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In Paros Properties LLC v. Colorado Cas. Ins. Co., rainfall caused a substantial flow of water, mud and debris onto an insured’s property, causing extensive damage. The insurer disclaimed coverage for damages related to the rainfall on the basis of a Water Exclusion Endorsement. This exclusion enumerated multiple types of damage caused by water not covered by the policy, including mudslides. The insurer posited that the substantial flow of water, mud and debris constituted a mudslide and, thus, was not covered by the policy.

The Water Exclusion Endorsement included an exception to the exclusion, which allowed coverage if the cause of the injury was caused by an explosion. Citing to its retained expert’s report, the insured claimed that impact of water, mud and debris split the covered property into two structures, causing the roof to collapse. According to the insured, such an event qualified as an “explosion,” which was covered because of the exception to the exclusion.

In examining the exclusion and the exception to the exclusion, the 10th U.S. Circuit Court of Appeals rejected the argument that “demolition by an external cascade of water, mud and debris is an explosion under the policy.” Because the policy did not define the term “explosion,” the court relied on the “classical notion of an explosion,” such as a bomb or leaking gas. Under this reasoning, “an explosion involves a buildup of internal pressure and sudden bursting outward in all available directions.” Thus, the court agreed with the insurer that the event that caused the property damage did not qualify as an “explosion.”

The 10th Circuit’s opinion is useful because it provides guidance regarding how to define the term “explosion.” The 10th Circuit’s reasoning further demonstrates how, despite the fact that a number of forces may arguably cause a property loss, in the end “classical notions” of terms are key to the interpretation of policy language.

Additionally, the court noted just how broad the insured’s interpretation of “explosion” was. Aside from mudslides, the Water Exclusion Endorsement excluded coverage for catastrophic events like tidal waves, tsunamis and tides. The insured argued that a court can find an explosion “any time an external impact transfers sufficient kinetic energy to a structure to destroy it.” In disagreeing with the insured, the court held that such an interpretation would render the language excluding coverage for mudslides, tidal waves, tsunamis and tides obsolete. The 10th Circuit’s opinion is instructive in showing that courts will construe the policy as a whole in interpreting policy language rather than focusing on policy provisions in isolation.