be construed in favor of the insured and against the insurer" (Lee v State Farm Fire & Cas. Co., 32 AD3d 902, 903 [2006]; see also Junius Dev., Inc. v New York Mar. & Gen. Ins. Co., 48 AD3d 426, 427 [2008]). Exclusionary provisions are to be strictly and narrowly construed (see e.g. Lee, 32 AD3d at 903; see also 10A Couch on Insurance 3d § 150:14). Exclusions must be construed within the reasonable understanding of business persons (e.g. Belt Painting Corp. v TIG Ins. Co., 100 NY2d 377, 383 [2003]; Pepsico, Inc. v Winterthur Intl. Am. Ins. Co., 13 AD3d 599, 600 [2004], lv dismissed 4 NY3d 882 [2005]). Moreover, exclusions must be construed in favor of the insured if doing otherwise would render the coverage illusory (Thomas J. Lipton, Inc. v Liberty Mut. Ins. Co., 34 NY2d 356, 361 [1974]). [*3]

We conclude that the District Court erred in finding that defendant met its burden on its motion for summary judgment. The Exclusions" portion of the insurance policy upon which defendant relied states:
1.We will not pay for any excluded loss, damage or expense, caused directly or indirectly by any of the following, whether or not caused by or resulting from an accident.'
a.Fire and Explosion
(1)Fire, including smoke from a fire.
(2)Combustion explosion. This includes, but is not limited to, a combustion explosion of any steam boiler or other fired vessel.
(3)Any other explosion, except as specifically provided in A.1.a.(3)."
Section A (1) (a) (3) of the coverage portion of the policy provides that covered accidents include, "Explosion, other than combustion explosion, of steam boilers, steam piping, steam engines or steam turbines."

The cause of the loss at issue has not been established with certainty. The "Definitions" section of the policy does not define explosion," combustion explosion," backfire," or misfire." The rule is clear that terms contained in an insurance policy are to be accorded their everyday, commonsense meanings (see Pepsico, Inc.,13 AD3d at 600). Where the evidence is disputed as to the meaning or applicability of terms of an insurance policy, the issue should be settled by reference to the intentions of the parties, which is a question of fact (see e.g. Pan Am. World Airways, 505 F2d at 1006; 10A Couch on Insurance 3d §§ 150:7, 150:21; see also Thomas J. Lipton, Inc., 34 NY2d at 361).Although the policy here excluded both direct and indirect damage from "combustion explosion" and any other explosions," except as otherwise provided, we conclude that it is unclear whether the parties intended by this language to exclude coverage for damages from the backfire" that is believed to have caused plaintiff's losses. In view of the foregoing, the District Court's order is modified by vacating the provision granting defendant's motion for summary judgment dismissing the complaint and by providing that defendant's motion is denied.

Molia, J.P., Scheinkman and LaCava, JJ., concur.
Decision Date: April 07, 2009